SEC Activity:

• Fund of funds arrangements. The SEC has adopted a new rule and related amendments that update the regulatory framework for fund of funds arrangements. New Rule 12d1-4 allows a fund to acquire the shares of another fund in excess of the limits of the Investment Company Act, replacing the existing approach of obtaining an individual exemptive order from the Commission. The Commission has also taken related actions to create a consistent and streamlined regulatory framework, such as rescinding Rule 12d-1 and certain exemptive orders permitting fund of funds arrangements

• Bank statistical disclosures. The SEC adopted final rules that update the statistical disclosures required from bank and savings and loan registrants while eliminating items that overlap with Commission rules, U.S. GAAP, or IFRS. Codified in new subpart 1400 of Regulation S-K, the new rules reflect the evolving nature of the industry and accounting standards. The rules also rescind Industry Guide 3, Statistical Disclosure by Bank Holding Companies.

• NMS fee amendments. The SEC rescinded a rule exception that allowed a proposed national market system (NMS) plan fee amendment to become effective on filing without review and comment by market participants. The new procedures will require public notice of proposed NMS plan fee amendments and provide for Commission approval by order before a changed fee may be charged. The Commission also modified the procedures for review of proposed NMS plans to add certainty to the process for NMS plan participants
• EDGAR submissions. The SEC proposed a new rule clarifying its approach to administrative issues that arise in connection with EDGAR submissions. Proposed Rule 232.15 is intended to confirm and clarify the Commission’s existing approach to addressing administrative issues arising in connection with EDGAR submissions and provides for several actions the Commission may take to promote the reliability and integrity of the submissions. In addition, the proposed rule would set forth a process to notify filers of the Commission’s actions under the proposed rule as soon as reasonably practicable.
• Fund disclosure. The SEC has unanimously proposed modifications to the mutual fund and exchange-traded fund disclosure frameworks to enhance transparency and modernize disclosure by encouraging “visually engaging” shareholder reports highlighting information particularly important to retail investors. Separately, the SEC also published procedures setting forth a staff-led process to nominate candidates for appointment to the Investor Advisory Committee.
• COVID-19 crowdfunding. The SEC passed temporary rules meant to allow eligible companies quicker access to capital via crowdfunding. The rules implement several suggestions that had been floated by members of the Small Business Capital Formation Advisory Committee in a meeting. Through August, eligible issuers can gauge interest in a Regulation Crowdfunding offering before preparing full offering materials and may close such an offering earlier than under the permanent rules. Issuers seeking less than $250,000 that do not have audited or reviewed financial statements may proceed without them. The SEC has extended the expiration of these temporary rules to September 21, 2021.
• Fund valuations. The SEC voted to propose a new rule to establish a framework for fund valuation practices with regard to changes in the markets, including increases in the types of fund holdings and changes in the data used in valuation determinations. According to the Commission, the proposal also accounts for the importance of investment adviser expertise. In particular, the proposed rule would establish requirements for fund boards to meet their respective obligations to determine fair value in good faith for purposes of the Investment Company Act.

CFTC Activity:

• Commodity broker bankruptcy: The CFTC proposed amendments to Part 190 regulations governing bankruptcy proceedings of commodity brokers regarding efforts to foster a resolution proceeding under Title II of the Dodd-Frank Act.

• Swaps margin requirements. Two proposals address margin for uncleared swaps:

  • A proposal would amend the calculation of the threshold for requirements initial margin (IM) for uncleared swaps and timing provisions in line with the Basel Committee on Banking Supervision and Board of the International Organization of Securities Commissions’ (BSBS/IOSCO) Framework for margin requirements for non-centrally cleared derivatives. The proposal also would allow risk-based calculation of IM.

  • A proposal would amend the CFTC Margin Rule to permit the application of separate minimum transfer amounts for initial and variation margin and the application of a minimum transfer amount of up to $50,000 for separately managed accounts.

• Capital requirements. Final rules impose minimum capital requirements and financial reporting requirements on swap dealers (SDs) and major swap participants (MSPs) that are not subject to a prudential regulator. The rules also amend existing capital requirements for futures commission merchants (FCMs) to provide for risk-based capital deductions and amend certain reporting and notice requirements.

NFA Activity:

• Beginning today, November 19, 2020, a person seeking relief from CPO registration pursuant to CFTC Regulation 4.13(a)(1), 4.13(a)(2), 4.13(a)(3) or 4.13(a)(5) must complete, in NFA’s Exemptions System, a statutory disqualification attestation including this mandated representation. A person that currently has a 4.13 exemption is not required to complete the statutory disqualification attestation until it completes the annual exemption affirmation process in 2021. Any person not completing this attestation will not qualify for the exemption or renewal of the exemption. More information on the annual affirmation process will be distributed in December 2020.