Securities Markets
FINRA Issues Proposals on Rulebook Consolidation
What This Means
FINRA has issued four proposals to consolidate existing NASD and NYSE rules into a single rulebook. Comments on the proposals are due to FINRA by June 13, 2008. The proposals are preliminary—they still must be filed with and adopted by the SEC before they can take effect. However, these proposals represent the first formal steps toward creating a single rulebook for broker-dealers that are FINRA members, which was a main objective of last year’s consolidation of member regulatory functions into a single SRO. FINRA indicated that the creation of this single rulebook will be accomplished in phases, with substantial completion during the next year.
SEC Fires Another Warning Shot over Insider Trading Policies and Procedures
PDF version For well over a year, SEC enforcement and examination officials have emphasized the staff’s focus on insider trading, particularly by securities industry professionals. This focus has proceeded largely on two fronts. The first involves high-profile cases in which industry employees have been charged with engaging in illegal insider trading. The second takes a more preventative approach to insider trading enforcement, and involves cases against broker-dealers and investment advisers that, even in the absence of actual insider trading, have failed to adopt or enforce insider trading policies and procedures. Although this second line of attack has received less attention in the press, a recent SEC enforcement action against Chanin Capital LLC and its chief compliance officer demonstrates that legal and compliance staff should be paying close attention to the effectiveness of their policies and procedures that are designed to prevent insider trading.
Amendments Increase Attractiveness of Rule 701
The Securities and Exchange Commission has recently adopted two rule amendments that will expand the ability of foreign private issuers that are not U.S. reporting companies to provide stock-based compensation to their U.S. employees. Specifically:
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.