Tag Archives: Dodd-Frank

SEC December Activities Implementing Dodd-Frank

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The SEC staff continues to carry out the rulemaking and proceed with the studies mandated by the Dodd-Frank Act.

The SEC’s  “Implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act” web page consolidates links to all of the SEC’s related accomplishments to date, includes a calendar of its planned activities implementing the Dodd-Frank Act through July 2011 and provides a link to comments the SEC has received on both rulemaking and planned studies.

In November, the SEC proposed the following: an anti-manipulation rule for security-based swaps, a Whistleblower Incentives and Protection Program, rules regarding the registration and regulation of security-based swap repositories and security-based swap reporting and, most recently, exemptions from investment adviser registration for venture capital firm advisers and certain private fund advisers, as well as rules and changes to forms to implement the transition of mid-sized investment advisers from SEC to State regulation.

Highlights of the December, 2010 calendar most relevant to hedge funds and investment advisers include: Continue reading →

SEC To Propose Hedge Fund Manager Registration Rules

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The SEC continues to closely follow its calendar of anticipated Dodd-Frank rulemaking activity and has posted a notice of an Open Meeting, to be held on Friday,  November 19, 2010 at 10:00 a.m.

The SEC plans to propose  Investment Advisers Act of 1940 rules:

  • requiring advisers to hedge funds and other private funds to register with the SEC;
  • addressing reporting by certain investment advisers that are exempt from registration;
  • increasing the statutory threshold for SEC  registration of investment advisers from $25 million in assets under management to $100 million;
  • implementing new exemptions from the registration requirements  for advisers to venture capital funds and advisers with less than $150 million in private fund assets under management in the United States; and
  • clarifying the meaning of certain terms included in a new exemption for foreign private advisers.

The SEC will consider proposed security-based swaps rules: Continue reading →

SEC November Activities Implementing Dodd-Frank

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The SEC staff continues its hard work on the rulemaking and studies mandated by the Dodd-Frank Act, signed into law by President Obama on July 21, 2010.

The SEC’s webpage captioned “Implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act” consolidates links to all of the SEC’s related accomplishments to date, and includes a calendar of its planned activities implementing the Dodd-Frank Act through July 2011.

Highlights of the November, 2010 calendar relevant to hedge funds and investment advisers include:

  • §§407 and 408: Propose rules implementing the exemptions from registration for advisers to venture capital firms and for certain advisers to private funds
  • §410: Propose rules and changes to forms to implement the transition of mid-sized investment advisers (between $25 and $100 million in assets under management) from SEC to State regulation, as provided in the Act

    • Continue reading →

Joint CFTC-SEC Public Roundtable: Credit Default Swaps

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The SEC has been working closely with the CFTC to coordinate their respective agencies’ rulemakings related to derivatives markets.  Most recently, the SEC and CFTC  staffs held a joint public roundtable on October 22 from 9 a.m. to noon to discuss issues related to the clearing of credit default swaps. The roundtable is meant to assist both agencies in the rulemaking process to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Agenda for the Roundtable follows.  A transcript of the public roundtable discussion will be published on the CFTC’s website. Continue reading →

Interim Final Rule: Security-Based Swap Transaction Data Reporting

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The SEC is steadily working through the rulemaking required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).  In October 2010 alone, the SEC proposed eight new rules and adopted an Interim Final Rule. The SEC has been working closely with the CFTC to coordinate their respective agencies’ rulemaking related to derivatives markets.

On October 13, 2010, the SEC adopted Interim Final Exchange Act Rule 13Aa-2T requiring certain swap dealers and other parties to report any security-based swaps entered into prior to, and not expired as of, the July 21, 2010 passage of the Dodd-Frank Act. The Interim Final Rule requires parties to report security-based swap information to the SEC, or to a registered security-based swap data repository, by a compliance date to be set in the rules or within 60 days after a registered security-based swap data repository commences operation, whichever is earlier. Until such date, the parties are required to provide information regarding the swaps to the SEC upon request.  An Interpretive Note provides guidance on the type of information and documents that reporting parties should preserve in order to be prepared for the reporting requirements.

The Interim Final Rule became effective upon publication in the Federal Register on October 20, 2010,  and will remain in effect until the earlier of January 12, 2012 or the date on which a permanent rule is published.  The SEC will continue seeking public comments until December 20, 2010.

SEC October Calendar of Activities Implementing the Dodd-Frank Act

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The SEC staff has been working hard on the rulemaking and studies mandated by the Dodd-Frank Act, signed into law by President Obama on July 21, 2010.

The SEC’s webpage captioned “Implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act” consolidates links to all of the SEC’s related accomplishments to date, and includes a calendar of its planned activities implementing the Dodd-Frank Act through July 2011.

Highlights of the October, 2010 calendar relevant to hedge funds and investment advisers include:

  • proposing rules defining “family office”;
  • proposing rules regarding conflicts of interest for clearing agencies, execution facilities and exchanges involved in security-based swaps;
  • adopting an interim final rule for reporting of security-based swaps entered into before the enactment of the Dodd-Frank Act; and
  • reporting to Congress on a Whistleblower Program.

