On June 21, 2019, the SEC adopted security-based swap (SBS) capital, margin and segregation requirements (the SEC Rules) for SBS dealers (SBSDs) and major SBS participants, revised the capital and segregation requirements for broker-dealers that are not SBSDs to the extent they engage in SBS
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Broker-Dealer
Davis Polk Client Memorandum: SEC and FINRA Staffs Highlight Broker-Dealer Regulatory Challenges Raised by Digital Assets—And Hint at Solutions
Broker-dealer custody of on-blockchain assets has been a key hurdle in the development of a more regulated financial infrastructure for digital assets in the United States. In a joint statement (the Joint Statement), the staffs of the SEC and FINRA outlined their concerns about broker-dealers’ ability to comply with…
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Davis Polk Visual Memorandum: SEC Adopts Regulation Best Interest, Form CRS and Related Advisers Act Interpretations
The SEC adopted its long-awaited Regulation Best Interest, establishing new standard of conduct regulations for SEC-registered broker-dealers and their associated persons that are natural persons. At the same time, the SEC adopted (i) a new relationship summary disclosure requirement, on Form CRS, for broker-dealers and investment advisers who offer services…
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Chairman Jay Clayton and Director Brett Redfearn Preview Potential Further Equity Market Structure Reforms—Exchange Market Data Business Model Targeted
Posted in Broker-Dealer, SEC
Earlier this month, SEC Chairman Jay Clayton and Division of Trading and Markets Director Brett Redfearn engaged in a public dialogue on equity market structure issues. In addition to reviewing three equity market structure initiatives adopted by the SEC in 2018 (the transaction fee pilot, enhanced order handling …
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U.S. Regulators Announce BSA/AML Enforcement Actions Against U.S. Broker-Dealers
As 2018 came to a close, U.S. financial regulators continued to pursue anti-money laundering (“AML”) enforcement actions against financial institutions, announcing monetary penalties against and resolutions with three U.S. broker-dealers. The Financial Crimes Enforcement Network (“FinCEN”), the Securities and Exchange Commission (“SEC”) and the…
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SEC Adopts Enhanced Order Handling Disclosure Requirements
The SEC recently voted to adopt amendments to Rule 606 of Regulation NMS (the “Final Rule”) that expand broker-dealers’ disclosure obligations with regard to how they handle investors’ orders. Specifically, the Final Rule requires broker-dealers, beginning May 20, 2019, (i) to provide, upon request, individualized reports in a…
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The CAT Nap Continues
Posted in Broker-Dealer, SEC
The Director of the SEC’s Division of Trading and Markets, Brett Redfearn, recently provided an update on the status of the consolidated audit trail (the “CAT”), which is being developed by the SROs and Thesys Technologies, LLC, the CAT plan processor. The public statement noted that although the…
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SEC Proposes Equity Market Study: Beginning of the End for the Maker-Taker Model?
In the first major trading and markets initiative under SEC Chairman Jay Clayton, on March 14, 2018, the SEC proposed to establish a transaction fee pilot program to study the effects of maker-taker fee structures. A pilot study was initially recommended by the SEC’s Equity Market Structure Advisory Committee in…
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FINRA Seeks Comment on Applying Various Rules to U.S. Treasuries and Extending Certain Equity Market Rules to All Debt Securities
Posted in Broker-Dealer, SEC
Responding to a 2016 request by the SEC (in consultation with the Treasury Department), FINRA recently reviewed the extent to which various FINRA rules apply to U.S. Treasury securities. Following up on that analysis, on February 6, 2018, FINRA issued Regulatory Notice 18-05, requesting comment on whether it should…
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The CFTC Forges Ahead with Listed Bitcoin Derivatives
By Jai R. Massari on
With virtual currency markets booming and bitcoin prices at record highs, U.S. financial regulators have been—each in its own manner—considering whether and how to regulate virtual currencies and related products. Last week, the U.S. Commodity Futures Trading Commission (CFTC) announced that three futures exchanges—CME, Cboe Futures Exchange, and Cantor Exchange—self-certified…
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