Pub Date : 2019-11-04DOI: 10.1108/joic-08-2019-0049
Michael R. Rosella, Vadim Avdeychik, Justin R. Capozzi
Purpose This article provides an overview of the US Securities and Exchange Commission’s (SEC) recent approval of a package of rulemakings and interpretations designed to enhance the quality and transparency of investors’ relationships with investment advisers and broker-dealers. Design/Methodology/Approach The article provides legal analysis for and historical context of the requirements of the SEC’s adopted rules, Regulation Best Interest and Form CRS in addition to the two separate interpretations under the Investment Advisers Act of 1940, the Standard of Conduct for Investment Advisers; and the Broker-Dealer Exclusion from the Definition of Investment Adviser. Findings The SEC’s adopted regulatory package does not adopt a uniform fiduciary standard for broker-dealers and investment advisers but instead promulgates legal requirements and mandated disclosures in order to conform to the SEC’s perceived expectations for reasonable investors. Practical implications Investment advisers and broker-dealers should consult with their legal counsel in assessing how and to what extent the new regulatory package is applicable to them. Originality/Value This article provides practical guidance from lawyers who have extensive experience with the Investment Company Act, Investment Advisers Act, and the Securities Acts.
{"title":"SEC adopts rules and interpretive guidance designed to enhance and clarify the obligations of financial professionals","authors":"Michael R. Rosella, Vadim Avdeychik, Justin R. Capozzi","doi":"10.1108/joic-08-2019-0049","DOIUrl":"https://doi.org/10.1108/joic-08-2019-0049","url":null,"abstract":"\u0000Purpose\u0000This article provides an overview of the US Securities and Exchange Commission’s (SEC) recent approval of a package of rulemakings and interpretations designed to enhance the quality and transparency of investors’ relationships with investment advisers and broker-dealers.\u0000\u0000\u0000Design/Methodology/Approach\u0000The article provides legal analysis for and historical context of the requirements of the SEC’s adopted rules, Regulation Best Interest and Form CRS in addition to the two separate interpretations under the Investment Advisers Act of 1940, the Standard of Conduct for Investment Advisers; and the Broker-Dealer Exclusion from the Definition of Investment Adviser.\u0000\u0000\u0000Findings\u0000The SEC’s adopted regulatory package does not adopt a uniform fiduciary standard for broker-dealers and investment advisers but instead promulgates legal requirements and mandated disclosures in order to conform to the SEC’s perceived expectations for reasonable investors.\u0000\u0000\u0000Practical implications\u0000Investment advisers and broker-dealers should consult with their legal counsel in assessing how and to what extent the new regulatory package is applicable to them.\u0000\u0000\u0000Originality/Value\u0000This article provides practical guidance from lawyers who have extensive experience with the Investment Company Act, Investment Advisers Act, and the Securities Acts.\u0000","PeriodicalId":399186,"journal":{"name":"Journal of Investment Compliance","volume":"32 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122876354","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-11-04DOI: 10.1108/joic-10-2019-0055
Michele L. Schaff, J. E. Schaff
Purpose Discusses the significance of the Illinois Supreme Court ruling in Van Dyke v. White, which clarified that annuities are not securities in the state of Illinois, with a particular focus on the ramifications to insurance, brokerage and investment advisory standards of care as well as causes of action for breaches thereof. Design/methodology/approach Describes the Court’s ruling as it relates to the industry going forward. Does not discuss the specifics of the plaintiff’s case or history. Findings The statutory language of Illinois’ securities laws specifically excludes annuities from the definition of securities. For this reason, the Illinois Department of Insurance has sole authority over regulating annuities, giving the Illinois Department of Securities no authority, except to the extent there is an investment advisor breach pursuant to §12(J) of the Illinois Securities Law of 1953. The industry has yet to react or adjust to the Court’s ruling, so there may be a future wave of reactions. Originality/value Assists the reader in understanding the unique regulatory environment of annuities in Illinois, the relevant standards of care related to annuity advice and transactions, and remedies for grievances after the Illinois Supreme Court ruling in Van Dyke v. White.
