Monthly Archives: November 2013

SEC Enforcement Focusing on Rule 105 of Regulation M

The following post comes to us from John M. Loder, partner and co-head of the Investment Management practice group at Ropes & Gray LLP, and is based on a Ropes & Gray publication by R. Daniel O’Connor, Maria Carboni, and Gina Riccio.

On September 16, 2013, the Securities and Exchange Commission (“SEC”) charged over 20 firms with violations of Rule 105 of Regulation M of the Securities Exchange Act of 1934 (“Rule 105” or “the Rule”), which prohibits the purchase of securities in a secondary offering when the buyer has a short position, as that term is defined in SEC rules, of the same securities established during a specified restricted period. [1] The same day, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued guidance to firms on issues they had observed regarding compliance with Rule 105 and made suggestions to firms as to how to address the relevant risk. These recent cases, and contemporaneous SEC statements on the subject, suggest that the SEC will continue to focus attention on Rule 105 violations in examinations and enforcement inquires. Companies should therefore take steps to ensure that their policies contain appropriate provisions related to Rule 105 and consider training of relevant staff to avoid such issues.


US Basel III Liquidity Coverage Ratio Proposal

Margaret E. Tahyar is a partner in the Financial Institutions Group at Davis Polk & Wardwell LLP. The following post is based on the overview of a Davis Polk visual memorandum; the complete publication, including diagrams, flowcharts, timelines, examples and comparison tables to illustrate key aspects of the US liquidity coverage ratio proposal, is available here.

Overview of U.S. Liquidity Coverage Ratio Proposal

  • The Federal Reserve, OCC and FDIC have issued a proposal to implement the Basel III liquidity coverage ratio (LCR) in the United States.
  • Part of the Basel III liquidity framework, the LCR requires a banking organization to maintain a minimum amount of liquid assets to withstand a 30-day standardized supervisory liquidity stress scenario.
  • The U.S. LCR proposal is more stringent than the Basel Committee’s LCR framework in several significant respects.
  • The U.S. LCR proposal contains two versions of the LCR:
    • A full version for large, internationally active banking organizations.
    • A modified, “light” version for other large bank holding companies and savings and loan holding companies (depository institution holding companies).
  • The proposed effective date is January 1, 2015, subject to a two-year phase-in period.
  • The comment period for the proposal ends on January 31, 2014.

Which Organizations Are Affected?


ISS Proposes Limited Updates to 2014 Voting Policy

The following post comes to us from Sullivan & Cromwell LLP, and is based on a Sullivan & Cromwell publication by Glen T. Schleyer and Marc Trevino.

Institutional Shareholder Services, the influential proxy advisory firm, has published for public comment two proposed changes to its proxy voting guidelines for U.S. companies. The proposals are limited and do not include any change related to the effect of longer board tenure on director independence. ISS had previously surveyed institutional investors and public companies on the topic of director tenure and received strong, but deeply split, responses from both constituencies. The proposed changes are:


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