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On April 10, 2013, the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) jointly adopted rules that require broker-dealers, mutual funds, investment advisers and certain other regulated entities to adopt programs designed to detect “red flags” and prevent identity theft. These rules implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, that amended the Fair Credit Reporting Act (“FCRA”) to direct the SEC and the CFTC to adopt rules requiring regulated entities to address risks of identity theft. The 2003 amendments to the FCRA required other regulatory authorities to issue identity theft red flags rules, but did not authorize or require the SEC or the CFTC to issue their own rules.

Recently adopted rules under the Dodd–Frank Act establish a comprehensive new regulatory framework for swaps, including their use and those who use them. We have prepared the below questions and answers to help clarify issues regarding the new rules. The questions and answers are not intended to be comprehensive or to address every situation but, rather, are intended to provide a general overview and explanation of matters related to the regulation of swaps.

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SEC Proposes Rules Relating to General Solicitation and General Advertising for Rule 506 and Rule 144A Offerings.

On August 29, 2012, the Securities and Exchange Commission  proposed amendments to Rule 506 of Regulation D and Rule 144A under the Securities Act of 1933, as required by Section 201(a) of the Jumpstart Our Business Startups Act (“JOBS Act”). The proposed amendments will permit certain unregistered exempt offerings of securities using general solicitation and general advertising. A copy of the SEC’s proposing release is available here.

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The Consumer Financial Protection Bureau recently issued two notices of proposed rulemaking implementing Truth-in-Lending Act and Real Estate Settlement Procedures Act regulations required by the Dodd-Frank Act. These NPRs represent the CFPB’s first step toward its stated goal of establishing national standards for mortgage servicing.

The NPRs incorporate many of the provisions of the March 2012 National Mortgage Settlement among state attorneys general, the federal government, and five of the largest mortgage loan servicers and propose additional rules related to a number of fundamental servicing activities, including borrower communications, loss mitigation, information management, and complaint and error resolution. A detailed discussion of the NPRs and the proposed rules is attached. 

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On August 13, 2012, the U.S. Commodity Futures Trading Commission (“CFTC” or “Commission”) issued a joint final rulemaking in conjunction with the U.S. Securities and Exchange Commission (“SEC”) further defining the term “Swap” as required under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted in July 2010 in response to the 2008 financial crisis. Title VII of the Act established a new framework for the regulation of the over-the-counter (“OTC”) derivatives markets. The Act requires the CFTC and SEC to establish a number of new regulations to implement the requirements of the Act, including further definitions of what constitutes a “Swap,” as well as defining two new classes of market participants: Swap Dealers and Major Swap Participants. Together, these foundational definitions determine which market participants may be subject to more than 50-plus new CFTC regulations.

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Earlier this year, the Consumer Financial Protection Bureau (“CFPB”) published a Bulletin signaling its intent to regulate and exercise enforcement authority over service providers to financial institutions. Pursuant to Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act and its implementing regulation, Regulation P, the CFPB has authority over certain large banks, credit unions and other consumer financial services companies. The Bulletin notes that the CFPB’s goal is to ensure compliance with “[f]ederal consumer financial law,” which includes the Gramm-Leach-Bliley Act and its implementing regulations, the Privacy Rule and the Safeguards Rule.

On February 15, 2012, the Securities and Exchange Commission ("SEC") adopted new rules under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), as required by Section 418 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank").  The new rules codify the SEC's July 12, 2011 order to increase the dollar amount tests applicable to qualified clients that may be charged performance fees under Rule 205-3.  A copy of the SEC's adopting release is available here.

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On December 21, 2011, the Securities and Exchange Commission (“SEC”) adopted new rules under the Securities Act of 1933, as amended (the “Securities Act”), as required by Section 413(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The rules exclude the value of a person’s primary residence for purposes of determining whether the person qualifies as an “accredited investor” on the basis of having a net worth in excess of $1 million. A copy of the SEC’s release is available here.

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On October 26, 2011, the Securities and Exchange Commission (“SEC”) adopted new rules under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), as required by Sections 404 and 406 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The new rules create a new reporting form — Form PF — to be filed quarterly or annually by registered investment advisers that manage private funds, including hedge funds and private equity funds. A copy of the SEC’s adopting release is available here.