目的讨论伊利诺伊州最高法院在Van Dyke诉White一案中的裁决的意义，该裁决澄清了年金在伊利诺伊州不属于证券，并特别关注对保险、经纪和投资咨询的注意标准的影响，以及违反这些标准的诉因。设计/方法/方法描述法院的裁决，因为它与行业的发展有关。不讨论原告案件或历史的细节。发现伊利诺伊州证券法的法定语言明确将年金排除在证券的定义之外。因此，伊利诺斯州保险部拥有监管年金的唯一权力，除了根据1953年伊利诺斯州证券法§12(J)的规定存在投资顾问违规行为的情况外，伊利诺斯州证券部没有任何权力。该行业尚未对法院的裁决做出反应或调整，因此未来可能会有一波反应。原创性/价值帮助读者理解伊利诺斯州独特的年金监管环境，与年金咨询和交易相关的护理标准，以及伊利诺斯州最高法院在Van Dyke v. White一案中作出裁决后的申诉救济。
{"title":"Annuities are not securities: the regulatory Island in Illinois","authors":"Michele L. Schaff, J. E. Schaff","doi":"10.1108/joic-10-2019-0055","DOIUrl":"https://doi.org/10.1108/joic-10-2019-0055","url":null,"abstract":"\u0000Purpose\u0000Discusses the significance of the Illinois Supreme Court ruling in Van Dyke v. White, which clarified that annuities are not securities in the state of Illinois, with a particular focus on the ramifications to insurance, brokerage and investment advisory standards of care as well as causes of action for breaches thereof.\u0000\u0000\u0000Design/methodology/approach\u0000Describes the Court’s ruling as it relates to the industry going forward. Does not discuss the specifics of the plaintiff’s case or history.\u0000\u0000\u0000Findings\u0000The statutory language of Illinois’ securities laws specifically excludes annuities from the definition of securities. For this reason, the Illinois Department of Insurance has sole authority over regulating annuities, giving the Illinois Department of Securities no authority, except to the extent there is an investment advisor breach pursuant to §12(J) of the Illinois Securities Law of 1953. The industry has yet to react or adjust to the Court’s ruling, so there may be a future wave of reactions.\u0000\u0000\u0000Originality/value\u0000Assists the reader in understanding the unique regulatory environment of annuities in Illinois, the relevant standards of care related to annuity advice and transactions, and remedies for grievances after the Illinois Supreme Court ruling in Van Dyke v. White.\u0000","PeriodicalId":399186,"journal":{"name":"Journal of Investment Compliance","volume":"68 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130472009","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-11-04DOI: 10.1108/joic-08-2019-0050
M. Wong
Purpose To provide an overview of the Hong Kong regulatory regime for crypto-related investment products. Design/methodology/approach Describes the existing regulatory regime in Hong Kong for crypto-related investment products prior to November 2018 and, following circulars issued by the Hong Kong Securities and Futures Commission (SFC) in November 2018, regulatory standards relating to virtual asset portfolio managers and fund distributors and a conceptual framework for potential regulation of virtual asset trading platform operators. Discusses the implications of the regulatory standards and conceptual framework. Findings The regulatory standards have aligned the requirements relating to crypto-related securities and futures contracts with those for crypto-related assets that do not fall within such definitions. The opt-in approach under the conceptual framework demonstrates that the SFC is actively trying to learn about the operations of platform operators and develop appropriate regulations accordingly. Originality/value Practical guidance from experienced lawyer with expertise in fund formation, fund investments and retail fund registration
{"title":"Hong Kong regulation of crypto-related investments","authors":"M. Wong","doi":"10.1108/joic-08-2019-0050","DOIUrl":"https://doi.org/10.1108/joic-08-2019-0050","url":null,"abstract":"\u0000Purpose\u0000To provide an overview of the Hong Kong regulatory regime for crypto-related investment products.\u0000\u0000\u0000Design/methodology/approach\u0000Describes the existing regulatory regime in Hong Kong for crypto-related investment products prior to November 2018 and, following circulars issued by the Hong Kong Securities and Futures Commission (SFC) in November 2018, regulatory standards relating to virtual asset portfolio managers and fund distributors and a conceptual framework for potential regulation of virtual asset trading platform operators. Discusses the implications of the regulatory standards and conceptual framework.\u0000\u0000\u0000Findings\u0000The regulatory standards have aligned the requirements relating to crypto-related securities and futures contracts with those for crypto-related assets that do not fall within such definitions. The opt-in approach under the conceptual framework demonstrates that the SFC is actively trying to learn about the operations of platform operators and develop appropriate regulations accordingly.\u0000\u0000\u0000Originality/value\u0000Practical guidance from experienced lawyer with expertise in fund formation, fund investments and retail fund registration\u0000","PeriodicalId":399186,"journal":{"name":"Journal of Investment Compliance","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126556173","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-11-04DOI: 10.1108/joic-10-2019-0054
