https://www.entrepreneur.com/article/420806
Monday, February 28, 2022
Sunday, February 27, 2022
Friday, February 25, 2022
SEC.gov | SEC Proposes Short Sale Disclosure Rule, Order Marking Requirement, and CAT Amendments
The Securities and Exchange Commission today announced that it has voted to propose changes that would provide greater transparency to investors and regulators by increasing the public availability of short sale related data. New Exchange Act Rule 13f-2 and the corresponding Form SHO would require certain institutional investment managers to report short sale related information to the Commission on a monthly basis. The Commission then would make aggregate data about large short positions, including daily short sale activity data, available to the public for each individual security.
“Proposed Rule 13f-2 would make aggregate data about large short positions available to the public for individual equity securities,” said SEC Chair Gary Gensler. “This would provide the public and market participants with more visibility into the behavior of large short sellers. The raw data reported to the Commission on a new Form SHO would help us to better oversee the markets and understand the role short selling may play in market events. It’s important for the public and the Commission to know more about this important market, especially in times of stress or volatility.”
Specifically, Rule 13f-2 would require institutional investment managers exercising investment discretion over short positions meeting specified thresholds to report on the Proposed Form SHO information relating to end-of-the-month short positions and certain daily activity affecting such short positions. The Commission would aggregate the resulting data by security, thereby maintaining the confidentiality of the reporting managers, and publicly disseminated the data to all investors. This new data would supplement the short sale data that is currently publicly available from FINRA and stock exchanges.
The Commission also voted to propose a new provision of Regulation SHO, Rule 205, which would establish a new “buy to cover” order marking requirement for broker-dealers. Regulation SHO, which is the Commission’s primary short selling regulation, requires broker-dealers to identify each sale order that it effects as either “long,” “short,” or “short-exempt,” but it does not currently have a corresponding requirement for purchase orders. Proposed Rule 205 would require a broker-dealer to mark a purchase order as “buy to cover” if the purchaser has any short position in the same security at the time the purchase order is entered. This information will be especially useful to the Commission in reconstructing significant market events and identifying potentially abusive trading practices including short squeezes.
Relatedly, the Commission voted to amend the national market system plan governing the consolidated audit trail (CAT). The amendment would require CAT reporting firms to report “buy to cover” information to CAT. The proposed amendments also include a provision that would require each CAT reporting firm to indicate where it is asserting use of the bona fide market making exception under Regulation SHO.
In light of Proposed Rule 13f-2, the Commission voted to reopen the comment period for Proposed Exchange Act Rule 10c-1. Rule 10c-1 was proposed by the Commission on November 18, 2021, to increase the transparency and efficiency of the securities lending market by requiring any person that loans a security on behalf of itself or another person to report the material terms of those securities lending transactions and related information to a registered national securities association. The initial Comment period for proposed Rule 10c-1 ended on January 7, 2022.
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Thursday, February 24, 2022
Wednesday, February 23, 2022
Tuesday, February 22, 2022
SEC.gov | SEC Charges Health Care Co. and Two Former Employees for Accounting Improprieties
The Securities and Exchange Commission today announced settled charges and an $18 million penalty against Baxter International Inc. for engaging in improper intra-company foreign exchange transactions that resulted in the misstatement of the company’s net income. The SEC also announced settled charges against Baxter’s former treasurer and assistant treasurer, Scott Bohaboy and Jeffrey Schaible, respectively, for their misconduct related to these transactions.
The SEC’s order against Baxter finds that the company violated the negligence-based anti-fraud, reporting, books and records, and internal accounting controls provisions of the federal securities laws. From at least 1995 to 2019, Baxter used a convention to convert non-U.S. dollar denominated transactions and assets and liabilities on its financial statements that was not in accordance with U.S. GAAP or generally accepted accounting principles. Beginning in at least 2009, Baxter exploited the convention to enter into intra-company foreign exchange transactions for the sole purpose of generating foreign exchange accounting gains or avoiding foreign exchange accounting losses.
"It is critical that companies that identify wrongdoing proactively come forward and cooperate with the SEC staff," said Paul Montoya, Associate Regional Director of the SEC’s Chicago Office. "Baxter’s self-reporting and substantial cooperation in working with the staff in this complex investigation was an important consideration in assessing the appropriate sanctions for this case."
