The SEC proposed amendments to eliminate redundant, overlapping, outdated or superseded provisions of its rules, in light of subsequent changes to public disclosure requirements, accounting standards and technology. The amendments, along with comments received on a release seeking information to simplify and improve disclosure requirements under Regulation S-K, are designed to further inform the Commission’s actions to enhance disclosure effectiveness and efficiency. The SEC is also seeking comment on certain disclosure requirements that overlap with US Generally Accepted Accounting Principles (GAAP) to determine whether to retain them or refer them to the Financial Accounting Standards Board for incorporation into GAAP. The proposed amendments are part of a broader staff review of the disclosure requirements that issuers are required to make to investors and the requirements of the Fixing America’s Surface Transportation Act (FAST) to eliminate provisions of Regulation S-K that are duplicative, overlapping, or unnecessary. There will be a 60-day comment period.

View The SEC’s proposed amendments.

The SEC adopted a series of amendments and related guidance regarding Regulation SBSR, which governs the regulatory reporting and public dissemination of security-based swap transactions. The amendments, among other things, assign reporting duties for platform-executed security-based swaps submitted for clearing and those resulting from the clearing process, establish reporting and publication requirements for certain cross-border security-based swaps, and prohibit swap data repositories from imposing fees or usage restrictions on data that Regulation SBSR requires be made public. The goal of the amendments and guidance is to increase transparency in the security-based swap market by facilitating better public access to transaction information and expanding the scope of Regulation SBSR to cover additional transactions and entities. The amendments and guidance will be effective on October 11, 2016. The rules and guidance also establish a compliance schedule for portions of Regulation SBSR, providing that transaction reporting will not begin until after security-based swap dealers and major security-based swap participants have registered with the SEC.

View the final rule.

The SEC proposed a rule that would require registered investment advisers to adopt and implement written business continuity and transition plans. The new rule requires investment advisers to prepare in advance for significant disruptions in their operations—whether temporary or permanent (such as a natural disaster, cyber-attack, technology failures, etc.)—thereby mitigating client and investor harm.

The proposed rule would require an adviser’s plan to be based on the particular risks associated with its operations, but also include policies and procedures addressing specified components, such as the maintenance of systems and protection of data, pre-arranged alternative physical locations, communication plans and review of third-party service providers. The rule would allow advisers to tailor the detail of their plans to the complexity of their business operations.

SEC Chair Mary Jo White commented that this rule was “the latest action in the Commission’s efforts to modernize and enhance regulatory safeguards for the asset management industry.” In addition to the proposed rule, the SEC staff issued related guidance addressing business continuity planning for registered investment companies, including oversight of operational capabilities of key fund service providers.

View the SEC press release.

View the proposed rule.

View SEC staff guidance.

The SEC voted to propose amendments that would increase the financial thresholds in the “smaller reporting company” definition. By expanding the number of companies that qualify as smaller reporting companies, the proposal is intended to “promote capital formation and reduce compliance costs for smaller companies” according to SEC Chairman Mary Jo White. Smaller reporting companies may qualify for scaled disclosures provided in Regulations S-K and Regulations S-X.

The proposed rules would enable a company with less than $250 million of public float to provide scaled disclosure as a smaller reporting company, as compared to the $75 million threshold under the current definition. If a company does not have a public float, it would be permitted to provide scaled disclosures if its annual revenues are less than $100 million, as compared to the current threshold of less than $50 million in annual revenues.

It is important to note, however, that the SEC is not proposing to increase the $75 million threshold in the “accelerated filer” definition. As a result, smaller reporting companies with $75 million or more of public float will be subject to accelerated filer requirements.

View SEC press release.

View the proposed rule.

The FDIC released a final rule revising the Securitization Safe Harbor Rule (12 C.F.R. Part 360.6) to clarify that its requirement that servicers of securitized assets take loss mitigation action within 90 days after an asset becomes delinquent does not conflict with the Consumer Financial Protection Bureau’s Regulation X (12 C.F.R. Part 1024), which prohibits a mortgage loan servicer from initiating foreclosure notices or filings unless a mortgage loan is more than 120 days delinquent. Specifically, the Securitization Safe Harbor Rule is being revised to clarify that documents governing a securitization transaction need not require the servicer of securitized assets to take any action that would be prohibited by Regulation X in order to satisfy the 90-day loss mitigation requirement of the securitization safe harbor. The final rule is effective July 27, 2016.