Kenneth Berman, Morgan J. Hayes, Matthew E. Kaplan, Byungkwon Lim, Gary E. Murphy, Yean Do, Jonathan R. Steinberg
Purpose To analyze and draw conclusions from the “Framework for ‘Investment Contract’ Analysis of Digital Assets” (the “Framework”), released by the US Securities and Exchange Commission (the “SEC”) on April 3, 2019, and the SEC’s corresponding no-action letter to TurnKey Jet, Inc. (“TKJ”), which is the SEC’s first no-action letter publicly agreeing with the view that the digital asset described therein is not a security. Design/Methodology/Approach Explains how the Framework assists market participants in analyzing whether a digital asset is a security, by applying the Howey factors for identifying an investment contract. Discusses the SEC’s TKJ Letter, highlighting the factors the SEC emphasized in its analysis of the Framework. Findings While largely reiterating prior guidance, the Framework provides a helpful overview of the SEC’s views on when a digital asset is a security and how to properly analyze the prongs of Howey with respect to digital assets. The Framework also leaves certain important questions unanswered, including, for example, whether digital assets distributed by means of a so-called “Airdrop” are securities under the Framework, and the extent to which the Framework is meant to interact with digital assets that were issued or otherwise operate on platforms that are primarily overseas. Originality/Value Expert guidance from lawyers with broad experience in financial services, securities, investment funds, derivatives, and digital assets regulation and compliance.
{"title":"SEC framework and no-action letter provide guidance on analyzing whether a digital asset is a security","authors":"Kenneth Berman, Morgan J. Hayes, Matthew E. Kaplan, Byungkwon Lim, Gary E. Murphy, Yean Do, Jonathan R. Steinberg","doi":"10.1108/joic-10-2019-0054","DOIUrl":"https://doi.org/10.1108/joic-10-2019-0054","url":null,"abstract":"\u0000Purpose\u0000To analyze and draw conclusions from the “Framework for ‘Investment Contract’ Analysis of Digital Assets” (the “Framework”), released by the US Securities and Exchange Commission (the “SEC”) on April 3, 2019, and the SEC’s corresponding no-action letter to TurnKey Jet, Inc. (“TKJ”), which is the SEC’s first no-action letter publicly agreeing with the view that the digital asset described therein is not a security.\u0000\u0000\u0000Design/Methodology/Approach\u0000Explains how the Framework assists market participants in analyzing whether a digital asset is a security, by applying the Howey factors for identifying an investment contract. Discusses the SEC’s TKJ Letter, highlighting the factors the SEC emphasized in its analysis of the Framework.\u0000\u0000\u0000Findings\u0000While largely reiterating prior guidance, the Framework provides a helpful overview of the SEC’s views on when a digital asset is a security and how to properly analyze the prongs of Howey with respect to digital assets. The Framework also leaves certain important questions unanswered, including, for example, whether digital assets distributed by means of a so-called “Airdrop” are securities under the Framework, and the extent to which the Framework is meant to interact with digital assets that were issued or otherwise operate on platforms that are primarily overseas.\u0000\u0000\u0000Originality/Value\u0000Expert guidance from lawyers with broad experience in financial services, securities, investment funds, derivatives, and digital assets regulation and compliance.\u0000","PeriodicalId":399186,"journal":{"name":"Journal of Investment Compliance","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130230131","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-11-04DOI: 10.1108/joic-09-2019-0053
Aegis J. Frumento, S. Korenman
Purpose The purpose of this paper is to review the first two years of the US Securities and Exchange Commission (SEC) efforts to regulate cryptosecurities to assess the trends of that regulation. Design/methodology/approach The authors review the SEC’s official pronouncements and informal statements about, and its enforcement actions against participants in, various early experiments in cryptosecurities. Findings The SEC has been evolving how to apply the US securities laws to cryptosecurities since its report on The DAO two years ago. When “coins” on a blockchain meet the traditional Howey Test, it is easy to categorize them as “securities.” However, the bedrock regulatory principle that some person must account for violations is frustrated by automated blockchain transactions, where no human is in control. This tension risks a “moral crumple zone” arising around cryptosecurities, in which persons might become liable for violations that they cannot fairly be said to have caused. Originality/value This paper provides valuable information and insights about the beginnings of US regulation of cryptosecurities and how the evolution of that regulation is trending after two years.
