Broker-Dealer Regulation
SEC Proposes “Naked” Short Selling Anti-Fraud Rule
On March 17, the U.S. Securities and Exchange Commission (SEC) issued its formal proposal to adopt an anti-fraud rule under the Securities Exchange Act of 1934 (Exchange Act). The rule would address failures to deliver securities that have been associated with “naked” short selling. The SEC stated that the proposed rule is intended to highlight the liability of persons that deceive certain specified persons about their intention or ability to deliver securities in time for settlement, including persons that deceive their broker-dealer about their locate source or ownership of shares, and that fail to deliver securities by settlement date. Comments will be due to the SEC 60 days after the proposal is published in the Federal Register, which should occur by March 25.
SEC Staff Extends Relief Allowing Broker-Dealers to Rely on Investment Advisers to Perform Customer Identification and Verification
On January 10, the SEC’s Division of Trading and Markets issued a letter to the Securities Industry and Financial Markets Association (SIFMA) that extends no-action relief allowing broker-dealers to fully rely on SEC registered investment advisers to perform some or all of their Customer Identification Program (CIP) obligations. The SEC extended the no-action relief for two years, or until such time as investment advisers become subject to an anti-money laundering rule.