Investment Management Updates October 2020

Investment Management, Trading & Markets Updates – October 2020

SEC Proposes Streamlined Shareholder Reports for Retail Investors

On August 5, 2020, the Securities and Exchange Commission (SEC) announced a proposal to modify the mutual fund and exchange-traded fund (ETF) disclosure framework to better serve the needs of retail investors. The framework focuses on visually engaging shareholder reports that would highlight particularly important information for retail investors to access and monitor their fund investments. Any information not included in the streamlined shareholder report would be available online for shareholders. 

SEC Updates the Definitions of “Accredited Investor” and “Qualified Institutional Buyer”

On August 26, 2020, the SEC published the final rule to update and expand the definitions of “accredited investor” and “qualified institutional buyer.” The amendments will add new categories to both definitions, expanding the pool of potential entities and individuals that may invest under these two definitions. The new categories include those that hold certain professional certifications and knowledgeable employees.

Learn more in our advisory: SEC Updates the Definitions of “Accredited Investor” and “Qualified Institutional Buyer”

CFTC Issues Guidance on Factors Used in Evaluating Corporate Compliance Programs in Enforcement Matters

On September 10, 2020, the Commodity Futures Trading Commission (CFTC) issued new guidance outlining the factors it will consider when evaluating compliance programs in enforcement matters. Pursuant to the new guidance, CFTC staff will evaluate whether a company’s compliance program was reasonably designed and implemented to (1) prevent the underlying misconduct at issue; (2) detect the misconduct; and (3) remediate the misconduct. The guidance also describes additional factors that determine whether a company’s compliance program satisfies these considerations.

CFTC Provides Additional Relief to Swap Dealers Transitioning from LIBOR 

On September 15, 2020, the CFTC issued three new staff letters that provide additional relief for swap dealers and other market participants during the transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates (IBORs). Specifically, the newly issued relief aids swap dealers seeking to amend their swaps that currently use LIBOR and other IBORs in order to institute alternative benchmarks. Such amended swaps would not count as a new swap toward the threshold for registration as a swap dealer and would avoid the CFTC’s trade execution and interest rate swap clearing requirements. 

BE-180 Deadline Approaches for U.S. Investment Managers with Foreign Sales

Every five years, the Bureau of Economic Analysis (BEA) surveys the financial services transactions between U.S. financial services providers and foreign persons through the BE-180 Benchmark Survey. The BE-180 for 2020 is required to be filed by any financial services provider that made sales to any foreign person during its 2019 fiscal year, including any U.S. investment manager that received a management fee or performance allocation from any foreign person in 2019. Previously, U.S. investment managers were only required to file the BE-180 if they were contacted by the BEA. However, on May 22, 2020, the BEA published a final rule that now requires all investment managers with sales to foreign persons to make this filing, whether or not the BEA contacted them. The deadline for the BE-180 is October 30, 2020 for electronic filers.

SEC Proposes Exemptive Relief for Finders

On October 7, 2020, the SEC released a proposed exemptive order to establish new exemptive relief for finders. The proposal would create a limited, two-tier exemption for individuals who are paid to serve as intermediaries who connect private issuers conducting offerings exempt from SEC registration with investors that the finder reasonably believes are accredited investors. The two tiers differ in several ways, including in the extent of the contact the finder is allowed to have with the issuer and the disclosure requirements. The comment period for this proposal closes on November 12, 2020.

Learn more in our advisory: SEC Proposes New Exemptive Relief for Finders
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