{"title":"The SEC meditates on The DAO: tracing the initial arc of cryptosecurities regulation","authors":"Aegis J. Frumento, S. Korenman","doi":"10.1108/joic-09-2019-0053","DOIUrl":"https://doi.org/10.1108/joic-09-2019-0053","url":null,"abstract":"\u0000Purpose\u0000The purpose of this paper is to review the first two years of the US Securities and Exchange Commission (SEC) efforts to regulate cryptosecurities to assess the trends of that regulation.\u0000\u0000\u0000Design/methodology/approach\u0000The authors review the SEC’s official pronouncements and informal statements about, and its enforcement actions against participants in, various early experiments in cryptosecurities.\u0000\u0000\u0000Findings\u0000The SEC has been evolving how to apply the US securities laws to cryptosecurities since its report on The DAO two years ago. When “coins” on a blockchain meet the traditional Howey Test, it is easy to categorize them as “securities.” However, the bedrock regulatory principle that some person must account for violations is frustrated by automated blockchain transactions, where no human is in control. This tension risks a “moral crumple zone” arising around cryptosecurities, in which persons might become liable for violations that they cannot fairly be said to have caused.\u0000\u0000\u0000Originality/value\u0000This paper provides valuable information and insights about the beginnings of US regulation of cryptosecurities and how the evolution of that regulation is trending after two years.\u0000","PeriodicalId":399186,"journal":{"name":"Journal of Investment Compliance","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124144679","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-11-04DOI: 10.1108/joic-08-2019-0047
Brenden Carroll, M. Perlow, Christine Ayako Schleppegrell, Samuel Scarritt-Selman
Purpose To explain the SEC’s Share Class Selection Disclosure Initiative (SCSD Initiative), the purpose it seeks to serve, the results it has generated, and its broader implications for the asset management industry. Design/methodology/approach Explains the newly announced results of the SEC’s Share Class Selection Disclosure Initiative. Provides background on the principles underlying the initiative, the mechanics by which the initiative’s self-reporting program operated, and industry reaction to the initiative. Analyzes the results the initiative generated, in terms of both aggregate disgorgement and the terms of settlement offered to self-reporting advisers. Draws conclusions and provides key takeaways. Findings Although the terms of the actual settlements were consistent with the framework of standardized settlement terms set forth in the SCSD Initiative, whether the standardized terms of settlement offered under the SCSD Initiative ultimately will be viewed as favorable will depend in large part upon how the SEC continues to treat advisers that did not self-report. Originality/value Expert analysis from experienced lawyers in the mutual fund and investment advisory industries.
