News

FRAUD AND MANIPULATION—Investment advisers failed - 21 January 2025

The advisers ignored investment model vulnerabilities for years. The SEC has announced settled charges against New York-based investment advisers Two Sigma Investments LP and Two Sigma Advisers LP (Two Sigma) for breaching their fiduciary duties, related compliance and supervisory failures, and for violating the Commissions whistleblower protection rule (In the Matter of Two Sigma Investments, LP, Securities Exchange Act No. 102207 (Jan. 16, 2
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ENFORCEMENT—Off-channel probe sweeps up another 12 - 15 January 2025

One firm self-reported and received a significantly lower penalty than the others. The SEC picked up another 12 firms in its ongoing sweep of recordkeeping violations related to off-channel communications. Nine investment advisers and three broker-dealers agreed to pay a combined $63 million in civil penalties and to shore up their compliance policies and procedures. Penalties for each firm range from $11 million on the high end to just $6
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Client News Notice: Summary of CFTC Staff Advisory - 06 December 2024

The U.S. Commodity Futures Trading Commission (CFTC) has issued Staff Advisory No. 24-17, addressing the integration of Artificial Intelligence (AI) within CFTC-regulated markets. This comprehensive advisory underscores the transformative potential of AI while emphasizing the importance of compliance with the Commodity Exchange Act (CEA) and CFTC regulations. Key Highlights: AIs Expanding Role in Derivatives Markets: The advisory recogni
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Top Cybersecurity Priorities for General Counsel i - 03 December 2024

As General Counsel you hold a pivotal role in strengthening enterprise-wide cybersecurity. While technical measures often fall under the purview of the Chief Technology Officers (CTOs) and Chief Information Security Officers (CISOs), your legal expertise and authority present very real opportunities to improve a companys cybersecurity posture and resilience. Below are 15 Top Cybersecurity Priorities for General Counsel in 2025,¹falling in
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FCM and IB Members—FinCEN updates its list of FATF - 06 November 2024

On October 30, 2024, the Financial Crimes Enforcement Network (FinCEN) issued anews releaseannouncing that the Financial Action Task Force (FATF) updated its list of jurisdictions with strategic AML/CFT/CPF deficiencies. NFA Member futures commission merchants (FCM) and introducing brokers (IB) should review this release to ensure that their AML programs have the most current information on FATF-identified jurisdictions with AML/CFT/CPF deficienc
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SEC’s Division of Examinations identifies areas of - 22 October 2024

The SECs Division of Examinations on Monday released its fiscal 2025 examination priorities, an annual publication designed to inform investors and registrants of potential risks in the U.S. capital markets and make them aware of the Divisions planned focus in the new fiscal year. Our 2025 examination priorities identify the key areas of potentially increased risks and related harm for investors, said Keith Cassidy, acting director of the Divi
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COMMODITY FUTURES—CFTC finalizes amendments to Reg - 16 September 2024

The CFTC has published afinal rulethat amends Regulation 4.7, which provides exemptions from certain compliance requirements for Commodity Pool Operators (CPOs) and Commodity Trading Advisors (CTAs). Theamendments, the first since 1992, include raising the monetary thresholds for qualifying as a Qualified Eligible Person (QEP), codifying exemptive letters for Funds of Funds, and making technical improvements for efficiency. The rule will take eff
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The new rule also prescribes standards for adviser - 29 August 2024

The Financial Crimes Enforcement Network (FinCEN) has issued a final ruleaimed at combatting illicit finance activity and national security threats in the investment adviser sector. The final rule adds certain at-risk investment advisers—specifically SEC-registered investment advisers (RIAs) and exempt reporting advisors (ERAs)—to the definition of financial institution under the regulations that implement the Bank Secrecy Act (BSA).
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CFTC NEWS AND SPEECHES—CFTC approves foreign board - 31 July 2024

The CFTC approves final rule allowing U.S. introducing brokers direct access to registered foreign boards of trade for the submission of customer orders. The CFTCapprovedfinal rules amending Part 48 of its regulations. The final rules permit a foreign board of trade (FBOT), registered with the CFTC, to provide direct access to its electronic trading and order matching system to an introducing broker (IB), located in the U.S. and registered wit
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The majority emphasized that the Administrative Pr - 01 July 2024

A 6-3 majority of the Supreme Court today overruled the long-used but often criticizedChevrondoctrine in a pair of cases that directly posed the question of whether that precedent should be overruled. The now defunctChevrondoctrine set forth the approach federal courts have followed for decades in cases in which an executive branch agency interpreted ambiguities in the agencys governing statute.Chevronwas controversial because of the deference co
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ENFORCEMENT—U.S.: Respondents in SEC enforcement m - 28 June 2024

The majority reasoned that securities fraud derives from common law and, thus, seeks to adjudicate private rights; the majority also said a prior opinion was not contrary because that case involved a new statutory right without common law origins. The U.S. Supreme Court held by a 6-3 majority that respondents in SEC enforcement actions seeking civil penalties for securities fraud are entitled to a federal court jury trial under the Seventh Ame
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Effective date for amendments to lists of document - 26 June 2024

NFA amended NFA Interpretive Notice 9031—Standard List of Documents to be Exchanged under Section 8 of NFA's Code of Arbitration and NFA Interpretive Notice 9032—Standard List of Documents to be Exchanged under Section 7 of NFA's Member Arbitration Rules. The amendments update these lists to incorporate relevant documents and information related to new methods of communication and the widespread implementation of electronic tr
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REGULATIONS CALIFORNIA adopts IA rep. continuing e - 30 May 2024

As adopted, California registered investment adviser representatives must complete within the 2024 reporting period and for each subsequent reporting period: (1) an IAR ethics and professional responsibility requirement consisting of six credits of IAR ethics and professional responsibility courses offered by an authorized provider, with at least three credits covering ethics; and (2) an IAR products and practice requirement consisting of six cre
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BLOCKCHAIN—House passes what would be historic shi - 24 May 2024

SEC Chair Gary Gensler took the rare step of issuing a statement opposing the bill on the ground that it deviates from the Howey standard and could undermine the wider financial marketplace. After a lengthy delay to deal with an unrelated parliamentary issue, the House voted to send the Financial Innovation and Technology for the 21st Century Act, unofficially referred to as the FIT21 Act, to the Senate. The bill would carve out a separate reg
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Effective date for NFA rule modifying Member Quest - 21 May 2024

As part of NFA's membership application process and at least annually, all NFA Members are currently required to complete NFA's Member Questionnaire1. Responses to the Questionnaire provide NFA with material information regarding Members' operations and are critical data sources for our oversight responsibilities. NFA recently adopted NFA Compliance Rule 2-52 and a related Interpretive Notice 9082 and amended Bylaw 301 modifying the Q
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CFTC NEWS – Proposed constraints on controversial - 17 May 2024

Amendments to the CFTCs current rule, which would restrict election contracts, passed 3-2 along party lines; final approval is pending following a comment period. The CFTC approved proposed amendments to its event contracts regulation Friday in a contentious bid to limit which event contracts can be listed for trading or clearing on a registered trading platform, essentially prohibiting contracts that reference terrorism, assassination, wa
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RISK MANAGEMENT—SEC requires firms to notify custo - 17 May 2024

Broker-dealers, investment companies, advisers, and transfer agents will have to provide prompt notice of a security incident. The SEC adopted amendments to Regulation S-P to require securities firms to notify customers of a data breach. The millennium-era rule already required firms to notify customers about the use of their information, but the amendments will also require notification of security breaches and expand on the requirements
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CFTC NEWS AND SPEECHES—CFTC amends large trader po - 02 May 2024

The CFTC approved final rules amending Part 17 Large Trader Position Reporting with one dissent from Commissioner Pham. The CFTC approvedfinal rulesto amend its large trading reporting regulations for futures and options. These regulations require futures commission merchants, clearing members, foreign brokers, and certain reporting markets to report to the CFTC position information for the largest futures and options traders. The final rules
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CFTC NEWS AND SPEECHES—CFTC approves final rules o - 24 April 2024

The CFTC amended Rule 37.6(b) to codify the longstanding staff no-action position related to uncleared swap confirmations. The CFTC approvedfinal rules to amend its swap execution facility (SEF) regulations related to uncleared swap confirmations to address issues which have been addressed in CFTC staff no-action letters, including the most recent CFTC No Action Letter No. 17-17. In particular, the final rules amend CFTC Regulation 37.6(b) to
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SEC NEWS AND SPEECHES—SEC issues risk alert regard - 23 April 2024

Advisers are encouraged to look to the observations and make appropriate modifications to their training, supervisory, oversight, and compliance programs. The SECs Division of Examinations has issued a Risk Alert for investment advisers, investors, and other market participants in which it shares its preliminary observations regarding investment advisers compliance with amended Rule 206(4)-1 (Marketing Rule) under the Investment Advisers A
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S. Ct.: Supreme Court decision in Macquarie clarif - 17 April 2024

A new Supreme Court decision could make it harder for private plaintiffs to bring securities fraud actions. In its April 12 decision inMacquarie Infrastructure Corp. v. Moab Partners, L.P., the Supreme Court clarified that private securities fraud actions may not use pure omissions as the basis for certain securities fraud claims without a misleading statement. The decision narrows potential liability for private securities fraud claims und
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INVESTMENT ADVISERS—Rule amendments address invest - 28 March 2024

The amendments will become effective 90 days after publication in the Federal Register. The SEC has voted to modernize a 22-year-old rule by adopting amendments that apply to when investment advisers who provide advisory services exclusively over the internet can register with the SEC. In July 2023, the Commission voted 5-0 to issue the internet advisers proposal and, at that time, SEC Chair Gary Gensler explained that in 2002 the S
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N.D. Ala: Constitutionality of CTA reporting requi - 05 March 2024

An Alabama district court found that the reporting requirements in the Corporate Transparency Act exceeded express legislative powers and lacked a sufficient nexus to enumerated powers. A district court in Huntsville, Alabama granted summary judgment to the National Small Business Association (NSBA) and an individual member in their suit for relief from the reporting requirements of the Corporate Transparency Act (CTA). The government defended
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BLOCKCHAIN—FINRA identifies potential violations o - 29 January 2024

FINRA said that 70 percent of the retail communications reviewed contained materials that could violate the regulators rules for broker-dealers. The Financial Industry Regulatory Authority (FINRA) has updated its 2022 targeted exam review of how member firms talk to their retail customers about crypto assets and those firms related compliance with the communications rules contained in FINRA Rule 2210. FINRA said it reviewed 500 retail comm
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DISTRICT OF COLUMBIA adopts IAR continuing educati - 29 January 2024

The District of Columbia Department of Insurance, Securities and Banking has adopted continuing education requirements for investment adviser representatives. Continuing education requirements.Registered investment adviser representatives must, for each reporting period: (1) complete at least six credits of ethics and professional responsibility offered by an authorized provider, with at least three hours covering ethics; and (2) complete at l
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BENEFICIAL OWNERSHIP—Final rule issued regarding a - 08 January 2024

The Treasury Departments Financial Crimes Enforcement Network (FinCEN) has issued a final rule that establishes the framework for access to and protection of beneficial ownership information (BOI). Pursuant to the Corporate Transparency Act (CTA), the final rule outlines the circumstances under which reported BOI may be disclosed to federal agencies; state, local, tribal, and foreign governments; and financial institutions; and how it must be pro
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TENNESSEE adopts private fund adviser exemption - 21 December 2023

The Tennessee Securities Division adopted a private fund adviser exemption as follows: Private fund advisers, i.e., advisers providing advice to one or more qualifying private funds, are exempt from registration under the Tennessee Securities Act if neither the advisers nor their advisory affiliates are subject to Tennessee bad boy disqualification provisions under federal Regulation D, Rule 506(d) (unless waived by the Director for good cause
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Guidance on the annual affirmation requirement for - 05 December 2023