The SEC’s orders against Bohaboy and Schaible find that they violated the negligence-based anti-fraud provisions of the federal securities laws and caused Baxter’s reporting and books and records violations. According to the order against Schaible he, along with others working at his direction, was primarily responsible for executing the transactions. The SEC’s order against Bohaboy finds that he did not take any steps to investigate how Baxter’s treasury department generated consistent gains or whether the transactions that generated the gains were permissible.
Without admitting or denying the SEC’s findings, Baxter, Bohaboy, and Schaible consented to cease and desist from future violations. Bohaboy consented to pay a $125,000 civil penalty. Schaible consented to pay a $100,000 civil penalty, disgorgement of $76,404 and prejudgment interest of $12,955. The settlement creates a fair fund for distribution of settlement proceeds to harmed investors.
The SEC’s investigation was conducted by Jen Peltz, Emily Rothblatt, Scott Hlavacek, Wilburn Saylor, Ann Tushaus, and Ariella Guardi, and was supervised by Jeffrey Shank and Paul Montoya.
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Monday, February 21, 2022
Sunday, February 20, 2022
Friday, February 18, 2022
SEC.gov | Largest South Korean Telecommunications Co. Agrees to Pay the SEC to Settle FCPA Charges
The Securities and Exchange Commission announced that Seoul-based KT Corporation (KT Corp.) will pay $6.3 million to resolve charges that it violated the Foreign Corrupt Practices Act (FCPA) by providing improper payments for the benefit of government officials in Korea and Vietnam.
According to the SEC’s order, KT Corp., South Korea’s largest telecommunications operator, engaged in multiple schemes to make improper payments in Korea and Vietnam. KT Corp. lacked sufficient internal accounting controls over charitable donations, third-party payments, executive bonuses, and gift card purchases. As a result, KT Corp. employees, including high-level executives, were able to generate slush funds that were used for gifts and illegal political contributions to government officials in Korea who had influence over KT Corp.’s business. Other employees were able to make payments in connection with seeking business from government customers in Vietnam.
"For nearly a decade, KT Corp. failed to implement sufficient internal accounting controls with respect to key aspects of its business operations, while at the same time lacking relevant anti-corruption policies or procedures. Issuers must be sure to devote appropriate attention to meeting their obligations under the FCPA," said Charles Cain, Chief of the SEC Enforcement Division’s FCPA Unit.
In November 2021, South Korean authorities indicted KT Corp. and 14 executives for criminal violations related to illegal political contributions from the slush funds.
KT Corp. consented to the SEC’s order without admitting or denying the findings that it violated the books and records and internal accounting controls provisions of the Securities Exchange Act of 1934, and agreed to pay approximately $3.5 million in civil penalties and $2.8 million in disgorgement.
The SEC’s investigation was conducted by Ilana Z. Sultan, Steven Susswein, and M. Shahriar Masud and supervised by Tracy L. Price.
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Thursday, February 17, 2022
SEC.gov | SEC Charges Infinity Q Founder with Orchestrating Massive Valuation Fraud
The Securities and Exchange Commission today charged James Velissaris, the former Chief Investment Officer and founder of Infinity Q Capital Management, with overvaluing assets by more than $1 billion while pocketing tens of millions of dollars in fees.
The SEC’s complaint alleges that, from at least 2017 through February 2021, Velissaris engaged in a fraudulent scheme to overvalue assets held by the Infinity Q Diversified Alpha mutual fund and the Infinity Q Volatility Alpha private fund. According to the complaint, Velissaris executed the overvaluation scheme by altering inputs and manipulating the code of a third-party pricing service used to value the funds’ assets. Velissaris allegedly collected more than $26 million in profit distributions through his fraudulent conduct and without disclosing his activities to investors.
"We allege that, while Velissaris marketed the mutual fund as a way for retail investors to access investment strategies typically reserved for high net worth clients, what he actually offered them were fraudulent documents, altered performance results, and manipulated valuations," said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. "This case affirms our commitment to using all our tools to root out misconduct in the $18 trillion private fund arena, a growing market attracting more and more institutional investors, including public pension funds, university endowments, and charitable foundations."
"We allege that Velissaris, in an attempt to cover up his scheme, sought to actively deceive the staff by creating backdated minutes of valuation meetings that never occurred and altering documents that described Infinity Q’s valuation policies," said Adam S. Aderton, Co-Chief of the SEC’s Asset Management Unit. "We also allege that Velissaris sent forged term sheets to the auditor of the mutual fund and the private fund."
