Broker Dealer

On December 13, 2023, the Securities and Exchange Commission (“SEC”) adopted new rules that will have the effect of requiring central clearing of a broad range of cash transactions and repurchase transactions in U.S. treasury securities (“U.S. Treasuries”).[1]  The new rules will require covered clearing agencies (“CCAs”)[2] to adopt policies and procedures requiring

On December 19, 2023, the Fifth Circuit formally vacated the SEC’s buy-back disclosure rules. While it is unclear what, if any, action the SEC may take in response to this definitive ruling, the realistic options appear to be commencing a new process to propose and adopt new rules, or to abandon the rule-making project for

The SEC has been sued again in the U.S. Court of Appeals for the Fifth Circuit, on the heels of that Court’s recent invalidation of the SEC’s newly-minted corporate buy-back rules. The new legal action asks the Court to invalidate the newly-adopted short sales and securities lending disclosure rules (see our client alert here on the

On November 13, 2023, FINRA filed with the SEC a proposal to amendment to Rule 2210 that would create a tailored exception from the general prohibition on projections in marketing materials and other communications with institutional investors, including marketing decks and pitch books for private placements in investment funds and other securities.

FINRA Rule 2210(d)(1)(F) currently prohibits any member from including a projected performance in a written communication — retail or institutional. The amendment would provide a limited exception for performance projections or targeted returns in written communications distributed or made available only to “institutional investors.” An “institutional investor” is defined in Rule 2210(a)(4) to include banks, insurance companies, government agencies, employee benefit plans, registered investment companies, registered investment advisers, as well as any other person (individual or entity) with total assets of at least $50 million.

On October 13, 2023, the Securities and Exchange Commission (the “SEC”) adopted new Rule 10c-1a (the “Securities Lending Rule”), requiring the reporting of certain securities lending transactions. Certain material terms of securities lending transactions relating to “reportable securities” are required to be reported to a registered national securities association (“RNSA”) by the end of the day on which the loan is agreed or modified. The RNSA is required to make the information – other than that deemed confidential as defined below – public on the morning of the next business day. The amount of the loan is to be made public on the 20th business day following submission of the report. Of note, currently the Financial Industry Regulatory Authority (“FINRA”) is the only registered RNSA and is expected to accept the securities lending reports once the Securities Lending Rule is effective.

Applies Broadly to A Wide Range of Equities

Compliance Delayed One Year to Permit Fund Systems Updates

On October 13, 2023, the Securities and Exchange Commission adopted new Rule 13f-2 to require monthly reporting of short sale positions and activity data on new Form SHO by institutional investment managers. The new rules require monthly reporting on new Form SHO of activity related to a broad spectrum of “equity securities.” An investment manager must report on activity and positions where it has investment discretion, subject to thresholds described below. The SEC also amended the CAT NMS Plan to supplement the reporting requirements for covered firms.

On April 20, 2023, the staff of the Securities and Exchange Commission (the “SEC”) published an FAQ‑style bulletin[1] that provides guidance on the care obligations of broker‑dealers and investment advisers in providing investment advice and recommendations to retail investors. The bulletin emphasizes the importance of complying with the Care Obligation of Regulation Best Interest (“Reg BI”) for broker‑dealers and the duty of care enforced under the Investment Advisers Act of 1940, as amended (the “IA fiduciary standard”) for investment advisers (together, the “care obligations”). The care obligations are drawn from key fiduciary principles, including an obligation to act in the retail investor’s best interest and not to place the fiduciary’s interests ahead of the investor’s interest.

On January 1, 2021, Congress enacted the Corporate Transparency Act (the “CTA”) as part of the Anti-Money Laundering Act of 2020 in the National Defense Authorization Act for Fiscal Year 2021.  Congress passed the CTA to “better enable critical national security, intelligence, and law enforcement efforts to counter money laundering, the financing of terrorism, and other illicit activity.” The CTA requires a range of entities, primarily smaller, otherwise unregulated companies, to file a report with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) identifying the entities’ beneficial owners—the persons who ultimately own or control the company—and provide similar identifying information about the persons who formed the entity. The CTA also authorizes FinCEN to disclose this information to authorized government authorities and to financial institutions in certain circumstances.

On December 14, 2022, the SEC adopted amendments to Rule 10b5-1 under the Securities Exchange Act of 1934 and added related new disclosure requirements. Rule 10b5-1 provides an affirmative defense to insider trading liability for individuals and companies in circumstances where, subject to certain conditions, the trade was pursuant to a written plan adopted when

The SEC recently proposed to require investment managers to report short sale information on a monthly basis if such activity exceeds certain thresholds (described below), and to require broker dealers to begin to mark “buy to cover” trades under Regulation SHO in addition to marking trading activity as “long,” “short,” and “short exempt.”  The definition