SEC Releases

Summary - The SEC voted to adopt a new rule that extends a “test-the-waters” accommodation, currently a tool available to emerging growth companies (EGCs), to all issuers.

Under the new rule, all issuers will be allowed to gauge market interest in a possible initial public offering or other registered securities offering through discussions with certain institutional investors prior to, or following, the filing of a registration statement. These communications will be exempt from restrictions imposed by Section 5 of the Securities Act on written and oral offers prior to or after filing a registration statement. The expanded test-the-waters provision will provide all issuers with flexibility in determining whether to proceed with a registered public offering while maintaining appropriate investor protections.

The new rule is one of several SEC initiatives that build on JOBS Act provisions intended to encourage companies to access our public markets.

The rule will become effective 60 days after publication in the Federal Register.

For more information, click here.

Release No. 33-10695: Exchange-Traded Funds

Summary - The SEC voted to adopt a new rule and form amendments that are designed to modernize the regulation of exchange-traded funds (ETFs), by establishing a clear and consistent framework for the vast majority of ETFs operating today. The adoption will facilitate greater competition and innovation in the ETF marketplace, leading to more choice for investors. It also will allow ETFs to come to market more quickly without the time or expense of applying for individual exemptive relief. In addition, the SEC voted to issue an exemptive order that further harmonizes related relief for broker-dealers.

The rule, form amendments, and related exemptive relief will be published on the Commission’s website and in the Federal Register. All will become effective 60 days after publication in the Federal Register.

For more information, click here.

Release No. 33-10688: Update of Statistical Disclosures for Bank and Savings and Loan Registrants

Summary - The SEC announced that it has proposed rules to update the statistical disclosures that bank and savings and loan registrants provide to investors, and eliminate disclosures that overlap with SEC rules, U.S. GAAP or IFRS. If adopted as proposed, the rules would replace Industry Guide 3, Statistical Disclosure by Bank Holding Companies, with updated disclosure in a new subpart of Regulation S-K. The proposed rules would apply to bank holding companies, banks, savings and loan holding companies, and savings and loan associations.

According to the SEC, the proposal reflects “the significant financial reporting changes, including the issuance of new accounting standards that have taken place for banking registrants since the agency last updated Industry Guide 3. The proposed rules are also part of an initiative by the Division of Corporation Finance to review disclosure requirements applicable to issuers to consider ways to improve the requirements for the benefit of investors and registrants.”

The SEC’s proposed rules would require disclosure about the following:
Distribution of assets, liabilities and stockholders’ equity, the related interest income and expense, and interest rates and interest differential;
Weighted average yield of investments in debt securities by maturity;
Maturity analysis of the loan portfolio including the amounts that have predetermined interest rates and floating or adjustable interest rates;
An allocation of the allowance for credit losses and certain credit ratios; and
Information about bank deposits including amounts that are uninsured.

The proposal will have a 60-day public comment period following its publication in the Federal Register.

For more information, click here.

Release No. 34-87115: Publication or Submission of Quotations Without Specified Information

Summary - The SEC voted to propose amendments to Exchange Act Rule 15c2-11, which sets out certain requirements with which a broker-dealer must comply before it can publish quotations for securities in the over-the-counter (“OTC”) market. The proposed amendments are designed to modernize Rule 15c2-11, which was last substantively amended in 1991, and to enhance investor protection by requiring that current and publicly available issuer information is accessible to investors. The proposed amendments would provide greater transparency to the investing public by requiring that information about the issuer and the security be current and publicly available before a broker-dealer can begin quoting that security.

The public comment period will remain open for 60 days following publication of the proposal in the Federal Register.

For more information, click here.

Release No. 34-87193: Rescission of Effective-Upon-Filing Procedure for NMS Plan Fee Amendments

Summary - The SEC proposed to require an amendment to a national market system plan (NMS plan) that would establish or change a fee or other charge (Proposed Fee Change) to be subject to the standard procedure for NMS plan amendments. The proposal would rescind a rule exception that allows an NMS plan amendment to be effective upon filing if it establishes or changes a fee or other charge. The standard procedure requires publication of the amendment, an opportunity for public comment, and SEC approval by order before the amendment can become effective.

Rule 608(b)(3)(i) of Regulation NMS currently permits a Proposed Fee Change to become effective immediately upon filing with the SEC, and an NMS plan may begin charging the new fee prior to an opportunity for public comment and without agency action. By changing the timing of effectiveness, the proposed rescission of Rule 608(b)(3)(i) provides investors and other market participants an opportunity to voice their views about a Proposed Fee Change prior to the time they are charged a new or changed fee.

Comments on the proposal are due 60 days from publication in the Federal Register.

For more information, click here.

Release No. 34-86901: Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail

Summary - The SEC proposed amendments to the national market system plan governing the Consolidated Audit Trail (the CAT NMS Plan). The Consolidated Audit Trail is intended to enable regulators to oversee the securities markets on a consolidated basis with the aim towards better protection of these markets and investors.

According to the SEC, the proposed amendments would require self-regulatory organizations that are participants to the CAT NMS Plan (Participants) to file with the SEC and publish a complete implementation plan for the Consolidated Audit Trail and quarterly progress reports, each of which must be approved by the Operating Committee established by the CAT NMS Plan and submitted to the CEO, President, or equivalently situated senior officer at each Participant.

In addition, the proposed amendments would include financial accountability provisions that establish target deadlines for four implementation milestones and reduce the amount of fee recovery available to the Participants if those target deadlines are missed.

The public comment period will remain open for 45 days following publication of the proposing release in the Federal Register.

For more information, click here.

Release No. 33-10521: Concept Release on Compensatory Securities Offerings and Sales

Summary - The SEC is soliciting comment on possible ways to modernize rules related to compensatory arrangements in light of the significant evolution in both the types of compensatory offerings and the composition of the workforce since the agency last substantively amended these rules in 1999.

