Jim Hamilton's World of Securities Regulation: Corporate & Securities Law

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Corporate & Securities Law

Jim Hamilton's World of Securities Regulation

Opines on every level of securities regulation (federal, state, international, theoretical) covering market players of all types (e.g., accountants, broker-dealers, foreign issuers, hedge funds, market manipulators) who engage all sorts of transactions and activities (acquisitions, financial reporting, private placements, pyramid schemes). Highlights issues of particular importance to securities lawyers and their clients with emphasis on SEC rulemaking, industry trends, and the many curiosities that inhabit this world.
By Jim Hamilton

Post Frequency: 15.3/day

Last Entry: April 01, 2011 at 16:29:00

Illinois Adopts Rules Regulating IA Advertising and Client Information

Posted on November 17, 2010
Two new rules adopted by the Illinois Securities Department on November 3, 2010:* Investment advisers registered or required to register in Illinois are prohibited from using advertisements that contain untrue statements of material fact or that are misleading...

Details Are Key to Landrieu-Isakson Qualified Residential Mortgage Exemption from Skin in the Game Rule

Posted on November 17, 2010
In a letter submitted today to the SEC and other joint regulators charged with implementing the section of the Dodd-Frank Act dealing with risk retention for securitized mortgage-backed securities, the American Securitization Forum (ASF) underscored its support for retention requirements which are tailored to different classes of securitized assets and spelled out a series of specific criteria that should be used to establish the definition for a Qualified Residential Mortgage (QRM)...

Colorado Adopts BD, Sales Rep. and IA/IAR Rule Amendments

Posted on November 17, 2010
Adding new solicitation and custody rules for investment advisers, modifying licensing exam requirements for sales and investment adviser representatives, providing a time frame for abandoning licensing applications, and changing NASD to FINRA to reflect the current name of the organization were the amendments adopted by the Colorado Securities Division, effective 11-30-2010...

FINRA Provides Data on Dual Registants in Aid of SEC Dodd-Frank Study

Posted on November 15, 2010
As part of its Dodd-Frank mandated inquiry into whether a uniform fiduciary duty should be imposed on investment advisers and broker, the SEC requested information from FINRA, which the SRO has provided. FINRA noted that as of mid-October, 4642 firms are registered with FINRA as a broker-dealer...

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Group Urges Securitization Exemption from Volcker Rule

Posted on November 13, 2010
In a letter to the SEC and other regulators, the American Securitization Forum urged the Commission and other financial regulators to clarify that there is a securitization exclusion from the Dodd-Frank Volcker Rule to allow banking entities and financial companies to participate in certain securitization relationships and activities without falling within the scope of the Rule and more broadly the Volcker Rule, as codified in Sec...

G-20 Calls for Globally Consistent Regulation of Hedge Funds and Derivatives and Coordinated Resolution Authorities to End Too Big to Fail

Posted on November 12, 2010
In the final communiqu� from their Seoul summit, the G-20 committed to take action at the national and international level to ensure that national authorities implement global financial regulatory standards developed to date in a consistent manner that ensures a race to the top and avoids fragmentation of markets, protectionism and regulatory arbitrage...

Concerns Voiced Over International Impact of Volcker Rule

Posted on November 12, 2010
International banks with U.S. banking operations are subject to Federal Reserve Board supervision and regulation as bank holding companies under the Bank Holding Company Act of 1956. As a result, they are ?banking entities? for purposes of the Volcker Rule, and their U...

NYU Professor Says Federal Financial Regulators Should Adopt IRS Model in Monitoring Volcker Rule

Posted on November 12, 2010
The SEC and other regulators charged with implementing the Dodd-Frank Volcker Rule provisions should establish the same type of multi-dimensional approach that the IRS uses to identify tax evasion, said NYU Professor William Silber, including face-to-face audits where such are indicated...

Volcker Urges SEC to Use Dodd-Frank's Anti-Evasive Authority to Thwart Attempts to Evade Ban on Proprietary Trading and Hedge Fund Sponsoring

Posted on November 11, 2010
In a letter to the SEC and other regulators comprising the Financial Stability Oversight Council, former Fed Chair Paul Volcker said that clear and concise definitions, firmly worded prohibitions, and specificity in describing permissible activities will be of prime importance as they implement the Dodd-Frank Act ban on financial institutions conducting proprietary trading and sponsoring hedge funds...

