Author Archives: aStoj

About aStoj

Amelia was an associate in the Private Investment Fund practice group at Proskauer Rose LLP. While at Proskauer she represented general partners and limited partners of private equity funds in connection with the structuring, formation, offering and on going operations of a variety of domestic and offshore private equity funds. Prior to this, Amelia spent two years working in-house at a hedge fund in Boston, MA. Amelia received a J.D. from the University of Connecticut School of Law in 2008 and a B.A. from Wesleyan University in 2002.

The SEC Proposes Two New Rules Under the Dodd Frank Act

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Whistleblower Program

The SEC proposed a new whistleblower program under the Dodd Frank Act. The SEC’s proposed rule provides a simple, straightforward procedure for potential whistleblowers to provide critical information to the agency.  To be considered for an award, a whistleblower must voluntarily provide the SEC with original information about a violation of the federal securities laws that leads to the successful enforcement by the SEC of a federal court or administrative action in which the SEC obtains monetary sanctions totaling more than $1 million. The SEC is asking for comments on or before December 17, 2010.  To see the proposed rule please go to: http://www.sec.gov/rules/proposed/2010/34-63237.pdf

Rule to Prevent Fraud in Connection with Security-Based Swaps:

The rule is proposed under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which generally authorizes the SEC to regulate security-based swaps. The proposed rule would add a definition of “security-based swap” to the U.S. Exchange Act of 1934 (the “Exchange Act”). “Security-based swaps” will be subject to the general antifraud provisions of the federal securities laws (for e.g., section 10(b) of the Exchange Act.

The proposed rule would ensure that market conduct in connection with the offer, purchase or sale of any security-based swap is subject to the same general anti-fraud provisions that apply to all securities.  The rule also would explicitly reach misconduct in connection with ongoing payments and deliveries under a security-based swap. The proposed antifraud rule would apply not only to offers, purchases and sales of security-based swaps, but also to the cash flows, payments, deliveries, and other ongoing obligations and rights that are specific to security-based swaps.  Further, the rule would make explicit the liability of persons that engage in misconduct to trigger, avoid, or affect the value of such ongoing payments or deliveries.  For further details please see http://www.sec.gov/rules/proposed/2010/34-63236.pdf

CFTC-SEC Advisory Committee to Meet on May 24

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The Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC) announced that the first meeting of the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues will be held on Monday, May 24.

The Joint Committee will discuss the preliminary findings of the staffs of the CFTC and SEC related to the unusual market events of May 6.  Monday’s meeting will be webcast live on the Internet at www.sec.gov.

For a list of members of the Joint Committee please go to http://www.sec.gov/news/press/2010/2010-79.htm

SEC, CFTC Announce the Creation of a new Joint CFTC-SEC Advisory Committee

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Securities and Exchange Commission Chairman Mary Schapiro and Commodity Futures Trading Commission Chairman Gary Gensler recently announced the formation of a joint committee that will address emerging regulatory issues.  The establishment of this committee was one of many recommendations included in the agencies’ harmonization report issued last year.  The first item on the committee’s agenda will be to review last Thursday’s market events and to make recommendations related to market structure issues, disparate trading conventions and rules across various markets.

Read More: http://www.sec.gov/rules/other/2010/33-9123.pdf
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More on the New Financial Reform Bill

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As posted last night on Compliance Avenue, Senator Christopher Dodd unveiled a financial regulatory reform bill Monday.  This 1336 page bill proposed what some have called the “most sweeping overhaul of financial regulation since the depression,” and included a provision that would require advisers to private funds with more than $100 million in AUM to register with the SEC as investment advisers. Two other areas of the bill are of particular import to hedge funds and hedge fund managers: (1) the regulation of over-the-counter derivatives markets; and (2) the inclusion of  the “Volcker Rule” (For a full report on the bill see the Wall Street Journal.)

1. Regulation of Over-the-Counter Derivatives Markets.

The current bill represents little change from the November draft.  But, Senators Jack Reed and Judd Gregg are working on a substitute amendment to this title that may be offered at full committee.  As currently written, the over-the-counter derivatives market will be regulated by the SEC and the CFTC.  The bill also requires central clearing and exchange trading for derivatives that can be cleared.  The SEC and the CFTC must pre-approve contracts before clearing houses can clear them but, both regulators and clearing houses will have a role in determining which contracts should be cleared.

The bill has also added safeguards for un-cleared trades.   Any un-cleared trades will require margin to offset the greater risk such trades pose.  In addition, swap dealers and major swap participants will be subject to capital requirements.

Finally, the bill aims to increase market transparency by requiring data collection and publication through clearing houses or swap repositories.

2. Volcker Rule.

The bill would implement a form of the “Volcker Rule,” named after former Fed Chairman Paul Volcker.  Specifically, the bill would require regulators to implement regulations to prohibit banks, their affiliates and bank holding companies, from proprietary trading.   The regulations would also prohibit such institutions from investing in, or sponsoring, hedge funds and private equity funds.  Notably, before any regulations are written, the bill calls for a study and recommendations to made by the Financial Stability Oversight Council.

The New York Times reports that Sen. Dodd hopes to begin holding votes in committee starting next week, and to have the legislation on the Senate floor by late April.