Category Archives: Regulatory

Focus on Senior Investors: FINRA’s Latest Rule Proposals

On October 19, 2016, FINRA filed with the SEC a proposed rule change that would amend FINRA Rule 4512 (Customer Account Information), and adopt new FINRA Rule 2165 (Financial Exploitation of Specified Adults).  The proposed amendments to FINRA Rule 4512 would require broker-dealers to make reasonable efforts to obtain the name and contact information for a “trusted contact person” for a customer’s account.  In addition, new FINRA Rule 2165 would permit (but not require) broker-dealers to place temporary holds on disbursements of funds or securities from the accounts of certain senior investors, as well as other investors with diminished capacity, when there is a reasonable belief of financial exploitation.

This rule proposal fits squarely within FINRA’s recent focus on protecting senior investors, particularly with FINRA’s recent launch of the “Securities Helpline for Seniors,” and should remain a continued regulatory focus moving forward.

Brexit: What Alternative Asset Managers Can Expect

On 23 June 2016, the British public voted to leave the European Union after 43 years of membership. Although the results of the referendum are not binding in law and there remains a possibility of a constitutional challenge, the early indications from Prime Minister Theresa May and leading figures within the ruling Conservative Party are that the United Kingdom will proceed with the so-called Brexit. How might Brexit affect alternative asset managers in the United Kingdom and the United States?

Read more here: Brexit: What Alternative Asset Managers Can Expect

Déjà Vu All Over Again – FINRA Revisits Mutual Fund Sales Charge Waivers

The Financial Industry Regulatory Authority is once again taking a close look at member firm mutual fund sales practices and sales charge waivers (Mutual Fund Waiver Sweep) in the U.S. FINRA’s target exam letter seeks information about mutual fund sales to retirement plans and charitable accounts, as well as the sales charge waivers that mutual funds make available to eligible purchasers. FINRA’s Mutual Fund Waiver Sweep covers the period from January 1, 2011 through December 31, 2015 and, as drafted, seeks responses from FINRA member firms by June 10, 2016.

Read more here:Déjà Vu All Over Again – FINRA Takes Another Look at Mutual Fund Sales Charge Waivers

SEC/FDIC Propose Dodd-Frank BD Resolution Rules

Troubled financial institutions, some with substantial broker-dealer operations, played a prominent role in the 2008 financial crisis. In an effort to protect the financial system from serious threats posed by significant nonbank financial companies in financial distress, Congress enacted Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) to provide for an orderly liquidation of such entities under the supervision of federal authorities. Federal regulators have proposed rules that would implement the provisions of Title II in regard to the resolution of a large broker-dealer. Most notably, the proposed rules address how a “bridge broker or dealer” could be used in connection with the liquidation of a “covered broker or dealer.”

Read more here: SEC and FDIC Propose Dodd-Frank Broker-Dealer Resolution Rules

Proposed SEC Rule Governing Derivatives and Short Sales

On Dec. 11, 2015, the Securities and Exchange Commission (the “SEC”) issued a release proposing the adoption of new Rule 18f-4 under the Investment Company Act of 1940 (the “1940 Act”). The proposed rule, if adopted as proposed, will establish new limitations on the use of derivatives by registered investment companies and business development companies (collectively, “regulated funds”). It will also regulate other trading practices of such funds (including short sales of securities) that are deemed to involve the issuance of “senior securities.” Hedge funds and other private investment funds will not be subject to the rule.

Read more here: SEC Proposes Rule Governing the Use of Derivatives and Short Sales