European Parliament Approves Legislation Regulating Hedge Funds and Private Equity Funds

Posted on November 11, 2010
By a vote of 513 to 92, the European Parliament has approved legislation regulating hedge funds and private equity funds. In approving the Directive on Investment Funds Managers, Parliament set up a new regulatory regime designed to bring transparency and regulation in the way these funds are managed and operated...

Giving Assurances on Tax Avoidance Scheme Did Not Make Law Firm Liable for Securities Fraud Since No Attribution Meant No Reliance

Posted on November 10, 2010
A law firm that gave assurances on a tax avoidance scheme that employed digital securities options was not liable for securities fraud, ruled a Fifth Circuit panel, since without direct attribution to the firm?s role in the tax scheme, any taxpayer-investor reliance on the firm?s participation in the scheme was too indirect for liability...

Michigan Issues Fifth Transition Order Following Adoption of its 2009 New Securities Act

Posted on November 10, 2010
The nonprofit organization Exemption for securities, previous Act-exempt broker-dealers, Canadian broker-dealers and their agents, and senior-specific designations are the provisions covered in the fifth transition order of the Michigan Office of Financial and Insurance Regulation following adoption of the State?s new uniform securities act on October 1, 2009...

Bowles-Simpson Commission Calls for Major Overhaul of Federal Tax Code

Posted on November 10, 2010
The President?s National Commission on Fiscal Responsibility and Reform has called for a complete overhaul of the US federal tax code that would significantly affect public companies, investment companies, hedge funds and offshore funds. The overall goal of the draft proposal is to dramatically reduces rates, simplify the Code, broaden the base, and reduce the deficit...

Federal Court Limits Sarbanes-Oxley Protection to PCAOB-Auditor Documents Prepared Specifically for the Board

Posted on November 10, 2010
Sarbanes-Oxley provisions protecting PCAOB-auditor documents from disclosure are expressly limited to materials that an audit firm prepared specifically for the Board, ruled a federal judge, and do not protect from discovery documents related to or concerning the Board?s inspection process...

Int?l Audit Groups Say PCAOB Proposed Confirmation Standard Falls Short on Convergence

Posted on November 09, 2010
International comments on the PCAOB?s proposed external audit confirmation standard, while praising the Board for its effort in converging the standard with IAS 505, indicate that ultimately the Board fell short in the effort to converge with global standards...

US Hedge Fund Industry Supports Hong Kong SFC Proposed Changes to Professional Investor Rules

Posted on November 09, 2010
The US hedge fund industry supports a proposal by the Hong Kong Securities and Futures Commission to replace the SFC?s current professional investor requirements with a principles-based approach that would permit firms to use any method to satisfy themselves that an investor meets the relevant threshold at the date of a firm?s communication or offer...

Senator Harkin Explains Insurance Exemption from Volcker Rule in Letter to SEC and Urges Regulators to Prevent Hedges from Masking Proprietary Trades

Posted on November 09, 2010
In a letter to the SEC and other regulators, Senator Tom Harkin (D-Iowa) said that the exemption from the Volcker Rule for regulated insurance companies directly engaged in the business of insurance to purchase and sell securities for the general account of the company was included in Section 619 of the Dodd-Frank Act to reflect the reality of the insurance business which requires insurance companies to effectively manage risk over a long period of time...

Iowa Adopts Broker-Dealer, Agent and Investment Company Rule Changes

Posted on November 09, 2010
Rule changes adopted by the Iowa Securities Bureau include amending broker-dealer registration requirements, increasing agent fees and mandating investment companies to submit their notice filings electronically, effective November 24, 2010.Investment companies making a notice filing on Form NF, Uniform Investment Company Notice Filing, on or after January 1, 2011 must implement a system permitting them to submit their documents and fees electronically on or after January 1, 2011, by following the instructions on the Iowa Insurance Division's web site at http://www...

FINRA Urges SEC to Create SRO for Investment Advisers Amid Fierce Debate Spurred by Dodd-Frank Study

Posted on November 08, 2010
FINRA has entered a fierce debate over Dodd-Frank?s call for an SEC study on enhanced examinations of investment advisers by urging the SEC to create a self-regulatory organization (SRO) for investment advisers. In a letter to the SEC, FINRA said that, given the Commission?s funding limits, it is unlikely that the SEC will be able to accomplish more frequent adviser examinations on its own...

NASAA Urges SEC to Adopt "Investments Owned" Accredited Investor Test

Posted on November 08, 2010
In a comment letter to the SEC, the North American Securities Administrators Association (NASAA) has urged the Commission to adopt an "investments owned" test for accredited investors in private offerings conducted under federal Regulation D. Writing to the SEC on November 4, 2010, NASAA President David Massey reiterated NASAA's belief that the quantitative standard contained in the current definition of "accredited investor" bears little correlation, if any, with an investor's qualifications for investing in securities offerings that do not benefit from the protections afforded by the registration process...

