SEC Proposes Amendments to Require Hyperlinks to Exhibits in Filings

The Securities and Exchange Commission today proposed rule and form amendments that would require registrants to include a hyperlink to exhibits in their filings.

“The proposed changes should make it significantly easier to locate documents attached to company filings,” said SEC Chair Mary Jo White. “This enhanced capability will benefit both investors and companies.”

The proposed amendments would require registrants that file registration statements and periodic and current reports that are subject to the exhibit requirements under Item 601 of Regulation S-K, or that file on Forms F-10 or 20-F, to include a hyperlink to each exhibit listed in the exhibit index of the filings. The amendments would also require that registrants submit all of these filings in HyperText Markup Language (HTML) format. 

The public comment period will remain open for 45 days following publication in the Federal Register. To submit comments, use the SEC’s Internet submission form or send an e-mail to rule-comments@sec.gov.

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

Fee Rate Advisory #1 for Fiscal Year 2017

The Securities and Exchange Commission today announced that in fiscal year 2017 the fees that public companies and other issuers pay to register their securities with the Commission will be set at $115.90 per million dollars.

The securities laws require the Commission to make annual adjustments to the rates for fees paid under Section 6(b) of the Securities Act of 1933 and Sections 13(e) and 14(g) of the Securities Exchange Act of 1934. The Commission must set rates for the fees paid under Section 6(b) to levels that the Commission projects will generate collections equal to annual statutory target amounts. The Commission’s projections are calculated using a methodology developed in consultation with the Congressional Budget Office and the Office of Management and Budget. The statutory target amount for fiscal year 2017 is $585 million. The annual adjustment to the fee rate under Section 6(b) also sets the annual adjustment to the fee rates under Sections 13(e) and 14(g).

By law, the annual rate changes for fees paid under Section 6(b) of the Securities Act of 1933 and Sections 13(e) and 14(g) of the Securities Exchange Act of 1934 must take effect on the first day of each fiscal year. Therefore, effective Oct. 1, 2016, the Section 6(b) fee rate applicable to the registration of securities, the Section 13(e) fee rate applicable to the repurchase of securities, and the Section 14(g) fee rates applicable to proxy solicitations and statements in corporate control transactions will increase from $100.70 per million dollars to $115.90 per million dollars. The Section 6(b) rate is also the rate used to calculate the fees payable with the Annual Notice of Securities Sold Pursuant to Rule 24f-2 under the Investment Company Act of 1940.

 The Commission will issue further notices as appropriate to keep the public informed of developments relating to fees under Section 6(b), Section 13(e) and Section 14(g). These notices will be posted on the Commission's Internet Web site at www.sec.gov.

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

RBC to Pay $2.5 Million for Proxy Statement Disclosure Violations

The Securities and Exchange Commission today announced that RBC Capital Markets LLC has agreed to a $2.5 million settlement for causing materially false and misleading disclosures about its valuation analysis in a proxy statement for Rural/Metro Corporation’s sale in 2011 to a private equity firm. 

RBC was the lead financial adviser to Rural/Metro, a medical transportation services provider, and received a $500,000 fee for a fairness opinion presented to Rural/Metro’s board as it considered the sale. An SEC investigation found that RBC’s presentation contained materially false and misleading statements which made the bid look more attractive, and caused that information to be included in the proxy statement Rural/Metro filed in May 2011 to solicit shareholder approval for the sale.

The SEC found that RBC’s presentation described one of its valuations as being based on Wall Street analysts’ “consensus projections” of Rural/Metro’s 2010 adjusted EBITDA, a pretax earnings figure. In fact, the valuation did not reflect analysts’ research or a “consensus” view, but was Rural/Metro’s actual 2010 adjusted EBITDA of $69.8 million.  Rural/Metro’s proxy statement included a summary of RBC’s valuation analysis, which falsely stated that RBC used “Wall Street research analyst consensus projections” for 2010 “consensus” adjusted EBITDA. The SEC order found that in addition to being false, the proxy statement was misleading because shareholders would be led to believe the analysis reflected the “consensus” calculation of $76.8 million. The SEC also found that RBC caused the proxy statement to include a misleading disclosure that suggested RBC had relied on another valuation analysis in its fairness presentation to Rural/Metro’s board when, in fact, RBC did not rely on the analysis for valuation purposes.

“Accurate disclosures about financial advisers’ fairness opinions are important to shareholders in the sale of a corporation,” said Andrew J. Ceresney, Director of the SEC Enforcement Division. “This enforcement action holds RBC accountable for causing its client to distribute material misstatements about its financial analysis to shareholders.”  

Without admitting or denying the findings, RBC agreed to the entry of an SEC order that it caused Rural/Metro to violate Exchange Act Section 14(a) and Exchange Act Rule 14a-9, which prohibits solicitation by means of a proxy statement that contains any materially false or misleading statement. RBC agreed to cease and desist from committing or causing further violations and to pay $500,000 in disgorgement, $77,759 in interest, and a $2 million penalty.

The SEC’s investigation was conducted by George Parizek, Brittany Hamelers, and Amanda de Roo, assisted by trial counsel Fred Block and supervised by Timothy England.

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

SEC Whistleblower Program Surpasses $100 Million in Awards

The Securities and Exchange Commission’s awards to whistleblowers have surpassed the $100 million mark with the program’s second-largest award of more than $22 million announced earlier today.

The whistleblower program was established by Congress to incentivize whistleblowers with specific, timely and credible information about federal securities law violations to report to the SEC. To date, enforcement actions resulting from whistleblower tips have resulted in orders for more than $500 million in financial remedies, much of which has been returned to harmed investors.

“The SEC’s whistleblower program has proven to be a game changer for the agency in its short time of existence, providing a source of valuable information to the SEC to further its mission of protecting investors while providing whistleblowers with protections and financial rewards,” said Mary Jo White, Chair of the SEC.

Whistleblowers may be eligible for an award when they voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action.  Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions ordered exceed $1 million. The SEC paid its first award in 2012, just over a year after its Office of the Whistleblower opened for business.

“The SEC whistleblower program has had a transformative impact on the agency, enabling us to bring high quality enforcement cases quicker using fewer resources,” said Andrew Ceresney, Director of the SEC Division of Enforcement. “The ultimate goal of our whistleblower program is to deter securities violations and paying more than $100 million in whistleblower awards demonstrates the value that whistleblowers have added to our enforcement program.”

