Pursuant to FINRA Rule 4210(f)(8)(A), FINRA is establishing higher strategybased margin requirements for exchange-traded notes (ETNs) and options on ETNs in light of the complex nature of these products. The new requirements for initial and maintenance margin are detailed in the regulatory notice. In addition, FINRA is clarifying that ETNs and options on ETNs are not eligible for portfolio margining under FINRA Rule 4210(g).
MSRB Regulatory Notice 19-15 SEC Approves Amendments to MSRB Rules and Data Collection Related to Primary Offering Practices
The MSRB received approval from the SEC on June 27, 2019 of amendments to MSRB Rule G-11, on primary offering practices, MSRB Rule G-32, on disclosures in connection with primary offerings and MSRB Form G-32, regarding a collection of data elements provided in electronic format to the Electronic Municipal Market Access Dataport (the “EMMA® Dataport”) system in connection with primary offerings.
SEC Release No. 34-86246 Order Granting Approval of a Proposed Rule Change to Adopt Additional Requirements for Listings in Connection with an Offering Under Regulation A of the Securities Act
The Exchange proposed to adopt a new initial listing requirement for companies listing on the Exchange in connection with an offering under Regulation A of the Securities Act. Specifically, the Exchange proposed to require any company listing on the Exchange in connection with an offering under Regulation A to have a minimum operating history of two years at the time of approval of its initial listing application.
SEC Release No. 34-86175 Capital, Margin, and Segregation Requirements for Security-Based Swap Dealers and Major Security-Based Swap Participants and Capital and Segregation Requirements for Broker-Dealers
In accordance with the Dodd-Frank Act, the SEC, pursuant to the Securities Exchange Act of 1934 (“Exchange Act”), is adopting capital and margin requirements for security-based swap dealers (“SBSDs”) and major security-based swap participants (“MSBSPs”), segregation requirements for SBSDs, and notification requirements with respect to segregation for SBSDs and MSBSPs. The Commission also is increasing the minimum net capital requirements for broker-dealers authorized to use internal models to compute net capital (“A NC broker-dealers”), and prescribing certain capital and segregation requirements for broker-dealers that are not SBSDs to the extent they engage in security-basedswap and swap activity. The Commission also is making substituted compliance available with respect to capital and margin requirements under Section 15F of the Exchange Act and the rules thereunder and adopting a rule that specifies when a foreign SBSD or foreign MSBSP need not comply with the segregation requirements of Section 3E of the Exchange Act and the rules thereunder.
SR-NYSE-2019-22 Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 2, to Amend NYSE Rule 7.31 to Add a New Order Type, Capital Commitment Order, Modify the Market Order and the Last Sale Peg Modifier, and Make Related Changes to NYSE Rules 7.16, 7.18, 7.34, 7.36, and 7.37
The Exchange proposes to amend Rule 7.31 (Orders and Modifiers) to add a new order type, Capital Commitment Order, and make related changes to Rules 7.16, 7.18, 7.34, 7.36, and 7.37. The Exchange proposes to further amend Rule 7.31 to specify that Market Orders and the Last Sale Peg Modifier would not be available to Designated Market Makers (“DMMs”). This Amendment No. 2 supersedes the original filing and Amendment No. 1 in its entirety.
Cboe RG19-022 Regulatory Division Contacts for Market Maker Quoting Issues and Late Withdrawals/Terminations
This circular was issued to inform Trading Permit Holders (“TPHs”) and Members registered as Market Makers of contact information for notifying the Regulatory Division when a Market Maker experiences quoting issues and when a Market Maker changes its appointment selections or withdraws or terminates its appointment or registration in a given security after the applicable cutoff time.
SEC Release NO. 33-10648 Auditor Independence With Respect to Certain Loans or Debtor-Creditor Relationships
The SECis adopting amendments to its auditor independence rules to refocus the analysis that must be conducted to determine whether an auditor is independent when the auditor has a lending relationship with certain shareholders of an audit client at any time during an audit or professional engagement period. The amendments focus the analysis on beneficial ownership rather than on both record and beneficial ownership; replace the existing 10 percent bright-line shareholder ownership test with a “significant influence” test; add a “known through reasonable inquiry” standard with respect to identifying beneficial owners of the audit client’s equity securities; and exclude from the definition of “audit client,” for a fund under audit, any other funds, that otherwise would be considered affiliates of the audit client under the rules for certain lending relationships. The amendments will more effectively identify debtor-creditor relationships that could impair an auditor’s objectivity and impartiality, as opposed to certain more attenuated relationships that are unlikely to pose such threats, and thus will focus the analysis on those borrowing relationships that are important to investors.
The Commission is adopting an amendment to an exemptive provision in the broker-dealer annual reporting rule under the Securities Exchange Act of 1934 (“Exchange Act”). The exemption provides that a broker-dealer is not required to engage an independent public accountant to certify the broker-dealer’s annual reports filed with the Commission if, among other things, the securities business of the broker-dealer has been limited to acting as broker (agent) for a single issuer in soliciting subscriptions for securities of that issuer.
Pursuant to industry regulations, the Exchanges are each required to establish standards for the designation of those participants that the respective Exchange reasonably determines are, taken as a whole, the minimum necessary for the maintenance of fair and orderly markets in the event of the activation of the Exchange’s business continuity and disaster recovery plans and designate participants pursuant to those standards. Designated Members and Designated Trading Permit Holders (“Designated Participants”) are required to participate in testing of the respective Exchange’s business continuity and disaster recovery plans. Periodically the Exchanges announce mandatory testing dates. The next mandatory test is October 26, 2019.
The SEC is adopting a new rule, establishing a standard of conduct for broker-dealers and natural persons who are associated persons of a broker-dealer when they make a recommendation to a retail customer of any securities transaction or investment strategy involving securities. Regulation Best Interest enhances the brokerdealer standard of conduct beyond existing suitability obligations, and aligns the standard of conduct with retail customers’ reasonable expectations by requiring broker-dealers, among other things, to: (1) act in the best interest of the retail customer at the time the recommendation is made, without placing the financial or other interest of the broker-dealer ahead of the interests of the retail customer; and (2) address conflicts of interest by establishing, maintaining, and enforcing policies and procedures reasonably designed to identify and fully and fairly disclose material facts about conflicts of interest, and in instances where we have determined that disclosure is insufficient to reasonably address the conflict, to mitigate or, in certain instances, eliminate the conflict. The standard of conduct established by Regulation Best Interest cannot be satisfied through disclosure alone. The standard of conduct draws from key principles underlying fiduciary obligations, including those that apply to investment advisers under the Investment Advisers Act of 1940. Importantly, regardless of whether a retail investor chooses a broker-dealer or an investment adviser (or both), the retail investor will be entitled to a recommendation (from a broker-dealer) or advice (from an investment adviser) that is in the best interest of the retail investor and that does not place the interests of the firm or the financial professional ahead of the interests of the retail investor.
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