In 2017, broker-dealers will be required to devote significant time and attention to preparing for a shortened settlement cycle. As a means of reducing credit risk, counterparty risk and overall systemic risk, the Securities and Exchange Commission (SEC) has moved forward with proposed rules that would amend Rule 15c6-1(a) in order to reduce the settlement cycle to two business days (T+2).
All posts by Anna T. Pinedo
FINRA Investor Study
Recently, FINRA published a report regarding its investor survey (FINRA Investors in the US 2016). The report summarizes findings from an online survey addressing investor relationships with broker-dealers and advisers, investor understanding of fees charged for investment services and investor literacy. The survey finds that a very small percentage of investors own “complex securities,” such as REITs, options and structured notes, which have been a focus of regulatory attention. Most investors own principally individual stocks and mutual funds. More than half of those investors surveyed rely on the services of a broker or other professional adviser for some of their investment decisions, with the percentage being somewhat higher for investors aged 55 and higher. Approximately 16% of those surveyed use robo-advisers. In making investment decisions, 49% expressed a preference for paper deliver of documents. An overwhelming percentage of investors (68%) rely on information from the company in which they are investing in order to make their investment decisions. The investor literacy component of the survey questions revealed that many investors do not have a complete understanding of concepts like short selling and buying stocks on margin, which suggests that broker-dealers and investment advisers have continued work ahead of them in terms of investor education.
FINRA Enhanced Pricing Disclosure Rule
In November 2016, the Securities and Exchange Commission approved FINRA’s proposed rules amending Rule 2232, which will require FINRA members to provide additional pricing information on retail customer confirmations for non-municipal fixed income transactions. The additional requirements have proven quite controversial and over the years FINRA had proposed and re-proposed various similar amendments. The Municipal Securities Rulemaking Board, or MSRB, has adopted corresponding rule amendments.
The amended rule requires that if a FINRA member trades as principal with a non-institutional customer in a corporate debt or agent debt security, the member would, subject to certain exceptions, be required to disclose the member’s mark-up or mark-down from the prevailing market price for the security on the customer confirmation. Rule 10b-10 under the Exchange Act already requires that FINRA members provide customers with limited pricing information (e.g., transaction cost information) in connection with transactions in equity securities where the member acts as principal; however, no such requirement had existed for transactions in fixed income securities.
The disclosure requirements would apply where:
For some time now, NASAA, FINRA and the SEC’s Division of Enforcement have been focused on cases involving sales of securities to at risk investors, including senior citizens. In various published remarks, NASAA representatives have noted that approximately one-third of the enforcement actions in recent years have involved sales made to senior citizens. In October 2016, FINRA filed with the SEC proposed rules that would amend Rule 4512 and adopt new Rule 2165. These proposals address a number of the concerns raised by FINRA’s Notice to Members 15-37.
The FINRA proposal would amend existing customer account information rules to require brokers to attempt to obtain the name and contact information for a “trusted contact person” upon opening an account. A broker would not be required to attempt to obtain the name of or contact information for a trusted contact person for accounts in existence prior to the effective date of the proposed rule change until the time that it updates the information for the account either in the course of its normal business, or until it is otherwise required to do so under applicable laws or rules.
Anna T. Pinedo – Contributor
Anna Pinedo has concentrated her practice on securities and derivatives. She represents issuers, investment banks/financial intermediaries, and investors in financing transactions, including public offerings and private placements of equity and debt securities, as well as structured notes and other hybrid and structured products.
Ms. Pinedo works closely with financial institutions to create and structure innovative financing techniques, including new securities distribution methodologies and financial products. Ms. Pinedo has particular financing expertise in certain industries, including working with technology-based companies, telecommunications companies, healthcare companies, financial institutions, REITs and consumer finance companies. Ms. Pinedo has worked closely with foreign private issuers in their securities offerings in the United States and in the Euro markets. She also works with financial institutions in connection with international offerings of equity and debt securities, equity- and credit-linked notes, and hybrid and structured products, as well as medium-term note and other continuous offering programs.
In the derivatives area, Ms. Pinedo counsels a number of major financial institutions acting as dealers and participants in the commodities and derivatives markets. Ms. Pinedo advises on structuring issues, as well as on regulatory issues, including those arising under the Dodd-Frank Act. Her work focuses on foreign exchange, equity and credit derivatives products, and structured derivatives transactions. Ms. Pinedo has experience with a wide range of transactions and structures, including collars, swaps, forward and accelerated repurchases, forward sales, hybrid preferred stock, and off-balance sheet structures. Ms. Pinedo also has advised derivatives dealers regarding their Internet sites and other Internet and electronic signature/delivery issues, as well as on compliance matters.
