SEC Releases Review Priorities for 2021 | Goodwin
SEC Examinations Division Releases Examination Priorities for 2021
On March 3, the Examinations Division of the SEC (Division) released its 2021 exam priorities. The Division has indicated that it will focus on the application of the recently established Rules and Standards of Conduct for Registered Investment Advisors (RIAs) and Securities Dealers – Best Interest Regulation, Interpretation Regarding the Standard of Conduct for RIAs and the rules regarding the CRS form. The Division further stated that it will focus on fraudulent practices and conflicts of interest of RIAs, brokers and investment firms; protecting retail investors in mutual funds and ETFs; the adequacy of the compliance programs of RIAs and investment firms; AIR from private funds; compliance by brokers with the client protection rule and the net capital rule; the business practices of brokers; Councillors; information security and operational resilience of market players; compliance with anti-money laundering rules and regulations by market players; and preparing market participants to abandon LIBOR. The Division has indicated that it will focus particularly on advancements in financial technology (ie “fintech”) and digital assets. Specifically, the Division said it would focus on automated investment tools and platforms (eg, ‘robo-advisers’), the use of technology to facilitate compliance with regulatory requirements (ie ‘Regtech’) and related financial services and market infrastructure. with digital assets.
SBA reviews calculation and eligibility of PPP loan amount
On March 3, the SBA issued a provisional final rule implementation of recent changes to the PPP. The interim final rule allows people who file an IRS Form 1040, Schedule C to calculate their maximum loan amount using gross income. This change in calculation only applies to PPP loans approved after the effective date of the Interim Final Rule. Borrowers who have already had their loans approved cannot increase their PPP loan amount based on the new maximum loan formula. Businesses that choose to use gross income to calculate their first-draw PPP loan will only have the safe-haven presumption of doing the necessary certification of economic necessity if they have reported $ 150,000 or less in gross income on their used Schedule C. to request a first. take out a PPP loan. Borrowers with reported gross income greater than $ 150,000 will be subject to additional review by the ASB. The SBA has released updated forms for borrowers and lenders reflecting these changes and loan amount calculations.
In line with the Biden administration’s previous announcement, the Interim Final Rule (1) also removes a restriction on businesses that are at least 20% owned by a person who has been arrested for or convicted of a crime related to fraud. financial assistance during the previous five years. or any other crime committed during the previous year as a result of obtaining PPP loans; and (2) removes a restriction on businesses owned at least 20% by a person who is behind on the student loan from receiving PPP loans.
CFPB officially proposes an extension of the compliance date for the general final rule of quality management
March 3, in accordance with its recent statement on this subject, the CFPB officially published a notice of proposed regulation to extend the mandatory compliance date of the final rule on general qualified mortgages (QM) from July 1, 2021 to October 1, 2022. If the proposed rule is finalized, the old general definition of QM based on the DTI, the new General price-based QM definition and GSE fix (unless GSEs leave trusteeship by October 1, 2022) would all remain available as long as the lender receives the consumer request by October 1, 2022. Comments on the rule proposed must be received no later than April 5, 2021.
SEC Examinations Division Risk Alert Regarding Digital Asset Securities
On February 26, the Examinations Division (Division) of the SEC released a Risk alert noting that “Digital Asset Securities” (i.e. assets issued and / or transferred using a distributed ledger or blockchain technology, including, for example, “virtual currencies” , “coins” and “tokens”) and other digital assets have characteristics and risks that should be considered in designing a regulatory compliance program. Based on its observations during reviews of investment advisers, brokers, stock exchanges and transfer agents involved in Digital Asset Securities and other digital assets, the Division explained how it will focus its reviews of these market players. in the future. With regard to investment advisers, the Division indicated that it would consider a number of issues related to portfolio management, books and records, custody, disclosure, valuation methods and issues of investment. ‘recording. Regarding brokers, the Division has indicated that it will review custody of funds and operations, registration requirements, compliance with anti-money laundering legislation, due diligence of digital assets as part of offers, disclosure of conflicts of interest and trading of digital assets of representatives registered as an outside business activity.
SEC Simplifies Variable Insurance Contract Substitution Process
The second Posted a no-action position allowing insurance companies to substitute, without obtaining new order, underlying fund options for variable life insurance and annuity contracts. As long as the insurance company has obtained an order approving a previous substitution under section 26 (c) of the Investment Companies Act 1940, the insurance company may implement a new substitution without new order. The terms and conditions of the new substitution must be substantially similar to the terms and conditions approved by the previous order. The insurance company must file – along with its prospectus supplement filed under Rule 497 – correspondence containing information about the substitution. This correspondence record should explain why each existing fund and the corresponding replacement fund are substantially similar and include a comparison of the investment objectives, strategies and risks of each existing fund and its corresponding replacement fund. The no-action position will come into effect upon publication in the Federal Register.
Banking regulators update BSA / AML review manual
FFIEC, an official interagency body empowered to prescribe uniform principles, standards and reporting forms for the federal review of financial institutions by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, Office of the Comptroller of the Currency, and Office of Consumer Financial Protection, updated their Bank Secrecy Law / Anti-Money Laundering Review Manual. The updated section is shown below.
Future updates to other sections of the manual will be announced as they are completed.
LITIGATION AND ENFORCEMENT
When the perks stop being fun and create serious liability risks for an issuer
Last week, the SEC filed a lawsuit against a company and its former CEO for failure to adequately disclose certain compensation and related party transactions. This decision is a stark reminder of the costs of failing to put in place adequate internal procedures to ensure both that company policies are properly developed, implemented and enforced and that potentially disclosable information is made. provided and verified by attorneys when preparing proxy documents and other SEC filings. Additionally, it highlights the SEC’s continued focus on disclosing executive benefits. Read it customer alert for a summary of enforcement actions and their potential implications for a company’s policies and procedures.