SEC’s Large Trader Reporting System Proposal Would Affect Large-Volume, High-Frequency Traders and Their Broker-Dealers
On April 14, the Securities and Exchange Commission (SEC) issued a release (Release) proposing that certain large-volume, high-frequency traders (classified as “large traders”) be required to self-identify to the SEC, and that broker-dealers that effect transactions for “large trader” customers maintain and produce records of these customers’ trades to the SEC.[1] Proposed Rule 13h-1 under the Securities Exchange Act of 1934 (Rule) is intended to bolster the SEC’s regulatory and enforcement capabilities by increasing its ability to obtain information about the activities of large-volume, high-frequency traders. If adopted, the Rule will require such “Large Traders” of exchange-listed stocks and options to self-report to the SEC and will impose recordkeeping, reporting, and monitoring requirements upon registered broker-dealers’ transactions with “large trader” customers for production to the SEC upon request. Comments on the Rule are due by June 22, 2010. >>> continued
Supreme Court Affirms Gartenberg Standard in Unanimous Decision in Jones v. Harris Associates L.P.
On March 30, the U.S. Supreme Court, in a unanimous decision in Jones v. Harris Associates L.P., affirmed the standard as articulated by the Second Circuit Court of Appeals in 1982 in Gartenberg v. Merrill Lynch[1] as the standard upon which mutual fund boards should rely when considering the fees that a mutual fund pays to its investment adviser. Under that standard, an investment adviser will not face liability under Section 36(b) of the Investment Company Act of 1940 (1940 Act) unless it charges a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s-length bargaining. In affirming the Gartenberg standard, which boards have used for many years in assessing the fees mutual funds pay to investment advisers, the Court vacated the judgment of the Seventh Circuit Court of Appeals[2] and remanded the case for further proceedings consistent with the Court’s opinion. >>> continued