Since the program’s inception:

• The Whistleblower Office has received more than 14,000 whistleblower tips from individuals in all 50 states and the District of Columbia and 95 foreign countries.
  • Tips from whistleblowers have increased from 3,001 in fiscal year 2012 – the first full fiscal year that the Whistleblower Office was in operation – to nearly 4,000 last year, an approximately 30 percent increase.
• More than $107 million has been awarded to 33 whistleblowers, with the largest being more than $30 million. (see Top Ten list)
• Because of the information and assistance provided by these whistleblowers, the SEC was able to bring successful enforcement actions where more than $504 million was ordered in sanctions, including more than $346 million in disgorgement and interest for harmed investors.  
• The SEC also has brought actions to ensure that employees feel secure in reporting wrongdoing to the SEC, without fear of reprisal from their employers, including one enforcement action under the anti-retaliation provisions of the Dodd-Frank Act and four actions against companies for including language in confidentiality and severance agreements that impeded whistleblowers from reporting to the SEC.
  • In addition, the Commission announced its first award – a maximum payment of 30 percent of amounts collected – to a whistleblower who suffered retaliation as a result of reporting to the Commission.
• The Whistleblower Office has returned over 13,000 phone calls from members of the public through the whistleblower hotline.

“This is a watershed moment for the SEC’s whistleblower program,” said Jane Norberg, Acting Chief of the SEC’s Office of the Whistleblower. “The SEC has issued more than $100 million in whistleblower awards in five years, demonstrating the invaluable information and assistance whistleblowers have provided to the agency and underscoring the program’s resounding success.”

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

All payments are made out of an investor protection fund established by Congress that is financed through monetary sanctions paid to the SEC by securities law violators.  No money has been taken or withheld from harmed investors to pay whistleblower awards.

For more information about the whistleblower program and how to report a tip: http://ift.tt/NFydSr.

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

$22 Million Whistleblower Award for Company Insider Who Helped Uncover Fraud

The Securities and Exchange Commission today announced the award of more than $22 million to a whistleblower whose detailed tip and extensive assistance helped the agency halt a well-hidden fraud at the company where the whistleblower worked.

The $22 million-plus award is the second-largest total the SEC has awarded a whistleblower. The largest, $30 million, was awarded in 2014.

“Company employees are in unique positions behind-the-scenes to unravel complex or deeply buried wrongdoing. Without this whistleblower’s courage, information, and assistance, it would have been extremely difficult for law enforcement to discover this securities fraud on its own,” said Jane Norberg, Acting Chief of the SEC’s Office of the Whistleblower. 

The SEC’s whistleblower program, which has been rewarding valuable information from tipsters since its inception in 2011, has now surpassed $100 million in total money awarded. More than $107 million has been awarded to 33 whistleblowers who became eligible for an award by voluntarily providing the SEC with original and useful information that led to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million. All payments are made out of an investor protection fund established by Congress that is financed through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards.

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

For more information about the whistleblower program and how to report a tip: http://ift.tt/NFydSr.

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

SEC Adopts Amendments Providing Authorities Access to Data Obtained by Security-Based Swap Data Repositories

The Securities and Exchange Commission today adopted amendments to a rule that would require security-based swap data repositories to make data available to regulators and other authorities, allowing them to share information and more effectively oversee the security-based swap market.

“These rules are fundamental to effective supervision of the security-based swap market,” said SEC Chair Mary Jo White. “Regulators must have timely, reliable access to data repositories in order to carry out their oversight responsibilities and reduce threats to financial stability, increase transparency, and improve the integrity of the market.”

The Dodd-Frank Act established provisions for regulators to access security-based swap data from data repositories.  Building on a proposal from September 2015, the final rule amendments implement these provisions and, among other things:

• Require either a memorandum of understanding or other arrangement between the Commission and the recipient of the data to address the confidentiality of the security-based swap data provided to the recipient;

• Identify the five prudential regulators named in the statute, as well as the Federal Reserve banks and the Office of Financial Research, as being eligible to access data;

• Address factors that the Commission may consider in determining whether to permit other entities to access data.

The proposed amendments included a conditional exemption from a statutory requirement for recipients of data from repositories to indemnify those repositories.  Congress repealed the requirement in December 2015, and the final rule amendments therefore do not include the conditional exemption. 

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

Next Insider Trading Case? Bresch Dumped Mylan Shares Before EpiPen Scandal

Rawstory (let's keep the source in mind) is reporting that Heather Bresch, the CEO of Mylan and next Pharma Bro (Pharma Sis?) dumped more than 10 percent of her shares of the pharmaceutical company’s stock as analysts warned of potential publicity problems withe the EpiPen price hikes.



According to Rawstory, Heather Bresch sold off 100,200 shares of Mylan stock on Aug. 9, the same day the drugmaker released its most recent earnings report amid questions over the swiftly ballooning cost of EpiPens,



Terrible optics, but the story also indicates that the sales were made pursuant to a 10b5 plan, which is used by insiders to plan out the sale of their shares, in advance, to avoid exactly this - an allegation of insider trading.



We haven't seen the plan, but if properly handled, the sales were planned in advance. Of course, we don't know when she adopted the plan, if or when she amended that plan, and she certainly could have terminated it when she learned of the potential scandal - if she didn't realize the potential scandal when she raised the price of the drug.



We will follow this story and post additional news. Meanwhile, read 10B5-1Plans - Insider Trading Defense at SECLaw.com, and the original RawStory article - Heather Bresch dumped more than 100,000 shares of Mylan — just two weeks before EpiPen scandal

Candidates for FINRA Board Want Greater Focus on Regulatory Pain

Four candidates for the small-firm seat on the board of governors of the Financial Industry Regulatory Authority Inc. want to make the broker-dealer regulator responsive to the compliance pain their sector is feeling.



Candidates for Finra board want greater focus on regulatory pain of small firms:

FINRA's Broker Recruiting Rules Explained - By FINRA

It was a silly rule, designed to address a problem that did not exist and that was gutted before adoption.



It should have been canned entirely, and what is left is another meaningless regulation



Frequently Asked Questions Regarding FINRA Rule 2273 | FINRA.org:

A Look at FINRA's Years under Ketchum and What's Ahead

Interesting article at RIABiz regarding the retirement of Rick Ketchum, the fact that there are two outsiders replacing him, and the problems FINRA faces going forward.



