Articles Tagged with Regulatory Compliance

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The SEC adopted today amendments that will, among other things:

  • shorten the deadline for initial Schedule 13D filings from 10 days to five business days;
  • require that Schedule 13D amendments be filed within two business days (rather than “promptly,” which had been interpreted by many practitioners as within one business day in most cases involving ownership changes under Rule 13d-2(a) that trigger the amendment requirement);
  • shorten the initial Schedule 13G filing deadline for qualified institutional investors and exempt investors from 45 days after the end of a calendar year to 45 days after the end of the calendar quarter in which the investor beneficially owns more than 5% of the covered class;
  • shorten the initial Schedule 13G filing deadline for passive investors from 10 days to 5 business days;
  • revise the Schedule 13G amendment deadline for all 13G filers from 45 days after the end of a calendar year in which any change occurs (other than those exempted under Rule 13d-2(b)) to 45 days after the end of the calendar quarter in which a material change occurs;
  • revise from “promptly” to two business days the Schedule 13G amendment obligations under Rule 13d-2(d) for qualified institutional investors and passive investors when their beneficial ownership exceeds 10% or increases or decreases by 5%;
  • extends the EDGAR filing cut-off time for Schedules 13D and 13G from 5:30 pm to 10:00 pm Eastern time;
  • clarify the Schedule 13D disclosure requirements with respect to derivative securities; and
  • require that Schedule 13D and 13G filings be made using a structured, machine-readable data language.

Pages 10-11 of the adopting release contains a table summarizing the changes.  The adopting release also provides guidance regarding the current legal standard governing when two or more persons may be considered a group for the purposes of determining whether the beneficial ownership threshold has been met, as well as how, under the current beneficial ownership reporting rules, an investor’s use of certain cash-settled derivative securities may result in the person being treated as a beneficial owner of the class of the reference equity securities.

The amendments will become effective 90 days after publication in the Federal Register. Compliance with the revised Schedule 13G filing deadlines will be required beginning on Sept. 30, 2024. Compliance with the structured data requirement for Schedules 13D and 13G will be required on Dec. 18, 2024. Compliance with the other rule amendments will be required upon their effectiveness.

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Enhanced Focus on Private Funds, ESG, and Operational Resiliency

The Securities and Exchange Commission’s Division of Examinations today announced its 2022 examination priorities.  The Division will focus on private funds, environmental, social and governance (ESG) investing, retail investor protections, information security and operational resiliency, emerging technologies, and crypto-assets.

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We urge our clients to consult Pillsbury’s comprehensive COVID-19 Resource Center for information regarding Responding to a Global Crisis, Business Interruption, Cybersecurity, Employer Concerns and other general matters related to the COVID-19 pandemic. We also recommend the following specific measures to mitigate risks of business interruption and regulatory noncompliance resulting from the COVID-19 pandemic.

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Registered and Exempt Reporting Firms:

The deadline for the annual update of Form ADV is approaching.  We have previously notified you regarding filing obligations that were due between January 1 and March 1.  Below is a recommended compliance and filing deadline table addressing registered firms’ obligations for the remainder of the calendar year.  Let us know if you need any assistance.

Annual Compliance Deadlines

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While acknowledging the challenges in applying the securities laws to digital assets, the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA), in a joint statement on July 8, 2019, reaffirm that those rules equally apply to digital assets, and promise they will continue to engage the industry in finding solutions.

Read the full public statement HERE.

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This is a reminder about the upcoming annual compliance deadlines that may or may not apply to you.

Please click HERE to open a summary chart of the filing deadlines.

Please feel free to contact us if you have questions or need assistance with any of these filings.

Sincerely,

Pillsbury IFIM Group

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This is a reminder that the 2019 IARD account renewal obligation for investment advisers (including exempt reporting advisers) starts this November.  An investment adviser must ensure that its IARD account is adequately funded to cover payment of all applicable registration renewal fees and notice filing fees.

Key Dates in the Renewal Process:

November 12, 2018 – Preliminary Renewal Statements which list advisers’ renewal fee amount are available for printing through the IARD system.

December 17, 2018 – Deadline for full payment of Preliminary Renewal Statements.  In order for the payment to be posted to its IARD Renewal account by the December 17 deadline, an investment adviser should submit its preliminary renewal fee to FINRA through the IARD system by December 14, 2018.