The full list of planned activities for October appears on the calendar on the SEC site.

Financial Stability Oversight Council Seeks Public Comment on the Volcker Rule, Criteria for Designating Non-Bank Firms for Heightened Supervision

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As reported in a Treasury Department press release and by Reuters,  the Financial Stability Oversight Council, a new council of U.S. regulators established under Title I of the Dodd-Frank Act, held its first meeting on Friday, October 1, 2010.  The Council is meant to provide “comprehensive monitoring to ensure the stability” of the U.S.’ financial system, and is charged with “identifying threats to the financial stability of the United States; promoting market discipline; and responding to emerging risks to the stability of the United States financial system.”

The Council is headed by U.S. Treasury Secretary Timothy Geithner, joined by top officials from the Fed, Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Deposit Insurance Corp.  The Treasury Department has posted a complete listing of attendants at the October 1 meeting.

The council voted unanimously to seek public comment for a period of 30 days on the “Volcker” rule (Section 619 of the Dodd-Frank Act, discussed in a June 26th Compliance Avenue posting), which restricts banks from trading with their own money (proprietary trading), and only allows them to invest up to 3 percent of their Tier 1 capital in hedge funds and private equity funds.

The Council has issued an Advanced Notice of Proposed Rulemaking which requests public comment on the criteria to be used in designating certain systemically important large hedge funds and other non-bank financial companies for heightened supervision by the end of the year, and anticipates a vote on a final proposal is anticipated by the end of March 2011.   The President’s regulatory reform plan and the Volcker G-30 report had identified these firms as a shadow banking system in need of systemic regulation.   The designated institutions would be supervised by the Federal Reserve and subject to the government’s new powers to seize and liquidate failing financial giants to prevent chaos in the financial system.

In addition, the Council presented an “Integrated Implementation Roadmap,” which sets out a coordinated timeline of goals, both of the Council and its independent member agencies, to fully implement the Dodd-Frank Act, and  includes statutory deadlines as well as non-statutory targets for agency work that may be updated over time.

AIMA to engage with U.S. authorities on implementation of Dodd-Frank Act

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The Alternative Investment Management Association (“AIMA”), a global hedge fund association, announced last week that it will meet with U.S. policymakers and supervisors in September regarding the Dodd-Frank Wall Street Reform and Consumer Protection Act.  AIMA will focus its efforts on several key areas including: registration of hedge fund managers and reporting of systematically relevant data in the interests of a broader financial stability assessment; how smaller managers may be impacted by the legislation; OTC derivatives; the revised “Volcker Rule”; potential tax issues; and the goal of global regulatory consistency.

Todd Groome, Chairman of AIMA, said of the meetings:

“AIMA, as the global hedge fund association, has historically worked closely with U.S. and international supervisors, and we look forward to engaging with U.S. authorities in September and beyond regarding numerous issues related to the implementation of the Dodd-Frank Act, as well as its interaction with reforms in other jurisdictions.

“AIMA supports increased dialogue with supervisors, and the goal of improved trading and market transparency by the industry. That includes periodic reporting of data to supervisors so they may better assess broad market and potential systemic risks.   Hedge funds do not present a systemic risk, but our industry can contribute to the analysis of systemic risk and financial stability.

“We also support OTC derivatives reform, including the introduction of central clearing. We believe central clearing of eligible contracts is a very important reform aimed at improving financial stability. However, we remain focused on certain implementation issues, such as direct access, governance and capital or margin requirements.

“From the outset, we have also called for a globally consistent and coordinated regulatory framework. Many of the measures that feature in the Dodd-Frank Act are being discussed in other jurisdictions, and it is desirable that there is a large degree of consistency in terms of approach and implementation. If that consistency is not achieved it could lead to unnecessary duplication and increased costs.”

AIMA expresses its views on this legislation in more detail in its June 28, 2010 statement on U.S. financial reform.

Financial Reform Leaves New York Investment Advisers Unsure Where to Register

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The Dodd-Frank financial reform bill, signed into law by President Obama on July 21, 2010, has left behind an odd but important ambiguity for investment advisers located in New York state.  The law requires most investment advisers with less than $100 million in assets under management to register with the securities commissioner of the state where the adviser maintains its principal office and place of business, provided that the adviser “would be subject to examination as an investment adviser” by such commissioner.  Unlike most other states, however, New York has never conducted examinations of investment advisers and currently its General Business Laws provide no specific authority for such examinations.

The Investment Adviser Association (the “IAA”), a not-for-profit association representing the interests of federally registered investment advisers, has estimated that approximately 350 New York-based advisers would be forced to de-register with the SEC as a result of the Dodd-Frank law.  David Tittsworth, the executive director of the IAA, has commented that “the answer about where they register is unclear.  It’s highly likely that the SEC will, in time, issue some sort of transitional rules that will deal with this and other questions.”

In order to avoid leaving these New York advisers in “no man’s land”, one of two responses is likely before the law takes effect in July of next year: either the SEC will bring these advisers back within its jurisdiction or New York will adopt an examination program to meet the requirements of the law.  New York advisers affected by the law will have to sit tight for the time being until guidance is released.