FINRA has proposed an amendment to FINRA Rule 2210 to require each of a member’s websites to include a readily apparent reference and hyperlink to BrokerCheck on: (1) the initial webpage intended to be viewed by retail investors; and (2) any other webpages including a professional profile of one or more registered persons who conduct business with retail investors. The proposed requirements would not apply to members that do not provide products or services to retail investors, or to directories or lists of registered persons limited to names and contact information.
On June 26, the SEC published an IM Guidance Update addressing Rule 204A-1, which provides that a registered investment adviser must report the personal securities trading of certain of its employees who have access to material non-public information (“access persons”). Subsection (b)(3)(i) of the Rule provides an exception to the reporting requirements when the securities are held in accounts over which the owner has “no direct or indirect influence or control.” The Guidance Update clarifies that an access person providing a trustee with management authority over a trust for which he is grantor or beneficiary, or providing a third-party manager discretionary investment authority over his or her personal account, by itself, is insufficient for an adviser to reasonably believe that the security owner had no direct or indirect influence or control over the trust or account for purposes of relying on the reporting exception. The Guidance Update includes examples of additional controls that an adviser should consider implementing as a part of policies and procedures reasonably designed to enable the adviser to determine whether the access person actually has direct or indirect influence over a trust or account.
The Federal Financial Institutions Examination Council (FFIEC) has issued a Cybersecurity Assessment Tool (Assessment) for institutions to evaluate their cybersecurity risks and preparedness. The release of the Assessment follows a summer 2014 pilot program to evaluate cybersecurity preparedness at community financial institutions. In addition to the Assessment, the FFIEC has made supplementary resources available, including an executive overview, a user’s guide, an online presentation explaining the Assessment, and appendixes mapping the Assessment’s baseline items to the FFIEC Information Technology (IT) Examination Handbook and to the National Institute of Standards and Technology’s (NIST) Cybersecurity Framework. The OCC has announced that it will gradually incorporate the Assessment into its examinations of the institutions it supervises, beginning in late 2015.
On June 29, the CFTC announced that it had voted to propose a rule that would apply the CFTC’s margin requirements for uncleared swaps in the context of cross-border transactions. The proposed rule would apply to CFTC-registered swap dealers and major swap participants that are not subject to the margin requirements of other prudential regulators, such as the FRB, OCC or FDIC. Under the proposed rule, covered swap entities would be required to comply with the Commission’s margin rules for all uncleared swaps in cross-border transactions, with a limited exclusion. In addition, the proposed rule would allow covered swap entities to comply with comparable margin requirements in a foreign jurisdiction as an alternative means of complying with the Commission’s margin rules for uncleared swaps (so-called “substituted compliance”). Eligibility to use substituted compliance will depend on whether parties are US or non-US entities and whether the obligations of a non-US entity under the relevant swap are guaranteed by a US person. The CFTC has provided a Fact Sheet on the proposed rule. The comment period for the proposed rule ends 60 days after the publication in the Federal Register.
Enforcement and Litigation
Goodwin Procter’s ERISA Litigation Practice published its latest quarterly ERISA Litigation Update. The update discusses (1) a Supreme Court decision vacating and remanding a Ninth Circuit decision applying the six year statute of limitations to bar parts of excessive fee claims; (2) the Solicitor General’s urging the Supreme Court to decline to hear an ERISA fiduciary breach case concerning which party bears the burden of proof on loss causation; (3) the Ninth Circuit’s division over the implication of Fifth Third v. Dudenhoeffer when plan fiduciaries are alleged to have breached duties by allowing a plan to hold employer stock during a time of alleged artificial inflation of the share price; (4) a District Court of Colorado decision declining to dismiss class action litigation challenging an insurer’s stable value product; and (5) a summary of upcoming conferences and presentations by Goodwin’s ERISA Litigation Practice.