The CFTC requires any person that claims an exemption from CPO registration under CFTC Regulation 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5), an exclusion from CPO registration under CFTC Regulation 4.5 or an exemption from CTA registration under 4.14(a)(8) (collectively, exemption) to annually affirm the applicable notice of exemption within 60 days of the calendar year end, which is February 29, 2024, for this affirmation cycle. Persons
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CPO Members—Effective date of FinCEN's beneficial - 05 December 2023

The Financial Crimes Enforcement Network (FinCEN) has issued afinal ruleestablishing beneficial ownership information (BOI) reporting requirements for existing and newly formed corporations, limited liability companies and similar entities (collectively referred to as a reporting company). As of January 1, 2024, subject to certain exemptions, reporting companies will be required to file a report with FinCEN identifying their BOI. Generally, BOI r
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CFTC NEWS AND SPEECHES—CFTC issues No-Action lette - 20 October 2023

The Commissions work on the issue of appropriate swap block thresholds is not done yet. The Commodity Futures Trading Commissions Division of Market Oversight (DMO) has issued a letter extending a no-action position taken in CFTC Letter No. 22-03, regarding the compliance dates for certain amendments, adopted in November 2020, to the CFTCs swap data reporting rules concerning block trades and post-initial cap sizes. The CFTC press releaseex
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ENFORCEMENT—CFTC releases enforcement advisory on - 19 October 2023

The CFTCs Division of Enforcement released an enforcement advisory providing guidance to enforcement staff on penalties, monitors and consultants, and admissions. The CFTCs Division of Enforcement issued an advisoryto provide guidance to enforcement staff on future enforcement resolution recommendations to the Commission. The advisory provides guidance on determining whether proposed civil monetary penalties are sufficient, when the imposi
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RISK MANAGEMENT—Report outlines Division of Examin - 19 October 2023

The priorities are guided by the Division's four pillars: promoting compliance, preventing fraud, monitoring risk and informing policy. The SEC's Division of Examinations released its examination priorities for 2024. The examinations will emphasize areas posing emerging risks to investors or the markets. Among other items, the examination focus areas include investment adviser compliance programs and broker-dealers' obligations und
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COMMODITY FUTURES—CFTC proposes to update requirem - 04 October 2023

The proposed updates to Regulation 4.7 would be the first changes since its adoption in 1992 and would apply to commodity pool operators, commodity trading advisers, and commodity pools. The CFTC has proposed to update the requirements underlying the exemption provisions of Regulation 4.7 which the Commission estimates is used by more than 800 commodity pool operators (CPOs) running 4,300 commodity pools and by more than 850 commodity trad
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CFTC ENFORCEMENT—Interactive Brokers to pay $20M f - 03 October 2023

The CFTC held Interactive Brokers accountable for widespread use of Whatsapp and personal text messaging. The CFTC issued an order settling charges against Interactive Brokers Corp., an introducing broker, and Interactive Brokers LLC, a futures commission merchant, for failing to maintain and preserve records that were required to be kept under CFTC recordkeeping requirements and failing to diligently supervise matters related to their busines
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SECURITIES OFFERINGS—FLORIDA amends its securities - 29 September 2023

Among the numerous changes to Floridas securities laws is the addition of new Section 517.1214, Continuing education requirements for associated persons of investment advisers and federal covered advisers. On October 1, 2023, Florida C.S. S.B. 180 takes effect. The legislation, enacted on June 9, 2023, makes changes across multiple sections of Floridas securities laws. Notably, the legislation, among other things, provides that the definition
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BLOCKCHAIN—SEC crypto enforcement chief David Hirs - 21 September 2023

The SEC will continue to pursue registration and fraud actions in the crypto space, with an evolving focus that could expand to institutional investors and DeFi platforms. Crypto assets are causing a lot of risk and harm to investors and institutional investors should be careful about acting as statutory underwriters, said David Hirsch, chief of the SEC Crypto Assets and Cyber Unit, Division of Enforcement. Hirsch discussed SEC enforcement act
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ENFORCEMENT—Commission hits five advisers, plus on - 08 September 2023

The Commission made a similar targeted sweep for custody rule violations nearly one year ago. Five investment advisers agreed to pay penalties totaling over $500,000 to settle SEC charges of violations of the custody rule. Among other violations, each of the five firms failed to conduct or timely distribute annual audited financial statements to investors in private funds that they advised. Each of the firms agreed to a cease-and-desist order
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BLOCKCHAIN—D.C. Cir.: SEC should have approved Gra - 01 September 2023

The ruling gives Grayscale the opportunity to have its proposed bitcoin exchange-traded product re-evaluated by the Commission. The D.C. Circuit has vacated the SEC's rejection of Grayscale Investment's proposed bitcoin exchange-traded product. The task before the court was to determine whether Grayscale demonstrated that its product was similar to two bitcoin futures ETPs that were approved while the Grayscale proposal was pending. Th
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ENFORCEMENT—W.D. Tex: Unregistered commodity tradi - 01 September 2023

The major question for requiring registration is where the line is drawn between CTA and technology provider. Texass Western District Court issued a consent order against a Texas commodity trading advisor firm (CTA) and its individual associated person owner (AP) for providing trade signals and using those signals to automatically trade binary options for customers without first registering with the Commodity Futures Trading Commission. The CF
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SEC NEWS AND SPEECHES—Commission approves new rule - 26 August 2023

Staffers say the rules are designed to protect private fund investors by increasing transparency and competition in the private funds market, but the Commissions approval is controversial.The SEC passed final rules and amendments governing private funds under the Investment Advisors Act of 1940 (Advisers Act) Wednesday by a 3-2 vote, with SEC Commissioners Hester Peirce and Mark Uyeda voting against the changes. The rules require private fund
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INVESTMENT ADVISERS—Comment period reopened on pro - 24 August 2023

The initial comment period on changes to the safeguarding rule ended in May, but the Commission feels that additional time is warranted in light of the adoption of the private fund adviser audit rule. The SEC has reopened the comment period on its controversial plan to amend Investment Company Act Rule 206(4)-2 (the custody rule) to extend an investment advisers safeguarding requirements to crypto and other digital assets. The Commission said
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BLOCKCHAIN—S.D.N.Y.: SEC moves for interlocutory a - 21 August 2023

Whether or not crypto tokens are securities underHoweyis critical to the SECs enforcement authority. In a key tactical move, the SEC filed a motion for interlocutory appeal of a recent SDNY ruling inSEC v. Ripple Labsthat sales of the XRP token in certain settings did not involve the offer and sale of securities requiring registration. The SEC said there is substantial ground for differences of opinion as reflected by a split in the SDNY distr
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ENFORCEMENT—SEC, CFTC again crack down on widespre - 09 August 2023

The agencies are hammering home the point that unapproved business communications on personal devices are recordkeeping failures that can impede investigations. Over a dozen firms have settled SEC and CFTC charges for pervasive failures to keep records of off channel communications. The SEC ordered civil penalties totaling $289 million against 11 firms, and the CFTC $260 million against four financial institutions, for longstanding and widespr
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BLOCKCHAIN—S.D. Cal.: SEC escapes lawsuit seeking - 02 August 2023

Although the SEC prevailed, the court chided that conflicting SEC positions demonstrate the need for the SEC to issue definitive guidance rather than approaching the issue in piecemeal litigation. The SEC won dismissal of a lawsuit by Hodl Law, a small crypto-focused law firm that sought declaratory relief on the status of the Ether crypto asset (ETH) under the federal securities laws. The federal district court dismissed on jurisdictional
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BLOCKCHAIN—S.D.N.Y.: Ripple opinion’s two holdings - 24 July 2023

The opinion appeared to be protective of sophisticated investors but interpreted existing law in a way that withheld such protections from others, thus suggesting a somewhat complicated path forward that may weaken some SEC crypto enforcement efforts. A judge on the U.S. District Court in Manhattan issued a long-awaited opinion in the Ripple Labs, Inc. XRP token case, but that opinion reached a split result that at least partially raises many
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The FTC’s New Safeguard Rule - 29 June 2023

The Federal Trade Commission (FTC) has updated the requirements of the Standards for Safeguarding Customer Information, known as the Safeguards Rule under the Gramm-Leach-Bliley Act (GLBA standards) to ensure protection of the privacy and personal information of consumers/customers. The main objectives of the GLBA standards for safeguarding information to ensure the security and confidentiality of consumer/customer information, protect against
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CFTC renews scrutiny of political event contracts - 27 June 2023

If approved, the contracts will settle based on which political party controls the House and Senate. The CFTC is taking more time to review a self-certified event contract that settles based on political control of the chambers of Congress. Amid calls for the CFTC to issue proactive regulation in this area, including from dissenting Commissioner Summer Mersinger, the agencys questions for commenters hint that it may see the contracts as a form
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CLEARANCE AND SETTLEMENT—CFTC issues staff advisor - 01 June 2023

The CFTCs Division of Clearing and Risk issued a staff advisory on review of risks associated with expansion of DCO clearing of digital assets. The CFTCs Division of Clearing and Risk (DCR) issued a staff advisory on the risks associated with the expansion of Derivatives Clearing Organization (DCO) clearing of digital assets. In the past several years, DCR has observed increased interest by DCOs and DCO applicants in expanding the types of pro
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DERIVATIVES—CFTC issues staff advisory related to - 19 May 2023

The CFTCs staff advisory encourages entities using prime brokerage arrangements to examine the specific nature of their activities for the potential need to register as a derivatives clearing organization. The CFTCs Division of Clearing and Risk (DCR) issued a staff advisory encouraging entities using prime brokerage arrangements that provide credit substitution on a centralized basis to examine the specific nature of their activities for the
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FINANCIAL INTERMEDIARIES—SEC Division of Examinati - 17 May 2023

LIBOR-Transition preparation efforts varied considerably depending on the type and amount of LIBOR exposure, with most firms examined having significant direct exposure to LIBOR-linked contracts, and a few with large retail client bases having more limited and indirect exposure. The SECs Division of Examinations has issued a Risk Alert identifying its observations from examinations conducted at investment firms concerning LIBOR-transition prep
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INVESTMENT COMPANIES—Gensler outlines SEC’s effort - 04 May 2023

In remarks to the MFA, he discussed some of the reasoning behind the Commissions pending proposals that affect how private funds operate. Private funds currently are the focus of a number of SEC initiatives, including February 2022 proposals to enhance the regulation of private fund advisers, many of which are intended to keep up with fast-changing technology and business models, according to SEC Chair Gary Gensler. Inremarksto the Managed Fun
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INVESTMENT ADVISERS—SEC approves amendments to For - 04 May 2023

The amendments advance the filing timeline in the case of a significant event, requiring large hedge fund advisers to report as soon as practicable but no later than 72 hours from its occurrence. The SEC adopted amendments to Form PF, the confidential reporting form for certain SEC-registered advisers to private funds. The reporting changes are designed to provide the Financial Stability Oversight Council (FSOC) with more timely information to
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INVESTMENT ADVISERS—SEC issues Risk Alert on obser - 05 April 2023

The SECs review of recent newly-registered adviser examinations identified issues in compliance policies and procedures, disclosure documents and filings, and marketing. The SECs Division of Examinations issued aRisk Alertdiscussing the focus areas reviewed during examinations of newly-registered advisers and sharing staff observations regarding compliance policies and procedures, disclosures, and marketing practices. Examinations of newly-reg
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Effective date for NFA rule establishing requireme - 29 March 2023

NFA recently adopted NFACompliance Rule 2-51, which imposes anti-fraud, just and equitable principles of trade, and supervision requirements on NFA Members and Associates that engage in digital asset commodity activities. The Rule's scope is currently limited to Bitcoin and Ether. The Rule also specifically references a Member's existing obligation to comply with NFA'sInterpretive Notice 9073—Disclosure Requirements for NFA Memb
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SWAPS—CFTC designates unique product identifier an - 17 February 2023