American Bankers Association Urges Regulators Not to Read Volcker Rule Definitions of Hedge Fund and Sponsor Too Broadly

Posted on November 08, 2010
Unless appropriate clarifications are made through the regulatory process, noted the American Bankers Association, the definitions of ``hedge fund?? and ``sponsor?? in the Dodd-Frank Volcker provisions could be read so broadly that they would adversely impact traditional banking activities, while not addressing the intended focus of the Volcker Rule to reach situations where there are significant conflicts of interest...

Big Four Audit Firms Believe that PCAOB?s Proposed Confirmation Standard is Overly Prescriptive and Downplays Professional Judgment

Posted on November 08, 2010
The Big Four and other global audit firms believe that the PCAOB?s proposed standard updating and expanding the requirements related to the outside auditor?s use of confirmations is overly prescriptive and does not make sufficient use of auditor professional judgment...

Incoming Ways and Means Chair Supports Reform of Tax Code Provisions for Investment Companies

Posted on November 07, 2010
The incoming Chair of the House Ways and Means Committee, Rep. Dave Camp (R-Michigan) strongly supports the complete legislative overhaul of federal tax code provisions affecting investment companies. Specifically, Rep. Camp is a manager of the Regulated Investment Company Modernization Act, HR 4337, which passed the House by voice vote on September 28, 2010, which would modify and update IRC provisions pertaining to investment companies in order to make them better conform to, and interact with, other aspects of the tax code and applicable securities laws...

Global Audit Firms Believe that PCAOB?s Proposed Confirmation Standard is Overly Prescriptive and Downplays Professional Judgment

Posted on November 06, 2010
The Big Four and other global audit firms believe that the PCAOB?s proposed standard updating and expanding the requirements related to the outside auditor?s use of confirmations is overly prescriptive and does not make sufficient use of auditor professional judgment...

Missouri Clarifies FINRA Applicable Exam Requirement for Issuer-Agents

Posted on November 05, 2010
Issuer-agents offering or selling securities in Missouri must meet a written exam requirement by taking and passing either the Uniform Securities Agent State Law Examination (Series 63) or the Combined State Law examination (Series 66), as well an applicable FINRA exam...

SEC Urges Supreme Court to Hold that Investment Adviser Could Be Liable for Misstatements in the Prospectuses of Funds It Manages

Posted on November 05, 2010
An investment adviser to a family of funds could be primarily liable for alleged misleading statements in the funds? prospectuses, maintained an SEC amicus brief to the Supreme Court, since an investment adviser exercising day-to-day management over a mutual fund cannot be considered a secondary actor for Rule 10b-5 purposes like an accountant or attorney could be...

IFRS Foundation Trustees Look to Second Decade with Request for Comments on Strategy

Posted on November 05, 2010
The International Financial Accounting Standards (IFRS) Foundation trustees seek comment (http://www.ifrs.org/NR/rdonlyres/FD229996-AD4B-4CBC-8A7A-F33E4A640270/0/StrategyReviewdocforpublicconsultFINAL.pdf) on the organization's strategy for the second decade of IFRS...

Colorado Reduces Licensing Fees for BDs, Sales Reps., IAs and IARs

Posted on November 04, 2010
* The licensing fee was reduced to $60, from $69 for FINRA, non-FINRA and mortgage broker-dealers; and for SEC and state investment advisers.* The licensing fee was reduced to $10, from $14 for FINRA, non-FINRA and mortgage sales representatives; and for SEC and state investment adviser representatives...

Incoming House Financial Services Chair Cautions that Volcker Rules Will Not Be Harmonized in the EU, Disadvantaging US Firms

Posted on November 04, 2010
The incoming Chair of the House Financial Services Committee urged federal financial regulators to interpret the Volcker provisions of the Dodd-Frank Act in a way that does not disadvantage US financial firms in competition with EU firms. In a letter to the Financial Stability Oversight Council, Rep...

Financial Reform Legislation Still Possible in 112th Congress with Republican House

Posted on November 03, 2010
With a Republican House in the 112th Congress, the legislative agenda for financial regulation will shift somewhat but there is still an opportunity for reform legislation next year. For example, there is a growing bi-partisan consensus for the reform of government sponsored enterprises such as Fannie Mae and Freddie Mac, as part of the overall reform of the securitized secondary mortgage market...

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