View the FDIC final rule.

The European Securities and Markets Authority published a final report setting out draft Regulatory Technical Standards on settlement discipline as required under the Central Securities Depository Regulation. The RTS cover measures for preventing settlement fails through automated matching, a hold and release mechanism, and partial settlement. The RTS also provide measures for monitoring and addressing settlement fails such as a mechanism for cash penalties and a buy-in process. ESMA has submitted the final draft RTS to the European Commission for endorsement.
 
View the Final Report and RTS.

The European Commission published a proposed Prospectus Regulation as part of the EU Capital Markets Union initiative. The proposed Prospectus Regulation would replace the current EU Prospectus Directive, revising the regime for companies to raise money on public markets or by public offer to potential investors. The key changes include: (i) increasing the threshold for when a prospectus would be required for offers with a total consideration from €100,000 to €500,000; (ii) removing the option for Member States to require a prospectus below that minimum threshold; (iii) giving Member States the option to give an exemption from the prospectus requirement for capital raisings with a total consideration of between €500,000 and €10 million for domestic offers for which no passport notification to other Member States is required; (iv) aligning the definition of SMEs with that under the new Markets in Financial Instruments Directive (MiFID II) so that the SME-specific regime is also available to SMEs with an average market capitalisation of less than €200 million, (increased from €100 million) not listed on a regulated market; (v) creating a system for frequent issuers using an annual "Universal Registration Document"; (vi) providing for a simplified disclosure regime for secondary issuances by listed firms; and (vii) establishing a single access point, provided by the European Securities and Markets Authority, for all prospectuses approved within the European Economic Area, although approvals will remain the responsibility of national listing agencies.

View the Proposed Regulation.

The US SEC issued final rules providing a framework of regulation to allow companies to offer and sell securities through crowdfunding. Concurrent with the adoption of the final rule, the SEC also proposed amendments to Rule 147 and Rule 504 of the Securities Act of 1933, as amended, to facilitate intrastate and regional offerings. The proposed amendments to Rule 504 of the Securities Act would increase the aggregate amount that may be offered and sold pursuant to the rule from $1 million to $5 million and apply bad actor disqualifications to Rule 504 offerings. The final rules enable individuals to purchase securities in crowdfunding offerings, subject to certain limits. Specifically, the rules: (i) allow a company to raise up to a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period; (ii) permit individual investors to invest in crowdfunding offerings, subject to specified limits over a 12-month period; and (iii) limit the aggregate amount of securities sold to an investor during any 12-month period to an amount not to exceed $100,000. In addition, companies that conduct crowdfunding offerings must, pursuant to the adopted rules, make certain disclosures about their business as well as the offering. The adopted crowdfunding rules and forms will be effective 180 days after publication in the Federal Register and the forms permitting funding portals to register with the SEC will be effective January 29, 2016. Public comments on the proposed amendments to Rule 147 and Rule 504 are open for a 60-day period following their publication in the Federal Register.

View the final rule.

View the proposed rules.

The European Securities and Markets Authority published its final Guidelines on Alternative Performance Measures for listed issuers. An APM is a financial measure of historical or future financial performance, position or cash flow and is usually derived from financial statements prepared by an issuer. The Guidelines aim to assist users in making investment decisions and encourage European issuers to publish comparable, transparent and reliable information on their financial performance so that users can obtain a comprehensive understanding of their performance. The Guidelines apply to issuers with securities traded on regulated markets who are required to publish regulated information under the EU Transparency Directive, any persons responsible for drawing up a prospectus under the EU Prospectus Directive and relevant EU national regulators. The guidelines will apply to APMs disclosed on or after July 3, 2016.

View the Guidelines.

The SEC announced the launch of a new rulemaking database to provide for greater transparency into the SEC’s rulemaking process. Unlike the structure of the current SEC website, the new database allows users to sort rules by date, status (e.g., proposed, completed, etc.), and SEC division (e.g., Investment Management, Trading and Markets, etc.).

View the SEC announcement of the new database.

View the SEC rulemaking index.

