United States: Corporate And Financial Weekly Digest - March 14, 2014

Last Updated: March 20 2014

Edited by Robert Weiss and Gregory Xethalis

SEC/CORPORATE

NASDAQ Launches Marketplace for Private Companies

On March 5, NASDAQ announced the launch of its new capital marketplace for private companies, NASDAQ Private Market. Qualifying companies will be able to use NASDAQ Private Market's platform to raise capital and control secondary transactions, similar to secondary market platforms offered by other companies. To qualify as a member company, a private company must meet minimum standards for reporting and disclosure and must: (1) have received at least $30 million in funding in the last two years and have an enterprise value of at least $50 million; (2) have had each of total assets and annual revenue of at least $50 million in the latest fiscal year, or in two of the last three fiscal years; (3) have an annual net income of at least $750,000 in the latest fiscal year, or in two of the last three fiscal years; (4) have $5 million in shareholders' equity and two years of operating history; or (5) be backed by a recognized financial investor or investors with a "track record of successful venture investments."

To view NASDAQ's press release, click here.

To access the NASDAQ Private Market website, click here.

SEC Proposes Rules to Enhance Oversight of Clearing Agencies

On March 12, the Securities and Exchange Commission voted to propose new rules that would enhance the oversight of registered clearing agencies that: (1) have been designated as systemically important by the Financial Stability Oversight Council and for which the SEC is the supervisory agency pursuant to the Clearing Supervision Act; (2) provide central counterparty services for security-based swaps or are involved in activities the SEC determines to have a more complex risk profile, where in either case the Commodity Futures Trading Commission is not the supervisory agency for such clearing agency (as defined in Section 803(8) of the Clearing Supervision Act); or (3) are otherwise determined to be covered clearing agencies by the SEC (Covered Clearing Agencies). These proposed rules would establish more robust requirements for Covered Clearing Agencies and would apply the existing rules for all other registered clearing agencies. Entities operating pursuant to an exemption from registration will not be subject to the proposed rules.

Under the proposed rules, Covered Clearing Agencies would be required to establish, implement, maintain and enforce policies and procedures covering many of the topics currently required by the SEC's existing oversight program, including settlement, central securities depositories and settlement systems, default management, operational risk management and transparency, and communication efficiency. In addition to the aforementioned topics, the proposed rules would require Covered Clearing Agencies to address the following new topics in such policies and procedures: (1) governance and comprehensive risk management (including establishing qualifications of members of board of directors or senior management); (2) financial risk management (including liquidity risk, credit risk, margin and collateral); and (3) general business risk management (including a requirement to hold liquid net assets funded by equity equal to at least six months of current operating expenses).

The proposed rules would permit the SEC to make the determination of whether a clearing agency falls within the scope of a Covered Clearing Agency. Upon such determination, the SEC would publish a notice of such preliminary determination and provide the public with at least 30 days to comment prior to any final determination.

The public will have 60 days to comment on the proposed rules beginning from the date the proposed rules are published in the Federal Register.

The proposed rule is available here.

BROKER DEALER

FINRA Proposes to Amend Rules 2210 and 2214

The Financial Industry Regulatory Authority filed proposed rule changes with the Securities and Exchange Commission to amend FINRA Rules 2210 and 2214. Rule 2210, which governs broker-dealers' communications with the public, generally provides the standards and guidelines for the content, approval and recordkeeping relative to broker-dealers' communications with the public and the filing thereof with FINRA. FINRA's proposed change to Rule 2210 seeks to exclude from the communications filing requirements any research reports produced by a broker-dealer that concern only securities listed on a national securities exchange (other than research reports that must be filed pursuant to Section 24(b) of the Investment Company Act of 1940). FINRA's proposed rule change also would clarify that free writing prospectuses that are exempt from having to be filed with the SEC are not subject to Rule 2210's filing or content standards. FINRA also is proposing to correct an incorrect rule cross-reference in Rule 2214, which provides requirements with respect to the use of investment analysis tools.