Advances in swap data reporting will increase regulatory insight into market activity, necessary to promote market integrity, says Commissioner Romero. The CFTC issued an order on Thursday that will require registered entities and swap counterparties to use unique product identifiers (UPIs) issued by the Derivatives Service Bureau Limited for all swaps in credit, equity, foreign exchange and interest rate asset classes. The Commission set a co
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RISK MANAGEMENT—SEC’s 2023 exam priorities include - 09 February 2023

Division of Examinations announced its priorities to help regulated entities assess whether they need to improve their compliance programs. The SECs Division of Examinations released its 2023 examination priorities which emphasize, among other things, compliance with new rules applicable to investment advisers and investment companies, ESG-related advisory services and fund offerings, and offers and recommendations of crypto assets. The report
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INVESTMENT ADVISERS—SEC proposes new oversight req - 27 October 2022

SEC Chair Gensler supports the new oversight requirements but Commissioner Peirce questions the necessity of a rulemaking that reconfirms the incontrovertible fact that an advisers fiduciary duty is not terminated by outsourcing. The SEC has proposed a new rule and rule amendments under the Investment Advisers Act of 1940 which will prohibit registered investment advisers from outsourcing certain services or functions without first meeting min
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COMMODITY FUTURES—CFTC suspends, fines Wisconsin b - 24 October 2022

The Commission charged the principal of Prime Agricultural Investors with a pattern of fraudulent transactions in CME Group wheat, corn, soybean and cattle futures. The CFTC simultaneously filed and settled charges against Prime Agricultural Investors, Inc., a Wisconsin-based introducing broker, and Chad Henderson, a principal and associated person of Prime, for violations of the Commodity Exchange Act and CFTC regulations relating to the impr
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INVESTMENT ADVISERS—SEC clarifies that advisers ma - 14 October 2022

A new SEC staff FAQ implements a 2021 recommendation by the Asset Management Advisory Committee to clarify the intersection of fiduciary duties and diversity, equity, and inclusion (DEI). SEC staff issued an FAQ stating that an investment adviser may consider factors relating to diversity, equity, and inclusion (DEI) in recommending other investment advisers to or selecting other advisers for its clients—if the use of such factors is con
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BROKER-DEALERS—WORM spurned: SEC modernizes electr - 13 October 2022

Broker-dealers and SBS entities are no longer bound by late-90s technology when preserving electronic records. The SEC unanimously adopted amendments to modernize its broker-dealer electronic recordkeeping requirements. The amendments to Exchange Act rules 17a-4 and 18a-6 modify requirements regarding the maintenance and preservation of electronic records, the use of third-party recordkeeping services to hold records, and the prompt production
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ENFORCEMENT—SEC, CFTC fine 11 financial groups $1. - 29 September 2022

Widespread use of off-channel communications tools at major financial institutions violated federal law and regulations, caused cybersecurity and privacy risks, and may have hobbled investigations. In massive parallel crackdowns, the SEC and CFTC ordered civil penalties of over $1.1 billion and $710 million, respectively, against 11 financial institution groups in connection with the use of unapproved communications methods and failure to pres
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INVESTMENT ADVISERS—Use of standing order for prox - 22 September 2022

The two dissenting Commissioners emphasized how the majoritys order could be misunderstood to deny clients agreements to use standing orders or it could deprive advisers, especially small ones, of the ability to mull cost in casting proxy votes. The SEC announced that Toews Corporation has agreed to pay $150,000 to settle charges that it repeatedly failed to determine whether proxies voted on behalf its clients were in those clients best inter
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DERIVATIVES—CFTC extends no-action relief from cer - 12 August 2022

The CFTC extended no-action relief from certain position aggregation requirements under CFTC Regulation 150.4 for an additional three years. The CFTCs Division of Market Oversight (DMO) issued a no-action letter extending CFTC Staff Letter No. 19-19, regarding certain position aggregation requirements, which expires August 12, 2022.CFTC Staff Letter No. 22-09provides that DMO will not make an enforcement referral to the Commission with respect
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INVESTMENT ADVISERS—SEC proposes to amend reportin - 12 August 2022

The SEC and CFTC proposed amendments to Form PF to enhance information collected from private fund advisers. The SEC proposed amendments to Form PF to amend reporting requirements for all filers and large hedge fund advisers. The amendments, which passed the Commission by a 3-2 vote, are also being considered by the CFTC. The amendments are intended to enhance the FSOC's monitoring of systemic risk and to collect additional, and more usefu
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Ruddy Gregory shortlisted for HFM US Services Award 2022!
Citywealth Magazine Top 15 US Legal Crypto Practitioners 2022 List

FORMS AND FILINGS—SEC moves Advisers Acts filings - 27 June 2022

New electronic filing requirements will improve the submission and review process and will make the information more accessible to the investing public. The SEC has unanimously adopted final rules requiring the electronic filing of documents by investment advisers, institutional investment managers, and others that had previously been filed on paper. In short, the amendments will require the filing or submission of: applications for orders und
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SWAPS—CFTC issues advisory on Swap Data Errors and - 15 June 2022

The CFTC issued a staff advisory with instructions for notifying staff when a swap execution facility, designated contract market, or reporting counterparty determines that it is unable to timely correct an error. The CFTCs Division of Data (DOD) issued an advisory that provides instructions for notifying staff when a swap execution facility (SEF), designated contract market (DCM), or reporting counterparty determines that it is unable to time
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SEC NEWS AND SPEECHES—Risk Alert highlights invest - 09 May 2022

The most commonly observed deficiencies related to Section 204A and Rule 204A-1, the Code of Ethics Rule. The SECs Division of Compliance has issued an alert to provide investment advisers, investors, and other market participants with information concerning deficiencies related to Section 204A of the Investment Advisers Act of 1940 and the Code of Ethics Rule, (Rule 204A-1), thereunder. Section 204A and Rule 204A-1.All investment advisers,
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TOP STORY—N.D. Ill.: Judge declares CFTC struck fo - 19 April 2022

After more than two years of silence, Judge Robert Blakely has issued a scathing rebuke to the CFTC which confirms an earlier finding of the agencys contempt for willfully violating the confidentiality provisions of an August 2019 settlement order. Judge Robert Blakey of the North District of Illinois has issued an order confirming a prior contempt finding against the CFTC. The judge stated that the agency had willfully violated the unambiguou
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RUDDY GREGORY ADVISES VERTEX ENERGY ON SUCCESSFUL - 01 April 2022

Ruddy Gregory is pleased to announce that advised refining company Vertex Energy, Inc. (NASDAQ: VTRN) on a major transaction completed on April 1, 2022, and being the completion of the acquisition of the Mobile, Alabama refinery and related marine terminal and logistics assets from Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), Shell UA, Inc. and Shell Chemical LP. At closing, Vertex acquired approximately $165 million in hydrocarbo
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ENFORCEMENT—8 representatives question SEC’s habit - 18 March 2022

A bipartisan group of congresspersons believe the SECs use of investigations to gather information from crypto and blockchain firms could violate the Paperwork Reduction Act. A group of eight U.S. Representatives—half Republicans, half Democrats—wrote to SEC Chair Gary Gensler to learn more about the agencys use of document requests to gather information from cryptocurrency and blockchain firms that are not within its jurisdiction.
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FCM and IB Members—FinCEN updates its list of FATF - 18 March 2022

Notice to Members I-22-11 On March 10, 2022, the Financial Crimes Enforcement Network (FinCEN) issued a news release announcing that the Financial Action Task Force (FATF) reissued its list of jurisdictions with strategic AML/CFT deficiencies. NFA Member futures commission merchants (FCM) and introducing brokers (IB) should review this release to ensure that their AML programs have the most current information on FATF-identified jurisdictions
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TOP STORY—SEC fines 12 additional firms in second - 17 February 2022

With a total of 42 firms now having been sanctioned for significant Form CRS lapses, the SEC might now turn its focus to specific deficiencies identified in a December 17 staff statement. In a second enforcement sweep targeting Form CRS shortcomings, the SEC imposed sanctions against six investment advisers and six broker-dealers for failing to deliver customer relationship summaries to retail investors by the required deadline. Some responden
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BROKER-DEALERS—FINRA annual examinations report di - 14 February 2022

The report also takes a look at problems FINRA found with some mobile apps communications with customers and firms supervision of activity on those apps. FINRA published the 2022 report on its examinations and risk monitoring program in which it discusses its efforts on newer SEC rules such as Regulation Best Interest and Form CRS, as well as cybersecurity threats and the proliferation of securities trading through mobile apps. The report, whi
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TOP STORY—Proposed rules enhance regulation of pri - 10 February 2022

Proposed rules on cybersecurity risk management and enhancing the regulation of private fund advisers were approved 3-1. The SEC has proposed two sets of new rules under the Investment Advisers Act concerning the regulation of private fund advisers and cybersecurity risk management. The proposed new rules and regulations regulating private funds would, among other changes, require private fund advisers to provide quarterly statements detailing
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SWAPS—CFTC provides no-action relief for complianc - 04 February 2022

The no-action position effectively adds approximately six months to compliance dates for the 2020 amendments to the swap data reporting regulations. The CFTC's Division of Data issued a no-action letter extending the compliance dates for the 2020 amendments to the swap data reporting rules. The rule amending regulations concerning the swap data recordkeeping and reporting requirements for swap data repositories has a compliance date of May
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Extension of relief from the on-site annual inspec - 01 February 2022

Notice to Members I-22-05 Due to COVID-19, NFA allowed Members to conduct all calendar year 2020 and 2021 annual inspections of branch offices and guaranteed introducing brokers (IB) remotely (see Notices to Members I-20-35 and I-21-25). NFA is extending the relief provided in Notices I-20-35 and I-21-25 through the end of 2022. Although Members must conduct the required annual inspection of each branch office and guaranteed IB by December 31
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INVESTMENT ADVISERS—Exams Division issues Risk Ale - 31 January 2022

The Division is encouraging private fund advisers to review their practices, and written policies and procedures to address the issues identified in the alert. The Exams Division has released a Risk Alert with its Observations from Examinations of Private Fund Advisers. (January 27, 2022). The alert provides an overview of certain compliance issues observed in examinations of registered investment advisers that manage private funds (private fu
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TOP STORY—Commission proposes enhanced Form PF rep - 27 January 2022

Amendments to Form PF would require reporting within one day if an event signals risk to the broader financial system. Regulation ATS would cover Communications Protocol Systems. The SEC has voted to propose amendments to enhance private fund reporting and, separately, to bring more Alternative Trading Systems under Regulation ATS. The proposed amendments to Form PF would require current reporting of certain stressors that could harm investors
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TOP STORY—Gensler has SEC taking closer look at PE - 21 January 2022

The SEC may be poised to look more closely at private equity firms and hedge funds as part of larger focus on market efficiency. SEC Chair Gary Gensler, in aspeechto an audience at the Exchequer Club of Washington, D.C., suggested that a wider agency focus on the efficient markets component of the agencys core mission could produce a staff recommendation regarding, among other things, the fees and expenses associated with private equity firms
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Maryland Adopts I-A Rep. Continuing Education Requ - 11 January 2022

The Maryland Securities Division, like some other states, has adopted a continuing education requirement for investment adviser representatives, along with amending investment adviser and investment adviser representative written examination requirements. As adopted, registered investment adviser representatives must, for each reporting period: (1) complete six credits of Regulatory and Ethics and Content offered by an authorized provider, with a
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FORMS AND FILINGS—SEC provides observations regard - 05 January 2022

The SEC provided observations regarding relationship summaries filed by broker-dealers and investment advisers offering services to retail investors. The SEC issued astatementregarding Form CRS disclosures required of broker-dealers and investment advisers offering services to retail investors. The statement describes observations of the Standards of Conduct Implementation Committee based on its review of filed relationship summaries from a di
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ENFORCEMENT—SEC and CFTC fine JPMorgan $200 millio - 21 December 2021

