Category Archives: Compliance

TIC Form SHC 5-Year Benchmark Survey of U.S. Ownership of Foreign Securities: Due March 3, 2017

Investment advisers are reminded to review their filing obligations under the TIC Form SHC as reporting on this 5-year benchmark survey is due on March 3, 2017. The instructions for Form SHC are available here, FAQ may be found here and key issues for reporters are available here.

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SEC OCIE Alert on Adviser Exams: 5 Most Frequent Deficiencies

The SEC’s OCIE office released its 5 most frequent deficiencies identified in examinations of Investment Advisers. They include the Compliance Rule, Regulatory Filings, Custody Rule, Code of Ethics Rule, and Books and Records.  According to the SEC staff, the Alert is based upon deficiencies cited from over 1,000 investment adviser exams over the past two years.  The document is helpful to the adviser legal and compliance personnel, not necessarily because there are surprises in the deficiencies cited, but because there is good amount of detail as to each of the cited deficiencies and thereby serves as a roadmap to be incorporated into the adviser’s annual compliance review.   View the Alert here: The Five Most Frequent Compliance T opics

Shortening the Settlement Cycle

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).

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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:

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Combating Disruptive Electronic Trading: Expedited Cease and Desist Proceedings by FINRA

The Financial Industry Regulatory Authority, Inc. (“FINRA”) recently filed an immediately effective proposal with the Securities and Exchange Commission (“SEC”) to adopt new rules aimed at certain abusive forms of electronic trading.  The proposed rules prohibit two specific types of disruptive quoting and trading activity, and permit FINRA to bring expedited cease and desist proceedings against violations, even if there is no showing of improper intent.  The proposal was published by the SEC on November 21, and will become operative on December 15 (see SR-FINRA-2016-043, available here).

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