SEC Enforcement

The SEC’s recent enforcement settlement involving a fund manager highlights the SEC’s focus on an investor’s “control purpose” triggering the requirement to file on a Schedule 13D as opposed to a short-form 13G. At issue was HG Vora Capital Management’s 5% interest in a public company, and whether it had complied with its obligations to supersede its existing filing with a long-form Schedule 13D filing within 10 days of no longer being “passive.”

Two years after proposing rules on climate change disclosure, the SEC has adopted new rules, predictably by a split 3-2 vote. The adopted rules maintain the core of the original proposals, requiring that both domestic companies and foreign private issuers disclose the actual and potential impacts of climate change as well as management and governance processes to address those impacts. In the face of public comments highlighting the costs, burdens, and practicality of some aspects of the proposals, and political opposition, the SEC materially paired back the proposals, most significantly dropping the requirement to disclose Scope 3 greenhouse gas (GHG) omissions data relating to downstream and upstream sources, such as by vendors and customers. However, as described in our recent report, California’s new rules will require Scope 3 information for companies doing business in California if implemented in their current form.

On January 24, 2024, the SEC adopted new rules that apply to SPAC transactions and the adopted rules largely track the agency’s proposals with some notable exceptions.  The new rules will become effective 125 days after publication in the Federal Register and will apply to transactions that are ongoing at that time, even if they…

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…

Following the financial crisis of 2007-2009 and Congressional investigations into the securitization market, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 prohibited securitization participants from engaging in any transaction that would result in a material conflict of interest with investors in the securitization. On November 27, 2023, the Securities and Exchange Commission…

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.

In May 2023, the SEC adopted final rules amending disclosure rules for public companies engaged in equity buy-back programs. We have detailed those rules in our client alert available here. 

The new rules were challenged in court, and on October 31, 2023, the Fifth Circuit Court of Appeals held that the SEC acted arbitrarily and capriciously, in violation of the Administrative Procedures Act (APA), because it did not respond to petitioners’ comments submitted to the SEC on its then-proposed rules, and failed to conduct a proper cost-benefit analysis in adopting final rules. The petitioners’ comments suggested ways to obtain relevant data on the costs and benefits of the then-proposed rules. 

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.