Comments were due September 24, 2018.

For more information, click here.

Release No. 34-84429: Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 Regarding Certain Cyber-Related Frauds Perpetrated Against Public Companies and Related Internal Accounting Controls Requirements

Summary - The SEC issued an investigative report cautioning that public companies should consider cyber threats when implementing internal accounting controls. The report is based on the SEC Enforcement Division's investigations of nine public companies that fell victim to cyber fraud, losing millions of dollars in the process.

According to the SEC, the investigations focused on "business email compromises" (BECs) in which perpetrators posed as company executives or vendors and used emails to dupe company personnel into sending large sums to bank accounts controlled by the perpetrators. The frauds in some instances lasted months and often were detected only after intervention by law enforcement or other third parties. Each of the companies lost at least $1 million, two lost more than $30 million, and one lost more than $45 million. In total, the nine companies wired nearly $100 million as a result of the frauds, most of which was unrecoverable. No charges were brought against the companies or their personnel.

The companies, which each had securities listed on a national stock exchange, covered a range of sectors including technology, machinery, real estate, energy, financial, and consumer goods. Public issuers subject to the internal accounting controls requirements of Section 13(b)(2)(B) of the Securities Exchange Act of 1934 must calibrate their internal accounting controls to the current risk environment and assess and adjust policies and procedures accordingly. The SEC indicates that the “FBI estimates fraud involving BECs has cost companies more than $5 billion since 2013.”

For more information, click here.

Release No. 34-84511: Commission Statement on Certain Provisions of Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants

Summary - The SEC has issued a statement setting forth the agency’s position, for a limited time period, that certain actions with respect to specific provisions of its Business Conduct Standards for Security-Based Swap (SBS) Dealers and Major Security-Based Swap Participants will not provide a basis for a Commission enforcement action. The statement also addresses the SEC’s position on the ability of parties to security-based swaps to rely on written representations previously provided in relation to swaps, also for a limited time period.

The SEC’s statement is “intended to minimize potential market disruptions to existing counterparty relationships resulting solely from documentation implementation issues that may arise when security-based swap dealers and major security-based swap participants are required to register with the Commission. Upon registration with the Commission, entities that are also registered with the Commodity Futures Trading Commission (CFTC) will be required to comply with both the Commission’s Business Conduct Standards as well as analogous rules adopted by the CFTC in 2012 applicable to swap dealers and major swap participants.”

For more information, click here.

Release No. 33-10675: Order Making Fiscal Year 2020 Annual Adjustments to Registration Fee Rates

Summary - The SEC announced that in fiscal year 2020 the fees that public companies and other issuers pay to register their securities with the Commission will be set at $129.80 per million dollars.

For more information, click here.

Release No. 33-10618A: FAST Act Modernization and Simplification of Regulation S-K; Correction

Summary - The SEC has issued a technical correction to its previously published final rule, FAST Act Modernization and Simplification of Regulation S-K. This document:

Reinstates certain item headings in registration statement forms under the Securities Act of 1933 that were inadvertently changed;
Relocates certain amendments to the correct item numbers in these forms and reinstates text that was inadvertently removed;
Corrects a portion of the exhibit table in Item 601(a) of Regulation S-K to make it consistent with the regulatory text of the amendments; and
Corrects certain typographical errors and a cross-reference in the regulatory text of the amendments.

For more information, click here.

Release No. 34-86304: Customer Margin Rules Relating to Security Futures

Summary - The SEC has issued for public comment a proposed rule, Customer Margin Rules Relating to Security Futures. The Commodity Futures Trading Commission (“CFTC”) and the SEC (collectively, the “Commissions”) are proposing amendments to regulations that establish minimum customer margin requirements for security futures. More specifically, the proposed amendments would lower the margin requirement for an unhedged security futures position from 20% to 15%, as well as propose certain revisions to the margin offset table consistent with the proposed reduction in margin.

Comments are due 30 days from publication in the Federal Register.

For more information, click here.

Release No. 33-10668: Modernization of Regulation S-K Items 101, 103, and 105

Summary - The SEC proposed amendments to modernize the description of business (Item 101), legal proceedings (Item 103), and risk factor disclosures (Item 105) that registrants are required to make pursuant to Regulation S-K. The SEC is proposing amendments to these items to “improve these disclosures for investors and to simplify compliance for registrants. More specifically, the proposed amendments are intended to improve the readability of disclosure documents, as well as discourage repetition and disclosure of information that is not material.”

Proposed Amendments to Item 101
The proposed amendment of Item 101(c) would:
Clarify and expand its principles-based approach, by including disclosure topics drawn from a subset of the topics currently contained in Item 101(c);
Include, as a disclosure topic, human capital resources, including any human capital measures or objectives that management focuses on in managing the business, to the extent such disclosures would be material to an understanding of the registrant’s business, such as, depending on the nature of the registrant’s business and workforce, measures or objectives that address the attraction, development, and retention of personnel; and
Refocus the regulatory compliance requirement by including material government regulations, not just environmental provisions, as a topic.

Proposed Amendments to Item 103
The proposed amendment of Item 103 would:
Expressly state that the required information about material legal proceedings may be provided by including hyperlinks or cross-references to legal proceedings disclosure located elsewhere in the document in an effort to encourage registrants to avoid duplicative disclosure; and
Revise the $100,000 threshold for disclosure of environmental proceedings to which the government is a party to $300,000 to adjust for inflation.

Proposed Amendments to Item 105
The proposed amendment of Item 105 would:
Require summary risk factor disclosure if the risk factor section exceeds 15 pages;
Refine the principles-based approach of that rule by changing the disclosure standard from the “most significant” factors to the “material” factors required to be disclosed; and
Require risk factors to be organized under relevant headings, with any risk factors that may generally apply to an investment in securities disclosed at the end of the risk factor section under a separate caption.