The European Commission launched a consultation on proposed action to address the legal and practical issues in the EU covered bond market to facilitate cross-border investment within the EU and from third countries. The consultation forms part of the Commission's Capital Markets Union initiative. The regulation of covered bonds is a matter of Member State national laws although the prudential treatment of covered bonds is provided for in a variety of EU legislative acts such as the Units for Collective Investment in Transferable Securities Directive, the Capital Requirements Regulation and the Bank Recovery and Resolution Directive. There are differences between the legal frameworks and supervisory practices of various EU Member States for covered bonds as highlighted by the European Banking Authority in its July 2014 report. The Commission is proposing a more integrated EU-wide covered bond framework that could be reflected in legislation and/or a set of recommendations and the consultation paper includes a discussion of the various approaches that might be taken in an effort to introduce harmonisation across the EU. The consultation closes on January 6, 2016. 

View the EU Covered Bond consultation paper. 

The European Securities and Markets Authority published a consultation paper on proposals for draft Regulatory Technical Standards on the European Single Electronic Format, the new format for annual financial reports, required under the Transparency Directive. The Transparency Directive requires issuers listed on regulated markets to prepare their annual financial reports in a new format from January 1, 2020. The new format aims to improve comparability and analysis for investors and regulators as well as simplify annual report submissions for issuers. The consultation paper assesses current practices and formats of annual financial reports and considers the options for harmonising the format of reports required under the Transparency Directive. ESMA is seeking views on its proposals in order to finalise draft RTS for submission to the European Commission before the end of 2016.  Comments on the consultation are due by December 24, 2015.

View the consultation.

The International Organization of Securities Commissions published a final report on the cross-border regulation of the global securities markets. The report sets out the cross-border regulatory toolkit of regulatory options available to national securities regulators, including an analysis of the approaches taken to cross-border regulation and the impact that the use of such cross-border regulatory tools may have on investor protection, markets and systemic risk. The tools that are used are classified into national treatment, recognition, and passporting. IOSCO undertook a survey of member jurisdictions to identify the tools that members currently use to regulate financial activities in the global securities markets. The report also sets out next steps for IOSCO, including considering (i) how to be more explicit in incorporating cross-border issues into its policy work; (ii) organizing workshops for regulators on the process and considerations for assessing foreign regulatory regimes under unilateral and mutual recognition or otherwise develop better understanding of the complex aspects of cross-border regulation; (iii) setting up an information repository of its members supervisory cooperation agreements; and (iv) setting up an information repository for recognition decisions, including the analyses that informed such decisions.

View the IOSCO Report.

The International Organization of Securities Commissions published its final report on the peer review of implementation of incentive alignment recommendations for securitization. The report sets out the implementation progress of its recommendations, which were published in 2012, on incentive alignment in securitization. The recommendations relate to, amongst other things: (i) achieving global harmonization of incentives of investors and securitizers along the securitization value chain; (ii) jurisdictions evaluating and formulating approaches for such alignment; and (iii) minimizing any adverse effects of cross border securitization transactions that may arise due to different approaches in incentive alignment and risk retention. The review states that only five jurisdictions of the 25 jurisdictions have reported to have completed implementation of all the recommended measures: China, India, Indonesia, Japan and Turkey. Eleven jurisdictions have taken steps to implement all measures but those steps were either not all complete or were not yet in force across the whole securitization market: Argentina, Brazil, France, Germany, Ireland, Italy, the Netherlands, Russia, Spain, the United Kingdom and the United States. The report also states that EU jurisdictions and the US were further progressed in implementation than other jurisdictions with smaller securitization markets. IOSCO aims to conduct a further adoption monitoring and implementation review in 2016.

View the report.
 

The European Securities and Markets Authority published a document setting out examples of waivers for pre-trade transparency requirements under the current Markets in Financial Instruments Directive and its implementing legislation, known as MiFID I. The document includes positions adopted by ESMA’s predecessor, the Committee of European Securities Regulators as well as opinions issued by ESMA. The document is intended to assist national regulators in ensuring that their supervisory practices are in line with ESMA’s opinions and to assist firms in determining the extent of the MiFID I requirements. Under MiFID I, operators of regulated markets and multilateral trading facilities must publish current bid and offer prices and the depth of trading interests in shares admitted to trading on a regulated market unless an exemption applies. Exemptions are available from national regulators for shares based on the market model or the type and size of orders. ESMA intends to update the document on an ongoing basis.

View the ESMA document.