Latest updates

What you need to know about Luxembourg's MiFID II legislation
  • Luxembourg
  • June 19 2018

The new Markets in Financial Instruments (MiFID) Act, which transposes the Markets in Financial Instruments Directive and implements the EU Markets in Financial Instruments Regulation, was recently voted into law. Most issues relating to markets in financial instruments are covered by the first part of the act, while the provision of investment services will continue to be governed by the Financial Sector Act, as amended by the second part of the MiFID Act.

SEC's standard of conduct proposals would raise the bar on investment advisers
Morrison & Foerster LLP
  • USA
  • May 22 2018

According to the Securities and Exchange Commission, its recent release proposing an interpretation of the standard of conduct for investment advisers is intended to "reaffirm – and in some cases clarify – certain aspects of the fiduciary duty that an investment adviser owes to its clients under section 206" of the Investment Advisers Act 1940. However, the proposed interpretation, if adopted, appears to expand the parameters of the fiduciary duty standard and could require advisers to take on additional regulatory obligations.

New Swiss prospectus regime in the making
Niederer Kraft Frey
  • Switzerland
  • May 15 2018

As part of Switzerland's efforts to meet EU equivalence requirements, the Swiss legislature is working on a new federal Financial Services Act. Under the act, which may enter into force as early as mid-2019, a comprehensive and harmonised prospectus regime will be introduced and will be applicable to all public offerings of financial instruments and all securities admitted to trading on a trading platform in Switzerland.

FINRA proposes amendments to quantitative suitability rules
Morrison & Foerster LLP
  • USA
  • May 08 2018

The Financial Industry Regulatory Authority (FINRA) recently issued proposed amendments to Rule 2111's quantitative suitability provisions. According to FINRA, the proposal is designed to more effectively counter the problem of 'churning' or excessive trading in customer accounts. The proposal arrives shortly after the Securities and Exchange Commission's proposal of Regulation Best Interest and illustrates how these two regulators must coordinate in order to avoid inconsistent sets of rules.

SEC issues statement on potentially unlawful online platforms for trading digital assets
  • USA
  • April 10 2018

The Securities Exchange Commission (SEC) recently issued a statement warning investors of potential risks involving digital asset exchanges. The statement aims to protect investors trading digital assets through online platforms and serves as a warning shot to exchanges dealing in digital assets that may be securities. This is the first time that the SEC has directly targeted exchanges and trading platforms in the context of virtual currencies and initial coin offerings.

FINRA updates FAQs on new mark-up and mark-down disclosure rules for transactions in fixed-income securities
Morrison & Foerster LLP
  • USA
  • April 03 2018

The Financial Industry Regulatory Authority (FINRA) has updated its guidance on its recent amendments to Rule 2232. The new requirements apply to transactions with retail customers in corporate and agency debt securities. Beginning on the effective date, FINRA will require confirmation disclosure of additional transaction-related information, including mark-ups and mark-downs. The goal of these new rules is to help retail customers to better understand and compare the costs of these transactions.

Finalisation of fair disclosure rule under securities law
Nagashima Ohno & Tsunematsu
  • Japan
  • April 03 2018

In June 2017 the Financial Instruments and Exchange Act was amended to introduce the fair disclosure rule in Japan. Subsequently, in October 2017 the Financial Services Agency (FSA) published draft legislation (comprising an implementing order and an ordinance) and guidelines for public comment, followed by final legislation in December 2017. The FSA has now published new guidelines and opinions on the public comments that it received.

SEC breaks silence on certain cryptocurrency exchanges
Morrison & Foerster LLP
  • USA
  • March 20 2018

The Securities and Exchange Commission (SEC) recently issued a public statement regarding exchanges and other secondary trading platforms that list or facilitate the trading of coins and tokens online. The statement emphasises that platforms offering the trading of digital assets that are securities must register with the SEC as a national securities exchange or operate under an exemption from such registration.

SEC publishes new guidance on cybersecurity disclosures and compliance practice
Morrison & Foerster LLP
  • USA
  • March 13 2018

In an unusual step that appears to indicate renewed, if not intensified, scrutiny of public companies' cybersecurity practices by the Securities and Exchange Commission, its five commissioners have unanimously issued guidance covering a range of cybersecurity topics, including disclosure obligations, board oversight and risk management controls. Among other things, companies are advised to make cybersecurity training and compliance a priority company-wide.

SEC grants principles-based Section 3(c)(5)(C) relief
Morrison & Foerster LLP
  • USA
  • March 06 2018

In a recent principles-based grant of relief, the Securities and Exchange Commission (SEC) focused on the business activities of the particular issuer, instead of whether a particular asset is a qualifying asset, in determining the availability of the Section 3(c)(5)(C) exemption. Mortgage real estate investment trusts should consider obtaining confirmation from the SEC regarding their own particular business activities in order to avoid any potential future uncertainty.