The proposal will have a 60-day public comment period following its publication in the Federal Register.

For more information, click here.

Release No. BHCA-6 - Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interest in, and Relationships with, Hedge Funds and Private Equity Funds

Summary - The SEC and four other federal financial regulatory agencies announced that they adopted a final rule to exclude community banks from the Volcker Rule, consistent with the Economic Growth, Regulatory Relief, and Consumer Protection Act.

The Volcker Rule generally restricts banking entities from engaging in proprietary trading and from owning, sponsoring, or having certain relationships with hedge funds or private equity funds. Under the final rule, which is unchanged from the proposal, community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5 percent or less of total consolidated assets are excluded from the Volcker Rule.

The final rule also permits a hedge fund or private equity fund, under certain circumstances, to share the same name or a variation of the same name with an investment adviser as long as the adviser is not an insured depository institution, a company that controls an insured depository institution, or a bank holding company.

For more information, click here.

Release No. 34-86175 - Capital, Margin, and Segregation Requirements for Security-Based Swap Dealers and Major Security-Based Swap Participants and Capital and Segregation Requirements for Broker-Dealers

Summary - In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC has adopted capital and margin requirements for security-based swap dealers (“SBSDs”) and major security-based swap participants (“MSBSPs”), segregation requirements for SBSDs, and notification requirements with respect to segregation for SBSDs and MSBSPs.

The SEC increased the minimum net capital requirements for broker-dealers authorized to use internal models to compute net capital requirements for broker-dealers that are not SBSDs to the extent they engage in security-based swap and swap activity. The Commission also is making substituted compliance available with respect to capital and margin requirements under Section 15F of the Exchange Act and the rules thereunder and adopting a rule that specifies when a foreign SBSD or foreign MSBSP need not comply with the segregation requirements of Section 3E of the Exchange Act and the rules thereunder. (“ANC broker-dealers”), and prescribing certain capital and segregation requirements for broker-dealers that are not SBSDs to the extent they engage in security-based swap and swap activity.

The SEC also is making substituted compliance available with respect to capital and margin requirements under Section 15F of the Exchange Act and the rules thereunder and adopting a rule that specifies when a foreign SBSD or foreign MSBSP need not comply with the segregation requirements of Section 3E of the Exchange Act and the rules thereunder.

These rules are effective 60 days after publication in the Federal Register. The rules also contain certain compliance dates.

For more information, click here.

Release No. 33-10645 - Adoption of Updated EDGAR Filer Manual

Summary - The SEC has published an update to the EDGAR Filer Manual. The revisions to the manual include a modernized interface for completing an application for EDGAR access and updates to incorporate SEC changes related to inline XBRL information on filing cover pages.

This update is effective upon publication in the Federal Register.

For more information, click here.

Release No. 33-10649 - Concept Release on Harmonization of Securities Offering Exemptions

Summary - The SEC is requesting public comment on ways to simplify, harmonize, and improve the exempt offering framework to expand investment opportunities while maintaining appropriate investor protections and to promote capital formation.

The concept release seeks input on whether changes should be made to improve the consistency, accessibility, and effectiveness of the SEC’s exemptions for both companies and investors, including identifying potential overlap or gaps within the framework. It also considers, among other things, whether:

The limitations on who can invest in certain exempt offerings, or the amount they can invest, provide an appropriate level of investor protection or pose an undue obstacle to capital formation or investor access to investment opportunities.
The SEC should take steps to facilitate a company’s ability to transition from one offering to another or to a registered offering.
The Commission should expand companies’ ability to raise capital through pooled investment funds.
Retail investors should be allowed greater exposure to growth-stage companies through pooled investment funds such as interval funds and other closed-end funds.
The SEC should revise its exemptions governing the secondary trading of securities initially issued in exempt offerings.

Comments on the proposal are due 90 days after publication in the Federal Register.

For more information, click here.

Release No. 33-10648 - Auditor Independence with Respect to Certain Loans or Debtor-Creditor Relationships

Summary - The SEC has adopted a final rule, Auditor Independence With Respect to Certain Loans or Debtor-Creditor Relationships. This rule includes amendments to the SEC’s auditor independence rules to refocus the analysis that must be conducted to determine whether an auditor is independent when the auditor has a lending relationship with certain shareholders of an audit client at any time during an audit or professional engagement period.

Rule 2-01(c)(1)(ii)(A) of Regulation S-X (the “Loan Provision”) generally provides that an auditor is not independent if that auditor is in a lending relationship with its audit client. In recent years, the SEC has become aware that, in certain circumstances, the existing Loan Provision may not have been functioning as it was intended. Among other things, the amendments:

Focus the analysis on beneficial ownership rather than on both record and beneficial ownership;
Replace the existing 10 percent bright-line shareholder ownership test with a “significant influence” test;
Add a “known through reasonable inquiry” standard with respect to identifying beneficial owners of the audit client’s equity securities; and
Exclude from the definition of “audit client,” for a fund under audit, any other funds, that otherwise would be considered affiliates of the audit client under the rules for certain lending relationships.

According to the SEC, the amendments “will more effectively identify debtor-creditor relationships that could impair an auditor’s objectivity and impartiality, as opposed to certain more attenuated relationships that are unlikely to pose such threats, and thus will focus the analysis on those borrowing relationships that are important to investors.”

The amendments are effective 90 days from publication in the Federal Register.

For more information, click here.