December 28, 2018 – January 1, 2019 – IARD system shut down.  The system is generally unavailable during this period.

January 2, 2019 – Final Renewal Statements are available for printing.  Any additional fees that were not included in the Preliminary Renewal Statements will show in the Final Renewal Statements.

January 21, 2019 – Deadline for full payment of Final Renewal Statements.

For more information about the 2019 IARD Account Renewal Program including information on IARD’s Renewal Payment Options and Addresses, please visit http://www.iard.com/renewals.asp

Please contact us if you have questions.

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This alert contains a summary of the primary annual and periodic compliance-related obligations that may apply to investment advisers registered with the Securities and Exchange Commission (the “SEC”) or with a particular state (“Investment Advisers”), and commodity pool operators (“CPOs”) and commodity trading advisors (“CTAs”) registered with the Commodity Futures Trading Commission (the “CFTC”) (collectively with Investment Advisers, “Managers”).[1]  Due to the length of this Alert, we have linked the topics to the Table of Contents and other subtitles for easy click-access.

This summary consists of the following segments: (i) List of Annual Compliance Deadlines; (ii) New Developments; (iii) 2018 National Exam Program Examination Priorities; (iv) Continuing Compliance Areas; and (v) Securities and Other Forms Filings.

READ MORE . . .

Read this article and additional Pillsbury publications at Pillsbury Insights.

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The Office of Compliance Inspections and Examinations (OCIE) of the SEC issued a Risk Alert yesterday providing a list of the most frequently identified compliance issues relating to the Advertising Rule (Rule 206(4)-1) under the Investment Advisers Act of 1940.  These compliance issues were identified as part of the OCIE examination of investment advisers:  misleading performance results, misleading one-on-one presentations, misleading claim of compliance with voluntary performance standards, “cherry-picked” profitable stock selections, misleading selection of recommendations and insufficient/inaccurate compliance policies and procedures.

Compliance with the Advertising Rule has long been, and remains, a favorite focus of the SEC.  In an age of fundraising challenges, investment advisers must balance the pressing need of appealing to prospective clients with adherence to precise regulatory standards.  Each marketing piece should go through rigorous internal review and sign-off procedures and, as necessary, outside counsel evaluation.  Investment advisers are urged to pay special attention to any form of performance or track record marketing.

Click here for the full Risk Alert. Contact your Pillsbury attorney for additional assistance.

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The global compliance deadline for implementation of variation margin requirements for uncleared swap transactions is March 1, 2017.  Unless an exception is available, the rules generally require swap dealers to collect and post variation margin with no credit threshold.  The rules require the parties to enter into new or amended credit support documentation, limit the types of collateral that may be posted, prescribe minimum transfer amounts and effectively require new operational processes to be put in place.  Moreover, different rules can apply depending on who the swap dealer’s regulator is and/or the jurisdiction of the counterparty.  Not surprisingly, many market participants, particularly smaller financial firms, buy-side firms, asset managers, pension funds and insurance companies are unlikely to be compliant by the March 1 deadline.  This has caused immense consternation among buy-side market participants who feared that they would be unable to trade until they came into compliance.

On February 23, 2017, following requests from numerous trade associations, U.S. banking regulators and IOSCO, the umbrella body for global securities regulators, issued statements encouraging leniency in enforcement of the documentation requirements.  More specifically, the Federal Reserve provided guidance to examiners of CFTC-registered swap dealers that, except for transactions with financial end users that present “significant exposures” (which must still comply with the March 1 deadline), examiners should focus on swap dealer’s good faith efforts to comply as soon as possible but no later than September 1, 2017.   Similarly, though less explicitly, IOSCO issued a statement that, while it expects all parties to make every effort to meet the March 1 deadline, it believes that the global regulators should take “appropriate measures … to ensure fair and orderly markets during the introduction and application of such variation margin requirements.”   These statements follow the release by the CFTC on February 13, 2017 of a time-limited no-action letter delaying compliance by swap dealers under their jurisdiction until September 1, 2017.

There are a number of paths to compliance for buy-side firms, including negotiating bilateral agreements or amendments directly with swap dealers or using an industry-wide questionnaire-style protocol developed by ISDA and available through their ISDA Amend automated service run jointly with Markit.

If you have questions regarding the current deadlines or need assistance with compliance, please contact our derivatives partner, Daniel Budofsky (daniel.budofsky@pillsburylaw.com), or your regular Pillsbury contact.