The SEC also alleges that, by masking actual performance, Velissaris sought to thwart redemptions by investors who likely would have requested a return of their money had they known the funds’ actual performance, particularly in the volatile markets in the wake of the COVID-19 pandemic. The complaint alleges that at times during the pandemic, the funds’ actual values were half of what investors were told.
In February 2021, Velissaris was removed from his role with Infinity Q after SEC staff confronted the firm with information suggesting that Velissaris had been adjusting the third-party pricing model. Several days later, at Infinity Q’s request and to protect shareholders, the Commission issued an order (Investment Company Act Rel. No. 34198 (Feb. 22, 2021)) to suspend redemptions of the mutual fund.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges Velissaris with violating antifraud and other provisions of the federal securities laws. The complaint seeks permanent injunctive relief, return of allegedly ill-gotten gains, and civil penalties. The SEC also seeks to bar Velissaris from serving as a public company officer and director.
In parallel actions, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Velissaris, and the Commodity Futures Trading Commission (CFTC) announced civil charges against him.
The SEC’s ongoing investigation is being conducted by David H. Tutor and Brian Fitzpatrick of the Asset Management Unit, Joshua Brodsky of the Complex Financial Instruments Unit, and Kerri Palen of the New York Regional Office. It is being supervised by Andrew Dean of the Asset Management Unit and Osman Nawaz of the Complex Financial Instruments Unit. The litigation will be led by Mr. Tutor and Preethi Krishnamurthy. The SEC’s Division of Investment Management’s Analytics Office initiated a parallel examination of Infinity Q. The examination was conducted by Jon Hertzke, Kenneth O’Connor, Luis Casais, and Timothy Husson. Additional assistance to the investigation and examination was provided by Daniel Gallagher, David Bartels, Janet Grossnickle, Jennifer Sawin, Jenson Wayne, and Alexander Bradford of the SEC’s Division of Investment Management; Ethan Coombs of the SEC’s Division of Trading and Markets; and Dennis Hamilton of the SEC’s Division of Economic and Risk Analysis. The SEC acknowledges the assistance and cooperation of the U.S. Attorney’s Office for the Southern District of New York, the FBI, and the CFTC.
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Wednesday, February 16, 2022
SEC.gov | Rita Sampson Named Director of Office of Equal Employment Opportunity
The Securities and Exchange Commission today announced that Rita M. Sampson has been named Director of the agency’s Office of Equal Employment Opportunity (OEEO).
"Rita brings a wealth of experience to the Office of Equal Employment Opportunity, and the SEC will greatly benefit from her leadership," said SEC Chair Gary Gensler. "I’d also like to thank Stacey Bach for serving as Acting Director of the OEEO."
OEEO is a neutral and independent office within the SEC that creates and applies best practices to achieve equality in the workplace and compliance with anti-discrimination laws. OEEO has significant expertise in legal and social science analysis, proactive prevention of workplace discrimination and harassment, conflict management, investigative techniques, federal sector equal employment opportunity rules and processes, and program management.
"I’m excited to join the SEC team in championing equal opportunity practices and strategic initiatives that promote the agency as the inclusive workplace and model employer it is," said Ms. Sampson, who began her new role this week.
Most recently, Ms. Sampson served as the Director of the Office of Diversity, Equity, Inclusion, and Accessibility (DEIA) at the U.S. Office of Personnel Management (OPM). Prior to her role at OPM, Ms. Sampson served 12 years within the Office of the Director of National Intelligence, including several as the U.S. Intelligence Community’s Chief Diversity Officer and Director of Equal Employment Opportunity. Ms. Sampson previously held numerous attorney leadership roles within the U.S. Department of Justice, including EEO Director at the Executive Office for United States Attorneys (EOUSA), and senior attorney roles within the EOUSA and the Federal Bureau of Investigation. Ms. Sampson began her legal career as a trial attorney in the Office of the Attorney General for the Commonwealth of Virginia. Ms. Sampson earned a bachelor’s degree from the College of William and Mary and a law degree from Wake Forest University School of Law.
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Tuesday, February 15, 2022
SEC.gov | SEC Charges 12 Additional Financial Firms for Failure to Meet Form CRS Obligations
The Securities and Exchange Commission today announced that six investment advisers and six broker-dealers have agreed to settle charges that they failed to file and deliver client or customer relationship summaries – known as Form CRS – to their retail investors by the required deadline and, in some cases, failed to include all information necessary to satisfy Form CRS requirements.
"With today’s actions, the SEC has now charged forty-two financial firms for failing to meet the obligations that are required to ensure retail investors understand their relationships with their securities industry professionals," said Sanjay Wadhwa, Deputy Director of the SEC’s Enforcement Division. "We urge firms that continue to be delinquent in fulfilling their Form CRS obligations to come into compliance with the law and to self-report to the SEC."
On June 5, 2019, the SEC adopted Form CRS and required SEC-registered investment advisers and SEC-registered broker-dealers to file their respective Forms CRS with the SEC, begin delivering them to prospective and new retail investors by June 30, 2020, and deliver them to existing retail investor clients or customers by July 30, 2020. The SEC also required firms to prominently post their current Form CRS on their website, if they had one. According to the SEC’s orders, each of the firms charged today missed those regulatory deadlines. In addition, the orders find that certain firms failed to include information and language specifically required for Form CRS.
The SEC’s orders find that the investment advisers violated Section 204 of the Investment Advisers Act of 1940 and Advisers Act Rules 204-1 and 204-5, and that the broker-dealers violated Section 17(a)(1) of the Securities Exchange Act of 1934 and Exchange Act Rule 17a-14. Without admitting or denying the findings, each of the firms agreed to be censured, to cease and desist from violating the charged provisions, and to pay the following civil penalties:
- Arthur Zaske & Associates, LLC, a Bingham Farms, Michigan-based investment adviser, has agreed to pay a $15,000 civil penalty.
- Banyan Securities, LLC, a Greenbrae, California-based broker-dealer, has agreed to pay a $10,000 civil penalty.
- Church, Gregory, Adams Securities Corporation, a Decatur, Georgia-based broker‑dealer, has agreed to pay a $10,000 civil penalty.
- Gutt Financial Management, LLC, an Atlanta, Georgia-based investment adviser, has agreed to pay a $25,000 civil penalty.
- Hinsdale Associates, Inc., a Hinsdale, Illinois-based investment adviser, has agreed to pay a $25,000 civil penalty.
- J.K. Financial Services, Inc., a Norco, California-based broker-dealer, has agreed to pay a $10,000 civil penalty.
- N.V.N.G. Investments, Inc., a Kalamazoo, Michigan-based investment adviser, has agreed to pay a $15,000 civil penalty.
- Personal Financial Planning, Inc., a Deerfield, Illinois-based investment adviser, has agreed to pay a $25,000 civil penalty.
- Stone Run Capital, LLC, a New York, New York-based investment adviser, has agreed to pay a $25,000 civil penalty.
- The Winning Edge Financial Group, Inc., a Clifton, New Jersey-based broker-dealer, has agreed to pay a $10,000 civil penalty.
- Wall Street Access, a New York, New York-based broker-dealer, has agreed to pay a $97,523 civil penalty.
- Watermark Securities, Inc., a New York, New York-based broker-dealer, has agreed to pay a $25,000 civil penalty.
On July 26, 2021, the SEC announced settlements with 27 other financial firms for similar failures to timely file and deliver their Forms CRS to their retail investors. https://www.sec.gov/news/press-release/2021-139. Three other investment advisers subsequently settled with the SEC in separate administrative proceedings: Disciplined Capital Management LLC; Lexicon Capital Management LP; and Newman Ladd Capital Advisors, LLC.
The SEC’s investigations of investment advisers were conducted by Anthony J. Winter of the Atlanta Regional Office and Stephen E. Donahue of the Enforcement Division’s Asset Management Unit and Atlanta Regional Office, Som P. Dalal and Anne C. McKinley of the Chicago Regional Office, and Sheldon Mui and Gerald A. Gross of the New York Regional Office. The SEC’s investigations of broker-dealers were conducted by Yael Berger, Elisabeth Grimm, Kelly V. Silverman, and Stacy L. Bogert of the Home Office. The compliance examinations that led to the investment adviser investigations were conducted by staff of the SEC’s Division of Examinations. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.
More About This Topic
- SEC Investor Bulletin: Relationship Summaries (Form CRS or Form ADV) - https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins
- SEC Spotlight: Regulation Best Interest, Form CRS, and Related Interpretations - https://www.sec.gov/regulation-best-interest
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Monday, February 14, 2022
SEC.gov | BlockFi Agrees to Pay $100 Million in Penalties and Pursue Registration of its Crypto Lending Product
The Securities and Exchange Commission today charged BlockFi Lending LLC (BlockFi) with failing to register the offers and sales of its retail crypto lending product. In this first-of-its-kind action, the SEC also charged BlockFi with violating the registration provisions of the Investment Company Act of 1940. To settle the SEC’s charges, BlockFi agreed to pay a $50 million penalty, cease its unregistered offers and sales of the lending product, BlockFi Interest Accounts (BIAs), and attempt to bring its business within the provisions of the Investment Company Act within 60 days. BlockFi’s parent company also announced that it intends to register under the Securities Act of 1933 the offer and sale of a new lending product. In parallel actions announced today, BlockFi agreed to pay an additional $50 million in fines to 32 states to settle similar charges.
"This is the first case of its kind with respect to crypto lending platforms," SEC Chair Gary Gensler said. "Today’s settlement makes clear that crypto markets must comply with time-tested securities laws, such as the Securities Act of 1933 and the Investment Company Act of 1940. It further demonstrates the Commission’s willingness to work with crypto platforms to determine how they can come into compliance with those laws. I’d like to thank and commend our remarkable SEC staff and state regulators for their efforts and collaboration on this settlement."
"Crypto lending platforms offering securities like BlockFi’s BIAs should take immediate notice of today’s resolution and come into compliance with the federal securities laws," said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. "Adherence to our registration and disclosure requirements is critical to providing investors with the information and transparency they need to make well-informed investment decisions in the crypto asset space."
According to the SEC’s order, from March 4, 2019 until today, BlockFi offered and sold BIAs to the public. Through BIAs, investors lent crypto assets to BlockFi in exchange for the company’s promise to provide a variable monthly interest payment. The order finds that BIAs are securities under applicable law, and the company therefore was required to register its offers and sales of BIAs but failed to do so or to qualify for an exemption from SEC registration. Additionally, the order finds that BlockFi operated for more than 18 months as an unregistered investment company because it issued securities and also held more than 40 percent of its total assets, excluding cash, in investment securities, including loans of crypto assets to institutional borrowers.
The order also finds that BlockFi made a false and misleading statement for more than two years on its website concerning the level of risk in its loan portfolio and lending activity.
Without admitting or denying the SEC’s findings, BlockFi agreed to a cease-and-desist order prohibiting it from violating the registration and antifraud provisions of the Securities Act and the registration provisions of the Investment Company Act. BlockFi also agreed to cease offering or selling BIAs in the United States.
The SEC’s investigation was conducted by Gwen Licardo, Craig Welter, and Kenneth Gottlieb, with assistance from Brent W. Wilner, under the supervision of Hane L. Kim, Chief of the Retail Strategy Task Force; Lara Shalov Mehraban, Associate Regional Director of the SEC’s New York Regional Office; and Kristina Littman, Chief of the Cyber Unit. The SEC appreciates the assistance of state regulators that are members of the North American Securities Administrators Association.
The SEC’s Office of Investor Education and Advocacy and Enforcement’s Retail Strategy Task Force has issued an Investor Bulletin on Crypto Asset Interest-bearing Accounts. Investors can find additional information about crypto assets at Investor.gov.
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Sunday, February 13, 2022
Friday, February 11, 2022
SEC.gov | Kelly L. Gibson, Director of the Philadelphia Regional Office, to Leave the SEC; Scott Thompson and Joy Thompson named Office Acting Co-Heads
The Securities and Exchange Commission today announced that Kelly L. Gibson, Director of the Philadelphia Regional Office, will leave the agency on Feb. 11 after 14 years of service. Joy Thompson and Scott Thompson will replace her as Acting Co-Directors.
“I thank Kelly for her service to the SEC over these past 14 years,” said SEC Chair Gary Gensler. “During that time, she has worked on a number of significant enforcement matters that helped protect investors in our capital markets. She also has held several important leadership roles at our Philadelphia Regional Office and agency-wide. We will miss her leadership and willingness to serve when called.”
Ms. Gibson has served as Director of the Philadelphia Regional Office since February 2020, overseeing a staff of approximately 160 including Enforcement, Examinations, and other staff. Last year, Ms. Gibson served as Acting Deputy Director of the Division of Enforcement and led the Division’s Climate and ESG Task Force. As Acting Deputy Director, she helped set the Division’s enforcement priorities and assisted in supervising all investigative and litigation activities. In that role, she also oversaw the Division’s Office of Market Intelligence and Office of the Whistleblower. Earlier in her tenure, she served in the Market Abuse Unit and as Assistant Regional Director and then Associate Regional Director of the Philadelphia office. She joined the SEC in 2008 as a staff attorney in the Division of Enforcement in the Philadelphia Regional Office and received the SEC's Analytical Methods award in 2016.
“Throughout her long public service career, Kelly has dedicated herself not only to protecting investors, but also to supporting staff across the Division,” said Gurbir S. Grewal, Director of the Division of Enforcement. “She has helped guide both the Philadelphia Office and the Division through the pandemic, leadership transitions and complex legal issues with compassion, resolve and sound judgment. We’ll miss her leadership.”
“Kelly has been a stellar leader for the Philadelphia Regional Office’s Examination Program during the past two years,” said Daniel S. Kahl, Acting Director of the Division of Examinations. “She led the program with her characteristic steadiness and excellent judgment resulting in the program seamlessly continuing its work with innumerable complex issues and complex registrants. She will be missed greatly.”
Ms. Gibson said, “It has been an incredible honor and privilege to serve the investing public alongside the talented and dedicated staff of this agency. I will greatly miss my colleagues from across the Commission, who work tirelessly and show unwavering commitment to advance the SEC’s mission every day.”
Joy Thompson currently serves as the Associate Regional Director for the SEC’s Philadelphia Office’s examination program. She joined the Commission in 1986 and has served in a number of roles in Enforcement and then Examinations since that time, including Acting Regional Director of the Philadelphia Office and Acting Deputy Director of the National Examination Program. She has a J.D. from the University of Pennsylvania Law School and an undergraduate degree, cum laude, from Tufts University.
Scott A. Thompson currently serves as the Associate Director of Enforcement for the SEC’s Philadelphia Office. Since joining the agency in 2007, he has served in a number of positions, including Senior Trial Counsel and Assistant Regional Director in the Market Abuse Unit. Mr. Thompson earned a law degree, magna cum laude, from Duke University School of Law and graduated, summa cum laude, from Tufts University.
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SEC.gov | SEC Charges Shari’ah-Focused Online Investment Service with Misleading Clients
The Securities and Exchange Commission today charged New York-based robo-adviser Wahed Invest, LLC with making misleading statements and breaching its fiduciary duty, and for compliance failures related to its Shari’ah advisory business.
According to the SEC’s order, from September 2018 through July 2019, Wahed Invest advertised the existence of its own proprietary funds when no such funds existed, and also promised investors that it would periodically rebalance their advisory accounts, but did not do so.
The SEC’s order further finds that when Wahed Invest ultimately launched a proprietary ETF in July 2019, it used its clients’ advisory assets to seed the ETF without prior disclosure to clients of any conflicts of interest.
The order also finds that Wahed Invest marketed itself as providing advisory services compliant with Islamic, or Shari’ah law, including marketing the importance of its income purification process on its website. Despite these representations, the order finds that Wahed Invest did not adopt and implement written policies and procedures addressing how it would assure Shari’ah compliance on an ongoing basis.
“Robo-advisers, like other advisers, must ensure that their marketing materials are not misleading and that conflicts are disclosed to investors,” said Adam S. Aderton, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “Registered investment advisers like Wahed Invest must also adopt and implement written policies and procedures reasonably designed to prevent the adviser from deviating from its claimed investment process.”
Wahed Invest consented to the entry of the SEC’s order finding that the firm violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-1(a) and 206(4)-7. Without admitting or denying the SEC’s findings, Wahed Invest agreed to a cease-and-desist order, to pay a $300,000 penalty, and to retain an independent compliance consultant among other undertakings.
The SEC’s investigation was conducted by David H. Tutor, with assistance from industry expert Dan Pines, and was supervised by Andrew Dean, all of the Enforcement Division’s Asset Management Unit. The examination that led to the investigation was conducted by Alessandra Hagemann, Michael Artus, Joy Best, Rachel Lavery, and Jennifer Klein of the SEC’s New York Regional Office.
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Freedom Factory
5500 Greenwood Plaza Blvd., Ste 230
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Phone: 844-MAX-VALUE (844-629-8258)
www.freedomfactory.com
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Thursday, February 10, 2022
SEC.gov | SEC Proposed Changes to Two Whistleblower Program Rules
The Securities and Exchange Commission today proposed two amendments to the rules governing its whistleblower program. The first proposed amendment concerns award claims for related actions that would be otherwise covered by an alternative whistleblower program. The second affirms the Commission's authority to consider the dollar amount of a potential award for the limited purpose of increasing an award but not to lower an award.
"These amendments, if adopted, would help ensure that whistleblowers are both incentivized and appropriately rewarded for their efforts in reporting potential violations of the law to the Commission," said SEC Chair Gary Gensler. "The first proposed rule change is designed to ensure that a whistleblower is not disadvantaged by another whistleblower program that would not give them as high an award as the SEC would offer. Under the second proposed rule change, the SEC could consider the dollar amounts of potential awards only to increase the whistleblower's award. This would give whistleblowers additional comfort knowing that the SEC could consider the dollar amount of the award only in such cases."
Specifically, the proposed amendment to Rule 21F-3 would allow the Commission to pay whistleblower awards for certain actions brought by other entities, including designated federal agencies, in cases where those awards might otherwise be paid under the other entity's whistleblower program. The proposed amendments also would affirm the Commission's authority under Rule 21F-6 to consider the dollar amount of a potential award for the limited purpose of increasing the award amount, and it would eliminate the Commission’s authority to consider the dollar amount of a potential award for the purpose of decreasing an award.
The public comment period will remain open for 60 days following publication of the proposing release on the SEC's website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.
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SEC.gov | SEC Proposes Rule Amendments to Modernize Beneficial Ownership Reporting
The Securities and Exchange Commission today announced that it proposed rule amendments governing beneficial ownership reporting under Exchange Act Sections 13(d) and 13(g). The proposed amendments would update those rules to provide more timely information to meet the needs of today's financial markets.
"These amendments would update our reporting requirements for modern markets, reduce information asymmetries, and address the timeliness of Schedule 13D and 13G filings," said SEC Chair Gary Gensler. "Investors currently can withhold market moving information from other shareholders for 10 days after crossing the 5 percent threshold before filing a Schedule 13D, which creates an information asymmetry between these investors and other shareholders.The filing of Schedule 13D can have a material impact on a company's share price, so it is important that shareholders get that information sooner. The proposed amendments also would clarify when and how certain derivatives acquired with control intent count towards the 5 percent threshold, clarify group formation, and create related exemptions.”
The proposed amendments to Regulation 13D-G would accelerate the filing deadlines for Schedules 13D beneficial ownership reports from 10 days to five days and require that amendments be filed within one business day; generally accelerate the filing deadlines for Schedule 13G beneficial ownership reports (which differ based on the type of filer); expand the application of Regulation 13D-G to certain derivative securities; clarify the circumstances under which two or more persons have formed a "group" that would be subject to beneficial ownership reporting obligations; provide new exemptions to permit certain persons to communicate and consult with one another, jointly engage issuers, and execute certain transactions without being subject to regulation as a "group;" and require that Schedules 13D and 13G be filed using a structured, machine-readable data language.
The public comment period will remain open for 60 days following publication of the proposing release on the SEC's website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.
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Wednesday, February 9, 2022
SEC.gov | SEC Issues Proposal to Reduce Risks in Clearance and Settlement
The Securities and Exchange Commission today voted to propose rule changes to reduce risks in the clearance and settlement of securities, including by shortening the standard settlement cycle for most broker-dealer transactions in securities from two business days after the trade date (T+2) to one business day after the trade date (T+1). The proposed changes are designed to reduce the credit, market, and liquidity risks in securities transactions faced by market participants and U.S. investors.
“These proposed amendments to the securities clearing and settling process, if adopted, could lower risk to the financial system and drive greater efficiencies in the markets,” said SEC Chair Gary Gensler. “First, these amendments would shorten the standard settlement cycle. As the old saying goes, time is money. Shortening the settlement cycle should reduce the amount of margin that counterparties would need to post with clearinghouses. Second, these changes would require affirmations, confirmations, and allocations to take place as soon as technologically practicable on trade date (“T+0”). Finally, the release would require clearing agencies that provide central matching services to have policies and procedures to facilitate straight-through processing — i.e., fully automated transactions processing.”