{"title":"SEC announces results of share class selection disclosure initiative","authors":"Brenden Carroll, M. Perlow, Christine Ayako Schleppegrell, Samuel Scarritt-Selman","doi":"10.1108/joic-08-2019-0047","DOIUrl":"https://doi.org/10.1108/joic-08-2019-0047","url":null,"abstract":"\u0000Purpose\u0000To explain the SEC’s Share Class Selection Disclosure Initiative (SCSD Initiative), the purpose it seeks to serve, the results it has generated, and its broader implications for the asset management industry.\u0000\u0000\u0000Design/methodology/approach\u0000Explains the newly announced results of the SEC’s Share Class Selection Disclosure Initiative. Provides background on the principles underlying the initiative, the mechanics by which the initiative’s self-reporting program operated, and industry reaction to the initiative. Analyzes the results the initiative generated, in terms of both aggregate disgorgement and the terms of settlement offered to self-reporting advisers. Draws conclusions and provides key takeaways.\u0000\u0000\u0000Findings\u0000Although the terms of the actual settlements were consistent with the framework of standardized settlement terms set forth in the SCSD Initiative, whether the standardized terms of settlement offered under the SCSD Initiative ultimately will be viewed as favorable will depend in large part upon how the SEC continues to treat advisers that did not self-report.\u0000\u0000\u0000Originality/value\u0000Expert analysis from experienced lawyers in the mutual fund and investment advisory industries.\u0000","PeriodicalId":399186,"journal":{"name":"Journal of Investment Compliance","volume":"88 3 Pt 2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131058708","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-10-14DOI: 10.1108/joic-06-2019-0038
Alice S. Fisher, Douglas K. Yatter, Douglas N. Greenburg, W. R. Baker, Benjamin A. Dozier, Robyn J. Greenberg
Purpose This paper aims to analyze the March 6, 2019 enforcement advisory in which the Division of Enforcement (Division) of the US Commodity Futures Trading Commission (CFTC or Commission) announced that it will work alongside the US Department of Justice (DOJ) and other agencies to investigate foreign bribery and corruption relating to commodities markets. Design/methodology/approach This paper explains the enforcement advisory and outlines key considerations for industry participants and their compliance teams, including the CFTC’s plan to investigate in parallel with other enforcement authorities, an expansion of the CFTC’s existing self-reporting, cooperation and remediation policy to address foreign corruption and the CFTC’s focus on market and economic integrity, and provides guidelines for commodities companies concerning anti-corruption compliance and training programs, investigating potential incidents of bribery and corruption, reporting obligations under the Commodity Exchange Act (CEA) and CFTC regulations, voluntary reporting of incidents of foreign corruption and whistleblowing. Findings The CFTC announcement adds a new dimension to an already crowded and complex landscape for anti-corruption enforcement. A range of industries, including energy, agriculture, metals, financial services, cryptocurrencies and beyond, must now consider the CFTC and the CEA when assessing global compliance and enforcement risks relating to bribery and corruption. Originality/value Expert guidance from lawyers with broad experience in white collar defense, investigations, financial services, securities, commodities, energy and derivatives.
{"title":"CFTC enters the market for anti-corruption enforcement","authors":"Alice S. Fisher, Douglas K. Yatter, Douglas N. Greenburg, W. R. Baker, Benjamin A. Dozier, Robyn J. Greenberg","doi":"10.1108/joic-06-2019-0038","DOIUrl":"https://doi.org/10.1108/joic-06-2019-0038","url":null,"abstract":"\u0000Purpose\u0000This paper aims to analyze the March 6, 2019 enforcement advisory in which the Division of Enforcement (Division) of the US Commodity Futures Trading Commission (CFTC or Commission) announced that it will work alongside the US Department of Justice (DOJ) and other agencies to investigate foreign bribery and corruption relating to commodities markets.\u0000\u0000\u0000Design/methodology/approach\u0000This paper explains the enforcement advisory and outlines key considerations for industry participants and their compliance teams, including the CFTC’s plan to investigate in parallel with other enforcement authorities, an expansion of the CFTC’s existing self-reporting, cooperation and remediation policy to address foreign corruption and the CFTC’s focus on market and economic integrity, and provides guidelines for commodities companies concerning anti-corruption compliance and training programs, investigating potential incidents of bribery and corruption, reporting obligations under the Commodity Exchange Act (CEA) and CFTC regulations, voluntary reporting of incidents of foreign corruption and whistleblowing.\u0000\u0000\u0000Findings\u0000The CFTC announcement adds a new dimension to an already crowded and complex landscape for anti-corruption enforcement. A range of industries, including energy, agriculture, metals, financial services, cryptocurrencies and beyond, must now consider the CFTC and the CEA when assessing global compliance and enforcement risks relating to bribery and corruption.\u0000\u0000\u0000Originality/value\u0000Expert guidance from lawyers with broad experience in white collar defense, investigations, financial services, securities, commodities, energy and derivatives.\u0000","PeriodicalId":399186,"journal":{"name":"Journal of Investment Compliance","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129491188","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-10-14DOI: 10.1108/JOIC-04-2019-0026
Richard F. Kerr, Matthew Rogers
Purpose To explain the significance of a recently issued interpretive letter in which FINRA staff agreed to permit the use of pre-inception index performance data by passively managed, registered open-end investment companies. Design/methodology/approach FINRA recently issued an interpretive letter extending previously issued guidance by permitting passively managed open-end registered investment companies including separately-managed series of a business trust to use pre-inception index performance data in Institutional Communications. Findings The 2019 Letter is an important shift in how FINRA staff views PIP data in Institutional Communications by acknowledging that passively managed open-end funds should be treated in a similar manner as passively managed exchange-traded funds. This shift will be a welcome development for FINRA member firms wishing to include PIP data in marketing materials for the passively managed open-end funds they distribute. Originality/value Practical guidance from experienced investment management and broker-dealer lawyers.
