anton4.jpg

Important November Regulatory Developments

There were a number of important regulatory developments in November, which we will cover in detail over the coming weeks. Here are the top three you need to know about.

1. The SEC and the Department of Justice issued on November 14, 2012, the FCPA guide (“Guide”) to be found here. As Robert Khuzami, Director of the SEC’s Enforcement Division explained, the guide is "an ambitious effort to lay out how the government interprets and applies the FCPA, in order to educate companies about how to prevent their employees from violating the law, and educate employees about the limits of permissible conduct." Khuzami reiterated that the Guide is mainly about prevention of illegal activity through education. Prevention is preferable than enforcement. As he said, “We want to make it clear how we reward companies to adopt compliance programs that are effective in preventing violations in the first place.”

2. There were a number of important CFTC-related developments in November we well. First, on November 16, 2012, the U.S. Treasury Department exempted foreign-exchange swaps and forwards from most of the Dodd-Frank Act's derivatives regulations intended to reduce risk and increase transparency in the derivatives market. This long-awaited determination would, among others, make a difference between having to register or not for many advisers (view the Treasury determination here). In particular, FX swaps and FX forwards do not need to be included in calculating whether an entity must register as a swap dealer, a commodity pool operator or commodity trading advisor. Second, the CFTC/NFA offered informal guidance about how to calculate assets under management (“AUM”) for purposes of Form CPO-PQR, the new CFTC filing form. Specifically, the NFA has explained that the AUM to be counted and reported for purposes of the CFTC Form CPO-PQR (including thresholds) is solely AUM of commodity pools for which a registered CPO must act and operate in its registered capacity.  Pools for which a CPO (whether registered or unregistered) relies on or claims a CPO registration exclusion or exemption are not to be counted and reported. So, for example, pools operated pursuant to CFTC Rule 4.7 will be counted while pools exempt under Rule 4.13(a)(3) or under Rule 4.5 will not be. It is important to note that the manner in which the AUM is calculated is important in order to determine both the content of the Form COP-PRQ as well as the frequency of reporting.

  • Small CPOs (less than $150mm pool AUM at close of business day on any business day during calendar year), complete Schedule A of the Form annually.

  • Mid-sized CPOs (at least $150mm aggregated pools AUM at close of business day on any business day during calendar year), complete Schedules A and B annually.

  • Large CPOs ($1.5bn in pool AUM as of the close of business on any day during any of the individual quarters), complete Schedules A, B, and C quarterly. 1

Dual registrants registered with both the SEC and the CFTC are subject to special rules. In particular, those who have to submit Form PF to the SEC, complete only Schedule A of the Form CPO-PRQ and may otherwise substitute SEC Form PF for Schedules B and/or C of Form CPO-PQR.

3. Finally, on November 1, 2012, the pan-European short selling regulation (the “Regulation”) came into effect, restricting short selling in the European Union (EU), after the Council of the European Union and the European Parliament voted to adopt the proposed regulation on March 14, 2012 (find the text of the Regulation here and related Q & A here). These regulations were adopted in an effort to harmonize short selling requirements across the EU. The Regulation applies to financial instruments admitted for trading on the EU markets and venues regardless of the domicile of the position holder. As such, the Regulation impacts US managers trading in the EU. However, there are a number of exemptions including when the principal trading venue for the shares of a company are outside of the EU. Consequently, the Regulation does not apply for instance to short positions of a US manager in shares of a company domiciled in the USA which are admitted to trading on a trading venue in Germany, but whose principal trading venue is located in the USA.

We will cover these developments in our upcoming communiques, but in the meantime, please contact us if you have any questions.

 

Newsletter

Get the latest compliance news and insights - delivered weekly. The SEC3 Communique covers all compliance topics. CCO3 focuses on CCO topics.
tip: check both to keep informed!

Communiques

Pre-Dating & Back-Dating are Equally Risky

The SEC today suspended three accountants formerly of BDO USA LLP for improper professional conduct during its 2013 audit of AmTrust Financial Services Inc., an exchange-listed insurance company. According to the... read more »

Fiduciary Duty

On Friday, September 28, 2018 the SEC charged LendingClub Asset Management (LCA) and its former president Renaud Laplanche with fraud for improperly using fund money to benefit LendingClub Corporation (LendingClub),... read more »

Exciting Summer Project -- Dig Into Some Sand or Dig Into Your Firm's Best Ex Pr…

The Office of Compliance Inspections and Examinations (OCIE) issued a risk alert July 11 targeting investment advisers’ most common deficiencies with regard to their best execution obligations under the Investment... read more »

