Tag: SEC


Expanding Oversight: SEC Proposes Amendments to Rule 15b9-1

The following post comes to us from Andre E. Owens, partner in the securities practice at Wilmer Cutler Pickering Hale and Dorr LLP, and is based on a WilmerHale publication.

The following post comes to us from Andre E. Owens, partner in the securities practice at Wilmer Cutler Pickering Hale and Dorr LLP, and is based on a WilmerHale publication.

On March 25, 2015, the Securities and Exchange Commission (“SEC” or “Commission”) proposed an amendment to Rule 15b9-1 (the “Proposal”) under the Securities Exchange Act of 1934 (“Exchange Act”) that, if adopted, would close an historical exception to the general requirement that registered broker-dealers must become members of a registered national securities association (“Association”), effectively, the Financial Industry Regulatory Authority (“FINRA”). [1] In doing so, the SEC intends to require SEC-registered broker-dealers that are members of one or more securities exchanges to also become members of FINRA, subject to FINRA rules and oversight. According to the SEC, FINRA membership would help accomplish a key regulatory goal: enhancing the oversight of off-exchange and cross-market trading activity. [2]

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Regulators Working Together to Serve Investors

Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s recent remarks at the North American Securities Administrators Association Annual NASAA/SEC 19(d) Conference; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s recent remarks at the North American Securities Administrators Association Annual NASAA/SEC 19(d) Conference; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

It is my honor to deliver the opening remarks for today’s [April 14, 2015] North American Securities Administrators Association (“NASAA”) and Securities and Exchange Commission (“SEC”) 19(d) Conference. For those who are keeping count, this is my seventh year as the SEC’s liaison to NASAA. It has been a privilege to serve you in this role, which I have done since my early days as a Commissioner. Before I begin my remarks, however, let me issue the standard disclaimer that the views I express today are my own, and do not necessarily reflect the views of the SEC, my fellow Commissioners, or members of the staff.

NASAA and the SEC have a long history of working together to provide a robust regulatory environment for businesses to grow and to protect the investors who fuel that growth. Today is a clear example of that partnership, where representatives from the SEC and state regulators come together to share ideas for increasing cooperation and collaboration. This partnership is crucial to achieving our common goal of protecting investors, maintaining market integrity, and facilitating capital formation.

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Financial Innovation and Governance Mechanisms

The following post comes to us from Henry T. C. Hu, Allan Shivers Chair in the Law of Banking and Finance at the University of Texas School of Law.

The following post comes to us from Henry T. C. Hu, Allan Shivers Chair in the Law of Banking and Finance at the University of Texas School of Law.

Financial innovation has fundamental implications for the key substantive and information-based mechanisms of corporate governance. My new article, Financial Innovation and Governance Mechanisms: The Evolution of Decoupling and Transparency (forthcoming in Business Lawyer, Spring 2015) focuses on two phenomena: “decoupling” (e.g., “empty voting,” “empty crediting,” and “hidden [morphable] ownership”) and the structural transparency challenges posed by financial innovation (and by the primary governmental response to such challenges). In decoupling, much has happened since the 2006-2008 series of sole- and co-authored articles (generally with Bernard Black and one with Jay Westbrook) developed and refined the pertinent analytical framework. In transparency, the analytical framework for “information,” developed and refined in 2012-2014, can contribute not only to the comprehensive new SEC “disclosure effectiveness” initiative but also to resolving complications arising from the creation of a new parallel public disclosure system—the first new system since the creation of the SEC.

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SEC Implements Dodd-Frank Reporting and Dissemination Rules for Security-Based Swaps

The following post comes to us from Arthur S. Long, partner in the Financial Institutions and Securities Regulation practice groups at Gibson, Dunn & Crutcher LLP, and is based on the introduction of a Gibson Dunn publication; the complete publication, including footnotes and charts, is available here.

The following post comes to us from Arthur S. Long, partner in the Financial Institutions and Securities Regulation practice groups at Gibson, Dunn & Crutcher LLP, and is based on the introduction of a Gibson Dunn publication; the complete publication, including footnotes and charts, is available here.

Implementation of the derivatives market reforms contained in Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) may fairly be characterized as a herculean effort. The Commodity Futures Trading Commission (CFTC) has finalized dozens of new rules to implement Title VII’s provisions governing “swaps.” Although Title VII requires the Securities and Exchange Commission (SEC or Commission) to implement similar provisions for “security-based swaps” (SBSs), the SEC’s rulemaking process has lagged the CFTC’s.

