Spotlight

DoL’s Proposed Retirement Security Rule: Definition of an Investment Advice Fiduciary

The DoL’s Employee Benefits Security Administration (EBSA) is proposing a new rule that would replace the 1975 five-part test to determine fiduciary status when giving advice. The new rule and amendments to the existing prohibited transaction exemptions (PTEs) “would protect workers' retirement savings by updating the regulation defining a fiduciary under the Employee Retirement Income Security Act (ERISA).” Comment Period:- 60 days from publication in the Federal Register.

Links to Details:

More Information about the DoL’s Fiduciary Rule is available here.
Proposed Retirement Security Rule.
Proposed Amendment to PTE 2020-02.
Proposed Amendment to PTE 84-24.
Proposed Amendment to PTEs 75-1, 77-4, 80-83, 83-1, and 86-128.

SEC Rulemaking & Other SEC Actions

SEC Adopts Final Rules to Increase Transparency in the Securities Lending Market

On October 13, the SEC adopted new Rule 10c-1a, which will require certain persons to report information about securities loans to a registered national securities association (RNSA) and require RNSAs to make publicly available certain information that they receive regarding those lending transactions. In the press release, the SEC said “[t]he rule is intended to increase the transparency and efficiency of the securities lending market.”

Compliance Date:
(1) An RNSA is required to propose rules within four months of the effective date (60 days after publication in the Federal Register);
(2) the proposed RNSA rules are required to be effective no later than 12 months after the effective date;
(3) covered persons are required to report information required by the rule to an RNSA starting on the first business day 24 months after the effective date; and
(4) RNSAs are required to publicly report information within 90 calendar days of the reporting date.

The press release and final rule are available here.

SEC Adopts Rule to Increase Transparency Into Short Selling and Amendment to CAT NMS Plan for Purposes of Short Sale Data Collection

On October 13, the SEC announced the adoption of new Rule 13f-2 “to provide greater transparency to investors and other market participants by increasing the public availability of short sale related data.” Congress had directed the SEC (in Section 929X of Dodd-Frank) to promulgate rules to make certain short sale data publicly available:

• Specifically, Rule 13f-2 will require institutional investment managers that meet or exceed certain thresholds to report on Form SHO specified short position data and short activity data. The SEC will aggregate the data post it on EDGAR, along with the existing short sale data that is currently publicly available.
• Relatedly, the Commission today also adopted an amendment to the National Market System Plan (NMS Plan) governing CAT. Each CAT reporting firm that is reporting short sales must indicate when it is asserting use of the bona fide market making exception in Rule 203(b)(2)(iii) of Regulation SHO.

Compliance Date: The rules become effective 60 days after publication in the Federal Register. The compliance date for Rule 13f-2 and Form SHO will be 12 months after the effective date of the adopting release, with public aggregated reporting to follow three months later, and the compliance date for the amendment to the CAT NMS Plan will be 18 months after the effective date of the adopting release.

The press release and final rule are available here.

SEC Proposes Rule to Address Volume-Based Exchange Transaction Pricing for NMS Stocks

On October 18, the SEC announced a proposed rule that would prohibit national securities exchanges from offering volume-based transaction pricing in connection with the execution of agency or riskless principal orders in NMS stocks. The proposal also would require national securities exchanges to have certain anti-evasion rules and written policies and procedures and disclose certain information if they offer volume-based transaction pricing for member proprietary volume in NMS stocks.

Comment Period: 60 days from publication in the Federal Register.

The press release and final rule are available here.

SEC Division of Examinations Announces 2024 Priorities

On October 16, the SEC released its 2024 examination priorities “to inform investors and registrants of the key risks, examination topics and priorities the Division plans to focus on in 2024.” The SEC highlighted key areas they will focus on during their exams of investment advisors, investment companies, broker dealers, SRO’s, clearing agencies, and other market Participants (e.g., municipal advisors, security-based swap dealers, transfer agents, and those associated with crypto assets and emerging financial technology),

Press release and 2024 Exam Priorities is available here.

FINRA

New FINRA Report: Quantum Computing Has Potential to Reshape Securities Industry

On October 30, FINRA released a new report, “Quantum Computing and the Implications for the Securities Industry,” which examines how the emerging technology relying on quantum mechanics significantly alter the future of the securities industry, including the opportunities and risks quantum computing presents report. The report included the most likely applications within the financial industry and potential threats to data security.

Comment Date: March 15, 2024

The FINRA Report is available here.

Regulatory Notice 23-17: FINRA Discontinues Collection of INSITE Data From Clearing Firms

Effective November 30, FINRA is discontinuing collection of data under Rule 4540. The data collected under Rule 4540 is used in the Integrated National Surveillance and Information Technology Enhancements program (INSITE). The data is now available through alternative sources not available when INSITE was developed.

FINRA’s Regulatory Notice 23-17 is available here.