JPMorgan employees routinely used personal communications means to discuss business matters, circumventing books and records requirements and ultimately hindering SEC and CFTC investigations. In parallel settled proceedings, the SEC and CFTC imposed civil penalties totaling $200 million against JPMorgan Chase Bank N.A. and affiliated entities for serious recordkeeping failures that impeded the regulators ability to investigate potential violat
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Action required: NFA adds virtual currency and mic - 06 December 2021

Notice to Members I-21-42 NFA Members must complete the Annual Questionnaire annually and update it throughout the year to reflect significant changes in business activity. Due to recent increased interest and activity in virtual currency and micro contract products, NFA has updated the Questionnaire to address Members' spot/physical virtual currency, virtual currency derivatives and micro contract transactions. NFA requires all CPO, CT
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TOP STORY—Gensler calls for more investor protecti - 02 December 2021

In a fireside chat with his direct predecessor at the DACOM Summit, Chair Gensler urged crypto trading and lending platforms to talk with the SEC about operating within the securities rules. In a conversation at theDigital Asset Compliance & Market Integrity Summit, SEC Chair Gary Gensler repeatedly stressed that innovations like crypto and DeFi will not survive outside of the regulatory framework. Outside of public policy norms, people ge
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VIRTUAL CURRENCIES—President signs infrastructure - 17 November 2021

The bipartisan infrastructure bill contains mostly traditional transportation funding but also contains a cryptocurrency transaction reporting provision that may presage further Congressional regulation of blockchain activities. President Joe Biden signed into law the Infrastructure Investment and Jobs Act (H.R. 3684) thus ending a months-long odyssey resulting in a compromise bill that passed theSenatefirst in August by a vote of 69-30 and th
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INVESTMENT ADVISERS—SEC amends rule on inflation a - 15 November 2021

The SEC amended Advisers Act Rule 205-3, a rule that permits investment advisers to charge performance-based compensation to qualified clients. According to the SECsfact sheet, the SEC amended Rule 205-3 to streamline the process relating to the adjustment of the assets-under-management and net worth tests for qualified client status and to ensure that the rule text remains consistent with the inflation adjustment orders issued by the SEC. Rul
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INVESTMENT ADVISERS—Division of Examinations issue - 15 November 2021

The Division has supplemented a previously issued Advisory Fees Risk Alert by providing greater detail on compliance issues observed during the recent Advisory Fees Initiative examinations. The SEC's Division of Examinations has issued aRisk Alert supplementing a previously published Advisory Fees Risk Alert by providing greater detail on certain compliance issues observed during the recent Advisory Fees Initiative examinations, including
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TOP STORY—Gensler comments on private funds regula - 15 November 2021

The SEC chair spoke about the importance of certain of these funds to our capital markets and potential Commission action in this area. In prepared remarks for a recent summit, SEC Chair Gary Gensler discussed why funds such as private equity and hedge funds matter to the capital markets. He said that they matter because such funds are large, and theyre growing in size, complexity, and number. The size and transaction activities of these funds
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TOP STORY—OCIE outlines compliance issues with adv - 12 November 2021

OCIE staff issued a deficiency letter to nearly every adviser it examined, with problems most often relating to compliance programs, portfolio management, and performance advertising. In a series of examinations to assess the practices of investment advisers providing robo-advisory services, the SECs Office of Compliance and Inspections (OCIE) observed a number of compliance issues which it has outlined in a new risk alert. Along with the defi
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INVESTMENT ADVISERS—SEC advisory committee adopts - 04 November 2021

The meeting was the last for the Asset Management Advisory Committee, formed in 2019 to advise the SEC on issues pertaining to asset management. At its final meeting, the SECs Asset Management Advisory Committee unanimously adopted recommendations from two of its subcommittees. One of the sets of recommendations highlights principles for regulation in the technologically evolving investment advisory industry, while the second aims to support a
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President’s Working Group recommends Congress quic - 04 November 2021

In the absence of such action, the group recommends that the FSOC consider steps it could take to address the risks of stablecoins. Congress should quickly enact legislation to ensure that payment stablecoins are subject to a prudential federal framework on a consistent and comprehensive basis, according to areportfrom the Presidents Working Group on Financial Markets (PWG), the Federal Deposit Insurance Corporation, and the Office of the Comp
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FCM and IB Members—FinCEN updates its list of FATF - 01 November 2021

Notice to Members I-21-34 On October 26, 2021, the Financial Crimes Enforcement Network (FinCEN) issued a news release announcing that the Financial Action Task Force (FATF) reissued its list of jurisdictions with strategic AML/CFT deficiencies. NFA Member futures commission merchants and introducing brokers should review this release to ensure that their AML programs have the most current information on FATF-identified jurisdictions with AML/
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INVESTMENT ADVISERS—Examinations staff reviews Div - 21 October 2021

As is the case in other SEC divisions and offices, the Examinations staff is taking a closer look at issues related to ESG and climate risk. This years SEC Speaks conference presented by the Practising Law Institute featured a discussion by several senior officials in the SECs Division of Examinations. The officials outlined several areas of focus in upcoming examinations, including advisers to private funds, the Commissions new marketing rule
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ENFORCEMENT—Enforcement staff gives update on Divi - 19 October 2021

The SEC will continue to pursue cases of unregistered digital tokens. Members of the SECs Division of Enforcement staff spoke at the Practising Law Institutes recent SEC Speaks conference on cyber-related issues, including digital token enforcement. The staff discussed how the Division pursues digital token-related cases as well as SEC victories in federal court over offerings made by Kik and Telegram. Cyber unit update.Kristina K. Littman,
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ENFORCEMENT—SEC signals tougher approach to invest - 18 October 2021

The Enforcement Division will be resurrecting the policy of requiring admissions in the most egregious cases. At this years Practising Law InstitutesSEC Speaks, top officials in the Division of Enforcement indicated that the staff will be taking a harder line in its approach to investigations and remedies sought. In addition to placing some restrictions on the Wells process such as the submission of white papers, the staff will also be seeking
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Effective date for amendments to NFA's Interpretiv - 14 October 2021

Notice to Members I-21-28 NFA's Interpretive Notice entitled Registration Requirements: Branch Offices requires each commodity pool operator (CPO), commodity trading advisor (CTA), futures commission merchant (FCM), retail foreign exchange dealer (RFED) and introducing broker (IB) Member to list its branch offices, as defined in the Interpretive Notice, on its Form 7-R. In March 2020, due to the COVID-19 pandemic, NFA issued Notice to Memb
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CFTC’s reparations jurisdiction extends to registe - 11 October 2021

The CFTC's reparations jurisdiction extended to a party who was registered in one capacity as to a particular entity but whose alleged violation was committed while acting solely on behalf of a different, non-registered entity. The CFTC reversed the dismissal of the fraudulent-solicitation claim against a registered person. The CFTC held that the CFTCs reparations jurisdiction extended to a party who was registered in one capacity as to a
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TOP STORY—E.D. Pa.: Dirks personal benefit test no - 11 October 2021

The court declined to import theDirkspersonal benefit test from Exchange Act cases into insider trading cases brought under Title 18. A district court rejected a proposed jury instruction that the personal benefit test applies to securities fraud charged under Title 18. The defendant in this case was charged with securities fraud for participating in an insider trading scheme. The government maintained that it does not have to prove that a tip
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CFTC fines Kraken for illegal digital asset transa - 04 October 2021

The CFTC levied a $1.25 million penalty on Payward Ventures, which does business as digital asset exchange operator Kraken, for illegal off-exchange trading and for failing to register as a futures commission merchant (FCM). The agency found that Kraken, which consented to cease and desist from further Commodity Exchange Act violations, illegally offered margined retail commodity transactions in digital assets, including Bitcoin (In the Matter of
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Ruddy Gregory Advises Vertex Energy on Two Success - 26 July 2021

Ruddy Gregory is pleased to announce that it hasrecentlyadvised refining company Vertex Energy (NASDAQ: VTNR) ontwo major transactions. In May, the firm advised Vertex Energy in its acquisition of a Mobile refinery in Alabama from Royal Dutch Shell for $75M. This acquisition is regarded to be the largest and most significant transaction completed by Vertex, thus allowing Vertex to become a leading regional supplier of both renewable and conve
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States seek to block DeFi firm’s interest-bearing - 26 July 2021

Decentralized finance company BlockFi faces enforcement actions in New Jersey, Texas, and Alabama for offering unregistered cryptocurrency products. Three states have now initiated enforcement proceedings against cryptocurrency lending and trading firm BlockFi, Inc. for alleged violations of state securities laws. In separate proceedings, New Jersey, Texas, and Alabama have each alleged that the New Jersey-based firms interest-earning cryptocu
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FCM and IB Members—FinCEN updates its list of FATF - 26 July 2021

On July 1, 2021, the Financial Crimes Enforcement Network (FinCEN) issued a news release announcing that the Financial Action Task Force (FATF) reissued its list of jurisdictions with strategic AML/CFT deficiencies. NFA Member futures commission merchants (FCM) and introducing brokers (IB) should review this release to ensure that their AML programs have the most current information on FATF-identified jurisdictions with AML/CFT deficiencies and r
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NFA Coronavirus Update - Extension of relief from - 21 July 2021

Due to COVID-19, NFA allowed Members to conduct all calendar year 2020 annual inspections of branch offices and guaranteed introducing brokers (IB) remotely (seeNotice to Members I-20-35). NFA understands that Members may find it difficult to complete on-site annual inspections for calendar year 2021 since their staff may be in various stages of transitioning back to the office or still working remotely. Therefore, NFA is extending the relief pro
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The Arkin Group: China’s move to limit cryptocurre - 01 June 2021

Last week, the Chinese Communist Party (CCP) State Council ordered a halt to cryptocurrency trading and mining within its borders, claiming that the ban would better protect its citizens from fraud and lower financial risks and speculative trading. In response to the new policy, the value of Bitcoin and Ethereum - ecosystems heavily dependent on mining activity in China - tumbled and the coins posted their largest one-day loss since the onset of
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CFTC Staff Publishes Updated Responses to FAQs Reg - 01 June 2021

Release Number 8390-21 The Commodity Futures Trading Commissions Market Participants Division (MPD) today published updated responses to frequently asked questions regarding CFTC Regulation 4.27 and Form CPO-PQR (FAQs). These FAQs update the 2015 FAQs that addressed issues on Form CPO-PQR from filing mechanics and deadlines to more technical questions. [See CFTC Press Release No.7273-15] In October 2020, the CFTC adopted a Final Rule amend
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INVESTOR EDUCATION—SEC staff weighs in on CFTC reg - 13 May 2021

The SECs Division of Investment Management statement urges continued investor vigilance despite increased trading volumes and growing open interest in Bitcoin futures markets overseen by the Commodity Futures Trading Commission. The SECs Division of Investment Management (IM) issued a statement addressing a number of issues funds registered under the Investment Company Act investing in the Bitcoin futures markets should consider. The IM statem
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SEC Intends to Raise Threshold for Performance-Bas - 13 May 2021

According to a May 10, 2021 release from the Securities and Exchange Commission (the Commission or SEC), an investment adviser may not charge clients a performance-based fee unless the client has a net worth of at least $2.2 million. The Commission is mandated by 17 C.F.R. § 275.205-3(e) (Rule 205-3) to adjust the dollar amount thresholds set forth in the rule every five years. The Investment Advisers Act of 1940 (the Advisers Act) genera
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INVESTMENT ADVISERS—NASAA report provides a snapsh - 23 April 2021

The annual report from NASAA's Investment Adviser Section includes an updated profile of state-registered firms and offers compliance guidance related to the pandemic. The North American Securities Administrators Association (NASAA) has released its annual report on the state-registered investment adviser industry and the related activities of state securities regulators. The report also discusses the challenges faced by the advisory indus
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Alternative funds organization foresees hedge fund - 15 April 2021

