Katten Financial Markets And Funds Quick Take – Fund Management / REITs


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SEC reopens/extends comment period on major rule proposals, including private fund adviser proposals

The Securities and Exchange Commission (SEC) announced that it is extending until June 17 the public comment period on proposed regulations to improve and standardize climate-related information for investors. The SEC also announced that it will reopen comment periods on proposed regulations to strengthen protections for private equity investors and on proposed regulations to include major Treasury Markets platforms in ATS regulations during 30 days. Read the SEC announcement.

SEC Examination Division Risk Alert on MNPI and Code of Ethics Compliance

On April 26, the Examinations Division (EXAMS) of the Securities and Exchange Commission (SEC) issued a risk alert on deficiencies observed by EXAMS staff in their examinations of investment advisers related to Section 204A of the Investment Advisers Act 1940 (Advisors Act). Section 204A requires all investment advisers, registered and unregistered, to establish, maintain and enforce written policies and procedures reasonably designed, having regard to the nature of the adviser’s business, to prevent the misuse of material non-public information (MNPI). The following are examples of areas where deficiencies were observed by EXAMS staff:

  • use of expert networks;

  • the use of alternative data by private fund managers and other investment advisers; and

  • “Value-Added Investors”, who are customers or fund investors who are corporate executives or professional finance investors who may have MNPI.

The risk alert also discussed deficiencies associated with the Ethics Code Rule (Rule 204A-1 under the Advisers Act) identified by EXAMS staff.

Investment advisers should carefully review the risk alert and assess their compliance policies, procedures and practices focusing on the issues raised in the risk alert to determine whether those policies and procedures are reasonably designed to prevent misuse of MNPI. Read the full risk alert.

SEC Chairman Raises Multiple Concerns About Crypto Trading Platforms, Token Issuers, and Stablecoins

Gary Gensler, Chairman of the Securities and Exchange Commission (SEC), raised multiple concerns about crypto trading platforms, token issuers in general and stablecoins in particular, during a presentation before the law school of the University of Pennsylvania on April 4.

Chairman Gensler said that because crypto trading platforms are “probably trading securities,” he directed SEC staff to undertake several defined initiatives. These include: (1) ensuring that platforms…are registered and regulated much like stock exchanges; (2) assess how best to ensure the protection of client assets on such exchanges, and in particular whether separate custody would be appropriate; and (3) work with the Commodity Futures Trading Commission to determine how best to register and regulate platforms where trading in securities and non-securities is intertwined. Chairman Gensler did not distinguish between centralized and decentralized trading platforms in outlining his initiatives, noting that his concerns apply to crypto trading and lending platforms, whether they call themselves centralized or decentralized. (Challenge). Read President Gensler’s comments.

FINRA Regulatory Notice on Sales Practice Obligations for Complex Products

The Financial Industry Regulatory Authority (FINRA) recently issued Regulatory Notice 22-08, which reminds FINRA members of their sales practice obligations for complex products and options and invites feedback on effective practices and rule improvements. The comment period ends on May 9. FINRA is concerned that investors – especially those using a self-directed platform – may not have the financial experience necessary to understand complex products and their associated risks or that the investment may perform unexpectedly on various markets or economic conditions. These new guidelines are timely due to the significant increase in trading of complex products, more investors trading these products online, and the application of Best Interest regulations. Learn more about the regulatory notice.

FDIC Requires Reporting of Crypto-Related Activities

Any institution supervised by the Federal Deposit Insurance Corporation (FDIC) that plans to engage in crypto-related activity must now notify the FDIC of its intention and provide all information necessary to establish a dialogue with the agency about the risks. related to such activity. This requirement follows the FDIC’s issuance of a Financial Institution Letter (FIL) on April 7 to all financial institutions supervised by the FDIC (namely, state-chartered banks that are not members of the Federal Reserve System) requiring notification to the agency if the institution is engaged or intends to engage in crypto-related activities. Read the full review.

SEC proposes climate-related disclosure requirements

On March 21, the Securities and Exchange Commission (SEC) proposed rule changes that would require public companies to include certain climate-related information in their registration statements and periodic reports. The proposed rule would require public companies to disclose information about climate-related risks that are reasonably likely to materially affect their business, results of operations or financial condition. In addition, public companies would be required to disclose their greenhouse gas emissions (GHG emissions) and include certain climate-related measures in their financial statements. Read the full article.

SEC Climate Comment Letters – Avoiding Potential Pitfalls

In September 2021, the Securities and Exchange Commission (SEC) provided a sample comment letter that included nine potential climate-related comments the SEC could direct to companies regarding their climate-related disclosure or lack thereof. . The SEC recently began publishing the comment letters and responses. Katten’s attorneys have reviewed climate-related comment letters unrelated to a securities offering through April 24 and identified trends and some key points companies can consider to potentially reduce their securities compliance costs related to these comment letters on climate change. Read the full article.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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