Release No. 33-10635 - Amendments to Financial Disclosures about Acquired and Disposed Businesses

Summary - The SEC has proposed rule amendments to improve the information that investors receive regarding the acquisition and disposition of businesses. The proposed amendments are also intended to facilitate more timely access to capital and to reduce complexity and compliance costs of these financial disclosures. The proposal includes amendments to the following rules and related forms for requirements on information related to financial statements of businesses acquired or to be acquired and for business dispositions:

Rule 3-05, Financial statements of businesses acquired or to be acquired;
Rule 3-14, Special instructions for real estate operations to be acquired; and
Article 11 of Regulation S-X.

The SEC also proposed new Rule 6-11 of Regulation S-X and amendments to Form N-14 for financial reporting of acquisitions involving investment companies. Among other things, the proposed amendments would:

Update the significance tests under these rules by revising the investment test and the income test, expanding the use of pro forma financial information in measuring significance, and conforming the significance threshold and tests for a disposed business;
Require the financial statements of the acquired business to cover up to the two most recent fiscal years rather than up to the three most recent fiscal years;
Permit disclosure of financial statements that omit certain expenses for certain acquisitions of a component of an entity;
Clarify when financial statements and pro forma financial information are required;
Permit the use in certain circumstances of, or reconciliation to, International Financial Reporting Standards as issued by the International Accounting Standards Board;
No longer require separate acquired business financial statements once the business has been included in the registrant’s post-acquisition financial statements for a complete fiscal year;
Align Rule 3-14 with Rule 3-05 where no unique industry considerations exist;
Clarify the application of Rule 3-14 regarding the determination of significance, the need for interim income statements, special provisions for blind pool offerings, and the scope of the rule’s requirements; and
Amend the pro forma financial information requirements to improve the content and relevance of such information. These improvements would include disclosure of “Transaction Accounting Adjustments,” reflecting the accounting for the transaction and “Managements Adjustments,” reflecting reasonably estimable synergies and transaction effects.

The proposal will have a 60-day public comment period following its publication in the Federal Register.

For more information, click here.

Release No. 34-85823 - Proposed Rule Amendments and Guidance Addressing Cross-Border Application of Certain Security-Based Swap Requirements

Summary - The SEC has issued for public comment a package of rule amendments and interpretive guidance to improve the framework for regulating cross-border security-based swaps transactions and market participants.

The proposals are intended to improve the regulatory framework by pragmatically addressing implementation issues and efficiency concerns, and in some cases further harmonizing the regulatory regime governing security-based swaps administered by the Commission with the regulatory regime governing swaps administered by the Commodity Futures Trading Commission.

The proposing release addresses four key areas:

The use of transactions that have been “arranged, negotiated, or executed” by personnel located in the United States as a trigger for regulating security-based swaps and market participants;
The requirement that non-U.S. resident security-based swap dealers and major security-based swap participants certify and provide an opinion of counsel that the SEC can access their books and records and conduct onsite inspections and examinations;
The cross-border application of statutory disqualification provisions; and
The questionnaires or employment applications that security-based swap dealers and major security-based swap participants must maintain with regard to their foreign associated persons

The accompanying fact sheet describes each of these aspects in more detail.

The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register.

For more information, click here.

Release No. 34-85814 - Amendments to the Accelerated Filer and Large Accelerated Filer Definitions

Summary - The SEC voted to propose amendments to the accelerated filer and large accelerated filer definitions. The SEC believes the proposed amendments would reduce costs for certain lower-revenue companies by more appropriately tailoring the types of companies that are categorized as accelerated and large accelerated filers while maintaining effective investor protections.

The proposed amendments would:

Exclude from the accelerated and large accelerated filer definitions an issuer that is eligible to be an SRC and had no revenues or annual revenues of less than $100 million in the most recent fiscal year for which audited financial statements are available;
Increase the transition thresholds for accelerated and large accelerated filers becoming a non-accelerated filer from $50 million to $60 million and for exiting large accelerated filer status from $500 million to $560 million; and
Add a revenue test to the transition thresholds for exiting both accelerated and large accelerated filer status.

The proposed amendments would not change key protections from the Sarbanes-Oxley Act of 2002, such as independent audit committee requirements, CEO and CFO certifications of financial reports, or the requirement that companies continue to establish, maintain, and assess the effectiveness of their ICFR.

The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register.

For more information, click here.

Release No. 33-10618: FAST Act Modernization and Simplification of Regulation S-K

Summary - The SEC adopted amendments to modernize and simplify disclosure requirements for public companies, investment advisers, and investment companies. The SEC indicated that these “amendments are expected to benefit investors by eliminating outdated and unnecessary disclosure and making it easier for them to access and analyze material information.”

The amendments are based on recommendations in the SEC staff’s FAST Act Report as well as a broader review of the agency’s disclosure rules. The amendments are intended to improve the readability and navigability of company disclosures, and to discourage repetition and disclosure of immaterial information. Specifically, the SEC indicated that the amendments will, among other things:
• Increase flexibility in the discussion of historical periods in Management’s Discussion and Analysis;
• Allow companies to redact confidential information from most exhibits without filing a confidential treatment request; and
• Incorporate technology to improve access to information on the cover page of certain filings.
Among other things, the amendments make changes to SEC Regulations S-K, M-A, AB, S-T, and various forms. Specific changes include:
• Registrants will generally be able to exclude discussion of the earliest of three years in MD&A if they have already included the discussion in a prior filing.
• Registrants will be able to omit confidential information in material contracts and certain other exhibits without submitting a confidential treatment request to the Commission, so long as the information is: (i) not material; and (ii) would likely cause competitive harm to the registrant if publicly disclosed.
• Only newly reporting registrants will be required to file material contracts that were entered within two years of the applicable registration statement or report.
• Registrants will not be required to file attachments to their material agreements if such attachments do not contain material information or were not otherwise disclosed.
• Registrants will need to provide disclosure about a physical property only to the extent that it is material to the registrant.
• Registrants will be required to disclose on the form cover page the national exchange or principal U.S. market for their securities, the trading symbol, and title of each class of securities.