Increased industry optimism has been driven partly by a perceived light at the end of the tunnel regarding the COVID-19 pandemic as well as a more predictable presidential administration in the U.S. The Alternative Investment Management Association (AIMA) has released its Hedge Fund Confidence Index (HFCI) for the first quarter of 2021. The HFCI indicates a high level of confidence in the hedge fund industry for the next 12 months. According t
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VIRTUAL CURRENCIES—Commissioner Peirce revisits sa - 15 April 2021

Clarity in the realm of digital currency will be crucial, according to the official. SEC Commissioner Hester Peirce has released a statement on GitHub providing an updated version of her token safe-harbor proposal from February 2020. According to the commissioner, the safe harbor is designed to provide network developers with a three-year grace period within which they can facilitate participation in and the development of a decentralized netw
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Gensler confirmed as next SEC permanent chair - 15 April 2021

Gensler will be pressed almost immediately to deal with growing issues surrounding SPACs along with longer-range policy choices on climate risk disclosures and digital asset securities. The Senate has confirmed Gary Gensler to be the next permanent chair of the SEC by a vote of 53-45. Gensler, like former SEC Chair Mary Schapiro before him, once was chair of the CFTC, which is why very few members of the Senate Banking Committee doubted his cr
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Effective date for NFA rules establishing CPO noti - 14 April 2021

Notice to Members I-21-15 NFA recently adopted Compliance Rule 2-50 and a related Interpretive Notice entitled Compliance Rule 2-50: CPO Notice Filing Requirements, which require commodity pool operator (CPO) Members to file notice with NFA when a market or other event affects a commodity pool's ability to fulfill its participant obligations. This rule and Interpretive Notice will become effective on June 30, 2021. Similar to NFA notifi
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Division of Examinations issues ESG Risk Alert - 13 April 2021

The Risk Alert tells what the Division's examinations will focus on and gives examples of both good and bad practices. The SEC's Division of Examinations has issued a risk alert highlighting its recent observations from exams of firms offering ESG products and services. The alert gives the Division's observations of deficiencies and internal control weaknesses derived from examinations of ESG investing by advisers and funds. The
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2d Circuit: Insider trading conviction based on ND - 07 April 2021

While the defendant and the company in which he traded dealt at arms length, his agreement to keep information confidential was enough to establish the fiduciary duties that in turn supported a guilty verdict for insider trading. The Second Circuit Court of Appeals upheld the conviction of a defendant who tipped information about a company that his fund was acquiring. Despite an arms-length relationship between the defendant and the company hi
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Effective date for NFA's swap dealer capital requi - 31 March 2021

Notice to Members I-21-14 On September 15, 2020, the CFTC adopted final rules imposing minimum capital and financial reporting requirements for swap dealers (SD) that are not subject to the rules of a prudential regulator (Covered SDs). These rules establish an October 6, 2021 compliance date. The Commodity Exchange Act requires that NFA adopt rules establishing minimum capital and other financial requirements for its Members, which are at lea
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BROKER-DEALERS—SEC staff highlight deficiencies in - 30 March 2021

The SECs Division of Examinations is reminding broker-dealers of their obligations under anti-money-laundering requirements. In a new risk alert, staff of the SECs Division of Examinations shared their observations from examinations of broker-dealers and mutual funds regarding their compliance with anti-money-laundering (AML) regulatory requirements. Staff found some deficiencies in firms policies and procedures, and in their implementation of
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Effective date for proposed Interpretive Notice re - 24 March 2021

Notice to MembersI-21-13 NFA recently adopted an Interpretive Notice entitled NFA Compliance Rules 2-9 and 2-36: Members' Use of Third-Party Service Providers. The Interpretive Notice requires each Member outsourcing regulatory functions to adopt and implement a supervisory framework over its outsourcing function to mitigate outsourcing-related risks. The Interpretive Notice will become effective on September 30, 2021. To assist Members
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ENFORCEMENT—Controversy looms as Coinbase agrees t - 23 March 2021

The agreed order, which found that Coinbase had engaged in false, misleading, and inaccurate reporting, as well as wash trading, prompted Commissioner Dawn Stump to issue a concurring statement raising serious concerns about the CFTCs appropriate role in the digital asset space. At 4:46 pm this past Friday afternoon, the CFTC issued an order filing and settling charges against Coinbase Inc., a digital asset exchange operator, finding reckless
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FCM and IB Members—FinCEN updates its list of FATF - 16 March 2021

Notice to Members I-21-12 On March 11, 2021, the Financial Crimes Enforcement Network (FinCEN) issued anAdvisoryannouncing that the Financial Action Task Force (FATF) reissued its list of jurisdictions with strategic AML/CFT deficiencies. NFA Member futures commission merchants (FCM) and introducing brokers (IB) should review this Advisory to ensure that their AML programs have the most current information on FATF-identified jurisdictions with
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Newly minted Exam Division announces 2021 prioriti - 04 March 2021

In particular, the Division will enhance focus on climate-related risks and other ESG issues. The SECs newly classified Division of Examinations has announced its 2021 examination priorities, including an enhanced focus on climate-related risks. The Division also will focus on conflicts of interest for brokers in connection with Regulation Best Interest and investment adviser fiduciary duties. The Division will look at risks relating to FinTec
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INVESTMENT ADVISORS—Division of Examinations issue - 02 March 2021

Citing risks associated with digital asset securities and distributed ledger technology, the Risk Alert outlines areas of focus for upcoming examinations of firms compliance programs. The SECs Division of Examinations, in its first major Risk Alert since being elevated to division status from the Office of Compliance Inspections and Examinations in December, has published guidance for investment advisers, broker-dealers, exchanges, and transfe
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COMMODITY FUTURES—S.D.N.Y.: Consent order closes N - 26 February 2021

This order concludes the CFTC's first enforcement action against an exchange for violations arising from disclosures of material nonpublic information by exchange employees. The CFTC announced that former energy broker Ron Eibschutz has consented to sanctions for soliciting confidential information from NYMEX employees. The consent order found that Eibschutz aided and abetted the NYMEX employees' illegal disclosures. Eibschutz consente
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ALTERNATIVE INVESTMENT FUNDS—SEC issues report on - 12 February 2021

The information is drawn from reports on filings of Form PF and aggregated to preserve anonymity and protect proprietary information. The SEC has released the most recent statistics and private fund trends gathered from filings of Forms PF and Forms ADV. The information, which reflects data from the third calendar quarter of 2018 through the second calendar quarter of 2020, includes aggregated data on from Form PF filers with numbers that are
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BROKER-DEALERS—New FINRA report highlights exam fi - 03 February 2021

FINRAs new combined report on exam findings and priorities provides compliance insights drawn from its ongoing regulatory operations. The Financial Industry Regulatory Authority (FINRA) has released a new annual report that seeks to provide insights from the SROs examination findings and priorities that member firms can use to improve their compliance efforts. The report highlights several key areas that impact the compliance programs of broke
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Remote Online Testing Available for Candidates See - 19 January 2021

Noticeto Members I-21-03 FINRA administers the futures industry proficiency exams on behalf of NFA including the Series 3, Series 30, Series 31, Series 32 and Series 34. Beginning today, candidates may choose to take these exams either at a local test center or remotely proctored online. Online testing will be delivered and remotely proctored by FINRA's testing provider, Prometric. Prometric allows candidates to use a personal or firm-prov
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Member obligations under NFA Bylaw 1101 and Compli - 14 January 2021

Notice to Members I-20-02 The CFTC requires any person that claims an exemption from CPO registration under CFTC Regulation 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5), an exclusion from CPO registration under CFTC Regulation 4.5 or an exemption from CTA registration under 4.14(a)(8) (collectively, exemption) to annually affirm the applicable notice of exemption within 60 days of the calendar year end. Persons that fail to file the affirmat
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SEC SEEKS TO ENCOURAGE INNOVATION BY ADDRESSING CU - 05 January 2021

On December 23, 2020, theSecurities and Exchange Commissionissued a statement, directed to special purpose broker-dealers, provides that the Commission will not bring an enforcement action against the BD for a five-year period so long as certain circumstances apply. In an effort to encourage innovation in the robust and ever-expanding digital asset space, the SEC recently issued a statement and request for comment regarding the operation of it
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SEC ADOPTS MODERNIZED MARKETING RULE FOR INVESTMEN - 05 January 2021

The SECs new merged rule on adviser marketing communications replaces rules on advertising and cash solicitation that were adopted in 1961 and 1979, respectively, while the Rule 144 proposal seeks to ensure that holders of market-adjustable securities are not acting as conduits for unregistered sales. Rules that govern investment adviser advertisements and payments to solicitors are set to be modernized now that the SEC has finalized reforms u
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SEC's OCIE Addresses Broker-Dealer & Adviser Large - 21 December 2020

The SECs Office of Compliance Inspections and Examinations (OCIE) addressed broker-dealer and adviser large trader obligations in a recent annoucement. Individuals and entities should remain vigilant in assessing circumstances and meeting filing obligations in connection with large trader status. The SECs OCIE recently discussed examinations focused on broker-dealers and investment advisers compliance with Exchange Act Rule 13h-1. OCIE note
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CFTC NEWS AND SPEECHES—CFTC approves electronic tr - 14 December 2020

In its last open meeting for 2020, the Commission voted to finalize long-awaited rules around electronic trading and bankruptcy reforms for FCMs and clearinghouses, as well approving a number of other final regulations. The Commission finalized rules on electronic trading risk principles, as well as approving long-awaited Part 190 bankruptcy regulations. Prior to the meeting, the agency also approved six other final rules on a seriatim basis,
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CPO Members—Changes to the NFA Form PQR - 04 December 2020

NFA Compliance Rule 2-46 requires, with limited exceptions, commodity pool operator (CPO) Members to file NFA Form PQR on a quarterly basis with NFA for each pool that it operates. CFTC Regulation 4.27 imposes similar CPO reporting requirements by requiring CPOs to file CFTC Form CPO-PQR. In October, the CFTC adopted several amendments to CFTC Regulation 4.27. The CFTC's final rule: Eliminates certain schedules and questions from its
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A New Approach to the Application of Securities La - 01 December 2020

The Investment Lawyer - a Wolters Kluwer journal publication that cover various legal andregulatory issues existent within the investment management industry - has just published its November 2020 Journal. Cameron Scullen, an associate-attorney with our firm, contributed an article in the November 2020 Journal that discusses the application of federal securities laws to digital assets. The latter addresses the need to develop a new test that will
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INVESTMENT ADVISERS—OCIE and its director review i - 23 November 2020

Particularly in these unique times, CCOs need backup to meet obligations. The SECs Office of Compliance Inspections and Examinations has issued a risk alert to provide an overview of notable compliance issues related to Advisers Act Rule 206(4)-7 (the Compliance Rule). Times have changed, but the need for investor protection remains the same, according the staff. Compliance rule. Under Rule 206(4)-7, it is unlawful for a registered investme
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INVESTMENT ADVISERS—SEC’s Compliance, Enforcement - 20 November 2020

Division directors amazed by their staffs extraordinary output during the pandemic and emphasize their successfully coordinated efforts. Peter Driscoll, the SECs Compliance Inspections and Examinations Office (OCIE) Director opened the November 19, 2020 10th annual Compliance Outreach program (for Investment Adviser and Investment Adviser Senior Officers) by remarking upon the effects that COVID-19 has had on the Commissions various Divisions,
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SEC adopts electronic signature use, electronic ad - 18 November 2020

The Commissions technology can now accept electronic signatures and facilitate electronic administrative proceeding documentation. The SEC voted to adopt rules and rule amendments permitting electronic signatures to authenticate SEC-filed documents, along with facilitating electronic service and filing in connection with Commission administrative proceedings. The rule amendments additionally require redaction of sensitive personal information.
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NFA Update: FCM and IB Members—FinCEN reissues and - 12 November 2020

