The following newsletter provides a roundup summarizing enforcement actions, guidance, rulemakings, and other public statements taken by a federal and/or state financial services regulatory agency, specifically focusing on: (1) the source of the development (regulator, legislative body, etc.), (2) the subject matter (consumer lending, money transmission, capital markets, etc.), and (3) the general issue covered.
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- Securities and Exchange Commission. Securities & Treasury Markets. SEC adopted a final rule (see fact sheet) to revise risk management practices for central counterparties in the U.S. Treasury market and facilitate additional clearing of U.S. Treasury securities transactions. The rule is effective 60 days after publication in the Federal Register. Chair Gensler, Comm'rs. Crenshaw, Lizárraga and Uyeda gave remarks in support of the rulemaking, while Comm'r. Peirce dissented.
- Securities and Exchange Commission. Broker Dealer. SEC Chairman Gensler spoke at the ABA winter meeting and discussed his views on the agency's rulemaking initiatives over the last two years, including: executive compensation, insider trading, proxy voting, and beneficial ownership. Separately, he provided remarks on the agency's recent regulatory actions on predictive data analytics.
- Securities and Exchange Commission. Cybersecurity. SEC's Division of Corporation Finance Director gave remarks on the agency's recent cybersecurity disclosure rule, its rationale, the cybersecurity incident disclosure provision, the national security and public safety delay provision; the risk management, strategy, and governance disclosure provision; and next steps. For additional information, please refer to our blog post on the topic.
- Commodity Futures Trading Commission. Derivatives & Carbon Markets. CFTC approved proposed guidance and request for public comment regarding the listing for trading of voluntary carbon credit derivative contracts. The deadline for comments is February 16, 2024. Chairman Behnam, Comm'r. Goldsmith Romero, Comm'r. Johnson, and Treasury Sec. Yellen gave statements in support of the proposal. For additional details on the proposal, please see our advisory on the topic.
- Commodity Futures Trading Commission. Commodities & Derivatives. CFTC Chairman Behnam, Comm'rs. Goldsmith Romero, Johnson and Pham issued opening remarks at the agency's open meeting on a series of proposed rules including: 1) a proposed rule requiring firms to establish operational resilience; 2) a proposed rule on the protection of clearing member funds held by derivatives clearing organizations (DCO); and 3) an application by a cryptocurrency firm for registration as a DCO.
- Commodity Futures Trading Commission. Swaps. CFTC approved a proposed rule to revise Parts 43 and 45 of the agency's regulations regarding real-time public reporting and swap data recordkeeping and reporting. The deadline for comments is 60 days after publication. Chairman Behnam and Comm'r. Mersinger released statements in support of the action, while Comm'r. Johnson voted to concur due to concerns with parts of the proposal.
Enforcement and Litigation
- Securities and Exchange Commission. Mutual Funds. SEC released an order to a firm and two affiliated entities, including a $10 million monetary penalty, to resolve allegations that they provided prohibited underwriting and investment adviser services to mutual funds.
- Securities and Exchange Commission. Broker Dealer. SEC charged five individuals and their companies for allegedly making fraudulent offerings relating to investments in pre-initial public offering (IPO) companies.
- Commodity Futures Trading Commission & Department of Justice. Fraud & Non-Public Information. CFTC issued an order simultaneously filing and settling misappropriation-based fraud charges against a commodities merchant to resolve allegations of unlawful misconduct designed to obtain material non-public information from a South American state-owned enterprise in connection with the purchase and sale of fuel oil. Concurrently, DOJ entered into a deferred prosecution agreement with the same company to resolve allegations that their activities violated the Foreign Corrupt Practices Act.
- New York Attorney General. Cryptocurrency & Broker Dealer. NY AG announced a consent order with a cryptocurrency exchange, including ordering a refund to over 150,000 New York investors of more than $16.7 million and payment of more than $5.3 million in penalties to the state, for allegedly failing to register as a securities and commodities broker-dealer and for falsely representing itself as a crypto exchange. The entity is also banned from trading securities and commodities in New York and prohibited from making its platform available to New Yorkers.
Research & Analysis
- Securities and Exchange Commission. Broker Dealer & Cybersecurity. SEC's Office of the Investor Advocate released its FY2023 activities report covering registered indexed-linked annuities; investment advisory agreements; and discussions of private markets, cybersecurity, and equity market structure.
Michael Buckalew is a regulatory analyst with Davis Wright Tremaine LLP.