What FINRA's CEO shuffle reveals about its waning viability as the self-funded fox guarding the investor henhouse | RIABiz:

SEC: Purported Green Technology Company Defrauding Investors

The Securities and Exchange Commission today charged a California-based company and two executives with using baseless financial projections and other misleading statements to defraud investors in a venture to manufacture environmentally-friendly building materials.

The SEC alleges that Enviro Board Corporation and its co-chairmen/CEOs Glenn Camp and William Peiffer raised approximately $6 million from investors during a four-year period by using documents predicting company earnings ranging from $18 million to $95 million per year.  They allegedly lacked any reasonable basis for such estimates amid persistent manufacturing problems plaguing the company since its inception.  Enviro Board claimed its green materials had already been used in residential and commercial construction projects, yet the company has never developed a commercially viable mill to manufacture its products.  Among other alleged misrepresentations to investors were claims to have secured $161 million in financing from a “vendor” that turned out to be nothing more than an entity created by Peiffer that lacked the resources to actually make such a loan.

Meanwhile, according to the SEC’s complaint filed in federal court in Los Angeles, Camp and Peiffer and their primary salesman Joshua Mosshart have paid themselves approximately $2.6 million in compensation out of investor funds.  Mosshart also is named in the SEC’s complaint and charged with selling unregistered securities and acting as an unregistered broker.

“We allege that Enviro Board appealed to investors’ desires to benefit the environment by creating the false impression that it was on the cusp of lucrative operations.  But Camp and Peiffer were merely lining their own pockets while their unviable manufacturing process has failed to commercialize after nearly 20 years of trying,” said Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office.

The SEC’s complaint charges Enviro Board, Camp, and Peiffer with violating Section 17(a)(2) of the Securities Act of 1933 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b).  The complaint further charges Camp and Mosshart with violating Sections 5(a) and 5(c) of the Securities Act and Mosshart with violating Section 15(a) of the Exchange Act.  The complaint seeks permanent injunctions, disgorgement of ill-gotten gains plus interest and penalties, and officer-and-director bars against Camp and Peiffer. 

The SEC’s investigation was conducted by William Fiske, Peter Del Greco, Maria D. Rodriguez, and Marc Blau of the Los Angeles office, and the litigation will be led by Gary Leung and supervised by John W. Berry.  The SEC appreciates assistance from the Financial Industry Regulatory Authority.

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

SEC Seeks Public Comment on Disclosure Requirements Relating to Management, Security Holders and Corporate Governance Matters

The Securities and Exchange Commission today announced that it is seeking public comment on disclosure requirements in Subpart 400 of Regulation S-K, including those relating to management, certain security holders, and corporate governance matters.

The request for comment is part of the Disclosure Effectiveness Initiative, which is a broad-based staff review of the disclosure requirements and the presentation and delivery of the disclosures. The request for comment also will inform the Commission’s study on Regulation S-K, which is required by the Fixing America’s Surface Transportation (FAST) Act.

The public comment period will remain open for 60 days following publication of the comment request in the Federal Register.  To submit comments, use the SEC’s Internet submission form or send an e-mail to rule-comments@sec.gov.

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

FINRA to Raise Gift Limits

While it is certainly not earth shattering FINRA is proposing to raise the limit on gifts to individuals from $100 to $175 annually. In our opinion, the whole thing is somewhat silly - while the goal is to avoid conflicts of interest, at $100, or $500, no one is conflicted.



Finra wants to raise the annual gift limit

SEC Adopts Rules to Enhance Information Reported by Investment Advisers

The Securities and Exchange Commission today adopted amendments to several Investment Advisers Act rules and the investment adviser registration and reporting form to enhance the reporting and disclosure of information by investment advisers.  The amendments will improve the quality of information that investment advisers provide to investors and the Commission. 

“These amendments are an important step in a series of rulemakings to enhance the SEC’s monitoring and regulation of the asset management industry,” said SEC Chair Mary Jo White.  “Requiring investment advisers to report this additional information will provide investors and the Commission with a better understanding of the risk profile of each adviser and the industry as a whole.”

The amendments will require investment advisers to provide additional information regarding their separately managed account business, including aggregate data related to the use of borrowings and derivatives, and information about other aspects of their advisory business, including branch office operations and the use of social media.  In addition, the amendments will facilitate streamlined registration and reporting for groups of private fund adviser entities operating a single advisory business.  

Amendments to Investment Advisers Act Rule 204-2 will require advisers to maintain additional records related to the calculation and distribution of performance information. These records will be useful to the Commission’s examinations staff in evaluating adviser performance claim, and could reduce the incidence of misleading or fraudulent advertising and communications by advisers.

The amendments will be published on the Commission’s website and in the Federal Register.  They will become effective 60 days after publication in the Federal Register, and advisers will need to begin complying with the amendments on Oct. 1, 2017.

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

SEC Charges 71 Municipal Issuers in Muni Bond Disclosure Initiative

The Securities and Exchange Commission today announced enforcement actions against 71 municipal issuers and other obligated persons for violations in municipal bond offerings. 

The actions were brought under the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative, a voluntary self-reporting program targeting material misstatements and omissions in municipal bond offering documents.  The initiative offered favorable settlement terms to municipal bond underwriters, issuers, and obligated persons that self-reported certain violations of the federal securities laws.  Obligated persons are typically nonprofit entities such as hospitals and colleges that borrow the proceeds of bond issuances and are obligated to pay principal and interest on the bonds. 

The SEC found that from 2011 to 2014, the 71 issuers and obligated persons sold municipal bonds using offering documents that contained materially false statements or omissions about their compliance with continuing disclosure obligations.  Continuing disclosure provides municipal bond investors with important information, including annual financial reports, on an ongoing basis.  The SEC’s 2012 Municipal Market Report identified issuers’ failure to comply with their continuing disclosure obligations as a major challenge for investors seeking information about their municipal bond holdings. 

“The diversity among the 71 entities in these actions demonstrates that continuing disclosure failures were a widespread and pervasive problem in the municipal bond market,” said Andrew Ceresney, Director of the SEC Enforcement Division. “The MCDC Initiative has brought attention to this important issue and resulted in increased compliance by municipal issuers and underwriters.”

The parties settled the actions without admitting or denying the findings and agreed to cease and desist from future violations.  Pursuant to the terms of the initiative, they also agreed to undertake to establish appropriate policies, procedures, and training regarding continuing disclosure obligations; comply with existing continuing disclosure undertakings, including updating past delinquent filings, disclose the settlement in future offering documents, and cooperate with any subsequent investigations by the SEC.

