December 4, 2020

Volume X, Number 339


December 04, 2020

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December 03, 2020

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December 02, 2020

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SEC and CFTC Chairman Issue Joint Letter Regarding CFTC Orders Implicating Regulations A and D

On October 23, Chairman Jay Clayton of the Securities and Exchange Commission and Chairman Heath P. Tarbert of the Commodity Futures Trading Commission issued a joint letter creating a one-year pilot program to formalize the practices between the Chairmen relating to CFTC orders that implicate the “bad actor” disqualification provisions of Regulations A and D under the Securities Act of 1933 (the SEC Disqualification Rules). Under the SEC Disqualification Rules, individuals or firms are disqualified from relying on certain exemptions from registration for securities offerings if certain triggering events occur, such as certain securities law violations or final orders issued by the CFTC in connection with certain enforcement proceedings.

However, the SEC Disqualification Rules also establish circumstances under which disqualification will not be triggered if the CFTC advises in writing that a disqualification is not a necessary consequence of a CFTC order. Through the joint letter, the Chairmen agree to use reasonable efforts to formalize and memorialize the coordination of their respective staffs with respect to CFTC orders that implicate the SEC’s Disqualification Rules. More specifically, the CFTC staff will provide notice to the SEC staff as soon as practicable if a CFTC order may involve the SEC Disqualification Rules, will share relevant information regarding the CFTC order, and will permit the SEC staff to comment on the potential for a waiver of automatic disqualification under the SEC Disqualification Rules. If the SEC staff fails to provide its view or comments within the timeframe stipulated in the letter, the CFTC will automatically provide language advising that disqualification should not arise as a consequence of the CFTC order.

The pilot program is currently set to expire on October 23, 2021, although Chairman Clayton, Chairman Tarbert or a future chair may opt to terminate the pilot program unilaterally at any time before the expiration date.

The joint letter is available here.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 304



About this Author

Michael T. Foley, Katten, Lawyer, Finance, FINRA, Chicago
Special Counsel

Michael Foley represents broker-dealers, investment advisers and other financial services industry participants with respect to a broad spectrum of legal and regulatory matters arising under the federal securities laws.

Michael has nearly 20 years of experience in private practice and in-house at both a large, full-service broker-dealer and at an online discount broker-dealer, advising broker-dealers and other financial institutions regarding compliance with the federal securities and commodities laws, and with the regulations of the US Securities and Exchange...

Laura Krcmaric, Financial Services Attorney, Katten Law Firm

Laura Krcmaric represents clients in the financial services industry, focusing on regulatory and compliance work. Prior to joining Katten, Laura served as counsel for Credit Suisse, where she provided advice to the private banking and wealth management division. She also was an honors intern with the Securities and Exchange Commission.

While in law school, Laura served as a staff member and symposium editor for the North Carolina Law Review. She also was a member of the Community Development Law Clinic, representing nonprofit organizations.

Gregory Uffner, Financial Services Attorney, Katten Law Firm

Gregory Uffner is an associate in the Financial Services practice. 

While in law school, Gregory was an associate editor for the Moot Court Board, a member of the Fordham Urban Law Journal and served as managing editor for the Fordham Sports Law Forum.