Tag: SEC

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United States: PCAOB’s Vacating 2021 Determination under HFCAA Lowers the Risk of Delisting
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United States: SEC Proposes Regulation Best Execution
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United States: A Record Year: SEC FY 2022 Enforcement Actions Bring Big Penalties
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United States: SEC Adopts Expanded Proxy Voting Reporting by Registered Funds and New Reporting of Executive Compensation Votes by Form 13F Filers
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United States: As the WORM Turns: SEC Provides Alternative Recordkeeping Requirements for Brokers

United States: PCAOB’s Vacating 2021 Determination under HFCAA Lowers the Risk of Delisting

By: Yuki Sako and Michael G. Lee

On 15 December 2022, the Public Company Accounting Oversight Board (PCAOB) announced that it was able to secure complete access to inspect and investigate audit firms in China. From September to November 2022, PCAOB staff members “conducted on-site inspections and investigations in Hong Kong…thoroughly testing all aspects of the agreement necessary to assess whether [Chinese] Authorities would allow complete access.” The PCAOB’s inspections and investigations were pursuant to a written agreement, called the Statement of Protocol, which the PCAOB entered into with Chinese authorities on August 26, 2022. The PCAOB concluded that Chinese authorities “did not obstruct the PCAOB’s ability to inspect and investigate completely, consistent with U.S. law.” Consequently, the PCAOB decided to vacate its previous December 16, 2021 determination, made pursuant to the Holding Foreign Companies Accountable Act (HFCAA), that positions taken by China prevented the PCAOB from inspecting and investigating firms headquartered in mainland China and Hong Kong completely.

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United States: SEC Proposes Regulation Best Execution

By: Stacy L. Fuller and Nicholas O. Ersoy

On December 14, 2022, the U.S. Securities and Exchange Commission (“SEC”) proposed Regulation Best Execution (“Regulation Best Ex”) under the Securities Exchange Act of 1934, as amended.  Regulation Best Ex would generally impose requirements on broker-dealers to use reasonable diligence to ascertain the best market for a security transaction and buy or sell in such market so that the resultant price to the customer is as favorable as possible under prevailing market conditions, subject to certain exemptions. For over half-of-a-century most broker-dealers have been subject to the Financial Industry Regulatory Authority’s best execution rule 5310, but if Regulation Best Ex is adopted, the SEC would begin to regulate best execution directly.

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United States: A Record Year: SEC FY 2022 Enforcement Actions Bring Big Penalties

By: Keri E. Riemer, Michael W. McGrath, Neil T. Smith, Hayley Trahan-Liptak, and Christopher F. Warner

On 15 November 2022, the U.S. Securities and Exchange Commission (SEC) announced its enforcement statistics for its 2022 fiscal year (FY 2022), noting that it filed 760 total enforcement actions — a 9% increase over fiscal year 2021.  This total was comprised of 462 new actions, 169 “follow-on” actions, and 129 actions for delinquent filings.  Money obtained in SEC actions, comprising civil penalties, disgorgement, and pre-judgment interest, totaled a record-breaking $6.439 billion (compared to $3.852 billion in fiscal year 2021).  Civil penalties, totaling $4.194 billion, were also the highest on record.

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United States: SEC Adopts Expanded Proxy Voting Reporting by Registered Funds and New Reporting of Executive Compensation Votes by Form 13F Filers

By: 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).

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United States: As the WORM Turns: SEC Provides Alternative Recordkeeping Requirements for Brokers

By: Eden L. Rohrer, Chloe Vargas, and Raymond F. Jensen

On October 12, 2022, the SEC voted to adopt new electronic recordkeeping requirements for broker-dealers in an effort to modernize recordkeeping requirements and to allow broker-dealers to use new technologies to satisfy their obligations.  The new recordkeeping requirements will amend the Securities Exchange Act of 1934 (“Exchange Act”) Rule 17a-4 (“Rule 17a-4”) for broker-dealers and Exchange Act Rule 18a-6 (“Rule 18a-6”) for Security-Based Swap Dealers, and Major Security-Based Swap Participants.

Significant to broker-dealers is that they will no longer be required to preserve electronic records in a non-rewritable, non-erasable or read once, write many (“WORM”) format.   The new rule is technology neutral, allowing broker-dealers to adopt new technologies.  The amended rule will eliminate references to outdated technology such as “micrographic media,” “microfilm or microfiche,” and “optical disk technology (including CD-ROM),” in their heyday when the rule was adopted in 1997.

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