The Commodity Futures Trading Commission’s (“CFTC”) Final Interpretive Guidance on the “actual delivery” exception to regulatory jurisdiction for digital assets became effective June 24, 2020. See 85 Fed. Reg. 37734. The CFTC unanimously adopted the Guidance in March: Retail Commodity Transactions Involving Certain Digital Assets, Rel. 8139-20 (Mar. 23, 2020).
The Final Guidance adopts the 2017 Proposed Interpretation with some minor changes. The “actual delivery” exception to CFTC regulatory jurisdiction still requires unencumbered physical ...
On June 16, the SEC issued a temporary exemptive order, allowing registered municipal advisors to solicit banks, their wholly-owned commercial lenders and credit unions in connection with direct placements by municipal-issuer clients. Ordinarily, that placement-agent activity would require broker-dealer registration under ’34 Act Section 15 (15 U.S.C. § 78o).
The Commission granted the temporary exemption to allow MAs to assist municipal issuers – especially smaller municipalities not otherwise eligible for the Fed’s Municipal Liquidity Facility – with ...
The Supreme Court allowed the SEC to seek “disgorgement” as a form of “equitable relief” in civil-actions, but limited the remedy to net profits for benefit of harmed investors. Answering part of a question reserved in 2017’s Kokesh opinion, this week’s Liu opinion raised more questions than it answered.
The Liu’s raised investor funds for an EB-5 visa program under a private offering, but pocketed most of them. In a civil enforcement action, the SEC obtained the Liu’s disgorgement of full amount raised from investors (not net), jointly and severally. The Supreme ...
Effective June 30, SEC Reg. BI requires broker-dealers to make recommendations only in the “best interests” of retail customers, imposing additional disclosure, care, conflicts-of-interest and compliance obligations. The disclosure obligations include dissemination of Form CRS educating customers on the nature of their relationship with the firm.
FINRA Regulatory Notice 20-18, issued June 19, makes corresponding changes to its Rules stressing the primacy of Reg. BI with respect to retail customers:
Capital Acquisition Brokers’ suitability (Rule 211).
On May 28, 2020, FINRA issued its Regulatory Notice 20-16 sharing firms’ WFH practices observed to date. They include common practices adopted across most industries, as one would expect.
During the TRANSITION TO WFH, firm practices included:
- Increased Customer Assistance through outreach and web-based communications, to ensure customers knew how to access representatives and other resources;
- Location Monitoring & Contact Lists to know where staff were and ensure they knew how to stay in touch;
- Increased Support for staff, including more frequent training and ...
On May 8, FINRA filed an expedited request for an immediate rule change that would allow service by email, extensions of time, and video-conference hearings in member-application, disciplinary proceedings and appeals. FINRA notes that the COVID-19 work-from-home (“WFH”) environment makes it “exceedingly difficult to send and receive hard copy mail and conduct in-person meetings and hearings.” The rule change is expected to be temporary through June 15, subject to another later filing extending the provisions if and as necessary.
FINRA previously made similar ...
The United States Department of Justice ("DOJ") has filed the first criminal action for fraud in connection with PPP loans. Documents unsealed May 5 in the United States District Court for the District of Rhode Island accuse David A. Staveley, aka Kurt D. Sanborn, 52, of Andover, Massachusetts, and David Butziger, 51, of Warwick, Rhode Island, of seeking over $500,000 in PPP loans for four businesses that they did not own, or were closed prior to the pandemic.
The criminal complaint charges both men with conspiracy to make false statements to influence the SBA and conspiracy to commit ...
In a May 4 joint public statement, SEC Chair Clayton and Municipal Securities Office Director Rebecca Olsen urged municipal issuers to make voluntary disclosures specific to issuers, and their various outstanding municipal securities, regarding the effect of COVID-19 on present and expected future operating and financial status.
Municipal issuers are obligated under SEC Rule 15c2-12 to provide annual audited financial disclosures and disclosures of certain material events. The MSRB’s description of the Rule is here.
The SEC’s statement emphasized the relative size and ...
On April 27, the SEC’s Division of Investment Management updated its COVID-19 FAQs to reflect the Staff’s position that small investment advisers must report the “nature, amounts and effects” of PPP loans if potentially material to their ability to serve clients and meet contractual obligations.
Question 11.4 provides:
Q. I am a small advisory firm that meets the requirements of the Paycheck Protection Program (PPP) established by the U.S. Small Business Administration in connection with COVID-19. If I receive or have received a PPP loan, what are my regulatory reporting ...
The Tenth Circuit joined a majority holding that the Federal Arbitration Act (“FAA”) permits modification of an arbitration award for a “material miscalculation of figures” if the miscalculation is “evident” on the face of the award and precludes consideration of the underlying record.
Section 11 of the FAA provides:
In either of the following cases, the United States court in and for the district wherein the award was made may make an order modifying or correcting the award upon the application of any party to the arbitration—
(a) Where there was an evident material ...