Earlier this year, the SEC finalized two of its required rules: one (Final Regulation SBSR) governs the reporting of SBS information to registered security-based swap data repositories (SDRs) and related public dissemination requirements; the other covers the registration and duties of SDRs (SDR Registration Rule). Additionally, the SEC published a proposed rule to supplement Final Regulation SBSR that addresses, among other things, an implementation timeframe, the reporting of cleared SBSs and platform-executed SBSs, and rules relating to SDR fees (Proposed Regulation SBSR). Comments on Proposed Regulation SBSR must be submitted to the SEC by May 4, 2015.

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SEC Enforcement Actions for Failure to Update 13D Disclosures

The following post comes to us from James Moloney, partner and co-chair of the Securities Regulation and Corporate Governance Practice Group at Gibson, Dunn & Crutcher LLP, and is based on a Gibson Dunn publication by Mr. Moloney and Andrew Fabens, with assistance from Lauren Traina.

The following post comes to us from James Moloney, partner and co-chair of the Securities Regulation and Corporate Governance Practice Group at Gibson, Dunn & Crutcher LLP, and is based on a Gibson Dunn publication by Mr. Moloney and Andrew Fabens, with assistance from Lauren Traina.

On Friday, March 13, 2015, the SEC announced that it had settled a string of 21C administrative proceedings brought against eight officers, directors, and shareholders of public companies for their failure to report plans and actions leading up to planned going private transactions. The SEC press release can be found here. In doing so, the SEC sent another strong reminder to those that beneficially own more than 5% of the equity securities of a public company to keep their 13D disclosures current.

The respondents included a lottery equipment holding company, the owners of a living trust, and the CEO of a Chinese technical services firm. According to the SEC, the respondents in each of these cases failed to report various plans and activities with respect to the anticipated going private transactions, including when the parties: (i) determined the form of the going private transaction; (ii) obtained waivers from preferred shareholders; (iii) assisted in arriving at shareholder vote projections; (iv) informed management of their plans to take the company private; and (v) recruited shareholders to execute on the proposals. In one case the respondents were charged for failure to report owning securities in the company that was going private. In another case, the respondents reported their transactions months or years later. The proceedings resulted in cease-and-desist orders as well as the imposition of civil monetary penalties ranging from $15,000 to $75,000 per respondent.

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Implications of the SEC’s Plans to Amend Rule 15b9-1

Annette Nazareth is a partner in the Financial Institutions Group at Davis Polk & Wardwell LLP, and a former commissioner at the U.S. Securities and Exchange Commission. The following post is based on an article by Ms. Nazareth and Jeffrey T. Dinwoodie that first appeared in Traders Magazine.

Annette Nazareth is a partner in the Financial Institutions Group at Davis Polk & Wardwell LLP, and a former commissioner at the U.S. Securities and Exchange Commission. The following post is based on an article by Ms. Nazareth and Jeffrey T. Dinwoodie that first appeared in Traders Magazine.

The overwhelming majority of SEC-registered broker-dealers must also be members of FINRA. Through a commonly overlooked exemption in SEC Rule 15b9-1, some broker-dealers that operate proprietary-only businesses are able to avoid FINRA regulation. The SEC recently voted to on a proposal to amend this rule on March 25.

While it is not clear whether the SEC will seek to eliminate the exemption or narrow its availability, the rulemaking could have important implications for firms currently relying on the exemption and, more broadly, for the ongoing market structure debate.

Let’s explore the history of this exemption and some of the possible implications of an SEC rulemaking.

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Preparing for the Regulatory Challenges of the 21st Century

Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s recent remarks at the Georgia Law Review’s Annual Symposium, Financial Regulation: Reflections and Projections; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s recent remarks at the Georgia Law Review’s Annual Symposium, Financial Regulation: Reflections and Projections; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

During my tenure as an SEC Commissioner, our country’s economy has experienced extreme highs and lows. In fact, the country experienced the worst financial crisis since the Great Depression, followed by the current period of significant economic growth where the stock market has grown by around 165% from the low point of the financial crisis.