SEC Adopts Fund Liquidity Reporting and Disclosure Changes

The final week of June was a busy one for SEC releases following the SEC’s June 28th open meeting. Among these was a revisit of Rule 22e-4 under the Investment... read more »

More SEC Settlements - This Time Form PF Filing Deficiencies

On June 1st, the SEC announced settlements with 13 RIAs who repeatedly failed to file Form PF reports. Most of these firms never filed over the review period (2012 through... read more »

Two Recent Enforcement Actions Against Private Fund Advisers

The industry should not misinterpret the SEC’s 2018 National Exam Program Priorities as a shift away from private fund advisers. As discussed during the SEC’s recent National Compliance Outreach Seminar... read more »

Events

Chief Compliance Officer Roundtable: Breakfast Briefing - November 8, 2018

When: November 8, 2018 Where: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 | 22nd Floor Boardroom | Phone: 212.885.5000 Schedule: 9:00-9:30am - Networking...

Dorsey PF 2018 Symposium

When: September 26, 2018 (8:30 am - 6 pm Where: Dorsey & Whitney LLP | 51 W. 52nd Street | New York, NY 10019 Directions > SEC3’s President, Janaya Moscony will join...

Chief Compliance Officer Roundtable: Breakfast Briefing - June 14, 2018

When: June 14, 2018 Where: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 | 22nd Floor Boardroom | Phone: 212.885.5000 Schedule: 9:00-9:30am - Networking...

Webinar: 2018 SEC Exam Priorities & Recent Exam Highlights

Don’t miss the opportunity to meet with us in person to discuss the topics that matter most to you. Tobin S. Cochran, Managing Member/President of Focus 1 Associates, LLC and...

Chief Compliance Officer Roundtable: Breakfast Briefing - February 7, 2018

When: February 7, 2018 Where: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 | 22nd Floor Boardroom | Phone: 212.885.5000 Schedule: 9:00-9:30am - Networking...

Upcoming Events - September & October 2017

Upcoming Events Don’t miss the opportunity to meet with us in person to discuss the topics that matter most to you. SEC3 is teaming up with industry experts in NYC to discuss...

May 23, 2017 - Webcast: WannaCry Ransomware: Were You Really Protected or Just L…

When: Tuesday, May 23rd, 2017 | Schedule: 12pm - 1pm EST Who: Paul Caiazzo, CEO and Co-Founder, TruShield Security Solutions Michael Brice, Founder, BW Cyber Services John Lukan, Managing Director, SEC Compliance Consultants, Inc. We...

June 14, 2017 - Compliance Breakfast Briefing

8:30-9:00am - Networking and Continental Breakfast 9:00-10:30am - Program Location: Willkie Farr & Gallagher LLP | 600 Travis Street | Suite 2310 | Houston, TX Barry Barbash from Willkie Farr & Gallagher LLP,...

June 13, 2017 - Compliance Breakfast Briefing

8:30-9:00am - Networking and Continental Breakfast 9:00-10:30am - Program Location: Haynes and Boone, LLP | 2323 Victory Avenue | Suite 700 | Dallas, TX 75219 Validated parking is available in the garage attached...

May 31, 2017 - Chicago

9:00-9:30 a.m - Networking and Continental Breakfast 9:30-11:00 a.m - Program Location: Baker & McKenzie LLP | 300 East Randolph Drive | Suite 5000 | Chicago, IL 60601 Kristin Gonzalez and Jerome Tomas...

May 17, 2017 (NYC WIMF)

This event is by invitation only. Please email info@seccc.com to learn more.

May 15, 2017 (NYC Chief Compliance Officer Roundtable)

9:00-9:30am - Networking and Continental Breakfast 9:30-11:00am - Program Location: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 | 22nd Floor Boardroom | Phone:...

Webcast: The Most Insidious Cybersecurity Threat Is Also The Least Understood

When: Tuesday, April 25th | Schedule: 12pm - 1pm EST Who: Paul Caiazzo, CEO and Co-Founder, TruShield Security Solutions Michael Brice, Founder, BW Cyber Services John Lukan, Managing Director, SEC Compliance Consultants, Inc. Ransomware, the...

CCO Liability (Part III): Managing Liability Webinar

In this webinar, panelists discuss indemnifications and insurance as potential remedies to address the direct financial risks to a CCO. Attendees will learn: What terms and conditions should Chief Compliance Officers be...

Webinar: CCO Liability (Part III): Managing Liability: Navigating Indemnities an…

When: Tuesday, February 21, 2017 Schedule: 11:00am ET / 10:00am CT / 9:00am MT / 8:00am PT / 7:00am AT Description of Webinar: The National Society of Compliance Professionals is pleased to host...