December 27, 2013

No-Action Relief Granted to Several Derivative Clearing Organizations in Connection with the Custody of Investment Company Assets

The SEC staff granted no-action relief to three derivatives clearing organizations registered with the CFTC permitting an investment company or its custodian to maintain investment company cash and securities with a clearing organization (“Exchange”) or its clearing members (“Clearing Members”) for the purpose of meeting the Exchange’s or Clearing Member’s margin requirements. The no-action letters address the clearing of interest rate swaps (“IRS”) and credit default swaps (“CDS”).

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December 27, 2013

NRSRO Ratings Removed from Various Rules and Forms

The SEC adopted amendments to rules and forms to delete references to credit ratings by nationally recognized statistical rating organizations (NRSROs). The Dodd-Frank Wall Street Reform and Consumer Protection Act mandated the SEC to take this action.With respect to the Investment Company Act of 1940, the SEC removed credit…

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December 17, 2013

2013 Enforcement Results Released

The SEC announced that the agency’s enforcement actions in fiscal year 2013 resulted in a record $3.4 billion in monetary sanctions ordered against wrongdoers. The SEC filed 686 enforcement actions in the 2013 fiscal year, which ended in September.  This was down from 734 in 2012 and 735 in 2011.

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December 5, 2013

SEC Updates “Bad Actor” Guidance

The SEC updated its “Disqualification of Felons and Other "Bad Actors" from Rule 506 Offerings and Related Disclosure Requirements,” originally issued on September 19, 2013. On July 10, 2013, the SEC adopted bad actor disqualification provisions for Rule 506 of Regulation D under the Securities Act of 1933, to implement Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The disqualification and related disclosure provisions appear as paragraphs (d) and (e) of Rule 506 of Regulation D.

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December 3, 2013

Trader Charged with Engaging in Illegal Shorting in Connection with a Secondary Offering

The SEC charged a Miami-based trader with insider trading in the stock of a Chinese company and conducting illegal short sales in the securities of three other companies. The SEC alleged that Charles Raymond Langston III learned confidential information in advance of a public announcement that significantly decreased the value of AutoChina International’s stock. Langston was solicited by placement agents to invest in a secondary offering of AutoChina stock. Despite agreeing to keep information confidential and not trade on it, he promptly sold short 29,000 shares of AutoChina stock in advance of the company’s public announcement that it had completed the secondary offering. To avoid detection, Langston made the trades through an entity he owned using a different broker and different account than he used to purchase shares in AutoChina’s initial offering. Langston made $193,108 in illegal profits by trading on inside information.

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