By: Shane Geraghty and Áine Ní Riain
On 6 July, the European Securities and Markets Authority (ESMA) announced it had launched a Common Supervisory Action (CSA) with National Competent Authorities (NCAs) on the integration of sustainability risks and on sustainability-related disclosures in the investment fund sector.
Read MoreBy Rich Kerr, Eden Rohrer, and Max Black
In a stunning move, over the last two days, the Securities and Exchange Commission (SEC) has filed back-to-back enforcement actions against major crypto exchanges Binance (See here) and Coinbase (See here). This clearly indicates that the SEC is flexing its enforcement power over both international exchanges as well as those exchanges with a focus on the United States. Please visit the K&L Gates Fintech and Blockchain Law Watch to see commentary about these developments from our Digital Assets team.
Non-transparent exchange-traded funds (ETFs) that are struggling to fit in digital advertisements the specific risk legend set forth in their exemptive orders (Exemptive Order Risk Legends) may be in luck. On 29 March 2023, the staff (Staff) of the Division of Investment Management of the U.S. Securities and Exchange Commission (SEC) issued a statement (Statement) requesting that non-transparent ETFs use in such ads either (i) the text and formatting of their Exemptive Order Risk Legends; or (ii) the following text and formatting (with bold as shown and without bullets) (the Staff Risk Legend):
Read MoreBy: Eden L. Rohrer, Raymond F. Jensen
On February 15, 2023, the SEC adopted rule amendments and new rules to reduce risk in clearance and settlement of securities transactions. The amendments to Rules 15c6-1(a) and 15c6-1(c) will shorten the standard settlement cycle for most securities transactions from two business days after the trade date (T+2) to one (T+1) and shorten the standard settlement cycle for firm commitment offerings priced after 4:30 p.m. from four business days after trade date (T+4) to T+2.
Read MoreBy: Lynn A. Schweinfurth, Kathy Kresch Ingber, and Crystal Liu
On November 2, by a vote of 3 to 2, the Securities and Exchange Commission adopted, largely as proposed, amendments to Form N-PX under the Investment Company Act of 1940 and new Rule 14Ad-1 under the Securities Exchange Act of 1934 (Amendments). The Amendments expand the proxy voting information that registered investment companies (Funds) report on Form N-PX, and require, for the first time, Form 13F filers (Managers) to report annually on Form N-PX how they voted proxies concerning certain shareholder advisory votes on executive compensation (“say-on-pay” votes).
Read MoreBy Kane Barnett
The Australian Government has delivered the 2022-23 Federal Budget. One of the announcements relevant to the investment funds industry was that the Government “has reviewed and will not proceed with … the 2016–17 Budget measure that proposed introducing a new tax and regulatory framework for limited partnership collective investment vehicles”.
Read MoreBy: Trayne S. Wheeler and Brian Doyle-Wenger
On October 7, 2022, the Securities and Exchange Commission (the “SEC”) announced that, due to a technological error, it was reopening the public comment periods for 11 pending rulemaking releases (“Rulemaking Releases”) and one request for comment. The comment periods will be reopened as of October 7th and will end 14 days after the publication of the release in Federal Register (if, for example, this release were to be published on October 15, then the comment periods would close on October 29, 2022). The SEC encouraged commenters that submitted a public comment through the internet comment process to check the SEC’s website, SEC.gov, to determine whether their comment was received and posted.
The SEC’s release did not elaborate on nature of the technological error but stated that a number of public comments submitted through the SEC’s internet comment form were not received. The SEC noted the majority of the affected comments were submitted in August 2022, but that the technological error is known to have occurred as early as June 2021.
The impact of the reopening of the public comment periods is not yet known, but will likely result in delaying the release of a number of highly anticipated SEC rules[1]. The Rulemaking Releases include the following proposals and request for comment:
• Reporting of Securities Loans
• Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based Swaps; Prohibition against Undue Influence over Chief Compliance Officers; Position Reporting of Large Security-Based Swap Positions
• Money Market Fund Reforms
• Share Repurchase Disclosure Modernization
• Short Position and Short Activity Reporting by Institutional Investment Managers; see also Notice of the Text of the Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail for Purposes of Short Sale-Related Data Collection,
• Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure
• Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews
• The Enhancement and Standardization of Climate-Related Disclosures for Investors
• Special Purpose Acquisition Companies, Shell Companies, and Projections
• Investment Company Names
• Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social, and Governance Investment Practices
• Request for Comment on Certain Information Providers Acting as Investment Advisers
(Certain SRO rules, not covered here, also have comment periods that have been reopened.)
[1] SEC Release, Resubmission of Comments and Reopening of Comment Periods for Several Rulemaking Releases Due to a Technological Error in Receiving Certain Comments, October 7, 2022 (https://www.sec.gov/rules/proposed/2022/33-11117.pdf)
By: Stacy L. Fuller, Clifford C. Histed, Cheryl L. Isaac, Richard F. Kerr, Keri E. Riemer, and Peter J. Shea
On Thursday, Grayscale Investments, LLC (Grayscale) filed suit against the Securities Exchange Commission (SEC) in the D.C. Circuit asking the court to reconsider the agency’s rejection of listing a spot Bitcoin ETP on the New York Stock Exchange (NYSE). In its appeal, Grayscale argued that the SEC’s ruling regarding its spot Bitcoin ETP was “arbitrary and capricious,” because it disregarded facts about the ETP and erroneously determined that listing the ETP would be in contravention of NYSE’s duties under the Securities Exchange Act of 1934.
Read MoreBy Kane Barnett and Bernard Sia
ASIC has published Information Sheet 272 (INFO 272) and Report 728 (REP 728) on the eve of the corporate collective investment vehicle’s (CCIV) commencement.
With the commencement date for CCIVs being 1 July 2022, today ASIC released 7 regulatory guides relating to the registration and licensing requirements for CCIVs. We outline the key features of CCIVs in our previous update. INFO 272 provides much needed clarity on how both the CCIV itself and its initial sub-funds are to be registered.
Read MoreBy: Andrew Massey and Melissa Vance
Fund managers can expect changes to custodian and other fund service provider practices in response to regulator challenge, and should review their due diligence of service providers.
In a letter on 23 March 2022, the FCA instructed the Chief Executive and Boards of third-party custodians, depositories for authorised and non-authorised funds, and third-party administrators to review key risks identified by the FCA, including the following:
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