October 27, 2020

Volume X, Number 301

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October 27, 2020

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October 26, 2020

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Securities and Exchange Commission (SEC) Updates, September 18, 2020

SEC Amends Exchange Act Rule 15c2-11 to Enhance Retail Investor Protections and Modernize Governing Quotations for Over-the-Counter Securities

On September 16, the Securities and Exchange Commission adopted amendments to the Securities Exchange Act of 1934 (Exchange Act) Rule 15c2-11 to modernize the rule, including by recognizing advances in communications technology. The rule requires broker-dealers to review key, basic issuer information before initiating or resuming quotations for the issuer’s security in the over-the-counter (OTC) market.

Currently, certain of the rule’s exceptions permit broker-dealers to maintain a quoted market for an issuer’s security in perpetuity in the absence of current and publicly available information about the issuer. Recognizing the faster flow of information today, the amendments generally prohibit broker-dealers from publishing quotations for an issuer’s security when issuer information is not current and publicly available, subject to certain exceptions. The amendments also add new exceptions for certain OTC securities that may be less susceptible to fraud or manipulation, such as actively traded securities of well-capitalized issuers, and expand the scope of market participants that may comply with the rule’s required review of issuer information.

The amendments to Exchange Act Rule 15c2-11, which was last substantively amended nearly 30 years ago, will become effective 60 days following publication in the Federal Register.

The SEC press release is available here.

SEC Modernizes Disclosures for Banking Registrants

On September 11, the Securities and Exchange Commission announced that it had adopted rules that update and expand the statistical disclosures that bank and savings and loan registrants provide to investors while eliminating duplicative disclosures. The new SEC rules 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;

  • certain credit ratios and the factors that explain material changes in the ratios, or the related components during the periods presented;

  • the allowance for credit losses by loan category; and

  • bank deposits including average amounts and rate paid and amounts that are uninsured.

The adopted rules will be effective 30 days after publication in the Federal Register and will apply to fiscal years ending on or after December 15, 2021. Voluntary compliance with the new rules will be accepted prior to such compliance date.

The SEC press release is available here.

SEC Releases Report and Recommendations in Connection With The 39th Annual Small Business Forum

On September 14, the Securities and Exchange Commission released its report and recommendations in connection with the Annual Small Business Forum. The report provides a summary of the forum proceedings, including the recommendations developed by participants for changes needed to the capital raising framework, and the SEC’s responses to the recommendations. The report is available here.

The SEC press release is available here.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 262
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About this Author

Kevin M. Foley, Finance Lawyer, Katten Llaw Firm
Partner

Kevin M. Foley has extensive experience in commodities law and advises a wide range of clients, both in the United States and abroad, on compliance with the Commodity Exchange Act and the rules of the Commodity Futures Trading Commission (CFTC) affecting traditional exchange-traded products, as well as the over-the-counter markets involving swaps and other derivative instruments. His clients include futures commission merchants, derivatives clearing organizations, designated contract markets, foreign boards of trade and an industry trade association.

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312-902-5372
Susan Light, Katten Law Firm, Finance Law Attorney, New York
Partner

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.

Previously, Sue was a senior vice president and chief counsel of Enforcement for FINRA, where she supervised all aspects of regulatory investigations, negotiations, settlements and disciplinary hearings concerning a wide variety of FINRA rules and federal securities laws. Prior to its merger with FINRA, she served in a similar role with NYSE Regulation, Inc. and helped lead the integration of the two enforcement departments. Earlier, Sue was a trial attorney in the Office of the District Attorney for Bronx County, New York.

Sue is a frequent speaker on regulatory and compliance topics for broker-dealer and securities conferences. She also advises several professional journals on securities industry topics.

212-940-8599
Jack West Financial Attorney Katten
Associate

Jack West is an associate in the Financial Markets and Funds practice.

312-902-5463
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