“The terms of the settlements reflect the credit these issuers earned for their cooperation in self-reporting pursuant to the MCDC initiative,” said LeeAnn Ghazil Gaunt, Chief of the SEC Enforcement Division’s Public Finance Abuse Unit.  “Because the issuers also voluntarily agreed to take steps to prevent future violations, both they and their investors have benefited from the initiative.” 

The SEC has now filed a total of 142 actions against 143 respondents as part of the MCDC Initiative.  Today’s actions are the first against municipal issuers since the first action under the initiative was announced in July 2014 against a California school district.  The SEC filed actions under the initiative against a total of 72 municipal underwriting firms, comprising 96 percent of the market share for municipal underwritings, in June 2015, in September 2015, and in February 2016.

The MCDC Initiative is being led by Kevin Guerrero of the Enforcement Division’s Public Finance Abuse Unit.  The cases announced today were investigated by members of the unit, including Michael Adler, Joseph Chimienti, Kevin Currid, Susan Curtin, Peter Diskin, Brian Fagel, Natalie Garner, Warren Greth, Sally J. Hewitt, Jason Howard, Jason Lee, Robbie Mayer, Heidi Mitza, William Salzmann, Cori Shepherd, Ivonia K. Slade, Steven Varholik, Jonathan Wilcox, Monique C. Winkler, and Deputy Chief Mark R. Zehner with assistance from Peter Moores and Ellen Moynihan of the Boston Regional Office, Howard Kaplan of the Enforcement Division’s Center for Risk and Quantitative Analytics, and Rebecca Olsen, Hillary Phelps, and Adam Wendell of the Office of Municipal Securities. 

*  *  *

 

SEC orders:

 

Alabama

• City of Vestavia Hills
• Board of Education of Madison County

 

Alaska

• Borough of North Slope

 

Arkansas

• Board of Trustees of Arkansas Tech University

 

California

• City of Alameda

 

Colorado

• Boulder County
• Thompson School District No. R2-J
• Colorado Department of Transportation

 

Connecticut

• Lawrence & Memorial Corp. and Lawrence & Memorial Hospital
• Town of Fairfield

 

Delaware

• Delaware Transportation Authority

 

Georgia

• Fulton County

 

Hawaii

• State of Hawaii

 

Idaho

• Idaho Housing and Finance Association

 

Illinois

• Palatine Park District
• Community Unit School District Number 18 (Blue Ridge)
• Metropolitan Airport Authority of Peoria

 

Indiana

• City of Gary
• Sanitary District of the City of Gary
• City of South Bend   

 

Iowa

• City of Cedar Rapids
• City of West Des Moines

 

Kansas

• Unified School District No. 418 (McPherson County)
• City of Andover

 

Kentucky

• Kentucky Housing Corporation
• Electric and Water Plant Board of the City of Frankfort

 

Louisiana

• East Ouachita Parish School District

    

Maine

• Town of York

 

Maryland

• Montgomery College
• Montgomery College Foundation

 

Massachusetts

• City of Chelsea

 

Michigan

• Berrien County

 

Minnesota

• State of Minnesota

 

Mississippi

• Lauderdale County

 

Missouri 

• Ascension Health Alliance
• Black Jack Fire Protection District of St. Louis County
• Blair Oaks R-II School District

 

Montana

• Montana Department of Transportation

 

Nebraska

• City of Alliance

 

New Hampshire

• Southern New Hampshire University

 

New Jersey

• Borough of Roselle Park
• Township of East Brunswick

 

New Mexico

• El Castillo Retirement Residences

 

New York

• Franklin County
• City of Ithaca
• Syracuse University
• Westchester County Health Care Corporation

 

North Carolina

• North Carolina Eastern Municipal Power Agency

 

North Dakota

• City of Devils Lake

 

Ohio

• The Ohio State University

 

Oklahoma

• City of Nichols Hills
• Oklahoma Housing Finance Agency
• Yukon Municipal Authority

 

Pennsylvania

• Adams County
• Collegium Charter School
• Hazleton Area School District
• Municipal Authority of the City of McKeesport

 

South Carolina

• City of Columbia
• Town of Hilton Head Island

 

South Dakota

• Tea Area School District 41-5

 

Tennessee

• City of Memphis

 

Texas

• Pecos County

 

Utah

• Heber Light & Power Company

 

Vermont

• Casella Waste Systems

 

Virginia

• Carilion Clinic

 

Washington

• City of Bainbridge Island
• Public Utility District No. 1 of Whatcom County

    

West Virginia

• County Commission of Ohio County

 

Wisconsin

• City of Oconomowoc

 

Wyoming

• Wyoming Community Development Authority

 

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

Apollo Charged With Disclosure and Supervisory Failures

The Securities and Exchange Commission today announced that four private equity fund advisers affiliated with Apollo Global Management have agreed to a $52.7 million settlement for misleading fund investors about fees and a loan agreement and failing to supervise a senior partner who charged personal expenses to the funds.

An SEC investigation found that the Apollo advisers failed to adequately disclose the benefits they received to the detriment of fund investors by accelerating the payment of future monitoring fees owed by the funds’ portfolio companies upon the sale or IPO of those companies.  The lump sum payments received by the Apollo advisers essentially reduced the portfolio companies’ value prior to their sale or IPO and reduced amounts available for distribution to fund investors. 

The SEC also found that one of the Apollo advisers failed to disclose certain information about interest payments made on a loan between the adviser’s affiliated general partner and five funds.  The purpose of the loan was to defer taxes on carried interest due the general partner.  The loan agreement obligated the general partner to pay interest to the funds during the course of the loan, and the funds’ financial statements disclosed that interest was accruing as an asset of the funds.  But that interest was instead ultimately allocated solely to the general partner, which made the disclosures in the financial statements misleading.

“A common theme in our recent enforcement actions against private equity firms is their failure to properly disclose fees and conflicts of interest to fund investors,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.  “Investors in Apollo funds were not adequately informed about accelerated monitoring fees and separately allocated loan interest, and therefore were unable to gauge their impact on their investments.”

