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Annual Letter from Larry Fink of BlackRock
BlackRock has $8.7 trillion AUM. So, securities issuers pay close attention to Larry Fink’s and Blackrock’s investment priorities.
Financial Advisers and Investors Face a Crazy Quilt of State Regulations
New state rules come on top of federal requirements. If you’re confused, you aren’t alone. The muddle of state regulation traces to the SEC’s adoption of a less-strict investor-protection measure than some had argued for.
Investment Adviser Advertising Rule Effective Date is May 4
The Investment Adviser Advertising Rule has been published in the Federal Register. I attach it. Thus, the effective date is May 4, 2021.
Interpretive Letters of the General Counsel of the TSSB
Reuters: U.S. SEC should revisit disclosure requirements on diversity - acting chair
I can see the argument that diversity statistics may be something that institutional investors (many of whom have diverse investors or beneficiaries) may want to have. If Vanguard/BlackRock/Fidelity etc. went on the record saying that they want this disclosure to better serve their diverse investors and beneficiaries, that would be a good thing. There also may be some studies tying diversity to better performance, but I am not up to speed on the academic literature in this area.
Richard Latham
Denny Crawford reports that her predecessor as Texas Securities Commissioner, Richard Latham, passed away last month. (Denny was Richard’s general counsel at the agency).
SEC Acting Chair: Public Input Welcomed on Climate Change Disclosures
In light of demand for climate change information and questions about whether current disclosures adequately inform investors, public input is requested from investors, registrants, and other market participants on climate change disclosure.
SEC charges FINRA-LICENSED Broker with Section 15(a) violation
I attach and here is a link to a recent SEC follow-on order against a registered broker who sold away. https://www.sec.gov/litigation/admin/2021/34-91289.pdf?utm_medium=email&utm_source=govdelivery I was a bit confused as to how someone constructively became unlicensed by selling securities not approved by his firm.
SEC Corp Fin Sample Letter to Companies Regarding Securities Offerings During Times of Extreme Price Volatility
The Division of Corporation Finance recognizes the importance of capital formation, including during times of market volatility and when an issuer’s own securities are experiencing extreme price volatility. The Division also cautions that such market and stock volatility can create risks for both companies and investors. These risks can be particularly acute when companies seek to raise capital during periods with: • recent stock run-ups or recent divergences in valuation ratios relative to those seen during traditional markets, • high short interest or reported short squeezes, and • reports of strong and atypical retail investor interest (whether on social media or otherwise).
SEC Division of Examinations 2021 Examination Priorities (attached)
The Securities and Exchange Commission’s Division of Examinations today announced its 2021 examination priorities, including a greater focus on climate-related risks. The Division will also focus on conflicts of interest for brokers (Regulation Best Interest) and investment advisers (fiduciary duty), and attendant risks relating to FinTech in its initiatives and examinations. The Division publishes its examination priorities annually to provide insights into its risk-based approach, including the areas it believes present potential risks to investors and the integrity of the U.S. capital markets.
SEC kills contingent offers of settlement
The SEC will no longer allow contingent offers of settlement – that is an offer of settlement contingent on the granting of bad actor waivers. Acting Chair Lee seems to have the position that allowing contingent offers of settlement means that bad actor waivers can be priced in settlement discussions.
SEC Proposes to Codify Certain Consultations and Modernize Auditor Independence Rules
In December 2019, the Securities and Exchange Commission (SEC) has announced a proposal to update certain provisions within the Commission’s Auditor Independence rules. These proposed amendments generally focus on those relationships or services that are more likely to pose threats to an auditor’s objectivity and impartiality. The proposed rules aim to provide a framework that will enhance both investor protection and market integrity. Some of the amendments include: (1) defining an affiliate of the audit client; (2) adding certain student loans and de minimis consumer loans to the categorical exclusions from independence-impairing lending relationships; (3) shorten the look-back period for domestic first-time filers in assessing compliance with the independence requirements. Also, there will be a comprehensive discussion about the potential economic effects of the proposed amendments, such as the impact on capital formation, competition, and efficiency. The SEC invites commentary on these proposed amendments. This can be done via email rule-comments@sec.gov, including the File Number S7-26-19 on the subject line or send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. Please bear in mind that all submissions should refer to File Number S7-26-19.