On November 6, 2020, the Financial Crimes Enforcement Network (FinCEN) issued an Advisory announcing that the Financial Action Task Force (FATF) reissued its list of jurisdictions with strategic AML/CFT deficiencies, with updates to two jurisdictions. NFA Member FCMs and IBs should review this Advisory to ensure that their AML programs have the most current information on FATF-identified jurisdictions with AML/CFT deficiencies and revise their AM
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OCIE’s Multi-Branch Initiative uncovers compliance - 11 November 2020

An examination of nearly 40 investment advisers and their branch offices revealed that policies and procedures often fail to respond to the unique challenges of operating from geographically diverse locations. The SECs Office of Compliance Inspections and Examinations released a risk alert detailing its observations from the Multi-Branch Initiative, a series of examinations of investment advisers operating from geographically dispersed locatio
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SEC approves exempt offerings rule benefitting sma - 05 November 2020

The SECs exempt private offerings rule to enhance small business capital raising efforts receives commissioner approval and dissent. The SEC voted 3-2 to approve a final rule comprising a year-long 400-page proposal to harmonize 10 long-time exempt offering provisions, by relaxing certain restrictions on them to make the exemptions more available to small- and medium-sized businesses for capital raising purposes. The final rule changes vote
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Order addresses requests concerning the expansion - 05 November 2020

The Commission provided exemptions in response to five of six requests and set October 6, 2021 as the expiration date for existing temporary exemptions. The SEC issued a release on November 2, 2020, granting exemptions from certain sections and rules of the Securities Exchange Act of 1934 and setting the expiration date for existing temporary exemptions (Release No. 34-90308, November 2, 2020). The SEC had issued a previous order extending
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NIBA October 2020 Journal Publication - 02 November 2020

The National Introducing Brokers Association (NIBA) has just published its October 2020 Journal. The October publication is dedicated to providing further insight on various cybersecurity issues existing in todays market-place. Cameron Scullen, an associate-attorney with our firm, contributed such an article for the NIBA journal, which can be accessed at this link. The latter addresses the importance of building strong cybersecurity when operatin
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CFTC Chairman Tarbert initiates sweeping reorganiz - 02 November 2020

The chairman asserts that the organizational changes will enhance the CFTCs operational effectiveness. The CFTC will be implementing a reorganization whereby four new operating divisions will be created: the Division of Data, the Markets Participants Division, the Legal Division, and the Division of Administration. According to the agencys announcement issued just days in advance of the presidential election, negotiations were completed to enh
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CFTC’s DSIO issues advisory providing guidance to - 29 October 2020

The CFTCs Division of Swap Dealer and Intermediary Oversight issued an advisory letter which provides guidance to market participants on how the agencys requirements apply to digital currencies deposited by customers. The CFTCs Division of Swap Dealer and Intermediary Oversight (DSIO) issued an advisory to letter to FCMs regarding the holding of virtual currency in segregated accounts. The advisory provides guidance to FCMs on how to hold and
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CFTC-SEC agreement seeks to address ‘Bad Actor Dis - 29 October 2020

The CFTC and SEC chairmen have signed a joint letter establishing a pilot program to take on problems created by the statutory disqualification provisions of SEC Regulations A and D. CFTC Chairman Heath Tarbert Chairman and SEC Chairman Jay Clayton have executed a joint letter agreement to address certain complications that have arisen in CFTC enforcement matters as a result of the SEC bad actor disqualification provisions contained in SEC Reg
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SEC gives broker-dealers violating the customer pr - 29 October 2020

No-action letter draws criticism from Commissioners Lee and Crenshaw who believe the six-month grace period presents an unacceptable risk to investors. In an unusual move, Commissioners Allison Herren Lee and Caroline Crenshaw have issued a statement in opposition to a no-action position taken by the staff of the SECs Division of Trading and Markets. The no-action relief addresses programs through which broker-dealers borrow fully paid and exc
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SEC Staff Updates Form CRS FAQs - 12 October 2020

The changes clarify the form requirements regarding the disciplinary history of a firms and their associated financial professionals. The SEC staff has added to its frequently asked questions relating to the filing of Form CRS and the relationship summary required of broker-dealers and investment advisers. According to the staff of the Division of Investment Management and the Division of Trading and Markets, filers may not change headings
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Commission Proposes Conditional Exemption from Bro - 09 October 2020

Proposal is intended to assist small businesses in raising capital by clarifying the limited activities in which finders may engage without registering. The SEC voted 3-2 to propose a limited, conditional exemption from broker registration requirements for finders who assist issuers with raising capital in private markets from accredited investors. Finders identify and sometimes solicit potential investors in order to connect small busines
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CFTC enforcement director departs after record-bre - 09 October 2020

Despite a pandemic, enforcement actions at an all-time high. On October 6, 2020, the Commodity Futures Trading Commission announced a record-breaking year in the agencys Division of Enforcement and that the Division of Enforcement Director, James McDonald, will depart the agency on October 8, 2020. According to the CFTC, as director of Enforcement Division since April of 2017, McDonalds leadership drove the Division to identify and
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Legislators Introduce Bills to Address Confusion R - 09 October 2020

The Digital Commodity Exchange Act and the Securities Clarity Act are intended to clarify when and how securities laws and commodities regulations apply to digital assets, according to sponsors. Congressman David Schweikert (R-Ariz) has introduced the Digital Commodity Exchange Act of 2020 (DCEA) to create a single, opt-in national regulatory framework for digital commodity trading platforms under the CFTC jurisdiction. Separately, Tom Emm
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Coronavirus Update—Expiration of Temporary Relief - 09 October 2020

In April 2020, the CFTC's Division of Swap Dealer and Intermediary Oversight (DSIO) issued ano-action lettergranting temporary relief to registrants and applicants for registration listing a principal, and for applicants for associate person (AP) registration, from the fingerprinting requirements in CFTC Regulations3.10(a)(2)(for natural person principals) and3.12(c)(3)(for APs). NFA issued similar relief from the fingerprinting requirements
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BitMEX charged with operating an illegal crypto de - 05 October 2020

The CFTC alleges that the cryptocurrency derivatives platform violated the Commodity Exchange Acts registration, KYC, and AML provisions, while the DOJ has indicted the owners for evading the Bank Secrecy Act. The CFTC has charged three individuals and five entities that own and run the Bitcoin Mercantile Exchange (BitMEX) cryptocurrency trading platform with operating an unregistered trading platform and violating multiple market integrity an
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NFA Coronavirus Update--Relief from the On-Site An - 05 October 2020

Notice to Members I-20-35 October 1, 2020 Coronavirus Update—Relief from the On-Site Annual Inspection of Branch Offices and Guaranteed IBs NFA's Interpretive Notice 9019 – Compliance Rule 2-9: Supervision of Branch Offices and Guaranteed IBs and Interpretive Notice 9053 – Forex Transactions require Members with branch offices and/or guaranteed introducing brokers (IB) to conduct an annual on-site inspection of each b
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BLOCKCHAIN—OCC says banks, thrifts may engage in s - 05 October 2020

In an interpretative letter, the agency said that national banks and thrifts may receive deposits from stablecoin issuers, including deposits that constitute reserves for a stablecoin associated with hosted wallets, and may also engage in any activity incidental to receiving these deposits. The Office of the Comptroller of the Currency hasissuedaninterpretive letterclarifying the authority of national banks and federal savings associations to
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Coronavirus (COVID-19) Update—Extension to Certain - 24 September 2020

NFA Notice to Members I-20-32 September 15, 2020 The CFTC recently issued no-action letter 20-26 extending through January 15, 2021, certain no-action relief issued in response to the COVID-19 pandemic. The relief, previously set to expire on September 30, 2020, applies exclusively to certain regulatory obligations of FCMs, RFEDs (i.e., FDMs), IBs and SDs. NFA is also extending through January 15, 2021 similar relief for Members that are in c
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SEC’s OCIE sees uptick in ‘credential-stuffing’ at - 24 September 2020

The SECs Office of Compliance Inspections and Examinations has observed an increase in credential-stuffing cyber attacks against investment advisers and broker-dealers which heightens firms financial, regulatory, legal, and reputational risks. Recent examinations conducted by the SECs Office of Compliance Inspections and Examinations (OCIE) have found an increase in the number of credential-stuffing cyber attacks against SEC-registered investm
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ABL Insights September 2020 Issue Published - 24 September 2020

The Alliance of Business Lawyers (ABL) has just published its first issue of the ABL Insights newsletter, a quarterly newsletter for ABL Members and their respective clients that provides insights that span across the globe. The purpose of this newsletter is to further ABLs goals of sharing legal industry related information that can be absorbed and utilized by ABL Members and their clients. You can accessthe September, 2020 ABL Insights newsl
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CFTC unanimously approves four final regulations a - 24 September 2020

The CFTC voted 5-0 to finalize a number of rules which aim to improve swap data reporting, as well as a supplemental measure that furthers the modernization of the agencys bankruptcy regulations. CFTC Chairman Heath Tarbert led off a virtual open meeting that lasted over five hours, without interruption, observing that data is the lifeblood of our markets. Those comments were a prelude to an agenda-packed meeting where the Commission unanimous
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N.D. Ill.: CFTC notes success against Illinois sof - 16 September 2020

After the failed criminal prosecution of Jitesh Thakkar for his involvement with spoofer and purported flash crash trader Navinder Sarao, a parallel CFTC case comes to an end with the entry of a consent order against Edge Financial and the charges dropped against Thakkar. The often-acrimonious legal battle between the CFTC and software developer Jitesh Thakkar, and his company, Edge Financial Technologies, Inc. has come to end. The corporate d
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U.S.: Analysts seek SCOTUS review of insider tradi - 15 September 2020

Two hedge-fund analysts asked the Supreme Court to review a Second Circuit holding that the government can avoid proving a personal benefit when it prosecutes insider trading under the criminal code. Investment fund analysts who were convicted of wire fraud for trading on regulatory information are appealing that conviction to the Supreme Court. The petitioners for writ of certiorari argue that theDirkspersonal-benefit test applies equally to
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CFTC provides guidance on compliance evaluations i - 15 September 2020

The guidance is designed to assist both Commission staff and companies in evaluating compliance programs and cultivating corporate cultures of compliance. The CFTC Division of Enforcement staff has issued new guidance outlining factors that it will consider while evaluating compliance programs in connection with enforcement activities. In the-first-of-its-kind guidance issued by the division, the staff noted that effective corporate compliance
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Climate change poses major risk to stability of th - 10 September 2020

The extensive report, issued by a subcommittee of the CFTCs Market Risk Advisory Committee, examines climate change-related financial risks and offers key policy recommendations. The CFTCs Climate-Related Market Risk Subcommittee of the Market Risk Advisory Committee (MRAC) released its report titledManaging Climate Risk in the U.S. Financial System. Thesubcommitteevoted unanimously 34-0 to adopt the report. According toa CFTC release, the rep
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CFTC provides Swap Dealers transitioning away from - 02 September 2020

Three divisions of the Commodity Futures Trading Commission have issued updated no-action letters to reduce regulatory burdens associated with the upcoming transition for swap dealers moving away from utilizing various interbank offer rates. The CFTCs Division of Swap Dealer and Intermediary Oversight (DSIO), Division of Market Oversight (DMO), and Division of Clearing and Risk (DCR) each issued revised no-action letters providing additional r
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SEC adopts an Expanded Definition of “Accredited I - 01 September 2020

The SEC adopted a regulatory amendment designed to expand who may be an accredited investor. On August 26, 2020, the revision to the accredited investor definition was adopted seriatim by a divided Commission in a 3-2 vote. (Amending the Accredited Investor Definition, Release No. 33-10824, August 26, 2020). Accredited investor definition. The centerpiece of the revised definition of accredited investor is its expansion of the types of p
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FinCEN issues additional FAQs to address questions - 21 August 2020