According to the SEC’s order instituting the settled administrative proceeding, Apollo’s supervisory failures pertain to a then-senior partner at the firm who was twice caught improperly charging personal items and services to Apollo-advised funds and their portfolio companies.  Other than verbally reprimanding the partner and requiring repayment of improperly submitted expenses, Apollo took no further remedial or disciplinary steps on either occasion.  A firm-wide expense review eventually revealed even more personal expenses the partner improperly charged to fund clients, and this led to the partner’s separation from the firm.

“Apollo failed to take appropriate action to protect its clients upon first learning that a partner was improperly expensing personal items and services to the funds, and its failure resulted in repeated misconduct,” said Anthony S. Kelly, Co-Chief of the SEC Enforcement Division’s Asset Management Unit.

Apollo consented to the entry of the SEC’s order finding that it violated Sections 206(2) and 206(4) of the Advisers Act and Rules 206(4)-7 and 206(4)-8.  The order also finds that Apollo failed reasonably to supervise the then-partner pursuant to Section 203(e)(6) of the Advisers Act.  Apollo agreed to cease and desist from further violations without admitting or denying the findings, and must pay $37.527 million in disgorgement, $2,727,552 in interest, and a $12.5 million penalty.  Apollo agreed to distribute the disgorgement and interest amounts to affected fund investors. 

The SEC’s investigation, which is continuing, is being conducted by Donna Norman of the Asset Management Unit and supervised by Mr. Kelly.  A related examination of Apollo was conducted by Majid Mahmood, Michael Devaney, Mandy Poon, Igor Rozenblit, and William Delmage. 

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

Internaut day: The world's first public website went online 25 years ago today

While it may be subject to some debate, based on your definition of "website" it appears that the first public website went online in August 1991.



In the grand scheme of things, SECLaw.com was right there! We went live in July 1995 only a few years later, at a time when there were no legal mega sites, only a handful of legal topic sites, and virtually no law firm sites.





Internaut day: The world's first public website went online 25 years ago today:

Company Punished for Severance Agreements That Removed Financial Incentives for Whistleblowing

The Securities and Exchange Commission today announced that a California-based health insurance provider has agreed to pay a $340,000 penalty for illegally using severance agreements requiring outgoing employees to waive their ability to obtain monetary awards from the SEC’s whistleblower program.

 

According to the SEC’s order, Health Net Inc. violated federal securities laws by taking away from departing employees who wanted to receive severance payments and other post-employment benefits the ability to file applications for SEC whistleblower awards.  Health Net added the provision in August 2011 after the SEC adopted a rule to prohibit any action to impede someone from communicating with the SEC about possible securities law violations.  Health Net removed the SEC-specific language from its severance agreements in June 2013, but retained restrictive language that removed the financial incentive for reporting information until finally amending the agreements to strike all such restrictive language last year.

 

“Financial incentives in the form of whistleblower awards, as Congress recognized, are integral to promoting whistleblowing to the Commission,” said Antonia Chion, Associate Director of the SEC Enforcement Division.  “Health Net used its severance agreements with departing employees to strip away those financial incentives, directly targeting the Commission’s whistleblower program.”

 

Health Net consented to the SEC’s cease-and-desist order without admitting or denying the findings.  The company agreed to make reasonable efforts to inform former employees who signed the severance agreements from Aug. 12, 2011, to Oct. 22, 2015, that Health Net does not prohibit former employees from seeking and obtaining a whistleblower award from the SEC under Section 21F of the Securities Exchange Act.  Health Net further agreed to certify to Enforcement Division staff that it has complied with this undertaking.

 

The SEC’s investigation was conducted by Jennie B. Krasner and supervised by Ricky Sachar and Ms. Chion.

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

Former Goldman Sachs Trader Settles Fraud Charges

The Securities and Exchange Commission today announced that the former head trader in residential mortgage-backed securities (RMBS) at Goldman Sachs has agreed to be barred from the securities industry and pay $400,000 to settle charges that he repeatedly misled customers and caused them to pay higher prices.  

An SEC investigation found that Edwin Chin generated extra revenue for Goldman by concealing the prices at which the firm had bought various RMBS, then re-selling them at higher prices to the buying customer with Goldman keeping the difference.  On other occasions, Chin misled purchasers by suggesting he was actively negotiating a transaction between customers when he was merely selling RMBS out of Goldman’s inventory.

“With no public exchange showing the price for each RMBS trade as it occurs, investors purchasing these securities rely on dealers to be honest about the purchase price they paid,” said Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit.  “Chin repeatedly abused his fundamental duty to serve as an honest transmitter of market information so he could increase Goldman’s trading profits and, indirectly, his own compensation.” 

The SEC’s order finds that Chin’s misconduct began in 2010 and continued until he left Goldman in 2012.  Without admitting or denying the findings, Chin agreed to the entry of the order finding that he violated Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5.  He agreed to pay $200,000 in disgorgement, $50,000 in prejudgment interest, and a $150,000 penalty.

The SEC’s continuing investigation has been conducted by Andrew Feller, David London, and Heidi Mitza, and the case has been supervised by Celia Moore and Michael Osnato.  The SEC appreciates the assistance of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).  

SEC Press Release

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Hedge Fund Manager Charged in Scheme Involving Terminally Ill

The Securities and Exchange Commission today announced fraud charges against a hedge fund manager and his firm accused of paying terminally ill individuals to use their names on purportedly joint brokerage accounts so he could purchase investments on behalf of his hedge fund and redeem them early by invoking a survivor’s option.

An SEC examination of investment advisory firm Eden Arc Capital Management uncovered the scheme alleged by the SEC Enforcement Division in an order instituted today.  Donald Lathen of New York City allegedly used contacts at nursing homes and hospices to identify patients with less than six months to live, and he successfully recruited at least 60 of them by paying $10,000 apiece to use their names on accounts.  When a patient died, Lathen allegedly redeemed investments in the accounts by falsely representing to issuers that he and the terminally ill individuals were joint owners of the accounts.  Lathen’s hedge fund was the true owner of the survivor’s option investments.  Issuers paid out more than $100 million in early redemptions as a result of the alleged misrepresentations and omissions by Lathen and Eden Arc Capital.

The SEC Enforcement Division further alleges that Lathen violated the custody rule by failing to properly place the hedge fund’s cash and securities in an account under the fund’s name or in an account containing only clients’ funds and securities, under the investment adviser’s name as agent or trustee for the client.

“We allege that Lathen deceived issuers by falsely claiming that he and the deceased jointly owned the bonds when the hedge fund was the true owner of the investments,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “Lathen allegedly put hedge fund client assets at risk by keeping them in accounts in his and the terminally ill individuals’ names rather than following the custody rule.”