{"title":"FINRA relaxes restrictions on pre-inception performance data","authors":"Richard F. Kerr, Matthew Rogers","doi":"10.1108/JOIC-04-2019-0026","DOIUrl":"https://doi.org/10.1108/JOIC-04-2019-0026","url":null,"abstract":"\u0000Purpose\u0000To explain the significance of a recently issued interpretive letter in which FINRA staff agreed to permit the use of pre-inception index performance data by passively managed, registered open-end investment companies.\u0000\u0000\u0000Design/methodology/approach\u0000FINRA recently issued an interpretive letter extending previously issued guidance by permitting passively managed open-end registered investment companies including separately-managed series of a business trust to use pre-inception index performance data in Institutional Communications.\u0000\u0000\u0000Findings\u0000The 2019 Letter is an important shift in how FINRA staff views PIP data in Institutional Communications by acknowledging that passively managed open-end funds should be treated in a similar manner as passively managed exchange-traded funds. This shift will be a welcome development for FINRA member firms wishing to include PIP data in marketing materials for the passively managed open-end funds they distribute.\u0000\u0000\u0000Originality/value\u0000Practical guidance from experienced investment management and broker-dealer lawyers.\u0000","PeriodicalId":399186,"journal":{"name":"Journal of Investment Compliance","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127148944","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-10-14DOI: 10.1108/joic-06-2019-0037
Nikiforos Mathews, J. Robison
Purpose The US Commodity Futures Trading Commission (CFTC), to date, has not directly addressed how liability for Commodity Exchange Act (CEA) violations involving blockchain or distributed ledger technology should be allocated among the various parties involved in the distributed ledger network, such as the network itself, persons running consensus nodes, developers building applications on the platform, and businesses and end users using such applications. This article discusses recent statements by CFTC Commissioner Brian Quintenz regarding this issue and the approach that the CFTC may take going forward. Design/methodology/approach This article examines the allocation of liability in the context of smart contracts that may violate the CEA. The article discusses how the CFTC, despite its significant focus in recent years on virtual currency and blockchain, has not addressed the issue of liability allocation directly. Recent remarks by Commissioner Quintenz may shed light on the CFTC’s future approach. Findings This article finds that liability allocation questions may become increasingly pressing as smart contracts that potentially violate the CEA proliferate, possibly exposing a broad range of parties involved in a distributed ledger network to liability. To the extent that Commissioner Quintenz’s recent remarks are indicative, the CFTC ultimately may adopt a foreseeability standard in determining liability. Practical implications Applications of distributed ledger technology (DLT) are ever-expanding, continually posing novel CFTC regulatory issues. This is especially the case with respect to smart contracts that may be subject to CFTC jurisdiction. Parties involved in such applications should be mindful of potential liability. Originality/value Practical guidance from experienced finance and derivatives lawyers with strong CFTC expertise.