The amendments relating to the redaction of confidential information in certain exhibits will become effective upon publication in the Federal Register. The rest of the amendments will be effective 30 days after they are published in the Federal Register, except that the requirements to tag data on the cover pages of certain filings are subject to a three-year phase-in, and the requirement that certain investment company filings be made in HTML format and use hyperlinks will be effective for filings on or after April 1, 2020.

For more information, click here.

Release No. 33-10619: Securities Offering Reform for Closed-End Investment Companies

Summary - The SEC proposed rule amendments to implement certain provisions of the Small Business Credit Availability Act and the Economic Growth, Regulatory Relief, and Consumer Protection Act.

The proposal would improve access to capital and facilitate investor communications by business development companies and registered closed-end funds. Business development companies (BDCs) are a type of closed-end fund established by Congress that primarily invest in small and developing companies.

The proposed amendments would modify the registration, communications, and offering processes available to BDCs and registered closed-end funds, building on offering practices that operating companies currently use.

The proposal would allow eligible funds to engage in a more streamlined registration process to sell securities in response to market opportunities. The proposed amendments also would allow BDCs and registered closed-end funds to use communications and prospectus delivery rules currently available to operating companies. The proposal includes additional amendments designed to help implement the congressionally-mandated amendments by further harmonizing the disclosure and regulatory framework for these funds with that of operating companies and by providing tools to help investors assess these funds and their offerings.

These proposed amendments include new periodic and current reporting requirements and new structured data requirements.

The Commission also is proposing a modernized approach to registration fee payments for closed-end funds that operate as “interval funds.”

The proposal will have a 60-day public comment period following its publication in the Federal Register.

For more information, click here.

Release No. 33-10607: Solicitations of Interest Prior to a Registered Public Offering

Summary - The SEC voted to propose an expansion of a popular modernization reform that would permit investor views about potential offerings to be considered at an earlier stage in the process than is the case today. The new rule and related amendments would expand the "test-the-waters" accommodation—currently available to emerging growth companies or "EGCs"—to all issuers, including investment company issuers.

According to the SEC, this proposal would allow all prospective issuers, not just EGCs, to gauge market interest in a possible initial public offering or other proposed registered securities offering by permitting discussions with certain investors prior to the filing of a registration statement. The proposed reform builds on a popular similar provision of the Jumpstart Our Business Startups Act (JOBS Act) that has been limited to EGCs. Generally, companies with more than $1 billion in annual revenues do not qualify as EGCs and, therefore, have not benefited from JOBS Act provisions intended to foster capital formation in the public markets. The proposed rule follows action taken by the Division of Corporation Finance in 2017 to extend another EGC reform to all issuers: the ability to initially submit certain filings in draft, non-public form. As a result of that policy change, all issuers, not just EGCs, have been able to make non-public filings with the SEC as they begin the process of becoming a public company.

The proposed test-the-waters rule and related amendments are intended to provide increased flexibility to issuers with respect to their communications with institutional investors about contemplated registered securities offerings, as well as a cost-effective means for evaluating market interest before incurring the costs associated with such an offering.

The proposal will have a 60-day public comment period following its publication in the Federal Register.

For more information, click here.

Release No. 34-84875: Transaction Fee Pilot for NMS Stocks

Summary - The SEC adopted new Rule 610T of Regulation NMS to conduct a Transaction Fee Pilot in NMS stocks. The pilot is designed to generate data that will help the Commission analyze the effects of exchange transaction fee and rebate pricing models on order routing behavior, execution quality, and market quality generally. Data from the Pilot will be used to facilitate an empirical evaluation of whether the exchange transaction-based fee and rebate structure is operating effectively to further statutory goals and whether there is a need for any potential regulatory action in this area.

The Transaction Fee Pilot, which will apply to all stock exchanges, will create two test groups with new restrictions on the transaction fees and rebates that exchanges charge or offer to their broker-dealer members. One test group will prohibit exchanges from offering rebates and linked pricing and the other group will test a fee cap of $0.0010.

The rule is effective 60 days from the date of publication in the Federal Register. The Commission will subsequently announce by notice the commencement dates for the pre-Pilot, Pilot, and post-Pilot Periods. Approximately one month prior to the beginning of the Pilot Period, the Commission will issue the List of Pilot Securities, which will include the securities in the Pilot and their Test Group assignments.

For more information, click here.

Release No. 34-84858: Applications by Security-Based Swap Dealers or Major Security-Based Swap Participants for Statutorily Disqualified Associated Persons to Effect or be Involved in Effecting Security-Based Swaps

Summary - The SEC has adopted Rule of Practice 194. In general, this rule creates a transparent, efficient, and comprehensive process for a registered security-based swap dealer or major security-based swap participant, collectively known as SBS Entities, to apply to the Commission for relief from the statutory disqualification prohibition found in Exchange Act Section 15F(b)(6). Rule of Practice 194 also provides an exclusion for an SBS Entity from the prohibition in Exchange Act Section 15F(b)(6) with respect to associated persons entities, consistent with the Commodity Futures Trading Commission’s approach with respect to the statutory prohibition for swap entities.

Rule of Practice 194 is effective 60 days after publication in the Federal Register. However, the compliance date for the SBS Entity registration rules depends on the adoption of two pending rules, and will be the later of: six months after the date of publication in the Federal Register of a final rule release adopting rules establishing capital, margin and segregation requirements for SBS Entities or the compliance date of final rules establishing recordkeeping and reporting requirements for SBS Entities.

For more information, click here.