The SEC Enforcement Division alleges that Lathen, Eden Arc Capital Management, and Eden Arc Capital Advisors violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  The Enforcement Division further alleges that Eden Arc Capital Management violated Section 206(4) of the Advisers Act and Rule 206(4)-2, and Lathen aided and abetted and caused those violations.

The matter will be scheduled for a public hearing before an administrative law judge, who will prepare an initial decision stating what, if any, remedial actions are appropriate.

The SEC’s investigation was conducted by Janna Berke, Judith Weinstock, Frank Milewski, Adam Grace, and Michael Birnbaum.  The case was supervised by Lara Shalov Mehraban and the litigation will be led by Alexander Janghorbani, Ms. Weinstock, and Ms. Berke.  The SEC examiners who detected the wrongdoing during the examination of Eden Arc Capital Management are Kathleen Raimondi, Lawrence Chinsky, and George DeAngelis.

SEC Press Release

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SEC: Investment Adviser Boasted Phony Assets and Track Record, Stole From Client

The Securities and Exchange Commission today announced fraud charges against a San Francisco man and his investment advisory firm accused of pretending to manage millions of dollars in assets and then stealing money from the first client who invested with them based on their misrepresentations.

The SEC alleges that Nicholas M. Mitsakos and Matrix Capital Markets, which is a state-registered investment adviser in California, solicited investors in a purported hedge fund while falsely marketing themselves as experienced money managers with a highly successful track record.  They claimed assets under management in the millions when in fact they did not manage any client assets at all, and they fabricated a hypothetical portfolio of investments earning 20 to 66 percent annual returns and passed it off to investors as real trading.  When Mitsakos and Matrix Capital Markets were given $2 million in client assets to manage in September 2015, they proceeded to steal approximately $800,000 from that client and used most of it to pay for unauthorized personal and business expenses.

“We allege that Mitsakos and his firm tried to lure prospective investors with a mirage of assets under management and phony performance results, and when they finally won some actual business from a client, they proceeded to steal a large portion of it,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “Whenever pitched an investment opportunity with claims of lofty historical performance, it’s important for investors to take the time to verify the information and make sure they’re getting the truth before deciding to invest.”

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Mitsakos.

The SEC’s complaint was filed in U.S. District Court for the Southern District of New York and charges Mitsakos and Matrix Capital Markets with violating the antifraud provisions of the federal securities laws.  Mitsakos also is charged with aiding and abetting Matrix Capital’s violations.  The SEC seeks permanent injunctions and disgorgement of ill-gotten gains plus penalties.

The SEC’s continuing investigation is being conducted by Alison R. Levine, Kerri Palen, Alex Janghorbani, and Valerie A. Szczepanik, and the case is supervised by Lara S. Mehraban.  The litigation will be led by Alex Janghorbani and Alison R. Levine.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York.

SEC Press Release

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SEC Charges Stockbroker and Friend With Insider Trading

The Securities and Exchange Commission today charged a stockbroker and his friend with participating in an insider trading scheme to profit in advance of two major announcements out of a pharmaceutical company. 

The SEC alleges that Paul T. Rampoldi coordinated the insider trading with two other brokers at his firm as well as a then-IT executive at Ardea Biosciences.  The Ardea employee tipped one of the brokers ahead of the company’s announcement of an agreement to license a cancer drug and later tipped him in advance of its acquisition by AstraZeneca PLC.  The SEC charged the other two brokers and the Ardea employee last year.

According to the SEC’s complaint filed in federal court in San Diego today against Rampoldi and William Scott Blythe III, they made approximately $90,000 in illicit profits by trading ahead of those announcements based on nonpublic information that flowed to them through one of the fellow brokers who learned it from the other after he was tipped by the IT executive.  It was decided that in order to evade detection by the compliance department at the brokerage firm where Rampoldi and the others worked, Blythe would fund the purchase of Ardea call option contracts in a brokerage account he held at a different brokerage firm, and they would subsequently divide the profits among them.

“As a stockbroker, Rampoldi should have known better than to allegedly trade on tips about significant corporate events before they were announced,” said Sharon B. Binger, Director of the SEC’s Philadelphia Regional Office.  “We further allege that Rampoldi and Blythe tried to evade detection by hiding their trading elsewhere, but to no avail.”

In a parallel action, the U. S. Attorney’s Office for the Southern District of California today brought criminal charges against Rampoldi and Blythe.

The SEC’s complaint charges Rampoldi and Blythe with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  The SEC seeks permanent injunctions as well as disgorgement, interest, and penalties.

The SEC’s investigation was conducted by Patricia A. Paw, John S. Rymas, Daniel Koster, and Brendan P. McGlynn of the Philadelphia office, and supervised by G. Jeffrey Boujoukos.  The litigation will be led by David L. Axelrod and Michael J. Rinaldi.  The SEC appreciates the assistance of the U. S. Attorney’s Office for the Southern District of California, Federal Bureau of Investigation, and Financial Industry Regulatory Authority.

SEC Press Release

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SEC Charges Former Professional Football Player With Running $10 Million Fraud

The Securities and Exchange Commission today charged Merrill Robertson Jr., a former player for the Philadelphia Eagles, with defrauding investors, including coaches he knew from his time playing football for the Fork Union Military Academy and the University of Virginia.

The SEC’s complaint, filed in federal court in Richmond, Virginia, charges Robertson, Sherman C. Vaughn Jr., and the company they co-owned, Cavalier Union Investments LLC.  According to the complaint, the defendants promised to invest in diversified holdings but diverted nearly $6 million of the more than $10 million they raised from investors to pay for personal expenses and used other funds to repay earlier investors.

Robertson and Vaughn, both of Chesterfield, Virginia, are alleged to have lied about the unregistered debt securities they sold, saying they would yield as much as 20 percent “while providing safety and security for our investors.”  According to the complaint, the defendants claimed that Cavalier had investment funds operated by experienced investment advisers when it did not have any funds or investment advisers and was functionally insolvent shortly after it was formed.  The defendants allegedly hid this fact from potential investors and relied on cash from new investors to stay afloat.  The complaint further alleges that Cavalier’s only investments were in restaurants that had all failed by 2014, something the defendants never disclosed as they continued soliciting and accepting investors’ money.  The scheme allegedly targeted seniors and coaches, donors, alumni, and employees of schools Robertson had attended.

