In Rule 10b5-1 of the Securities Exchange Act of 1934 (“Exchange Act”), the SEC created an affirmative defense to any charge of insider trading “designed to cover situations in which a person can demonstrate that the material nonpublic information was not a factor in the trading decision.” Established as one of the tools to promote trade, the provision created a safe harbor for insider trading when the trade was made according to a contract, instructions were given to another, or a written plan that did not allow an insider to influence or effect subsequent purchases or sales if such a plan was created before the person had inside information.
SEC Rule 10b5-1: Proposed Amendments to Prevent Insider Trading
MSRB Proposes New Conduct Rule for Non-Solicitor Municipal Advisors and Amendments to Books and Records Rules for Municipal Advisors
On January 9, 2014, the Municipal Securities Rulemaking Board (“MSRB”) published a request for comments on a proposed new conduct rule for non-solicitor municipal advisors and amendments to existing books and records rules to include municipal advisors in Regulatory Notice 2014-01 (the “Rule Notice”).
BCBLE Lecture Series: Eugene Ludwig on Putting Dodd-Frank in Context
On February 24, the Berkeley Center for Law, Business and the Economy (BCBLE) hosted a lunch presentation featuring Eugene Ludwig, founder and CEO of Promontory Financial Group. In his talk titled “Financial Regulation in the Post Reform Era: Putting Dodd-Frank in Context,” Ludwig shared his perspectives on the Dodd-Frank Act and other regulation efforts within the context of earlier cycles of crisis and reform. He discussed what the changes mean for the evolution of the American regulatory model and the transformative potential of the financial services industry.
SEC Issues New Guidance On “Bad Actor” Disqualification From Rule 506 Offerings
On December 4, 2013, the staff of the Securities and Exchange Commission (SEC) Division of Corporation Finance issued new guidance regarding the “bad actor” disqualification provisions of Rule 506(d) of Regulation D under the Securities Act of 1933 (Securities Act) and the related disclosure requirements of Rule 506(e) through an update to its Securities Act Rules Compliance and Disclosure Interpretations (C&DIs). The 14 new CD&Is provide important clarification to the final rules approved by the SEC earlier this year and additional guidance to issuers seeking to comply with the new requirements of Rules 506(d) and 506(e) of Regulation D under the Securities Act. This advisory summarizes some of the more significant of these new CD&Is.
Click here to read the entire Advisory.
SEC Proposes Rules for Crowdfunding Intermediaries
As described in our Client Newsflash entitled “SEC Proposes Crowdfunding Rules under JOBS Act,” the Securities and Exchange Commission (“SEC”) recently proposed rules under the JOBS Act (the “Proposed SEC Rules”) that would permit certain private issuers to raise investment capital through “crowdfunding”—a process of enabling a large number of investors to each make relatively small investments in an issuer via the Internet.
Click here to read the entire story.
High Tide Warning in Global Shareholder Activism
In its new report titled “Rising Tide of Global Shareholder Activism,” the Financial Strategy and Solutions Group of Citi observes that shareholder activism has spread to companies in all sectors, of all sizes and across all geographic regions.
As the report suggests, activist hedge funds have accumulated their funds and, in order to put this financial firepower to work, are exporting their activism abroad. On the so-called “supply side” of the phenomenon, shareholder interventions are increasingly encouraged by the presence of undervalued targets with conservative financial strategies and a lack of top-line growth, dispersed share ownership, and reforms that enhance shareholder rights.
Crowdfunding: A Dream or Reality?
Last Wednesday, the Securities and Exchange Commission released new rules for crowdfunding under the 2012 Jumpstart Our Business Startups (JOBS) Act. Crowdfunding gives startups a way to raise capital through the Internet and thereby reach a large, diverse set of investors.
SEC Investor as Purchaser Subcommittee Issues Recommendations Related to Broker-Dealer Fiduciary Duty
The Investor as Purchaser Subcommittee (the “Subcommittee”) of the SEC’s Investor Advisory Committee (the “Committee”) issued two principal recommendations (the “Recommendations”) regarding SEC adoption of a uniform standard of duty for investment advisers and broker‑dealers engaged in the delivery of personalized investment advice to retail investors.
The Government Shut Down, The Revival of High Frequency Trading, And What The SEC Is Doing To Keep Up
The government shut down continues while the American public anxiously awaits a resolution. Unless Congress raises the debt ceiling by October 17, the U.S. government will default on its debt. For the securities markets, this means market chaos, which provides a feeding ground for high frequency traders.
High frequency trading (HFT) uses complex computer algorithms to analyze multiple markets and trade high volumes of stocks, moving in and out of trades in fractions of a second. For high frequency traders, fortune favors the speedy. Computers generate returns in a manner that human beings simply cannot, leaving ordinary investors aghast. The question remains, does high frequency trading help or hurt our markets? On one side of the debate, proponents of this practice argue that HFT provides liquidity in the market. On the other side, critics blame HFT for market disruption and see the sophisticated technology as providing an unfair advantage to traders.
The Securities and Exchange Commission has been fighting to keep up with the technological advancements on Wall Street and research just how much of an advantage traders acquire through the use of such technology. The SEC is planning to release a public website containing data-driven analysis of trading patterns, increasing accessibility to the obscure patterns of high frequency trading. The data collected will also aid the SEC in closing the technological gap between this regulatory agency and high frequency traders. Although the SEC continues to weigh the actions it should take, if any, against high frequency traders, it is not as quick to blame HFT for market crashes as some of its critics are. SEC Chairman, Mary Jo White, in a speech on October 2nd, noted that although there is an increased risk of technology failure as trading systems become faster and more complex, high frequency traders are not to blame for the market problems of the last few years.
SEC Adopts Tighter Regulations for Brokerage Firms
Recently, the SEC announced the adoption of new rules to protect clients with cash or securities at brokerage firms by requiring more disclosure and safeguards from securities brokers.
The new measures, which were approved in a split 3-2 vote by the commission, are part of regulators’ ongoing efforts to strengthen custody rules and prevent future fraud in the wake of Bernard Madoff’s long-running Ponzi scheme. (more…)