Release No. 33-10593: Disclosure of Hedging by Employees, Officers and Directors

Summary - The SEC approved final rules to require companies to disclose in proxy or information statements for the election of directors any practices or policies regarding the ability of employees or directors to engage in certain hedging transactions with respect to company equity securities.

The final rules, which implement a mandate from the Dodd-Frank Act (new Rule 406(i) of Regulation S-K), will require disclosure of practices or policies in full, or, alternatively, a summary of those practices or policies that includes a description of any categories of hedging transactions that are specifically permitted or disallowed. If the registrant does not have any such practices or policies, it will disclose that fact or state that hedging is generally permitted.

For more information, click here.

Release No. 33-10577: Form N-1A; Correction

Summary - The SEC has published a technical correction to several amendments to Form N-1A, which the Commission adopted previously. This document is being published to correct the paragraph designations that appeared in the amendatory instructions preceding certain of the form amendments that the SEC adopted as part of each of these rulemakings. This document makes technical corrections only to the paragraph designations that appear in the amendatory instructions preceding these form amendments. This document does not make any substantive changes (i.e., changes except corrections to typographical errors) to the text of the form amendments themselves.

For more information, click here.

Release No. 34-84861: Risk Mitigation Techniques for Uncleared Security-Based Swaps

Summary - The SEC proposed rules requiring the application of risk mitigation techniques to portfolios of uncleared security-based swaps. Proposed Rules 15Fi-3 through 15Fi-5 would establish requirements for registered security-based swap dealers and major security-based swap participants (SBS Entities) with respect to:

Reconciling outstanding security-based swaps with applicable counterparties on a periodic basis.
Engaging in certain forms of portfolio compression exercises, as appropriate.
Executing written security-based swap trading relationship documentation with each of its counterparties prior to, or contemporaneously with, executing a security-based swap transaction.

Comments are due 60 days following publication in the Federal Register.

For more information, click here.

Release No. 33-10590: Fund of Funds Arrangements

Summary - The SEC proposed a new rule and related amendments designed to streamline and enhance the regulatory framework for fund of funds arrangements. Funds of funds are created when a mutual fund or other type of fund invests in shares of another fund.

The SEC's proposal would allow a fund to acquire the shares of another fund in excess of the limits of the Investment Company Act without obtaining an individual exemptive order from the Commission. In order to rely on the rule, funds must comply with conditions designed to enhance investor protection, including conditions restricting funds' ability to improperly influence other funds, charge excessive fees, or create overly complex fund of funds structures.

Because the proposed rule would create a new, comprehensive exemptive rule for funds of funds to operate, the Commission is proposing to rescind rule 12d1-2 as well as most exemptive orders permitting fund of funds arrangements.

The SEC will seek public comment on the proposal for 90 days.

For more information, click here.

Release No. 33-10588: Request for Comment on Earnings Releases and Quarterly Reports

Summary - The SEC published a Request for Comment soliciting input on the nature, content, and timing of earnings releases and quarterly reports made by reporting companies.

The request “solicits public input on how the Commission can reduce burdens on reporting companies associated with quarterly reporting while maintaining, and in some cases enhancing, disclosure effectiveness and investor protections.” In addition, the SEC is seeking comment on how the existing periodic reporting system, earnings releases, and earnings guidance, alone or in combination with other factors, may foster an overly short-term focus by managers and other market participants.

For more information, click here.

Release No. BHCA-5: Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds

Summary - Five federal financial regulatory agencies have proposed revisions to the regulations implementing the Bank Holding Company Act (BHCA). The proposed amendments, Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds, would exclude certain community banks from the Volcker Rule, consistent with the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). Comments are due 30 days after publication of the proposal in the Federal Register.

The Volcker Rule generally restricts banking entities from engaging in proprietary trading and from owning or sponsoring hedge funds or private equity funds. The agencies are jointly proposing to exclude community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5 percent or less of total consolidated assets from the restrictions of the Volcker Rule.

In addition, the proposal would, under certain circumstances, permit a hedge fund or private equity fund to share the same name or a variation of the same name with an investment adviser that is not an insured depository institution, company that controls an insured depository institution, or bank holding company.

The federal agencies that issued the proposal are the SEC, the Federal Reserve Board, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.

For more information, click here.

Regulation of NMS Stock Alternative Trading Systems – Release No. 34-84541

Summary - The SEC has issued a technical correction to its final rule, Regulation of NMS Stock Alternative Trading Systems. This document makes technical corrections to a rule that was published in the Federal Register on August 7, 2018. The SEC adopted amendments to the regulatory requirements in Regulation ATS under the Securities Exchange Act of 1934 applicable to alternative trading systems (“ATSs”) that trade National Market System (“NMS”) stocks (hereinafter referred to as “NMS Stock ATSs”), which included, among other items, Form ATS-N. This document is being published to correct a citation contained in the adopted language of Part III, Item 15.a of Form ATS-N.

This final rule became effective November 13, 2018.

For more information, click here.

Modernization of Property Disclosures for Mining Registrants – Release No. 33-10570

Summary - The SEC adopted amendments to modernize the property disclosure requirements for mining registrants, and related guidance, under the Securities Act of 1933 and the Securities Exchange Act of 1934. The amendments “will provide investors with a more comprehensive understanding of a registrant’s mining properties, which should help them make more informed investment decisions. The amendments also will more closely align the Commission’s disclosure requirements and policies for mining properties with current industry and global regulatory practices and standards.”

Under the final rules, a registrant with material mining operations must disclose specified information in its Securities Act and Exchange Act filings concerning its mineral resources, in addition to its mineral reserves. Current SEC rules and guidance permit the disclosure of non-reserve estimates only in limited circumstances. The SEC indicates that requiring the disclosure of mineral resources in addition to mineral reserves will provide investors with important information concerning the registrant’s operations and prospects.