“Our complaint alleges that Robertson and Vaughn preyed on elderly victims and others who placed their trust in these individuals, only to have their savings stolen,” said Sharon B. Binger, Director of the SEC’s Philadelphia Regional Office.  “We will continue to aggressively pursue fraudsters who exploit their relationship of trust with victims and promise returns that appear to be too good to be true.”   

The SEC encourages investors to check the backgrounds of people selling them investments.  A quick search on the SEC’s investor.gov website would have shown that Robertson and Vaughn are not registered to sell securities.

In a parallel action, the U.S. Attorney’s Office for the Eastern District of Virginia today announced criminal charges against Robertson.

The SEC’s complaint charges Robertson, Vaughn, and Cavalier with violations of the antifraud and registration provisions of the federal securities laws and seeks permanent injunctions, return of allegedly ill-gotten gains with prejudgment interest, and civil penalties.

The SEC’s investigation, which is continuing, has been conducted by Lawrence D. Parrish, Dustin Ruta, and Kingdon Kase of the Philadelphia Office, and was supervised by G. Jeffrey Boujoukos.  The SEC’s litigation will be led by David L. Axelrod and John V. Donnelly.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of Virginia and the Federal Bureau of Investigation.

SEC Press Release

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Kristin Snyder Named Co-Head of SEC’s Investment Adviser/Investment Company Examination Program

The Securities and Exchange Commission today announced that Kristin Snyder has been named Co-National Associate Director of the Investment Adviser/Investment Company examination program in the Office of Compliance Inspections and Examinations (OCIE).  She joins Co-National Associate Director Jane Jarcho who has led the program since August 20, 2013 and was named OCIE’s Deputy Director on February 3, 2016.  Together, Ms. Jarcho and Ms. Snyder oversee more than 520 lawyers, accountants, and examiners responsible for inspections of SEC registered investment advisers and investment companies.  

Ms. Snyder has been the Associate Regional Director for Examinations in the SEC’s San Francisco office since November 2011 and will continue in that role while also assuming this new leadership position in the national investment adviser/investment company program.  She joined the SEC in 2003 and spent eight years as a Branch Chief and a Senior Counsel in the San Francisco office’s enforcement program. 

“With Kristin’s experience in examinations and enforcement, she is well-positioned to develop and lead national initiatives in our investment adviser and investment company program that support OCIE’s mission to improve compliance, prevent fraud, monitor risk, and inform policy,”  said OCIE Director Marc Wyatt.

Ms. Snyder said, “I am truly honored by this opportunity to lead OCIE’s IA/IC program with Jane.  I look forward to expanding my role to work with our talented and dedicated colleagues throughout the country as we continue to develop and implement important national initiatives in the asset management industry.”

Prior to joining the SEC, Ms. Snyder practiced law at Sidley Austin Brown & Wood LLP in San Francisco.  She received her law degree from the University of California Hastings College of the Law and received her bachelor’s degree from the University of California at Davis.

OCIE conducts the SEC’s National Examination Program through examinations of SEC-registered investment advisers, investment companies, broker-dealers, self-regulatory organizations, clearing agencies, and transfer agents.  It uses a risk-based approach to examinations to fulfill its mission to promote compliance with U.S. securities laws, prevent fraud, monitor risk, and inform SEC policy.

SEC Press Release

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Company Paying Penalty for Violating Key Whistleblower Protection Rule

The Securities and Exchange Commission today announced that an Atlanta-based building products distributor is settling charges that it violated securities laws by using severance agreements that required outgoing employees to waive their rights to monetary recovery should they file a charge or complaint with the SEC or other federal agencies.

BlueLinx Holdings Inc. has agreed to pay a $265,000 penalty.

According to the SEC’s order, BlueLinx added the monetary recovery prohibition to all of its severance agreements in mid-2013, nearly two years after the SEC’s adoption of Rule 21F-17 that prohibits any action to impede someone from communicating with the SEC about possible securities law violations.  BlueLinx’s restrictive language forced employees leaving the company to waive possible whistleblower awards or risk losing their severance payments and other post-employment benefits.

“We’re continuing to stand up for whistleblowers and clear away impediments that may chill them from coming forward with information about potential securities law violations,” said Stephanie Avakian, Deputy Director of the SEC’s Enforcement Division.

Jane Norberg, Acting Chief of the SEC’s Office of the Whistleblower, added, “Companies simply cannot undercut a key tenet of our whistleblower program by requiring employees to forego potential whistleblower awards in order to receive their severance payments.”

BlueLinx consented to the SEC’s cease-and-desist order without admitting or denying the findings.  The company agreed to two undertakings: (1) to amend its severance agreements to make clear that employees may report possible securities law violations to the SEC and other federal agencies without BlueLinx’s prior approval and without having to forfeit any resulting whistleblower award, and (2) to make reasonable efforts to contact former employees who had executed severance agreements after Aug. 12, 2011 to notify them that BlueLinx does not prohibit former employees from providing information to the SEC staff or from accepting SEC whistleblower awards.  BlueLinx further agreed to certify to Enforcement Division staff that it has complied with its undertakings.

The SEC’s investigation was conducted by Tara Kelly and V.V. Cooke.  The case was supervised by Yuri B. Zelinsky and Antonia Chion.

SEC Press Release

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SEC Charges Cardiologist With Insider Trading on Confidential Drug Trial Developments

The Securities and Exchange Commission today charged a cardiologist with insider trading on confidential developments as he worked on a clinical drug trial.   

The SEC alleges that Dr. Edward Kosinski of Weston, Connecticut, traded in advance of two negative news announcements by Regado Biosciences, which was pursuing a drug called REG-1 to regulate clotting in patients undergoing coronary angioplasty.  Kosinski, who served as principal investigator of the drug trial, got advance notice that patient enrollment in the trial was being suspended because patients had experienced severe allergic reactions.  He allegedly sold all 40,000 shares of his Regado stock the following day to avoid approximately $160,000 in losses when the news became public and the stock price dropped.  A month later, Kosinski received advance notice that enrollment would be permanently halted because a patient had died, and he profited through options trades by betting the stock price would drop again.  Kosinski allegedly made more than $3,000 when he exercised the options after the company’s stock fell by 60 percent upon the negative news.