Supreme Court rejects petition on extension of broker-dealer registration beyond secondary markets
From Wolters Kluwer: Supreme Court denies review of two unremarkable securities cases, one involving broker-dealer registration and second case involving the application of the investment contract definition to LLC interests.
Texas Securities Act Amendment filed!
The attached recodified Texas Securities Act amendment was filed today in both the House and the Senate. As a reminder, the recodified TSA becomes effective next January. The bill would amend the recodified Texas Securities Act civil liability provisions to remove cross-references to TSA provisions that impose no duties on private actors.
Texas Securities Act Revised and Codified
The Texas Securities Act recodification bill has been filed in the 86th session of the Texas Legilature.
TSA amendment proposal received press in Texas Lawyer
The Texas Lawyer buried the Securities Committee’s bill in the last two paragraphs of the story. Perhaps that is a sound use of editorial discretion?
Chairman's Welcome Message
Welcome to the General Practice Committee
Status of the Committee Reports
The following are links to works by the Legal Opinions Committee
Fifth Circuit Opinion on Attorney Liability under Texas Securities Act
On April 17, 2019 the Fifth Circuit Court of Appeals determined that that attorney immunity to third party claims applies to the Texas Securities Act. The case related to the Stanford Ponzi scheme and involved Greenberg Traurig.
CorpFin issues guidance on confidential treatment applications
Securities and Exchange Commission’s Division of Corporation Finance (CorpFin) has issued practical guidance on what steps to take when filing an application objecting to the public release of confidential information. In March 2019, the commission made significant changes to filing requirements pursuant to rule 406 and Rule 24b-2. Generally, the filing guidelines include: what information is required; how to maintain protection of the confidential information and relevant time limitations. CorpFin staff will review all applications for confidential treatment.
Intellectual Property and Technology Risks Associated with International Business Operations
Today, global technology advancements with respect to intellectual property expose companies to a myriad of risks. The SEC’s Division of Corporation Finance has issued guidance on (1) situations where technology, data or intellectual property may be stolen when conducting business outside of the United States, and (2) how companies should assess these risks and disclosure obligations in connection to their international operations.
Europe data privacy a problem for U.S.
In May 2018, the European Union implemented the General Data Protection Regulation (GDPR), which aims to provide greater control for individuals over their personal data and privacy. Europe-based asset managers and advisers applying for Securities and Exchange Commission registration are subject to the GDPR. SEC officials must comply with the GDPR when examining and requesting information from European asset managers. In light of EU's data privacy changes, the question arises as to whether some states in the U.S should adopt similar measures.
EU adopts universal taxonomy aimed at helping investors reduce carbon emissions
On December 18th, 2019, the European Parliament issued a new law requiring investment funds subject to EU regulation to provide disclosures concerning carbon emissions within their investments and assets, known as the "Taxonomy". The new regulation aims to improve the environment by progressing towards a recycling-based economy; reducing the negative impact of investments in biodiversity, water and pollution. The Taxonomy will become effective by the end of December 2020. Investors can ascertain whether their portfolios comply with the EU’s overall goal to reduce carbon emissions to zero by 2050.
Fifth Circuit Opinion on Attorney Liability under Texas Securities Act
The Fifth Circuit held on April 17, 2019 that attorney immunity to non-parties applies to Texas Securities Act claims. The case related to claims related to the Stanford Ponzi scheme against Greenberg Traurig.
Really Bad Lawyering costs client $240,000 per SEC
SEC Charges Broker-Dealer Nationwide Planning and Two Affiliated Investment Advisers with Violating Whistleblower Protection Rule