NFA Notice I-20-31 On August 3, 2020, the Financial Crimes Enforcement Network (FinCEN), in consultation with the federal functional regulators, published newFrequently Asked Questions(FAQs) on its website regarding customer due diligence (CDD) requirements for covered financial institutions. These FAQs clarify the regulatory requirements related to obtaining customer information, establishing a customer risk profile, and performing ongoing mo
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FinCEN clarifies BSA enforcement, stresses importa - 21 August 2020

As the primary regulator and administrator of the Bank Secrecy Act, FinCEN issued a statement setting forth its approach to enforcing rules and regulations implemented under the BSA. The Financial Crimes Enforcement Network has released a statement setting forth its approach to enforcing the rules and regulations within the Bank Secrecy Act (BSA). The statement follows an earlier joint statement by the federal banking regulators—Office o
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SEC and FDIC Adopt Final Rule on the Orderly Liqui - 13 August 2020

On July 24, 2020, the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) adopted a final rule required by the Dodd-Frank Act clarifying and implementing provisions relating to the orderly liquidation of certain brokers or dealers (covered broker-dealers) in the event the FDIC is appointed receiver under Title II of the Dodd-Frank Act. By statute, the liquidation of a covered broker-dealer must be acco
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FinCEN Advisory on Cybercrime and Cyber-Enabled Cr - 13 August 2020

The Financial Crimes Enforcement Network (FinCEN) issued an advisory on July 30, 2020, to alert financial institutions to potential indicators of cybercrime and cyber-enabled crime observed during the COVID-19 pandemic. The advisory contains descriptions of COVID-19-related malicious cyber activity and scams, associated financial red flag indicators, and information on reporting suspicious activity. The advisory addresses the primary means by
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CFTC Approves Final Rule Amending Registration and - 13 August 2020

At its open meeting on June 4, 2020, the Commodity Futures Trading Commission unanimously approved a final rule amending the Commodity Pool Operator (CPO) registration exemption found in Regulation 4.13. The final rule generally prohibits persons who have, or whose principals have, incurred any of the relevant statutory disqualifications articulated in the Commodity Exchange Act from seeking to claim a Commodity Pool Operator (CPO) registration e
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OCIE OUTLINES COVID-19 COMPLIANCE CONSIDERATIONS F - 13 August 2020

Based on its outreach and interaction with registered brokers and investment advisers, OCIE staff offers recommendations concerning COVID-19-related issues and risks, including the heightened potential for misconduct. In its 2020 interactions with broker-dealers and investment advisers, the SECs Office of Compliance and Inspections (OCIE) has observed a number of operational, technological, and other challenges brought on by the pandemic. OCIE
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CFTC Approves Final Swap Dealer Capital Rule, Comp - 13 August 2020

The Commodity Futures Trading Commission at its open meeting on July 22, 2020 approved a final rule regarding new capital and financial reporting requirements for swap dealers (SDs) and major swap participants (MSPs). Adoption of this rule marks the completion of the CFTCs required rulemakings under Section 731 of the Dodd-Frank Act, which was enacted 10 years ago this week. Final rule: capital requirements of swap dealers and major swap parti
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Effective date for NFA rule amendments related to - 22 July 2020

NFA Compliance Rule 3-14 sets forth the types of penalties that an NFA disciplinary panel may impose at the conclusion of an NFA disciplinary proceeding. NFA recently amended this rule to increase the maximum monetary penalty to $500,000 per rule violation. This increase is intended to further deter violations of NFA requirements and provide NFA's disciplinary panels with the flexibility needed in assessing penalties. NFA also made several ot
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NFA SWAPS PROFICIENCY REQUIREMENTS MUST BE COMPLET - 22 July 2020

Reminder, NFAs Swap Proficiency Requirements must be successfully completed by individuals registered as APs at FCMs, IBs, CPO and CTAs who engage in swaps activity subject to the CFTCs jurisdiction as well as individuals acting as APs at swaps dealers. Individuals approved as swap APs on January 31, 2021 (the Compliance Date), must have satisfied the Swaps Proficiency Requirements to remain approved as a swap AP after the Compliance Date. Indivi
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FCM and IB Members—FinCEN reissues and updates its - 21 July 2020

On July 14, 2020, the Financial Crimes Enforcement Network (FinCEN) issued an Advisory announcing that the Financial Action Task Force (FATF) reissued its list of jurisdictions with strategic AML/CFT deficiencies, with updates to two jurisdictions. NFA Member FCMs and IBs should review this Advisory to ensure that their AML programs have the most current information on FATF-identified jurisdictions with AML/CFT deficiencies and revise their AML p
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Coronavirus (COVID-19) Update—Extension to Relief - 21 July 2020

The CFTC's Division of Swap Dealer and Intermediary Oversight (DSIO) recently issued Staff Letter No. 20-20 extending its temporary relief provided in CFTC Staff Letter No. 20-16. This relief was granted to registrants and applicants for registration listing a principal, and for applicants for associated person (AP) registration from fingerprinting requirements. The temporary relief, originally scheduled to expire on July 23, 2020, now extend
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SEC OCIE risk alert highlights private-fund advise - 01 July 2020

Many identified deficiencies may have caused investors in private funds to pay more in fees or to remain unaware of relevant conflicts of interest, OCIE said. The SECs Office of Compliance Inspections and Examinations has issued a risk alert in connection with examinations of registered investment advisers managing private equity funds and hedge funds. The alert primarily addresses common deficiencies and compliance issues related to fees and
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New York launches series of virtual currency initi - 01 July 2020

The initiatives include a State University of New York-related virtual currency program, a Department of Financial Services proposal of a virtual currency conditional licensing authority, guidance regarding licensees ability to self-certify, and additional resources to help currency market participants launch and operate in New York. Superintendent of Financial Services Linda A. Lacewell announced that the New York State Department of Financia
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U.S.: Disgorgement not exceeding amount of net pro - 25 June 2020

The Supreme Court upheld the SEC's ability to seek disgorgement in civil proceedings as a form of equitable relief, so long as the award is limited to the net profits of the wrongdoer and funds go to victims. Answering a question left open in Kokesh v. SEC, the Supreme Court held that a disgorgement award that does not exceed a wrongdoer's net profits and is awarded for victims is permissible equitable relief. Writing for the Court in
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SEC OCIE Releases Risk Alert RE: LIBOR Transition - 24 June 2020

The OCIE issued this risk alert to provide registrants with information about the scope and content of their registrant preparedness analysis examinations. The Commissions Office of Compliance Inspections and Examinations identified registrant preparedness for the transition away from LIBOR as an examination program priority. The OCIE has now issued this Examination Initiative: LIBOR Transition Preparedness to provide registrants with addition
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Amendments to NFA Interpretive Notice 9045—Complia - 19 June 2020

NFA Compliance Rule 2-9(c) and Interpretive Notice 9045—FCM and IB Anti-Money Laundering Program require all futures commission merchants (FCM) and introducing brokers (IB) to develop and implement an anti-money laundering (AML) program reasonably designed to achieve compliance with the Bank Secrecy Act and its implementing regulations. This includes obligations related to the Customer Identification Program (CIP) and Beneficial Ownership (
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CFTC extends work-from-home COVID-19 relief to Sep - 16 June 2020

An extension of no-action relief provides flexibility as financial services personnel return to the office. As states continue to lift COVID-19 closures and workplaces cautiously reopen, the CFTC is easing the transition for financial services firms and infrastructure by extending relief from certain regulatory requirements until September 30. The relief applies to a broad range of market participants and relates particularly to requirements t
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NFA UPDATE COVID-19--QUARTERLY REPORT REGULATORY R - 09 June 2020

On March 23, 2020, the NFA issued Notice to Members I-20-05, which provided an update on the regulatory relief available to CPOs and CTAs during the ongoing global pandemic caused by COVID-19. The regulatory relief extended thedue dates for the quarterly reports for period ending March 31, 2020. CPOs The NFA extended the due date for the March 31, 2020 Form PQR until July 15, 2020. CTAs The NFA extended the due date for the March 31,
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CFTC approves final rule closing loophole for bad - 08 June 2020

At an open meeting of the CFTC, the full Commission unanimously approved a final rule relating to registration and compliance requirements for CPOs and CTAs prohibiting exemptions for those persons subject to certain statutory disqualifications. At a recent Commodity Futures Trading Commission open meeting held via conference call in accordance COVID-19 social distance protocols, the CFTC voted 5-0 to approve a final rule amendment to Regulati
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Mark Ruddy named President of the Alliance of Busi - 08 June 2020

On May 21st, the Alliance of Business Lawyers (ABL) announced that Mark Ruddy was named to lead the association as President for a three-year term. When asked about his new position, Mark stated, I am excited about this opportunity. We live in a globalized world and our clients demand services that embrace multiple jurisdictions. Our expertise together with our privileged partnerships with Integra International, a leading association of global
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CFTC approves proposed CPO exemption rule and inte - 02 June 2020

At an open meeting of the CFTC, the full Commission unanimously approved a proposed regulation relaxing registration requirements for foreign CPOs, as well as an interim final rule extending margin compliance requirements for swap dealers and major swap participants. At a recent CFTC open meeting held via conference call in accordance COVID-19 social distance protocols, the CFTC unanimously approved two matters before it. The first agenda item
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Senators urge CFTC subcommittee to consider climat - 28 May 2020

Senators Sheldon Whitehouse and Brian Schatz have strongly recommended that clear standards around climate-related risks be included in a soon to be issued report by the CFTCs Climate-Related Market Risk Subcommittee. Senators Sheldon Whitehouse (D-RI) and Brian Schatz (D-HI) have issued a pair of letters to Bob Litterman, the chairman of the Climate-Related Market Risk Subcommittee of the CFTCs Market Risk Advisory Committee (MRAC). In those
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CFTC issues first public guidance on determining c - 26 May 2020

The Division of Enforcements memorandum represents the first such guidance since the agency published penalty guidelines over 25 years ago. Staff of the CFTCs Division of Enforcement has issued new guidance outlining the factors the division considers in recommending the civil monetary penalties to be imposed by the agency in CFTC enforcement actions. The guidance, which generally reflects the existing practice within the division, represents
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N.D. Cal.: New fraud action alleges ‘brazenly lawl - 26 May 2020

Rampant fraud at the Seychelles-based crypto trading platform causes artificial prices that spread like forest fires through the cryptocurrency ecosystem, a new lawsuit alleges. A complaint filed in the Northern District of California alleges that BitMEX, a cryptocurrency products trading platform based in the Seychelles, has engaged in a truly staggering amount of unlawful activity, spreading artificial prices to other trading platforms and w
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NFA COVID-19 UPDATE-RELIEF FROM FINGERPRINTING REQ - 27 April 2020

NFA Notice to Members I-20-20 April 27, 2020 Due to concerns regarding the spread of COVID-19, NFA temporarily suspended its fingerprinting services in March. NFA understands that this action, along with the measures taken by federal, state and local governments to restrict the movement of, and contact among, individuals, makes it difficult for individuals to obtain fingerprints and comply with both CFTC and NFA fingerprinting requirements.
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CYBER PRACTICES CONTINUE TO CONCERN STATE SECURITI - 27 April 2020

NASAAs annual report on state-registered investment advisers notes an uptick in deficiencies related to cybersecurity. The North American Securities Administrators Association (NASAA) has released its annual report concerning the oversight of more than 17,000 state-registered investment advisers by state securities regulators. Although overall deficiencies fell for this reporting period, coordinated examinations of state-registered advisers in
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CTA MEMBERS: AMENDMENTS TO NFA COMPLIANCE RULE 2-2 - 24 April 2020