“We allege that Dr. Kosinski illegally sold all of his stock in the company to avoid thousands of dollars in losses when the bad news came out,” said Joseph Sansone, Co-Chief of the SEC Enforcement Division’s Market Abuse Unit.  “Not content with avoiding heavy losses, Kosinski allegedly further enriched himself by placing options trades to profit when the company’s stock price dropped again on more bad news.”

In a parallel case, the U.S. Attorney’s Office for the District of Connecticut today announced criminal charges against Kosinski.

The SEC’s complaint filed in federal court in Connecticut charges Kosinski with violating antifraud provisions of the federal securities laws and related rules. 

The SEC’s investigation was conducted by Andrew J. Palid and Michele T. Perillo of the Market Abuse Unit in the Boston Regional Office, and the litigation will be led by Deena R. Bernstein.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Connecticut, Federal Bureau of Investigation, and Financial Industry Regulatory Authority.  

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

Statement Regarding Progress on the Review of the U.S. Treasury Market Structure since the July 2015 Joint Staff Report

The U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, the U.S. Securities and Exchange Commission, and the U.S. Commodity Futures Trading Commission (Joint Member Agencies) today issued this statement to highlight significant actions taken since the issuance last July of their Joint Staff Report on the U.S. Treasury market, including the recently signed memorandum of understanding to share information on U.S. Treasury cash and related derivative markets among the agencies and their plans to host a second conference on October 24 to continue progress on these efforts.

The Joint Staff Report concerning the U.S. Treasury Market on October 15, 2014 was released one year ago and analyzed the significant volatility in the U.S. Treasury market experienced on October 15, 2014.  Using non-public data from the U.S. Treasury cash and futures markets, the Joint Staff Report provided detailed analysis of the market conditions and record trading volumes that day, including an unusually rapid round trip in prices and deterioration in liquidity during a narrow window.  In addition to describing a number of developments that help explain the conditions that likely contributed to the volatility, the Joint Staff Report offered several next steps to further enhance the public and private sectors’ understanding of changes to the structure of the U.S. Treasury market and their implications.

The Joint Member Agencies have taken both joint and individual actions in the past year to promote understanding, transparency, risk management, and inter-agency coordination with respect to the U.S. Treasury market, including a number of steps that are consistent with the recommendations of the Joint Staff Report.  Highlights include:

• Treasury published a request for information on the evolution of the U.S. Treasury market structure, as part of a comprehensive official sector review of the U.S. Treasury market;
• Treasury, CFTC, SEC, and the Federal Reserve Board signed a memorandum of understanding that permits sharing of information on U.S. Treasury cash and related derivative markets among the agencies, which will facilitate the analysis of major market events;
• SEC published for comment on July 19, 2016 a proposed rule from the Financial Industry Regulatory Authority (FINRA) that would require its member brokers and dealers to report Treasury cash market transactions to a centralized repository;
• SEC published proposed amendments that would enhance transparency and oversight of alternative trading systems (ATSs) and solicited public comment on whether such rules should be applied to systems that only trade Treasury securities; and
• CFTC published a proposed rule for public comment on specific aspects of automated trading in futures markets, including Treasury futures, which covers pre-trade risk controls and requirements (registration with CFTC, development, testing and monitoring standards) for market participants using algorithmic trading systems on U.S. futures exchanges.

In the coming months, staff of the Joint Member Agencies will continue to make progress on the next steps identified in the Joint Staff Report.

• The Joint Member Agencies will host a second conference at the Federal Reserve Bank of New York on October 24 to further the discussion on the evolution of the U.S. Treasury market and related policy initiatives.
• Staff of the Joint Member Agencies will continue to assess effective means to ensure that the collection of data regarding Treasury cash securities market transactions is comprehensive and includes information from institutions that are not FINRA members.
• Staff of the Joint Member Agencies will continue to work together for effective and coordinated monitoring of market activity and liquidity, including consideration of the potential for ongoing sharing and collaborative analysis of transaction data from Treasury cash and related derivatives markets.
• Staff of the Joint Member Agencies will continue to study and engage market participants to develop and communicate a set of principles on the appropriate scope of Treasury market data available to the public.
• Staff of the Joint Member Agencies will continue to review and evaluate potential changes to the regulatory framework for government securities market and its participants.

“Strong Treasury markets demand close regulatory coordination that addresses the full range of participants and trading platforms active today,” said SEC Chair Mary Jo White. “Transparency is vital to maintaining robust markets, and the Commission is actively evaluating measures to enhance regulation and reporting for alternative trading systems and other market participants in the cash Treasury market.”

“The volatility in the U.S. Treasury market on October 15, 2014 led to an intensive interagency review that has helped us better understand the current nature of this market,” said CFTC Chairman Timothy Massad. “Among other findings, it made clear the need to collect better data on the cash market and to examine the implications of the dramatic increase in automated trading in this, as with all financial markets. I look forward to continuing our progress on these and other important issues.”

“The progress highlighted today on the first comprehensive review of the U.S. Treasury market since 1998 is ‎the result of closely coordinated interagency work,” said Antonio Weiss, Counselor to Treasury Secretary Jacob J. Lew. “We remain committed to that approach, and I look forward to sharing our vision of the road ahead at the conference in October.”

“Treasury markets are important to all of us and are undergoing significant changes,” said Federal Reserve Governor Jerome Powell. “The Joint Staff Report and progress made over the last year have helped to shed light on the evolving nature of these markets.  The members of the Inter-Agency Working Group will need to continue to work with market participants to ensure the resilience and smooth functioning of all of the markets involving Treasury securities.”

“Over the past year, the members of the Inter-Agency Working Group and the private sector have made great progress on implementing the next steps identified in the Joint Staff Report,” said Federal Reserve President Bill Dudley.  “A well-functioning and resilient Treasury market is critical to the financial system, and serves policymakers and market participants alike.  We look forward to ongoing engagement by all stakeholders to continue to safeguard the integrity and functioning of the Treasury market as it evolves.”

Media Contacts:

Treasury:                                  Rob Runyan                            (202) 622-2960

Federal Reserve Board:           Darren Gersh                          (202) 452-2955

FRBNY:                                    Suzanne Elio                           (212) 720-6449

SEC:                                         Office of Public Affairs             (202) 551-4120

CFTC:                                       Steve Adamske                       (202) 418-5675

 

JOINT RELEASE

U.S. Department of the Treasury Board of Governors of the Federal Reserve System Federal Reserve Bank of New York U.S. Securities and Exchange Commission U.S. Commodity Futures Trading Commission

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SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.