Regulatory & Compliance Update

News, insight and market knowledge on regulatory and compliance issues from Schulte Roth & Zabel

On Oct. 9, 2018, in a wide-ranging notice of proposed rulemaking (the “KISS Proposal”), the Commodity Futures Trading Commission proposed (1) to codify several accepted practices that currently rely on no-action letters and similar CFTC staff guidance and (2) to make a number of substantive changes to CFTC regulations, such as offering broader exemptive relief for offshore funds and imposing disqualifications from certain commonly claimed exemptions. The proposals are now in a comment period, so…
On Oct. 3, 2018, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (collectively, the “Agencies”) issued an interagency statement regarding the sharing of Bank Secrecy Act (“BSA”) resources (“Interagency Statement”). The Interagency Statement is directed at banks, and does not extend to other financial institutions…
On Sept. 28, 2018, the Commodity Futures Trading Commission filed a civil enforcement action against EOX Holdings LLC, an introducing broker, and one of its registered associated persons, Andrew Gizienski. The CFTC’s complaint, which charges that EOX Holdings and Gizienski misused material, nonpublic information in connection with block trades of energy contracts on the ICE Futures U.S. exchange, represents the latest assertion of CFTC jurisdiction over the relatively new concept of illegal insider trading in…
On Sept. 26, 2018, the SEC approved a proposal previously filed in January by The Nasdaq Stock Market LLC to amend Nasdaq Listing Rule 5635(d), the shareholder approval rules applicable to discounted private placements. Under the previous version of Nasdaq Listing Rule 5635(d), Nasdaq-listed companies were generally required to obtain shareholder approval prior to the issuance of securities in a nonpublic offering if (1) the number of shares of common stock issued or potentially issuable…
In its budget request for fiscal year 2018, the CFTC outlined an increasingly muscular enforcement effort, stating that, “the Commission will utilize its enforcement resources to continue preserving market integrity[.]” This 2017 request, however, also foreshadowed a new enforcement initiative for 2018, one focused on: “Increasing effectiveness and efficiency of enforcement through cooperative enforcement with SROs, state, Federal, and international authorities, including achieving efficiencies through referrals[.]” The fruits of this “cooperative enforcement” initiative became evident…
On Sept. 12, 2018, the U.S. Securities and Exchange Commission charged the principal of a hedge fund manager and the hedge fund manager itself with illegally profiting from a scheme to drive down the price of Ligand Pharmaceuticals Inc., generating approximately $1.3 million in illegal profits. The SEC’s complaint charges that Gregory Lemelson and Massachusetts-based Lemelson Capital Management LLC issued false information about Ligand after Lemelson took a short position in Ligand on behalf of…
On Aug. 27, 2018, the U.S. Securities and Exchange Commission announced settlements with a U.S.-based registered investment adviser, several of its affiliates and two of its executives for alleged misconduct involving quantitative investment models that contained numerous errors. These settlements, especially when placed in the context of other recent enforcement efforts related to quantitative and systematic trading strategies, make it clear that the SEC staff will utilize its anti-fraud powers to sanction investment advisers employing…
On July 31, 2018, the Office of the Comptroller of the Currency (“OCC”) issued a news release announcing that it will begin accepting special purpose national bank (“SPNB”) charter applications from fintech companies that do not take deposits but are engaged in the business of lending money or paying checks (including the modern equivalent thereof, which the OCC suggests includes issuing debit cards or otherwise facilitating payments electronically). The OCC’s decision was announced shortly after the…
On July 18, 2018, the U.S. Securities and Exchange Commission approved amendments to Regulation ATS and Rule 3a1-1 under the Securities Exchange Act of 1934, as amended. The Amendments impose extensive new transparency requirements on alternative trading systems (“ATSs”) that effect transactions in NMS Stocks. With the increase in regulatory burdens associated with operating an NMS Stock ATS and the new requirement to disclose potentially sensitive business information, the competitive landscape among NMS Stock ATSs…