Resources/ Updates - May 2014

The SDDco Client Update

The SDDco Client Update is an action oriented email prepared in-house, tailored to client needs, and sent as an adjunct to our online newsletter.  Verified newsletter subscribers receive our Client Update once each month.

The SDDco Client Update is intended to provide general information only. It is not intended as, and should not be taken as, financial, tax, accounting, legal, consulting or any other type of advice specific to you or your firm. Users of the SDDco Client Update should not act or refrain from acting on the basis of information provided on the website. Always check with your accountant and/or attorney.


Arbitrator Mid-case Referrals ~ FINRA Rule Refile

Under current FINRA rules, arbitrators may refer a case to FINRA for disciplinary investigation at the end of arbitration.  FINRA has again filed with the SEC a proposal to authorize arbitrators to make such referrals during arbitration proceedings. FINRA proposes to amend Rule 12104 of the Code of Arbitration Procedure for Customer Disputes (“Customer Code”)

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Target Date Retirement Funds ~ Round 3 of Disclosure Comments

The third round of SEC comment requests on enhancing the disclosures of target date retirement funds ( “TDFs”) with info-specific graphs is winding down.  While TDFs are more prevalent than ever as pension investment options, the SEC contends that TDFs should provide certain fund specific data graphically in their marketing material so that investors can understand the asset allocations and risks over

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SEC Warns About Marijuana Microcap Investments

An SEC investor alert concerns microcap companies claiming operations connected to the marijuana industry.  The alert cautions investors about the potential for fraud related to the weed business, citing the tendency for schemers to exploit the latest growth industry (no pun intended) to entice investors with an unfounded potential of high returns. This warning was

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For Municipal Advisors on MSRB Registration ~ Action Req’d by Aug 10th

The Municipal Securities Rulemaking Board (MSRB)—regulator of entities engaged in municipal securities and advisory activities—amended Rule A-12, to consolidate MSRB registration requirements into a single rule and to create Form A-12, a simplified electronic registration form. New guidance, including a few FAQs, details the steps that firms need to take to update or establish their

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Proposed Rules for Security-Based Swap Dealers-Participants Built on BD Rules

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) the SEC has proposed rules for comment related to the assigned governance of security-based swap dealers (“SBSDs”) and major security-based swap participants (“MSBSPs”) modeled after broker-dealer rules including the FOCUS report. The proposed rules cover: Recordkeeping, reporting, and notification requirements (“reqs”)  for SBSDs and

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Be Wary of Bitcoin Investments

The lure of a seemingly ground-floor opportunity in a novel investment space could easily cloud judgment.  As such, the SEC’s Office of Investor Education and Advocacy (OIEA) issued an alert on Bitcoin and other virtual currency to inform investors of the associated risks. Bitcoin Defined Bitcoin is a “decentralized, peer-to-peer virtual currency that is used like

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For Brokers-Dealers with Market Access: FAQs on Rule 15c3-5

Consider the initial guidance on Exchange Act Rule 15c3-5  (Risk Management Controls for Brokers or Dealers with Market Access) within the new FAQ doc provided by the Division of Trading and Markets of the SEC (“Staff”) . Backfill In November 2010, the SEC adopted Securities Exchange Act Rule 15c3-5 to reduce the risks of broker-dealers and the

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Clarity on BD Filing Requirements ~ And June 1st Effective Date

The SEC Division of Trading and Markets released in April answers to questions concerning the July 30, 2013 amendments to the broker-dealer financial reporting rule.  This guidance addresses questions related to broker-dealer (BD) filing requirements under amendments to Rule 17a-5: BDs must file one of two new reports with the SEC annually;  A compliance report if the

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CFTC Portal Serves More Market Participants

The Commodity Futures Trading Commission (CFTC) increased its portal service to enable more market participants to E-submit event-specific reports.  Now designated contract markets (DCMs), swap execution facilities (SEFs), and swap data repositories (SDRs), can electronically submit event-specific reports to the CFTC in a more timely manner. Per the CFTC, old and new users of the

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FINRA Approves Must Do Registrant Background Checks

FINRA’s board has approved changes to the supervision rule that would mandate member firms to perform background checks on their employee FINRA registrants. Such checks would verify the information entered on Form U4 (the Uniform Application for Securities Industry Registration or Transfer). Broker-Dealer Due Diligence Under new rules, if SEC approved, broker-dealers would need to:

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Municipal Advisor Model Docs ~ New SEC Reg Rules Assistance

In September of 2013, the Securities and Exchange Commission (SEC) approved final rules defining a Municipal Advisor (MA), requiring MA registration (absent specific exceptions and exemptions) and imposing fiduciary obligations. MA Related Model Docs Consider the editable MA model documents and guidance issued by the Securities Industry and Financial Markets Association (SIFMA).  These docs assist brokers-dealers, issuers

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Reminder on New FINRA Payment Paths

FINRA switched its banking services to Bank of America in February 2014, but continued to accept payments mailed or wired to its former bank (Mellon Bank). Effective May 31, 2014, Mellon Bank will no longer accept payments on behalf of FINRA. FINRA payments (except for GASB) Mail FINRA P.O. Box 418911, Boston, MA  02241-8911 Overnight/Courier

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SEC Issues Cybersecurity Risk Alert for BDs & RIAs

The SEC ’s Office of Compliance Inspections and Examinations (OCIE) issued a Risk Alert detailing its initiative to examine firm’s cybersecurity procedures.  The document explains the SEC’s intention to examine over 50 broker-dealers (“BDs”) and registered investment advisers (“RIAs”). The examination will focus on an entity’s: Cybersecurity governance Identification and assessment of cybersecurity risks Protection of networks and information Risks

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MSRB Implements New Fees for MA Professionals

On April 17, 2014 the Municipal Securities Rulemaking Board (MSRB) registered a new rule with the Securities and Exchange Commission (SEC) to adopt a $300 annual fee for each municipal adviser professional. In compliance with the new MSRB Rule A-11, all registered municipal advisers are expected to pay this annual professional fee to curb rising

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