The proposed rule changes can be found here.

CFTC

CME Group Exchanges Adopt Revised Rules Regarding Transfer Trades and Concurrent Long and Short Positions

On March 10, a self-certified rule change related to transfer trades and concurrent long and short positions submitted by the Chicago Mercantile Exchange, Chicago Board of Trade, New York Mercantile Exchange and Commodity Exchange (Exchanges) became effective. Under the amended transfer trade rule: (1) the president or chief compliance officer of the clearing house may permit a transfer to correct an error outside of the three-day window permitted under existing rules; (2) the chief regulatory officer may approve a transfer to facilitate a restructuring or consolidation of a fund or commodity pool; and (3) the president of the clearing house may permit a transfer of cleared-only products under certain specified circumstances. The revised rule regarding concurrent long and short positions: (1) eliminates the restrictions on netting down contracts that are not subject to a spot-month position limit; (2) increases to two percent of reported open interest the amount of concurrent long and short positions in physically delivered futures contracts that can be netted to correct an error; and (3) prohibits the reestablishment of positions that have been netted down.

The rule submission is available here.

Joint Audit Committee Adopts Template Acknowledgment Letters

On March 12, the Joint Audit Committee issued a regulatory alert and revised templates for segregated, secured and cleared swap customer acknowledgment letters. The revised template letters will help futures commission merchants (FCMs) and depositories achieve compliance with new requirements arising from the enhanced customer protection rules recently adopted by the Commodity Futures Trading Commission. FCMs and depositories are required by CFTC regulations to use the new template acknowledgment letters for all accounts opened on or after January 13, 2014 and, for all accounts that were opened prior to January 13, 2014, must execute new letters that conform to the template by July 12, 2014. FCMs and depositories must file a copy of all executed acknowledgment letters with the CFTC and the FCM's designated self-regulatory organization within three business days after the account is opened.

The regulatory alert indicated that the templates will be posted on the Joint Audit Committee's website, which is available here.

CFTC Announces Available-to-Trade Determinations

In December 2013, Bloomberg LLC (BSEF) submitted a self-certified determination that certain interest rate and credit default swaps are made available to trade (MAT) for purposes of the Commodity Exchange Act (CEA) and Commodity Futures Trading Commission regulations. The CFTC's Division of Market Oversight has announced that BSEF's MAT determinations are deemed certified. BSEF's MAT determination only involves contracts that were previously made available to trade, meaning that the swaps covered by the current determination will remain subject to the trade execution requirement in CEA Section 2(h)(8) even if another swap execution facility (SEF) withdraws its MAT certification.

Counterparties must execute swaps that are subject to the MAT determinations on or pursuant to the rules of a SEF or designated contract market. A swap subject to the MAT determinations cannot be executed over the counter unless one or both of the parties invokes a valid exemption from clearing for the swap, which also operates as an exemption from the trade execution requirement. MAT swaps executed on or pursuant to the rules of an SEF are "required transactions," and therefore must be executed through either the SEF's order book or request-for-quote system unless the swap qualifies as a block trade.

BSEF's MAT filing is available here.

The CFTC's press release is available here.

A listing of all swaps made available to trade is available here.

CFTC to Host Roundtable on Commodity Pool Operator Risk Management Practices

Commodity Futures Trading Commission staff will host a public roundtable on March 18 to discuss risk management practices by commodity pool operators, including: (1) risk management procedures in the operation of various types of commodity pools; and (2) risk management controls relating to investment risk, operational risk, and compliance or regulatory risk.

More information is available here.

DIGITAL ASSETS AND VIRTUAL CURRENCIES

New York Department of Financial Services Issues Public Order to Invite Virtual Currency Exchange Proposals

On March 11, the New York Department of Financial Services (the DFS) issued a public order stating that it will begin considering proposals and applications to establish virtual currency exchanges located in New York. DFS Superintendent Benjamin M. Lawsky stated, "The recent problems at Mt. Gox and other firms further demonstrate the urgent need for stronger oversight of virtual currency exchanges, including robust standards for consumer protection, cyber security, and anti-money laundering compliance."