The final rules include several other requirements designed to further the protection and understanding of investors. The final rules also reflect a number of changes to the rules proposed in June 2016 in response to comments received by the SEC.

The final rules provide a two-year transition period so that a registrant will not be required to begin to comply with the new rules until its first fiscal year beginning on or after January 1, 2021.

For more information, click here.

Adoption of Updated EDGAR Filer Manual – Release No. 33-10566

Summary - The SEC is adopting revisions to the Electronic Data Gathering, Analysis, and Retrieval System (“EDGAR”) Filer Manual and related rules. Updates to the EDGAR Manual include various technical changes, including those related to XBRL validation.

For more information, click here.

Amendments to Rules for Nationally Recognized Statistical Ratings Organizations - Release No. 34-84289

Summary - The SEC announced that it has voted to propose rule amendments to codify an existing temporary exemption for credit rating agencies registered with the Commission as nationally recognized statistical rating organizations (NRSROs). Rule 17g-5(a)(3) under the Securities Exchange Act established a program to provide information necessary to determine a structured finance product’s credit rating to NRSROs that were not hired by the issuer, sponsor, or underwriter of the structured finance product. Prior to the compliance date for Rule 17g-5(a)(3), the Commission granted a temporary conditional exemption to the rule for certain structured finance products issued by non-U.S. persons and offered and sold outside the United States. The Commission subsequently extended this exemption.

The amendments proposed by the Commission “would codify the existing temporary exemption to Rule 17g-5(a)(3) and clarify the exemption’s conditions. The proposed amendments would also clarify the conditions applicable to similar exemptions in Exchange Act Rules 17g-7(a) and 15Ga-2 so that the approach among these exemptions remains consistent. Rule 17g-7(a) requires an NRSRO to disclose certain information when it publishes a rating action. Rule 15Ga-2 requires an issuer or underwriter to disclose the findings and conclusions of any third-party due diligence report it obtains with respect to an asset-backed security that is to be rated by an NRSRO.”

The public comment period will remain open for 30 days following publication of the proposing release in the Federal Register.

For more information, click here.

Release No. 34-83885: Amendments to Municipal Securities Disclosure

Summary - The SEC adopted amendments to enhance transparency in the municipal securities market. The adopted amendments to Rule 15c2-12 of the Securities Exchange Act focus on material financial obligations that could impact an issuer’s liquidity, overall creditworthiness, or an existing security holder’s rights. Rule 15c2-12 requires brokers, dealers, and municipal securities dealers that are acting as underwriters in primary offerings of municipal securities to reasonably determine that the issuer or obligated person has agreed to provide to the Municipal Securities Rulemaking Board (MSRB) timely notice of certain events. The amendments add two new events to the list included in the rule:

Incurrence of a financial obligation of the issuer or obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the issuer or obligated person, any of which affect security holders, if material; and
Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of the financial obligation of the issuer or obligated person, any of which reflect financial difficulties.

The compliance date for the amendments is 180 days after they are published in the Federal Register.

For more information, click here.

Rule 701 - Exempt Offering Pursuant to Compensatory Arrangements - Release No. 33-10520

Summary - The SEC issued final rules to amend Securities Act Rule 701, which provides an exemption from registration for securities issued by non-reporting companies pursuant to compensatory arrangements. As mandated by the Economic Growth, Regulatory Relief, and Consumer Protection Act, the amendment increases from $5 million to $10 million the threshold in excess of which the issuer is required to deliver additional disclosures to investors.

This final rule is effective upon publication in the Federal Register.

For more information, click here.

Concept Release on Compensatory Securities Offerings and Sales - Release No. 33-10521

Summary - The SEC is soliciting comment on possible ways to modernize rules related to compensatory arrangements in light of the significant evolution in both the types of compensatory offerings and the composition of the workforce since the agency last substantively amended these rules in 1999.

The public comment period will remain open for 60 days following publication of the concept release in the Federal Register.

For more information, click here.

Amendments to the Commission's Whistleblower Program Rules - Release No. 34-83557

Summary - The SEC proposed amendments to the rules governing its whistleblower program. The whistleblower program was established in 2010 to incentivize individuals to report high-quality tips to the SEC and help the agency detect wrongdoing and better protect investors and the marketplace.

After nearly seven years of experience administering the whistleblower program, the SEC has identified various ways in which the program might benefit from additional rulemaking. The proposed rules would, among other things, provide the SEC with additional tools in making whistleblower awards to ensure that meritorious whistleblowers are appropriately rewarded for their efforts, increase efficiencies in the whistleblower claims review process, and clarify the requirements for anti-retaliation protection under the whistleblower statute.

For more information, click here.

Technical Amendments to Rules of Practice and Rules of Organizations; Conduct and Ethics; and Information and Requests - Release No. 34-83325

Summary - The SEC has issued a Final Rule, Technical Amendments to Rules of Practice and Rules of Organization; Conduct and Ethics; and Information and Requests. This document includes technical amendments to certain rules of organization and rules of practice to indicate that SEC materials will no longer be compiled and published as the “SEC Docket” (“SEC Docket” or “Docket”), but will continue to be available on the SEC public website.

This final rule became effective June 1, 2018.

For more information, click here.

