Financial Institutions

On March 6, 2024, the Securities and Exchange Commission (“SEC” or “Commission”) adopted amendments to the disclosure requirements of Rule 605 of Regulation NMS for order executions of stocks listed on a national securities exchange.[1]  The final rule amendments expand the scope of entities that must comply with, and order types and sizes that must be reported under, Rule 605, and requires time-based metrics to be reported at a more granular level.  This is the first substantive update of Rule 605 since it was adopted in 2000. Continue Reading SEC Approves Amendments to Enhance Disclosure of Order Execution Information

On February 15, 2024, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) released a notice of proposed rulemaking (the “Proposed Rule”)[1] that would impose anti-money laundering/countering the financing of terrorism (“AML/CFT”) compliance obligations on SEC-registered investment advisers (“RIAs”) and exempt reporting advisers (“ERAs”) pursuant to the Bank Secrecy Act (the “BSA”), taking steps to close a perceived gap in the AML/CFT defenses of the U.S. financial system. FinCEN estimates more than 15,000 RIAs and almost 6,000 ERAs may be covered by the Proposed Rule, including many advisers that are located outside the United States but have registered (or file reports) with the SEC because they have U.S. clients. Continue Reading FinCEN Tries Again . . . to Impose AML Requirements on Investment Advisers

On November 14, the Securities and Exchange Commission announced its enforcement results for the 2023 fiscal year,[1] with case numbers up from fiscal year 2022 and monetary sanctions at the second highest level in the agency’s history, though down significantly from last year’s record highs.  In a press release announcing the results, Enforcement Director Gurbir Grewal noted that the past year’s cases demonstrate how the agency “work[s] with a sense of urgency, using all the tools in our toolkit.”  This post evaluates how the SEC used its enforcement tools in the past year and surveys the enforcement highlights in key substantive areas.Continue Reading SEC Announces FY 2023 Enforcement Results with Second-Highest Penalties on Record

On October 13, the Securities and Exchange Commission (the “SEC”) adopted new rule 10c-1a (the “Rule”), which establishes broad reporting requirements of the terms of securities loans to the Financial Industry Regulatory Authority (“FINRA”) for public dissemination. Aimed at increasing transparency in the securities lending market, the Rule will significantly increase compliance obligations in the securities lending industry, and many market participants will likely require extensive operational upgrades to prepare for compliance. Certain details of reporting obligations will be the subject of FINRA rulemaking, and participants should be prepared to review and provide comment on what is proposed.Continue Reading SEC Finalizes Rule Requiring Securities Loan Reporting

On July 26, 2023, the Securities and Exchange Commission (“SEC”) proposed new rules targeting the use of predictive data analytics and artificial intelligence (“AI”) by registered investment advisers (“RIAs”) and broker-dealers.[1]  The new proposed rules focus on the potential for conflicts of interest and the possibility that newer, more complex analytics models (including those using AI) might optimize decision making for RIAs and broker-dealers by placing those firms’ interests above the interests of their clients.[2]  The proposed rules would require RIAs and broker-dealers to: (i) evaluate whether their use of technologies “that optimize for, predict, forecast or direct investment-related behaviors or outcomes” create such a conflict of interest, and (ii) either stop using or address the effects of tools that place a firm’s interests before the interests of clients.  RIAs and broker-dealers will also will be required to adopt policies to ensure compliance with the new proposed rules.[3] Continue Reading SEC Proposes Rules Limiting the Use of Artificial Intelligence by Registered Investment Advisers and Broker-Dealers

Companies face new pressures relating to the potential environmental impact of their products and services. In recent years, ESG has become a focal point about how companies conduct their business and there has been an increase in pledges to reduce greenhouse gas emissions, marketing of environmentally friendly products and reporting on environmental, social and corporate

On December 15, 2022, the Financial Crimes Enforcement Network (“FinCEN”) of the Department of the Treasury announced a Notice of Proposed Rulemaking (the “Access Rule NPRM”)[1] to implement the requirements of the Corporate Transparency Act (“CTA”) with respect to access to beneficial ownership information (“BOI”) reported to FinCEN under the CTA.[2] The Access Rule NPRM would implement the CTA’s provisions on who may access BOI held by FinCEN, the circumstances under which access may be granted, and the conditions regarding use, security, and oversight of BOI. Separately, it proposes an approach to the use of “FinCEN identifiers” for corporate entities that FinCEN’s final BOI Reporting Rule left unaddressed.Continue Reading FinCEN Proposes Rule Regarding Access to Beneficial Ownership Information under the Corporate Transparency Act

On December 21, 2022, the Federal Deposit Insurance Corporation published a notice of proposed rulemaking elaborating on what constitutes false advertising of deposit insurance for purposes of the Federal Deposit Insurance Act.Continue Reading FDIC Continues Rulemakings Related to Misrepresentation in Advertising: Digital Asset Businesses Still in the Crosshairs

On September 30, 2022, the Financial Crimes Enforcement Network (“FinCEN”) of the Department of the Treasury adopted a final rule (the “Final Rule”) to implement the beneficial ownership reporting requirements of the Corporate Transparency Act (“CTA”), as part of the Anti-Money Laundering Act of 2020.  The CTA and Final Rule require a range of U.S. entities, and non-U.S. entities registered to do business in the United States, to report information on their underlying beneficial owners who are individuals to FinCEN.  Notably, certain investments advisers exempt from registration and subsidiaries of private fund clients of investment advisers will be subject to these reporting requirements.
Continue Reading FINCEN’s Corporate Beneficial Ownership Reporting Rule: Significance for Investment Advisers

On January 24, 2022, Securities and Exchange Commission Chair Gary Gensler gave a speech at the Northwestern Pritzker School of Law’s Annual Securities Regulation Institute signaling the SEC’s intention to step up its cyber-related regulatory and enforcement efforts.  Gensler described the continued rise in cybersecurity incidents targeting the financial sector as a serious threat to the nation’s economy and critical infrastructure, with costs potentially in the trillions of dollars.
Continue Reading SEC Chair Previews Ramp Up in Regulation and Enforcement in the Cybersecurity Context