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Volume X, Number 187

July 03, 2020

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July 02, 2020

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SEC Antitrust Memo; Chairman Speaks on Equity Market Structure; FINRA CAB Suitability

SEC and Antitrust Division of DOJ Sign MOU

On June 22, the Securities and Exchange Commission and the Department of Justice’s Antitrust Division announced a Memorandum of Understanding (MOU) that is intended to foster collaboration between the agencies with respect to the enhancement of competition in the securities industry.

The MOU includes regular discussions between the agencies to review relevant law enforcement and regulatory matters, including periodic meetings among the agencies’ officials. The MOU also provides for exchanges of information and expertise.

The SEC press release is available here.

SEC Chairman Speaks on Modernizing US Equity Market Structure

On June 22, Securities and Exchange Commission Chairman Jay Clayton and Brett Redfearn, the Director of the SEC’s Division of Trading and Markets, spoke together on an SEC-sponsored virtual forum about modernizing the US Equity Market Structure. Chairman Clayton identified the market for thinly traded securities, retail fraud and National Market System (NMS) market data and access as three current targets for SEC initiatives.

Director Redfearn indicated that one such initiative with respect to thinly traded securities may be to provide incentives to market makers with regard to this segment of the markets. Director Redfearn also discussed the potential to adjust the market structure of Regulation NMS as it relates to thinly traded securities.

With respect to retail fraud, Chairman Clayton cited proposed amendments to Rule 15c2-11 that are designed to increase the availability of issuer information and modernize the rules governing quotations for over-the-counter (OTC) securities. Director Redfearn focused on enhancing transparency for OTC securities by requiring that information about the issuer and its security be current and publicly available and reducing regulatory burdens on broker-dealers with respect to OTC securities that are less susceptible to fraud and manipulation.

With respect to NMS market data and access, Chairman Clayton referred to SEC initiatives for this year intended to address the process for review of NMS market data fee changes, governance of the NMS market data plans and infrastructure for NMS market data. Director Redfearn indicated that the SEC would soon consider a staff recommendation to rescind an exception to the normal procedure for review and approval of NMS plan amendments under Rule 608 of Regulation NMS that allows fee changes to be immediately effective. Director Redfearn also highlighted the SEC’s requirement that self-regulatory organizations (SROs) submit a proposed new NMS plan to adjust the voting rights for exchange groups with multiple SROs and expand voting participation to key stakeholders with a diversity of views. Next, Director Redfearn discussed expanding the content of NMS market data and highlighted a proposal to lower the round lot size for many higher-priced securities while not expanding the scope of the trade-through rule, Rule 611 of Regulation NMS, to the new round-lot quotes. Further, Director Redfearn indicated that another majority objective of the Regulation NMS market data proposal is to reduce the latency of its infrastructure compared to the exchange proprietary data feeds.

Lastly, Chairman Clayton and Director Redfearn discussed the SEC’s role in ensuring that exchange fees for market data and connectivity comply with the Securities Exchange Act of 1934.

The SEC transcript of the speech is available here.

SEC Approves Changes to FINRA’s Suitability and Non-Cash Compensation Rules

On June 19, the Financial Industry Regulatory Authority (FINRA) issued a regulatory notice that it had amended its Capital Acquisition Broker (CAB) suitability rule and rules governing non-cash compensation to align with the Securities and Exchange Commission’s Regulation Best Interest (Reg BI) with respect to the requisite standards of conduct.

Specifically, FINRA has amended its suitability rule, FINRA Rule 2111, to state that it will not apply to recommendations subject to Reg BI. Similarly, FINRA’s non-cash compensation rules have been amended so that the addressed arrangements must also be consistent with the applicable requirements of Reg BI.

These changes were approved by the SEC and become effective on June 30, 2020, the compliance date of Reg BI.

FINRA Regulatory Notice 20-18 is available here.



©2020 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 178


About this Author

Susan Light, Katten Law Firm, Finance Law Attorney, New York

Susan Light focuses her practice on financial services regulatory matters. She counsels broker-dealers, hedge funds, investment banks and financial services clients on enforcement issues involving the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), other self-regulatory organizations (SROs) and state and federal regulatory authorities. She has particular experience related to sales practice issues, financial and operational issues, anti-money laundering, crowdfunding, cybersecurity, and cryptocurrencies.

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 Commission, the US Commodity Futures Trading Commission and financial industry self-regulatory organizations. 


Timothy Kertland concentrates his practice on transactional, corporate and regulatory aspects of financial services matters. Timothy is able to provide legal services to a wide variety of clients including proprietary trading firms, hedge funds, broker-dealers, registered investment advisers, and commodity trading advisers.

While in law school, Timothy served as an editor of the Virginia Tax Review. As a first-year law student, he represented the University of Virginia School of Law at the National...