The submission of proposals and applications will begin the regulatory process, and applicants will work with the DFS to ensure that their applications include robust protections with respect to consumers, cyber security and anti-money laundering. Approved applications will be subject to the regulatory framework that the DFS expects to put forth by the end of the second quarter of 2014. Among the proposed regulations will be a "BitLicense" for virtual currency firms in New York. The DFS also plans to consider proposals and applications for virtual currency firms other than exchanges in the near future. Superintendent Lawsky stated, "Consumers should understand and receive appropriate disclosures about the potential risks associated with using virtual currencies or any other financial product, but the fact is that virtual currencies are unlikely to disappear entirely."

The DFS announcement regarding the public order is available here.

The DFS public order is available here.

LITIGATION

SEC Prevails in Lawsuit Involving $50 Million Ponzi Scheme

On March 6, the US District Court for the Eastern District of Michigan ordered the former leaders of an investment group to pay more than $8 million in disgorgement and fines for their role in running a $50 million real estate Ponzi scheme. John Bravata founded Bravata Financial Group and BBC Equities, and Richard Trabulsy served as chief executive officer. Between 2006 and 2009, they received more than $50 million from approximately 440 investors. The Securities and Exchange Commission alleged that defendants engaged in the unauthorized sale of securities to raise the funds, and that the securities were offered as part of a Ponzi scheme in which the companies paid investors "returns" with money from subsequent investors, as opposed to proceeds from the companies' investments. According to the SEC, Bravata and Trabulsy used investors' money to purchase personal luxury goods. In 2009, the SEC brought suit against the companies, Bravata, Trabulsy, Bravata's son and Bravata's wife as "relief defendant," alleging that they unlawfully sold unregistered securities, defrauded investors in violation of the Securities Act of 1933 and Securities Exchange Act of 1934 (Exchange Act), and unlawfully sold securities without registering under the Exchange Act as broker dealers. While the suit was pending, a jury convicted Bravata and his son of various counts of conspiracy and wire fraud stemming from the scheme, and Trabulsy pleaded guilty to the same. Based on the criminal convictions, the court ordered Bravata and his wife to disgorge more than $5.2 million earned from the Ponzi scheme, in addition to more than $1.2 million in interest, and ordered Bravata's son to disgorge $444,384 plus $98,474 in interest. The court also ordered Bravata to pay a $1.8 million penalty and his son to pay a $130,000 penalty.

Securities and Exchange Commission v. Bravata et al., Case No. 09-12950 (E.D. Mich. Mar. 6, 2014).

SEC Brings Lawsuit Against Former Carter's Executive for Insider Trading and Tipping

On March 7, the Securities and Exchange Commission filed a complaint in the US District Court for the Northern District of Georgia against Richard Posey, former vice president of Operations of children's clothing manufacturer Carter's Inc., for insider trading and tipping of insider information. According to the complaint, between January 2006 and October 2009, Posey violated the Securities Act of 1933 and Securities Exchange Act of 1934 (Exchange Act) by illegally trading Carter's stock using material nonpublic information. The SEC alleged that Posey was subject to blackout periods and pre-clearance procedures, and that he attempted to hide the trades by failing to obtain pre-clearance and, at times, liquidating blackout trades before earnings announcements. The SEC also alleged that Posey tipped confidential company information to a friend and former colleague, who traded on the information and tipped others. The complaint alleged that Posey's illegal trading and tipping generated profits and avoided losses totaling $49,778. The SEC is seeking a permanent injunction enjoining Posey from future violations of federal securities laws, disgorgement of illegal gains and losses with prejudgment interest, a permanent officer and director bar under the Exchange Act, and a civil penalty.

Securities and Exchange Commission v. Richard T. Posey, Case No. 1:14-cv-00664 (N.D. Ga. Mar. 7, 2014).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions