Securities Regulation Daily Wrap Up, REGULATION TRACKER—Upcoming SEC and CFTC comment deadlines and effective dates, (Mar 13, 2023)

By WK Editorial Staff

A table of proposed rule comment dates and final rule effective and compliance dates for SEC and CFTC rulemaking.

Recent SEC activity includes the following:

Form 144 hours. The SEC extended the filing deadline for Form 144. An amendment to Regulation S-T extends the filing deadline for Form 144 from 5:30 p.m. to 10 p.m. Eastern Time. EDGAR will be updated to include Forms 144 and 144/A17 among the submission types that EDGAR will accept and disseminate on the same day if the submissions are made from 6:00 a.m. to 10:00 p.m. The Commission expects these updates to be completed on or about March 20, 2023. Technical amendments were made to other provisions for consistency related to the filing format of Form 144.

Settlement cycle. The SEC has adopted rules to shorten the securities transaction settlement cycle from two to one business days after the trade date. Amended Rule 15c6-1 shortens the standard settlement cycle to T+1. New Rule 15c6-2 concerns how institutional trades are allocated and requires broker-dealers and investment advisers to establish written policies and procedures to ensure that allocations, confirmations, and affirmations are completed on the trade date. The rules also contain new requirements to facilitate straight-through processing by clearing agencies that are central matching service providers.

Advisory client assets. The SEC proposed a new rule addressing how investment advisers safeguard client assets. The current custody Rule 206(4)-2 would be amended and redesignated as new Rule 223-1 and expanded in scope beyond client funds to include any client assets of which an adviser has custody. The proposal would also update and enhance related recordkeeping requirements for advisers and amend Form ADV to align reporting obligations with the proposed rule.

Privacy Act. The SEC proposed amendments under the Privacy Act of 1974 intended to clarify and streamline the language of several provisions. The proposed revisions, which would replace the current regulations in their entirety, would, among other benefits, update the rules to account for modern technology. The proposed rules would revise procedural and fee provisions and eliminate unnecessary provisions. A new rule would allow for electronic methods to verify one’s identity and to submit Privacy Act requests.

ABS Conflicts of Interest. The SEC re-proposed a 2011 rule prohibiting certain conflicts of interest in the context of asset-backed securities. Proposed Rule 230.192 would implement Securities Act Section 27B and prohibit transactions involving or resulting in material conflicts of interest between a securitization participant and an investor in an asset-backed security. The rule would apply to the underwriter, placement agent, initial purchaser, or sponsor of an ABS and prohibits directly or indirectly entering into certain conflicted transactions within one year after the date of the first closing of the sale of the ABS. The proposed rule carves out exceptions for risk-mitigating hedging activities, liquidity commitments, and bona fide market-making activities.

Regulation Best Execution. The SEC proposed new Regulation Best Interest. The new rules would require brokers, dealers, government securities brokers, government securities dealers, and municipal securities dealers to establish, maintain, and enforce written policies and procedures reasonably designed to comply with the proposed best execution standard. More robust policies and procedures for would be required for broker-dealers engaging in certain conflicted transactions for or with a retail customer. The new rules would also mandate that broker-dealers review the execution quality of their customer transactions at least quarterly and review their best execution policies and procedures at least annually, followed by a report to their boards detailing the results.

Order competition. The SEC proposed to add a new rule to Regulation NMS promoting order competition. The proposed rule would prohibit a restricted competition trading center from internally executing certain orders of individual investors at a price unless the orders are first exposed to competition at that price in a qualified auction operated by an open competition trading center. The rule applies, with limited exceptions, to "segmented orders," that is, orders for NMS stocks made for an account of a natural person in which the average daily number of trades executed in NMS stocks was less than 40 in each of the six preceding calendar months.

Minimum pricing increments. The SEC proposed to amend Regulation NMS rules regarding pricing, fees, and transparency. The proposed rule would amend the minimum pricing increments, or "tick sizes," under Rule 612 to establish a variable minimum pricing increment model that would apply to both the quoting and trading of NMS stocks regardless of trading venue. Access fee caps under Rule 610 would also be reduced and exchanges would be required to make the amounts of all fees and rebates determinable at the time of execution. The proposal would also accelerate the implementation of the round lot and odd-lot information definitions adopted under the Market Data Infrastructure Rules and amend the odd-lot information definition to require the identification of the best odd-lot order.

Order execution information. The SEC proposed amendments to enhance the disclosure of order execution information required under Rule 605 of Regulation NMS. The proposed amendments would: expand the scope of entities subject to Rule 605; expand the rule's scope to cover additional order categories; modify the information required to be reported under the rule; and require all entities subject to the rule to make available a summary report.

Proxy voting disclosure. The SEC adopted amendments to Form N-PX to enhance reporting of proxy and executive compensation votes. The amendments require funds and managers to categorize each matter by type and, where a form of proxy or “proxy card” subject to the proxy rules is available, tie the description and order of voting matters to the issuer’s form of proxy. In addition, the amendments prescribe how funds and managers organize their reports and require them to use a structured data language to make the filings easier to analyze. Funds and managers must also disclose how their securities lending activity impacted their voting. New Rule 14Ad-1 requires institutional investment managers to disclose how they voted on executive compensation, that is, so-called "say-on-pay" matters.

Please see the SEC Regulation Tracker for proposal comment deadlines and final rule compliance dates.

CFTC

Recent CFTC activity includes the following:

Swaps clearing update re: LIBOR. The CFTC adopted a final rule that revises CFTC Regulations 50.4 and 50.26 to account for newer overnight, nearly risk-free reference rates that have begun to replace LIBOR, which is being phased out years after a global manipulation scandal. Prior to January 2022, LIBOR consisted of five currencies with seven tenors, resulting in 35 individual LIBOR rates that now either are no longer published or are no longer representative of markets.

Please see the CFTC Regulation Tracker for proposal comment deadlines and final rule compliance dates.

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