On July 9, the CFPB released an outline of its guiding Consumer Protection Principles (Principles) for protecting consumers as the private sector develops faster payment systems. The CFPB is advocating for the development of faster and safer consumer payment capabilities in both new and existing payment systems. The Principles outlined include: (1) consumer control over payments; (2) data and privacy protection and transparency; (3) fraud and error resolution protections; (4) transparency of information about transaction status and costs, risks, funds availability and security of payments; (5) affordability and transparency of costs associated with using various systems; (6) broad accessibility to consumers; (7) faster clearing and settlements to decrease risk of overdraft and declined transactions; (8) strong built-in protections to safeguard against and respond to data breaches, and limiting value of payment credentials to reduce worth to fraudsters; and (9) strong accountability mechanisms that effectively curtail system misuse.
In the July 1 issue we reported that the CFTC had voted to propose a rule that would apply the CFTC’s margin requirements for uncleared swaps in the context of cross-border transactions. That proposal was published in the Federal Register yesterday. Comments are due on September 14, 2015.
In a June 29 No-Action Letter, the staff of the SEC provided assurance to Northern Lights Fund Trust (the “Trust”) that it would not recommend enforcement action under Sections 12(d)(1)(A) and (B) if a fund-of-funds that is a series of the Trust (the “Fund-of-Funds”) operates in a manner that complies with all of the provisions of Section 12(d)(1)(G) of the 1940 Act and in accordance with all of the provisions of Rule 12d1-2 under the 1940 Act, except for Rule 12d1-2(a)(2) to the extent that it restricts the Fund-of-Funds from investing in assets that might not be securities under the 1940 Act. Prior to the issuance of the no-action relief, such a fund-of-funds was limited to pursing its investment objectives through investments in securities as defined in Section 2(a)(36) under the 1940 Act (“Securities”). Under this no-action letter, in addition to Securities, funds-of-funds will be permitted to invest in assets, such as real estate, futures contracts and other financial instruments, that might not qualify as securities under the 1940 Act. In providing the no-action assurances, the staff of the SEC noted that in 2008 it had proposed amendments to Rule 12d1-2 which, if adopted, would permit the relief provided in the no-action letter and that the SEC has issued exemptive relief to other fund complexes of the kind that would have been provided by the proposed amendments to Rule 12d1-2.
On July 8 the SEC published Release No. 34-75394, notice of filing by FINRA of a proposed rule change to establish the Securities Trader and Securities Trader Principal registration categories. The change would replace the Equity Trader registration category and Series 55 qualification examination with the Securities Trader registration category and a new Series 57 qualification examination and amend NASD Rule 1022(a) (General Securities Principal) to add the Securities Trader Principal registration category. This is being done in part to coordinate with the registration categories and qualification examinations of the national securities exchanges, such as NYSE and CBOE. The national securities exchanges use a Proprietary Trader qualification examination (Series 56), and FINRA states in its release that it expects the national securities exchanges to submit rule changes to replace the Series 56 examination with the Series 57. Comments on the FINRA rule proposal are due 21 days after publication in the Federal Register.
As noted in the July 1 issue, FINRA has proposed a change to FINRA Rule 2210 that would require each of a member’s websites to include a readily apparent reference and hyperlink to BrokerCheck. The proposed rule was published in the Federal Register on July 13, and comments are due on or before August 3.
Enforcement & Litigation
On July 23 from noon to 1 p.m. EDT, Goodwin Procter partners Jamie Fleckner and Scott Webster will host a complimentary webinar discussion on the Ninth Circuit's Tibble v. Edison, Int'l decision, highlighted in our quarterly newsletter, ERISA Litigation Update. They will analyze the implications of that ruling for ERISA litigation and fiduciary decision-making. To register for the webinar please click here.