I have had a front-row seat to all of this, as I became an SEC Commissioner just weeks before the financial crisis hit our nation. As a result, I witnessed first-hand just how fragile our capital markets can be, and the need for a robust and effective SEC to protect them. First, let me provide a snapshot of what went on. I was sworn-in as an SEC Commissioner on July 31, 2008. Within a few weeks, on September 15, 2008, Lehman Brothers filed for bankruptcy. To give you a sense of its rapid decline, within 15 days, its share price went from $17.50 per share to virtually worthless. The demise of Lehman Brothers is often seen as the first in a rapid succession of events that led to an unimaginable market and liquidity crisis. These events included:

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SEC Charges Schedule 13D Filers for Untimely Disclosure

David A. Katz is a partner at Wachtell, Lipton, Rosen & Katz specializing in the areas of mergers and acquisitions, corporate governance, and complex securities transactions. This post is based on a Wachtell Lipton memorandum by Mr. Katz and Alison Z. Preiss.

David A. Katz is a partner at Wachtell, Lipton, Rosen & Katz specializing in the areas of mergers and acquisitions, corporate governance, and complex securities transactions. This post is based on a Wachtell Lipton memorandum by Mr. Katz and Alison Z. Preiss.

The Securities and Exchange Commission announced last week that it had charged eight directors, officers and major stockholders for failing to timely disclose steps taken to take their respective companies private in their beneficial ownership reports on Schedule 13D. The orders issued by the SEC indicate the SEC staff became aware of the violations in the course of their review of proxy and Schedule 13E-3 transaction statements, which described the steps taken in the required disclosures regarding the background of the transactions. The orders note that emails and other contemporaneous communications clearly indicate the steps taken that had not been properly disclosed. The orders issued by the SEC (to which the offending parties consented) resulted in cease-and-desist orders and payment of civil penalties.

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The Role of Academics and Industry in Improving Equity Market Structure

Michael S. Piwowar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Piwowar’s recent remarks at the University of Notre Dame, Mendoza College of Business, Center for the Study of Financial Regulation; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Piwowar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Michael S. Piwowar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Piwowar’s recent remarks at the University of Notre Dame, Mendoza College of Business, Center for the Study of Financial Regulation; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Piwowar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Today [March 13, 2015], I want to focus my remarks on the equities markets, and specifically equity market structure. Although it may be hard for some of you in this room to believe, in the 20 months since I began this job, some have suggested that I am a so-called “market structure expert.” While such comments are certainly flattering, I cannot accept the compliment. Of course, my academic research, my private and public sector experience, and my current role as a Commissioner at the Securities and Exchange Commission (“SEC” or the “Commission”) have all given me unique insights into the functioning of our equities markets. However, like many people in this room, I still consider myself a “student of markets.” With so many issues to examine and debate, and the continued evolution of the financial markets, I think we can agree there is more for all of us to observe and learn.

It has been fifteen months since I gave my first speech on equity market structure. Both before and since, my colleagues at the Commission have kept the issue of market structure in the forefront through their own public remarks. Congress also has been expressing keen interest in equity market structure, shining a bright light on the issue. And we have had some unsolicited prompting by a bestselling author, who, to put it lightly, does not have flattering things to say about the current state of the equity markets in what many refer to as simply “The Book.” Given all of this attention, I am frankly disappointed that we at the SEC have accomplished very little.

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A Few Observations on Shareholders in 2015

Mary Jo White is Chair of the U.S. Securities and Exchange Commission. This post is based on Chair White’s recent address at Tulane’s 27th Annual Corporate Law Institute; the full text, including footnotes, is available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Mary Jo White is Chair of the U.S. Securities and Exchange Commission. This post is based on Chair White’s recent address at Tulane’s 27th Annual Corporate Law Institute; the full text, including footnotes, is available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Today [March 19, 2015], I will share a few observations on three specific areas: the current state of shareholder activism; the shareholder proposal process; and fee-shifting bylaws. I know your next two panels take up aspects of these important topics, but I think the space is lively and big enough for all of us to comment.

The Current Activism Landscape

There are different views on what is meant by “shareholder activism,” but just the word “activism” triggers an adverse reaction from many companies. Reflexively painting all activism negatively is, in my view, using too broad a brush and indeed is counterproductive. To me, the term activism captures the range of efforts by investors to influence a company’s management or decision-making. Some of it is constructive. In certain situations, activism seeks to bring about important changes at companies that can increase shareholder value. Now, some of you may find the juxtaposition of the word “activism” with “shareholder value” does not comport with your sense of reality. Some of you also believe that activists are not interested in increasing long-term value for shareholders and other stakeholders. Still others will assert that activists are simply short-term traders looking to make a quick dollar. I did say this was a lively topic with many different views.

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