As the regulatory landscape is constantly evolving, Compliance Risk Concepts (“CRC”) is issuing its monthly review and summary of FINRA, SEC, and NFA notices and bulletins to assist our clients in keeping abreast of notable regulatory developments and deadlines in an effort to strengthen their compliance and regulatory initiatives.
FINRA
Regulatory Notices
Per Notice 22-13, FINRA has adopted amendments to Rule 6732 (Exemption from Trade Reporting Obligation for Certain Transactions on an Alternative Trading System) to expand the scope of the exemption to include eligible ATS transactions that involve only one member (other than the ATS). As amended, a member ATS may apply for the exemption for transactions between a member subscriber and a non-member entity (e.g., a bank). The amendments to Rule 6732 will take effect on October 3, 2022.
The amended rule text is available in the online FINRA Manual.
Per Notice 22-14, FINRA is soliciting comment on a proposal to establish a new trade reporting requirement for transactions in over-the-counter options on securities with terms that are identical or substantially similar to listed options. FINRA is proposing to require firms to report this information to FINRA on a daily basis (end-of-day) for regulatory purposes only.
Special Notices
There were no special notices in June.
SEC
Final Rules
Per Release No. 33-11070, the SEC is adopting rule and form amendments that mandate the electronic filing or submission of documents that are currently permitted electronic submissions, including the “glossy” annual report to security holders, notices of exempt solicitations and exempt preliminary roll-up communications, notices of sales of securities of certain issuers, filings of required reports by foreign private issuers and filings made by multilateral development banks on the SEC’s Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system. The SEC is also adopting rules that will mandate the electronic submission of the “glossy” annual report to security holders, the electronic filing of the certification made pursuant to the Exchange Act and its rules that a security has been approved by an exchange for listing and registration, the use of Inline eXtensible Business Reporting Language (“Inline XBRL”) for the filing of the financial statements and accompanying notes to the financial statements required in the annual reports of employee stock purchase, savings and similar plans, and that will allow for the electronic submission of certain foreign language documents. comment period for a release proposing amendments to its rules under the Securities Exchange Act of 1934 (“Exchange Act”) that would amend a rule under the Exchange Act, which defines certain terms used in the statutory definition of “exchange” under the Exchange Act, re-propose amendments to Regulation ATS for ATSs that trade government securities as defined under the Exchange Act or repurchase and reverse repurchase agreements on government securities (“Government Securities ATSs”), re-propose amendments to Regulation SCI to apply to ATSs that meet certain volume thresholds in U.S. Treasury Securities or in a debt security issued or guaranteed by a U.S. executive agency or government-sponsored enterprise (“Agency Securities”), amend the fair access rule for ATSs, and amend Form ATS-N, Form ATS-R, and Form ATS (“Exchange Act Proposing Release”). These actions will allow interested persons additional time to analyze the issues and prepare their comments, which would benefit the SEC in its consideration of final rules.
The comment periods for the proposed rules published in the Federal Register on March 24, 2022, at 87 FR 16886, and March 18, 2022, at 87 FR 15496 were reopened. Comments were to have been received on or before June 13, 2022.
Per Release No. 33-11075, the SEC is adopting amendments to Volume II of the Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”) Filer Manual (“Filer Manual”) and related rules and forms. The EDGAR system was upgraded on June 21, 2022.
Per Release No. 34-95148, the SEC is adopting amendments to rules to convert the filing of certain applications, confidential treatment requests, and forms from paper to electronic submission. Specifically, the SEC is amending its rules to require that the following types of filings be submitted via its Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system: applications for orders under any section of the Investment Advisers Act of 1940 (“Advisers Act”) and confidential treatment requests for filings made under section 13(f) of the Securities Exchange Act of 1934 (“Exchange Act”). The SEC is also adopting rule amendments to harmonize the requirements for the submission of applications for orders under the Advisers Act and the Investment Company Act of 1940 (“Investment Company Act”). In addition, the SEC is amending other rules and a form to require the electronic submission of Form ADV-NR through the Investment Adviser Registration Depository (“IARD”) system. The SEC is also adopting requirements for non-resident general partners and non-resident managing agents to amend their Form ADV-NR within 30 days whenever any information contained in the form becomes inaccurate by filing with the Commission a new Form ADV-NR. Further, the SEC is adopting amendments to Form 13F to require managers to provide additional identifying information and to allow managers to disclose, for any security reported on Form 13F, the security’s share class level Financial Instrument Global Identifier (“FIGI”). Finally, the SEC is adopting certain technical amendments to Form 13F, including modernizing the structure of data reporting and amending the instructions on Form 13F for confidential treatment requests in light of a recent decision of the U.S. Supreme Court.
Proposed Rules
Per Release No. 33-11071, the SEC is reopening the comment period for its proposal for Listing Standards for Recovery of Erroneously Awarded Compensation, Exchange Act Release No. 34-75342 (July 1, 2015) (the “Proposing Release”). The proposed rules would direct the national securities exchanges and national securities associations to establish listing standards that would require each issuer to develop and implement a policy providing for the recovery, under certain circumstances, of incentive-based compensation based on financial information required to be reported under the securities laws that is received by current or former executive officers, and require disclosure of the policy. The SEC reopened the comment period for Proposing Release in the Reopening of Comment Period for Listing Standards for Recovery of Erroneously Awarded Compensation Release, Exchange Act Release No. Release No. 34-93311 (Oct. 14, 2021) (the “Reopening Release”). The SEC is re-opening the comment period to allow interested persons to analyze and comment on the additional analysis and data on compensation recovery policies and accounting restatements contained in a staff memorandum that was added to the public comment file on June 8, 2022.
The comment period for the proposed rule published July 14, 2015, at 80 FR 41144, which was initially reopened on October 21, 2021, at 86 FR 58232, is again reopened. Comments should be received on or before July 14, 2022.
Interim Final Rules
There were no interim final rules in June.
Interpretive Releases
There were no interpretive releases in June.
There were no policy statements in June.
NFA
Notices to Members
Notice I-22-16
June 28, 2022
FCM and IB Members—FinCEN updates its list of FATF-identified jurisdictions with AML/CFT deficiencies
On June 23, 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 with AML/CFT deficiencies and revise their AML programs accordingly. A copy of the news release is available on FinCEN's website.
News Releases
There were no NFA news releases in June.Bottom of Form
Hot Issues
As part of its 2022 Examination Priorities, the SEC announced that it will continue to prioritize its focus on RIAs to private funds. Examinations will review issues under the Investment Advisers Act of 1940 (Advisers Act), including an adviser’s fiduciary duty, and will assess risks, including a focus on compliance programs, fees and expenses, custody, fund audits, valuation, conflicts of interest, disclosures of investment risks, and controls around material nonpublic information (MNPI). Additionally, Reg BI continues to be an area of heightened focus, in line with regulatory prioritization of main street investor protection.
Our Perspective
Regulators continue to demonstrate their commitment to protecting investors by aggressively pursuing bad actors and reviewing and updating regulations to guard investors against constantly evolving threats. CRC continuously follows regulatory trends and focus areas, particularly with regard to fintech and digital currency.
The best approach to regulatory compliance is a proactive one. Staying ahead of the curve by taking note of statements and guidance released by regulators and using them as a barometer to assess the current regulatory climate can help ensure that a firm is prepared for a regulatory exam. Rather than scrambling to rectify issues or meet deadlines, a thorough, active compliance program that considers and incorporates regulatory developments is in a better position to satisfy regulators and preserve operations so they can best serve their clients.
For more information, please contact:
Mitch Avnet
p. (646) 346-2468
David Amster
p. (917) 568-6470
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