In addition to shortening the standard settlement cycle, the proposal includes rules directed at broker-dealers and registered investment advisers to shorten the process of confirming and affirming the trade information necessary to prepare a transaction for settlement so that it can be completed by the end of trade date. Further, the proposal includes a new requirement to facilitate straight-through processing, which would apply to certain types of clearing agencies that provide central matching services. Central matching service providers help facilitate the processing of institutional trades between broker-dealers and their institutional customers. The proposed rule would require new policies and procedures directed to straight-through processing and require an annual report on progress with the process.
With the goal of shortening the settlement cycle further, the proposal solicits comments on challenges associated with and potential paths to achieving a same-day settlement cycle.
The public comment period will remain open for 60 days following publication of the proposing release on the SEC’s website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.
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Tyler Tysdal is the world's best business broker. Tyler is the managing partner and cofounder at Freedom Factory. Tyler Tysdal Will Help You Sell Your Business in San-Antonio-Texas or anywhere else in the USA.
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5500 Greenwood Plaza Blvd., Ste 230
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www.freedomfactory.com
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SEC.gov | SEC Proposes Cybersecurity Risk Management Rules and Amendments for Registered Investment Advisers and Funds
The Securities and Exchange Commission today voted to propose rules related to cybersecurity risk management for registered investment advisers, and registered investment companies and business development companies (funds), as well as amendments to certain rules that govern investment adviser and fund disclosures.
"Cyber risk relates to each part of the SEC’s three-part mission, and in particular to our goals of protecting investors and maintaining orderly markets," said SEC Chair Gary Gensler. "The proposed rules and amendments are designed to enhance cybersecurity preparedness and could improve investor confidence in the resiliency of advisers and funds against cybersecurity threats and attacks."
The proposed rules would require advisers and funds to adopt and implement written cybersecurity policies and procedures designed to address cybersecurity risks that could harm advisory clients and fund investors. The proposed rules also would require advisers to report significant cybersecurity incidents affecting the adviser or its fund or private fund clients to the Commission on a new confidential form.
To further help protect investors in connection with cybersecurity incidents, the proposal would require advisers and funds to publicly disclose cybersecurity risks and significant cybersecurity incidents that occurred in the last two fiscal years in their brochures and registration statements.
Additionally, the proposal would set forth new recordkeeping requirements for advisers and funds that are designed to improve the availability of cybersecurity-related information and help facilitate the Commission’s inspection and enforcement capabilities.
The proposal will be published on SEC.gov and in the Federal Register. The public comment period will remain open for 60 days following the publication of the proposing release on the SEC’s website or 30 days following the publication of the proposing release in the Federal Register, whichever period is longer.
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SEC.gov | SEC Proposes to Enhance Private Fund Investor Protection
The Securities and Exchange Commission today voted to propose new rules and amendments under the Investment Advisers Act of 1940 (Advisers Act) to enhance the regulation of private fund advisers and to protect private fund investors by increasing transparency, competition, and efficiency in the $18-trillion marketplace.
"Private fund advisers, through the funds they manage, touch so much of our economy. Thus, it’s worth asking whether we can promote more efficiency, competition, and transparency in this field," said SEC Chair Gary Gensler. "I support this proposal because, if adopted, it would help investors in private funds on the one hand, and companies raising capital from these funds on the other."
The proposed rules would increase transparency by requiring registered private fund advisers to provide investors with quarterly statements detailing certain information regarding fund fees, expenses, and performance.
Additionally, the proposed rules would prohibit private fund advisers, including those that are not registered with the SEC, from providing certain types of preferential treatment to investors in their funds and all other preferential treatment unless it is disclosed to current and prospective investors.
The proposed changes also would create new requirements for private fund advisers related to fund audits, books and records, and adviser-led secondary transactions.
The proposals also would prohibit all private fund advisers from engaging in several activities, including seeking reimbursement, indemnification, exculpation, or limitation of liability for certain activity; charging certain fees and expenses to a private fund or its portfolio investments, such as fees for unperformed services and fees associated with an examination or investigation of the adviser; reducing the amount of an adviser clawback by the amount of certain taxes; charging fees or expenses related to a portfolio investment on a non-pro rata basis; and borrowing or receiving an extension of credit from a private fund client.
In addition, the SEC proposed amendments to the Advisers Act compliance rule that would require all registered advisers, including those that do not advise private funds, to document the annual review of their compliance policies and procedures in writing.
The public comment period will remain open for 60 days following publication of the proposing release on the SEC’s website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.
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