{"title":"Smart contracts that violate the Commodity Exchange Act: which parties are liable?","authors":"Nikiforos Mathews, J. Robison","doi":"10.1108/joic-06-2019-0037","DOIUrl":"https://doi.org/10.1108/joic-06-2019-0037","url":null,"abstract":"\u0000Purpose\u0000The US Commodity Futures Trading Commission (CFTC), to date, has not directly addressed how liability for Commodity Exchange Act (CEA) violations involving blockchain or distributed ledger technology should be allocated among the various parties involved in the distributed ledger network, such as the network itself, persons running consensus nodes, developers building applications on the platform, and businesses and end users using such applications. This article discusses recent statements by CFTC Commissioner Brian Quintenz regarding this issue and the approach that the CFTC may take going forward.\u0000\u0000\u0000Design/methodology/approach\u0000This article examines the allocation of liability in the context of smart contracts that may violate the CEA. The article discusses how the CFTC, despite its significant focus in recent years on virtual currency and blockchain, has not addressed the issue of liability allocation directly. Recent remarks by Commissioner Quintenz may shed light on the CFTC’s future approach.\u0000\u0000\u0000Findings\u0000This article finds that liability allocation questions may become increasingly pressing as smart contracts that potentially violate the CEA proliferate, possibly exposing a broad range of parties involved in a distributed ledger network to liability. To the extent that Commissioner Quintenz’s recent remarks are indicative, the CFTC ultimately may adopt a foreseeability standard in determining liability.\u0000\u0000\u0000Practical implications\u0000Applications of distributed ledger technology (DLT) are ever-expanding, continually posing novel CFTC regulatory issues. This is especially the case with respect to smart contracts that may be subject to CFTC jurisdiction. Parties involved in such applications should be mindful of potential liability.\u0000\u0000\u0000Originality/value\u0000Practical guidance from experienced finance and derivatives lawyers with strong CFTC expertise.\u0000","PeriodicalId":399186,"journal":{"name":"Journal of Investment Compliance","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123301214","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-10-14DOI: 10.1108/JOIC-04-2019-0024
B. L. Rubin, A. Pollet
Purpose To analyze FINRA’s 2018 disciplinary actions, the issues that resulted in the most significant fines and restitution, and the emerging enforcement trends from 2018 and beyond. Design/methodology/approach Discusses the disciplinary actions in 2018 and prior years; details the top 2018 enforcement issues measured by total fines assessed, including anti-money laundering, suitability, variable annuity, and short selling; and explains current enforcement trends, including higher fines per case, more cases with larger sanctions in the second half of the year, share class issues, and inadequate resources. Findings In 2018, the Financial Industry Regulatory Authority (FINRA) ordered fewer fines than in 2017, and the number of cases and amount of restitution were down. Practical implications Firms and their representatives should heed the trends in both the substantial fines per case that FINRA is ordering and the related enforcement issues in the cases FINRA has brought. Originality/value Expert analysis and guidance from experienced securities enforcement lawyers.
{"title":"FINRA’s disciplinary actions in 2018:Increased fines ordered with significant drop in number of cases","authors":"B. L. Rubin, A. Pollet","doi":"10.1108/JOIC-04-2019-0024","DOIUrl":"https://doi.org/10.1108/JOIC-04-2019-0024","url":null,"abstract":"\u0000Purpose\u0000To analyze FINRA’s 2018 disciplinary actions, the issues that resulted in the most significant fines and restitution, and the emerging enforcement trends from 2018 and beyond.\u0000\u0000\u0000Design/methodology/approach\u0000Discusses the disciplinary actions in 2018 and prior years; details the top 2018 enforcement issues measured by total fines assessed, including anti-money laundering, suitability, variable annuity, and short selling; and explains current enforcement trends, including higher fines per case, more cases with larger sanctions in the second half of the year, share class issues, and inadequate resources.\u0000\u0000\u0000Findings\u0000In 2018, the Financial Industry Regulatory Authority (FINRA) ordered fewer fines than in 2017, and the number of cases and amount of restitution were down.\u0000\u0000\u0000Practical implications\u0000Firms and their representatives should heed the trends in both the substantial fines per case that FINRA is ordering and the related enforcement issues in the cases FINRA has brought.\u0000\u0000\u0000Originality/value\u0000Expert analysis and guidance from experienced securities enforcement lawyers.\u0000","PeriodicalId":399186,"journal":{"name":"Journal of Investment Compliance","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128375682","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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