Notice to Members I-20-18 April 22, 2020 CTA Members: Amendments to NFA Compliance Rule 2-29 and related Interpretive Notice now effective NFA Compliance Rule 2-29 and Interpretive Notice 9003 – NFA Compliance Rule 2-29: Communications with the Public and Promotional Material require, among other things, that past performance used in promotional material be presented net of all commission, fees and expenses. NFA recently amended the
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COVID-19: THE CFTC PROVIDES FURTHER RELIEF TO MARK - 24 April 2020

DSIO provides no-action relief for futures commission merchants and introducing brokers regarding net capital treatment of loans obtained under the Paycheck Protection Program. In a further response to the COVID-19 (coronavirus) pandemic, the CFTC's Division of Swap Dealer and Intermediary Oversight issued a no-action letter on the treatment of covered loans under the CARES Act. Subject to certain conditions, the DSIO will not recommend en
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COVID-19: SEC extends relief for regulatory filing - 27 March 2020

The SEC extended recent filing period exemptions, and the Division of Corporation Finance issued Topic No. 9 on disclosure considerations and other matters related to the COVID-19 outbreak. The SEC has extended earlier exemptive orders providing relief from reporting and proxy delivery requirements for those affected by the COVID-19 outbreak. Earlier conditional reporting relief from the reporting and proxy delivery requirements for public com
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Client Alert: VIRTUAL CURRENCIES – CFTC clarifies - 26 March 2020

The CFTCs interpretive guidance provides welcome clarity on when certain leveraged digital asset transactions qualify for an exception from many requirements under the Commodity Exchange Act. The CFTC has issued interpretive guidance to clarify how the actual delivery exception applies to leveraged spot retail commodity transactions involving digital assets like bitcoin and ether. The guidance sets out two primary factors in determining if act
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Client Alert: COVID-19 NFA Update -- Regulatory Re - 23 March 2020

On March 23, 2020, the NFA issued Notice to Members I-20-15, which provides an update on the regulatory relief available to CPOs and CTAs during the ongoing global pandemic caused by COVID-19. The NFA's notice is reproduced below. Notice to Members I-20-15 March 23, 2020 Coronavirus (COVID-19) Update—Regulatory Relief for CPOs and CTAs On March 20, 2020, the CFTC issued a no-action letter to commodity pool operators (CPO)
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CFTC’s DSIO provides COVID-19 related relief to ma - 18 March 2020

The CFTCs Division of Swap Dealer and Intermediary Oversight issued several no-action letters detailing regulatory relief which are geared towards keeping futures and derivatives markets functioning smoothly in response to the COVID-19 crisis. In response to the COVID-19 (coronavirus) pandemic, the CFTCs Division of Swap Dealer and Intermediary Oversight (DSIO), issued five no-action letters which provide temporary, targeted relief to futures
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Client Alert: Coronavirus Update—NFA Branch Office - 13 March 2020

Due to the novel coronavirus, COVID-19, the NFA is providing temporary relief from the NFAs branch office requirements for member firms who adopt contingency plans providing for APs to temporarily work from a location not listed as a branch office, without a branch manager. The NFA recognizes that a number of its members are considering implementing contingencies pursuant to their business continuity plans that would permit employees, includin
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Client Alert: COVID-19 – NFA issues Notice to Memb - 13 March 2020

On March 4, 2020, the National Futures Association (NFA) issued an advisory notice to its members regarding the new coronavirus, COVID-19. The NFA stated that NFA and CFTC staff have been in regular contact regarding these and other developing issues, including the possible need for regulatory relief, and in the event that regulatory relief is necessary, NFA and CFTC staff intend to take a practical approach that will give its members appropriate
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Client Alert: COVID-19 – FINRA Provides Guidance o - 13 March 2020

FINRA reminds member firms to consider creating a pandemic-related business continuity plan (BCP). Regulatory Notice 20-08, issued by FINRA, provides guidance and regulatory relief to member firms for some requirements, with the caveat that as the threat of the virus decreases, member firms should expect to return to meeting any regulatory obligations for which relief has been provided. Rule 4370. The rule requires a member firm to create,
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Client Alert: COVID-19 - SEC to provide filing rel - 13 March 2020

The SEC announced that it will allow some companies an extended filing period to meet hardships that may arise from the spread of novel coronavirus while also reiterating best practices regarding transactions in company stock during periods of company crises. The SEC announced that it will allow companies affected by the global spread of novel coronavirus (COVID-19) to delay certain filings by up to 45 days. An SEC press release announcing the
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Relief from CTA-PR filing requirement for CTAs tha - 10 March 2020

NFA Notice to Members I-20-09 March 2, 2020 Relief from CTA-PR filing requirement for CTAs that solely direct trading of pools for which the firm operates as a registered or exempt CPO The CFTC recently amended CFTC Regulation 4.27 to no longer require commodity trading advisors (CTA) that solely direct trading of pools for which the firm operates as a registered or exempt commodity pool operator (CPO) to file the Form PR. This relief is e
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VIRTUAL CURRENCIES—CFTC advisory committee delves - 10 March 2020

Officials from two traditional banks as well as a DAO (decentralized autonomous organization) described their organizations stablecoins, including functioning, benefits, and regulatory oversight. A recent meeting of the CFTC Technology Advisory Committee (TAC) took an in-depth look at the particular form of virtual currency known as stablecoins. Chaired by Commissioner Brian Quintenz, who sponsors the TAC, the panel received an overview from a
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SEC publishes observations on cybersecurity and re - 27 February 2020

The SEC Office of Compliance Inspections and Examinations (OCIE) encourages market participants to review their practices, policies and procedures with respect to cybersecurity and operational resiliency. The observations, issued on January 27, 2020, relate to cybersecurity and operational resiliency practices taken by market participants. The OCIE observations highlight certain approaches taken by market participants in the areas of govern
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Texas adopts cybersecurity incident procedures for - 26 February 2020

Texas is the latest state to require broker-dealer and investment adviser firms to take steps to protect their customers and clients account information from cybersecurity breaches. The Texas State Securities Board has adopted certain notification procedures that dealers and investment advisers must undertake when a cybersecurity incident is triggered, effective February 27, 2020. Cybersecurity incident procedures. Definitions. A cybersecur
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Office of Compliance Inspections and Examinations - 25 February 2020

On January 7, 2020, the Office of Compliance Inspections and Examinations (OCIE) of the Securities and Exchange Commission (SEC) issued Press Release 2020-4. The focus on investment advisers and broker-dealers, as well as security and fintech, reflects OCIE`s assessment of risks and policy matters arising from recent market and regulatory developments. The SEC`s Office of Compliance Inspections and Examinations has published its annual examina
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DSIO issues follow-up statement concerning annual - 24 February 2020

The Division of Swap Dealer and Intermediary Oversight acknowledged that its December advisory has presented challenges for chief compliance officers seeking to adapt existing reporting procedures for 2020 submissions. In an apparent effort to alleviate concerns among registrants required to file a Chief Compliance Officer Annual Report, DSIO Director Joshua Sterling has issued a statement regarding the Divisions December 2019 advisory which h
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The SEC Intends to Focus its Adviser Exams on Robo - 21 February 2020

In its annual examination priority report, the Securities and Exchange Commission unveiled that it intends to prioritize investigating each of digital assets and automated investment advice existing in the securities industry. The agency staff has shifted the focus of its examinations in 2020 to technology. In addition to other priorities mentioned in its annual examination priority report, the agency put a special emphasis on each of digital
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2d Cir.: Dirks personal benefit not required in so - 20 February 2020

The government can avoid proving a personal benefit when it prosecutes insider trading under the criminal code, a Second Circuit panel held. Affirming convictions for insider trading, the Second Circuit held that the Dirks personal-benefit test does not apply in criminal prosecutions under the wire fraud and securities fraud provisions of Title 18 of the U.S. Code. The court also held that confidential government information may constitute pro
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VIRTUAL CURRENCIES—IOSCO report sizes up issues, r - 19 February 2020

Report does not mandate regulatory action, but suggests tools regulators might use in addressing the issues that crypto-assets present. A new report prepared by the International Organization of Securities Commissions (IOSCO) offers assistance to global regulators that are wrestling with how to handle crypto-assets trading platforms (CTPs) within their existing regulatory frameworks. The report, which includes tools that regulators could consi
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OCIE highlights observations, common deficiencies from fund exams
Jessen Gregory Named To Super Lawyers Rising Stars list for 2019
SEC directors address Enforcement Division matters including cybersecurity

SEC, FINRA offer guidance on custody of digital as - 08 July 2019

The SEC and FINRA issued new guidance addressing emerging digital asset models. It recognizes that while the general rules of securities custody apply regardless of whether securities are paper or digital form, existing securities regulations do not necessarily fit perfectly with the custody needs of those handling digital asset securities. The guidance divides digital asset security landscapes into noncustodial and custodial; among the noncustod
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8. CFTC issues report focuses on swap dealer de mi - 08 July 2019

The report defines on-venue swaps as those executed on an exchange, swap execution facility, or designated contract market. The data used for this report by the CFTC was collected using a swap-dealer to be defined as a person who is deemed to be a swap dealer shall be deemed to be a swap dealer with respect to each swap it enters into, regardless of the category of the swap or the persons activities in connection with the swap. The previous de
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CFTC broadens path for proprietary traders to act - 27 June 2019

The CFTC issued no-action relief for registered floor traders in an attempt to open up swap dealing to new sources of liquidity. Therelief eliminates ambiguity for market participants wishing to engage in swaps activity in their capacity as a floor trader, encouragingnew liquidity providers to trade cleared swaps on registered venues without regulatory uncertainty, benefiting market participants seeking to access liquid, competitive cleared swaps
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CFTC amends Part 30 rules on the sale of foreign f - 25 June 2019

The CFTC unanimously approved a proposed rule to its Part 30 exemption program. The part 30 exemption program gives US customers increased access to foreign futures trading markets; people located outside the U.S., who are subject to a comparable regulatory framework in the country in which they are located, may seek an exemption from the application of certain CFTC regulations, including those with respect to registration.However, the issue with
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SEC issues long-awaited final rules on capital, ma - 21 June 2019

Brought upon by the Dodd-Frank Act, the SEC is adopting capital and margin requirements for security-based swap dealers and major security-based swap participants. This will create a stricter control and more structure for security-based swap dealers by enhancing segregation between security-based swap dealers and major security-based swap participants. This stricter control will protect investors and the market more generally by helping central
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CFTC issues whistleblower alert on insider trading - 18 June 2019

The CFTC has provided specific direction for reporting improper use of material nonpublic information. They are offering financial awards and protections to members of the public who report any misconduct with the information. The CFTC has defined improper use of material nonpublic information as 1) trading on the basis of material nonpublic information when it breaches any past agreements or 2) trading on the basis of material nonpublic informat
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SEC adopts Regulation Best Interest, Form CRS summ - 05 June 2019

The SEC voted in favor of adopting a controversial proposal to enact Regulation Best Interest (BI) to require advisors and brokers to disclose certain information to retail investors. Regulation BI has three main components: the disclosure obligation, the care obligation, the conflict-of-interest obligation, and the compliance obligation. The disclosure obligation says broker-dealers must disclose material facts about the relationship and recomme
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FinCEN issues guidance on convertible virtual curr - 09 May 2019

FinCEN released an interpretive guidance of preexisting regulations to apply to certain business models involving money transmission of substitutes for currency, specifically, convertible virtual currency. The guidance is in response to questions raised by financial institutions, law enforcement, and regulators concerning the regulatory treatment of multiple variations of businesses dealing in CVCs.This guidance lists specific examples of busines
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SEC OIG Issues Recommendations on Adviser Examinat - 29 August 2017

The SECs Office of the Inspector General has issued a report discussing its findings during an audit of the Office of Compliance Inspections and Examinations investment adviser examination completion process. While noting the overall effectiveness of OCIEs controls, the OIG found certain areas of concern in its reporting and documentation processes and recommended improvements to examination reviews and approvals and documentation of meetings and
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