Optional Internet Availability of Investment Company Shareholder Reports - Release No. 33-10506

Summary - The SEC adopted new rule 30e-3 under the Investment Company Act of 1940. Subject to conditions, new rule 30e-3 will provide certain registered investment companies with an optional method to satisfy their obligations to transmit shareholder reports by making such reports and other materials accessible at a website address specified in a notice to investors. The SEC also adopted amendments to rule 498 under the Securities Act of 1933 and the SEC's fund registration forms to require that during a certain transition period funds that choose to implement the new delivery method for shareholder reports provide prominent disclosures in prospectuses and certain other shareholder documents that will notify investors of the upcoming change in transmission format for a period of two years. New rule 30e-3 and the amendments to rule 498 and the SEC's registration forms address the fact that some investors may wish to receive shareholder reports in paper. As such, the new rule incorporates a set of protections so that investors who prefer to receive reports in paper will continue to receive them in that format. These protections include, among others, a minimum length phase-in period that ends no earlier than December 31, 2020 and notice requirements that must be implemented and ollowed beginning January 1, 2019, or the date shares are first publicly offered, if a registered investment company would want to use new rule 30e-3 as of January 1, 2021. The rule requires that a paper notice be sent to an investor each time a current shareholder report is accessible online. The notice must include instructions for how an investor can elect—at any time—to receive all future reports in paper, or request to receive particular reports in paper on an ad hoc basis. We are also adopting related amendments to certain other rules and forms. This optional method is intended to modernize the manner in which periodic information is made available to investors, which the SEC believes will improve investors’ experience while reducing expenses associated with printing and mailing shareholder reports that are borne by investment companies and ultimately their investors.

This final rule is generally effective January 1, 2019, with certain exceptions specified within the rule.

For more information, click here.

Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds - Release No. BHCA-3

Summary - The SEC has issued for public comment Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds. The SEC and a group of other regulators are requesting comment on a proposal that would amend the regulations implementing section 13 of the Bank Holding Company Act. Section 13 contains certain restrictions on the ability of a banking entity and nonbank financial company supervised by the Board of Governors of the Federal Reserve to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund. The proposed amendments are intended to provide banking entities with clarity about what activities are prohibited and to improve supervision and implementation of section 13.

Comments on this proposal are due 60 days from publication in the Federal Register.

For more information, click here.

Amendments to Forms and Schedules to Remove Provision of Certain Personally Identifiable Information - Release No. 34-83097

Summary - The SEC has issued a final rule, Amendments to Forms and Schedules to Remove Provision of Certain Personally Identifiable Information. This final rule includes revisions to forms filed under the Securities Exchange Act of 1934 to eliminate the portion of those forms that requests filers to furnish certain personally identifiable information, including Social Security numbers. Commission forms amended by this final rule include:

Form Funding Portal;
Form MA;
Form MA-I; and
Form MSD.

The final rule is effective upon publication in the Federal Register.

For more information, click here.

Investment Company Reporting Modernization - Release No. 33-10442

Summary - The SEC has issued a temporary final rule that modifies its approach to the pending requirement for registered investment companies to file Form N-PORT electronically while the agency continues its previously announced review and uplift of its EDGAR and other systems. According to the SEC, for the first nine months after the Form N-PORT compliance date of June 1, 2018, larger fund groups will maintain the Form N-PORT information in their records and make it available to the SEC upon request in lieu of filing the form on EDGAR. Smaller fund groups will continue to benefit from a filing start date that is one year after larger fund groups begin filing the form.

In May 2017, Chairman Jay Clayton initiated an assessment of the SEC's cybersecurity risk profile and its approach to cybersecurity. Clayton subsequently directed the staff to take a number of steps designed to assess and strengthen the SEC's cybersecurity risk profile. In connection with these ongoing efforts, the agency commenced a focused review and uplift of EDGAR and other systems. Form N-PORT uses the EDGAR system.

The SEC adopted Form N-PORT to require registered investment companies to report enhanced information about their monthly portfolio holdings in a structured data format. Filing of Form N-PORT through the EDGAR system will begin in April 2019 for larger fund groups and in April 2020 for smaller fund groups. To ensure that investors do not lose access to important information, the SEC is requiring funds to continue filing public reports on existing Form N-Q until they begin filing reports on Form N-PORT using EDGAR.

The temporary rule is effective 30 days after publication in the Federal Register and is effective until March 31, 2026.

For more information, click here.

Updates to Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Sotckpile - Release No. 33-10403

Summary - The SEC has issued a release to update its 2005 Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile. The release states that consistent with ASC Topic 606, manufacturers should recognize revenue for vaccines that are placed into the Vaccines for Children Program and the Strategic National Stockpile. The release states that until a registrant adopts ASC Topic 606, it should continue referring to the guidance included in the 2005 Release.

For more information, click here.

Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 - the DAO - Release No. 34-81207

Summary - The SEC issued a Report of Investigation (Report) cautioning market participants that offers and sales of digital assets by "virtual" organizations are subject to the requirements of the federal securities laws. Such offers and sales, conducted by organizations using distributed ledger or blockchain technology, have been referred to, among other things, as "Initial Coin Offerings" or "Token Sales." Whether a particular investment transaction involves the offer or sale of a security - regardless of the terminology or technology used - will depend on the facts and circumstances, including the economic realities of the transaction.

The SEC's Report found that tokens offered and sold by a "virtual" organization known as "The DAO" were securities and therefore subject to the federal securities laws. The Report confirms that issuers of distributed ledger or blockchain technology-based securities must register offers and sales of such securities unless a valid exemption applies. Those participating in unregistered offerings also may be liable for violations of the securities laws. Additionally, securities exchanges providing for trading in these securities must register unless they are exempt. The purpose of the registration provisions of the federal securities laws is to ensure that investors are sold investments that include all the proper disclosures and are subject to regulatory scrutiny for investors' protection.

The SEC's Report stems from an inquiry that the agency's Enforcement Division launched into whether The DAO and associated entities and individuals violated federal securities laws with unregistered offers and sales of DAO Tokens in exchange for "Ether," a virtual currency. The DAO has been described as a "crowdfunding contract" but it would not have met the requirements of the Regulation Crowdfunding exemption because, among other things, it was not a broker-dealer or a funding portal registered with the SEC and the Financial Industry Regulatory Authority.

For more information, click here.