Everyone knows that Seinfeld, which premiered 31 summers ago, was one of the most popular television sitcoms ever. It was on the airwaves (remember those?) for nine years, nominated for 68 Emmy Awards, winning ten times, including twice for Outstanding Writing in a Comedy Series, winning twice. It was self-identified as a “show about nothing.” Indeed, co-creator Larry David “admonished the writing staff that there would be ‘no hugging, no learning’ in the scripts, and there wasn’t. Ever.” However, despite this warning, those who watched the show know that it was, in fact, a show about a lot, including the following:
- A “puffy” shirt;
- A low talker, a close talker, and a high talker;
- A short-tempered soup restaurant owner who yells, “No soup for you”;
- Waiting for a table at a Chinese restaurant;
- Contests among friends;
- Re-gifting; and
- Of course, yada yada yada.
Those who watched the show carefully also know that despite the “no learning” admonition, Seinfeld provided important lessons about topics related to investing and the securities industry. Indeed, the final episode of the first season was called “The Stock Tip,” and 24% of all televisions in America “tuned in” to watch14 (back when we “changed” channels on a “TV”—not on a “screen” and “streaming” was the route tears took down your face when the TV antenna flew off your roof).
Read more here, to explore themes contained in Seinfeld that help explain securities enforcement actions.
In a stark 3-2 vote along political lines, the SEC announced today that it was proposing new rules relating to finders. Essentially, if the proposed rules are, ultimately, approved, the SEC will sharply change the position it has maintained for over 8 decades, allowing unregistered finders to sell securities to the investing public while receiving transaction based compensation. See https://www.sec.gov/news/press-release/2020-248.
If approved, the proposed rules would permit 2 categories of finders. Both types of finders would be allowed to solicit accredited investors for investments in various issuers. There are restrictions on the activities the finders could engage in as well as certain disclosure requirements for one category. Nonetheless, the breadth of the proposed rules is significant because it represents a sea change from the SEC’s previous position that any transaction based compensation paid to persons who solicit investors would require broker-dealer registration.
The SEC, just a few days ago, announced an enforcement action against a trust company for failure to exercise substantial investment authority over their collective trust funds. According to the SEC, because of this failure, the trust was not entitled rely on the Section 3(c)(11) under the Investment Company Act and was therefore operating unregistered investment companies. This SEC’s action is curious to say the least; it is first statement by the SEC in recent memory which addresses Section 3(c)(11)’s bank-maintained requirement. The action does not allege client harm and does not serve to advance any stated concern by the SEC regarding bank collective trust funds which are bank-regulated products. By bringing last week’s case, the SEC raises the question of what constitutes “substantial investment authority” for purposes of the “maintained by a bank” requirement, but offers no sense of the SEC’s expectations or where the SEC may be headed more generally with respect to bank collective trust funds.
Read More Here.