Ms. Pinedo regularly speaks at conferences and participates in panel discussions addressing securities law issues, as well as the securities issues arising in connection with derivatives and other financial products. She is the co-author of JOBS Act Quick Start, published by International Financial Law Review (2013, 2014, updated 2016), contributor to OTC Derivatives Regulation Under Dodd-Frank: A Guide to Registration, Reporting, Business Conduct, and Clearing (Thomson Reuters, 2014, second ed. 2015, 2016 ed.), co-author of Considerations for Foreign Banks Financing in the US, published by International Financial Law Review (2012, updated 2014, 2016), Liability Management: An Overview (2011, updated 2015), published by International Financial Law Review, co-author of Covered Bonds Handbook, published by Practising Law Institute (2010, updated 2012-2014), co-author of the treatise Exempt and Hybrid Securities Offerings, published by Practising Law Institute (2009, second ed. 2011) and also co-author of BNA Tax and Accounting Portfolio, SEC Reporting Issues for Foreign Private Issuers (BNA Accounting Policy and Practice Series, 2009, second ed. 2012, updated 2016). Ms. Pinedo is also a contributing author to Broker-Dealer Regulation (2011, second ed. 2012), published by Practising Law Institute. Ms. Pinedo co-authored “The Approaches to Bank Resolution,” a chapter in Bank Resolution: The European Regime (Oxford University Press, 2016). Ms. Pinedo contributed to The Future of Bank Funding and Capital: Solutions for Issuers, Opportunities for Investors (IFR Market Intelligence, 2009). Additionally, Ms. Pinedo co-authored “The Ties that Bind: the Prime-Brokerage Regulation,” a chapter in Global Financial Crisis (Globe Law and Business, 2009) and “The Law: Legal and Regulatory Framework,” a chapter in PIPEs: A Guide to Private Investments in Public Equity (Bloomberg, 2006).
Ms. Pinedo has been included in Best Lawyers in America, Euromoney’s Expert Guide for Capital Markets and Expert Guide for Women in Business Law, Super Lawyers, Crain’s New York Business “Forty Under 40,” Investment Dealer’s Digest “Forty Under 40” and Hispanic Business‘s “100 Most Influential Hispanics.” Ms. Pinedo has been ranked by Chambers USAas one of America’s leading capital markets-derivatives and capital markets-structured products lawyers and has been recognized as a notable lawyer for financial services regulation-broker dealer (compliance). Chambers Globalhas ranked Ms. Pinedo as one of the world’s leading lawyers (recommended in capital markets–derivatives). Ms. Pinedo has also been cited as a recommended lawyer for capital markets in the IFLR1000 Guide to Leading Lawyers, and as a recommended lawyer by The Legal 500 US for her work in capital markets: debt, equity, and global offerings, as well as structured finance and REITs. Ms. Pinedo was a recipient of the Burton Award for Legal Achievement in 2007, 2009 and 2011 which honors excellence in legal writing. Ms. Pinedo was also a winner of the 2013 Euromoney LMGAmericas Women in Business Law Awards as the Leading Lawyer in the Americas in the category of Structured Finance, which includes Derivatives.
Ms. Pinedo is a member of the American Bar Association’s Committee on the Federal Regulation of Securities, a member of the subcommittee on Disclosure and Continuous Reporting, vice-chair of the subcommittee on Securities Registration, and a member of the task force on the future of securities regulation. She has participated in the drafting committee for the ABA’s comment letters on such topics as securities offering reform, revisions to accelerated filing, smaller public company proposals, and various JOBS Act related matters. Ms. Pinedo also is a member of the ABA Committee on the Regulation of Futures and Derivatives Instruments. Ms. Pinedo is a chair of the Structured Products Association Legal, Regulatory and Compliance Executive Committee. She is a member of the Mortgage Bankers Association’s Mortgage REIT Council and a member of the MBA’s Secondary & Capital Markets Committee.
Ms. Pinedo is a member of the George Washington University Center for Law, Economics & Finance Advisory Board. Ms. Pinedo is a member of the Visiting Committee of the Law School of the University of Chicago. Ms. Pinedo was a member of the University of Chicago Legal Forum during her time at the University of Chicago Law School.