SEC budget highlights capital formation and small business capital formation
Morrison & Foerster LLP
  • USA
  • February 27 2018

In the recently released Congressional Budget Justification, the Securities and Exchange Commission (SEC) highlighted a number of priorities. The request notes that the Division of Corporation Finance remains focused on measures designed to promote capital formation. It also references the SEC's intent to "propose amendments to further facilitate capital formation through exempt and registered offerings" and refers to proposed amendments to modernise disclosures applicable to real estate companies.

SEC's final rule regarding price quotes and research reports relating to security-based swaps
Morrison & Foerster LLP
  • USA
  • February 20 2018

The Securities and Exchange Commission recently issued a final rule which provides that certain communications relating to security-based swaps (SBS) will not constitute 'offers' for the purposes of Section 5 of the Securities Act 1933. The final rule makes clear that the publication or distribution of certain price quotes relating to SBS, and of certain research reports discussing SBS, will not constitute offers of the related SBS for purposes of Section 5 and thus should not require registration.

SEC releases liquidity rule FAQs
Morrison & Foerster LLP
  • USA
  • January 23 2018

The Security and Exchange Commission Division of Investment Management has released a series of frequently asked questions (FAQs) regarding the new liquidity rule. The FAQs relate to sub-advised funds and exchange-traded funds that meet redemptions through in-kind transfers of securities, positions and assets other than a de minimis amount of cash and are a timely reminder that the compliance date for the liquidity rule is fast approaching.

SEC's regulatory agenda revealed
Morrison & Foerster LLP
  • USA
  • January 16 2018

The Securities and Exchange Commission (SEC) recently published an update to its regulatory agenda for 2018 as part of a broad rulemaking agenda published by the Office of Management and Budget, which lists the rules that agencies and departments intend to propose or finalise within one year. It appears that the SEC will focus on new regulations that streamline or reduce regulation while delaying consideration of rules that could add regulatory burden.

New staff guidance on shareholder proposals
Morrison & Foerster LLP
  • USA
  • January 09 2018

The Securities and Exchange Commission Division of Corporation Finance recently released a staff legal bulletin which provides new guidance on how staff will evaluate arguments for the omission of a shareholder proposal from their proxy materials and the submission of a proposal by a representative on behalf of a shareholder, among other things. Given the significance of the topics addressed, Senior Special Counsel Matt McNair took time to answer questions regarding the guidance.

Don't be afraid to ask – SEC staff ready to respond to Rule 3-13 waiver requests from registrants
Morrison & Foerster LLP
  • USA
  • December 19 2017

Rule 3-13 of Regulation S-X allows the Securities and Exchange Commission (SEC) to permit the omission of financial statements otherwise required by the SEC rules or their substitution by financial statements of a comparable character. The chief accountant of the SEC Division of Corporation Finance has now reminded registrants that the SEC is willing to consider and process Rule 3-13 waiver requests. Under a pilot programme, SEC staff should respond within five days.

Capital formation bills pass House Financial Services Committee
Morrison & Foerster LLP
  • USA
  • December 05 2017

The House Financial Services Committee recently approved 23 bills. These included various bills to facilitate capital formation and reduce certain regulatory requirements, such as the Regulation A+ Improvement Act and the Corporate Governance Reform and Transparency Act 2017.‎ The chair of the committee stated that the bills "will provide smaller businesses with greater access to the capital markets so those businesses can grow and create jobs".

Recent SEC and FINRA actions relating to survivor's options
Morrison & Foerster LLP
  • USA
  • November 28 2017

A seasoned investment banker established a hedge fund and solicited terminally ill patients to open brokerage accounts as joint tenants with rights of survivorship. Upon the death of a patient, the investment banker exercised the survivor's option and assigned the profits to the hedge fund. The Securities and Exchange Commission filed charges against those behind this investment strategy for possible securities law violations, which were recently dismissed by an SEC administrative law judge.

Fair disclosure rule under securities law
Nagashima Ohno & Tsunematsu
  • Japan
  • November 21 2017

In June 2017 the Financial Instruments and Exchange Act was amended to introduce the so-called 'fair disclosure' rule in Japan. The amendments address recent cases of selective disclosure of material information by issuers to sell-side analysts and investors' requests to introduce similar fair disclosure rules to those of other jurisdictions. The Financial Services Agency recently published a draft implementing order, ordinance and guidelines for public comment.

Securities rating agency not entitled to refund of erroneously remitted sales tax
Morrison & Foerster LLP
  • USA
  • November 21 2017

A New York state administrative law judge recently upheld the denial of a securities rating agency's request for a refund of sales tax. The judge rejected the agency's argument that it had paid the sales tax on behalf of its customers, finding that it did not demonstrate that the tax had not been collected from its customers. The decision seems to elevate form over substance, as it seems logical to conclude that it was the agency that bore the cost of (and actually paid) the sales tax.

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