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Earlier today, the U.S. Court of Appeals for the D.C. Circuit vacated the Securities and Exchange Commission's ("SEC") proxy access rules, which had been stayed pending the outcome of this litigation. The court found that the SEC "inconsistently and opportunistically framed the costs and benefits of the rule; failed adequately to quantify the certain costs or to explain why those costs could not be quantified; neglected to support its predictive judgments; contradicted itself; and failed to respond to substantial problems raised by commenters." In addition, the unanimous three-judge panel stated that "[b]y ducking serious evaluation of the costs that could be imposed upon companies from use of the rule by shareholders representing special interests, particularly union and government pension funds, we think the Commission acted arbitrarily."

As we previously explained, the proxy access rules would have permitted shareholders who collectively owned at least 3% of a company's shares for a period of three years to include nominees in a company's proxy materials. The court's decision is a rebuke to the SEC, but the SEC could request a rehearing, appeal to the supreme court or revise its analysis without necessarily changing the rules.

Click here for a copy of the decison.

On May 25, 2011, the U.S. Securities and Exchange Commission (SEC) by a 3–2 vote adopted final rules implementing the whistleblower award program of Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).i New Regulation 21F requires the SEC to pay cash awards to whistleblowers who voluntarily supply the SEC with original information leading to a judicial or administrative action in which the SEC obtains monetary sanctions over $1 million, subject to certain limitations. Whistleblowers who provide such information are eligible for a cash award of from 10 to 30 percent of the monetary sanctions. Employers are prohibited from retaliating against individuals who provide the SEC with information about possible federal securities law violations, and victims of retaliation are granted an independent cause of action.

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On January 11, 2011, the Institutional Limited Partners Association ("ILPA") released a revised version of its Private Equity Principles (the "ILPA Principles") and the first of its five recommended standardized reporting templates. A copy of the ILPA Principles is available here.

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On January 25, 2011, the Securities and Exchange Commission ("SEC") proposed new rules under the Securities Act of 1933, as amended (the "Securities Act"), as required by Section 413(a) of the "Dodd-Frank Wall Street Reform and Consumer Protection Act" ("Dodd-Frank"). The proposal excludes the value of a person's primary residence for purposes of determining whether the person qualifies as an "accredited investor" on the basis of having a net worth in excess of $1 million. A copy of the SEC's Proposing Release is available here.

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On November 19, 2010, the Securities and Exchange Commission ("SEC") proposed new rules under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), as required by Sections 403, 407, 408 and 410 of the "Dodd-Frank Wall Street Reform and Consumer Protection Act" ("Dodd-Frank"). If adopted as proposed, the "Exemptive Release" would define the scope of the registration exemptions available to advisers to venture capital funds, advisers to private funds with less than $150 million in assets under management in the United States, and foreign private advisers. The "Implementation Release" would require reporting by certain "exempt reporting advisers" (including advisers to venture capital funds and private funds with less than $150 million in assets under management in the United States). Further, the Implementation Release would expand the reporting requirements for registered investment advisers on Form ADV. A copy of the SEC's Exemptive Release is available here and a copy of the SEC's Implementation Release is available here.

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On October 12, 2010, the Securities and Exchange Commission (“SEC”) proposed new Rule 202(a)(11)(G)-1 (the “Proposed Rule”) to define the term “family office” under the Investment Advisers Act of 1940 (the “Advisers Act”), as required by Section 409 of the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (“Dodd-Frank”). Family offices that comply with the final version of the rules, once they are adopted, will not be required to register or comply with the Advisers Act. A copy of the SEC’s Proposing Release is available here.

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On October 18, 2010, the Securities and Exchange Commission (“SEC”) proposed new Rule 14Ad-1 (the “Proposed Rule”) under the Securities Exchange Act of 1934 (the “Exchange Act”), as required by Section 951 of the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (“Dodd-Frank”). If adopted as proposed, the Proposed Rule would require certain institutional investment managers, including hedge fund managers and pension fund managers that are required to file Form 13F, to annually file their record of proxy voting with respect to executive compensation shareholder votes. A copy of the SEC’s Proposing Release is available here.

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On October 27, 2010, the U.S. Commodity Futures Trading Commission (the “CFTC”) issued two notices of proposed rulemaking (“NPRMs”), citing Gramm-Leach-Bliley Act (“GLBA”) privacy rules, and marketing and data disposal rules of the Fair Credit Report Act (“FCRA”).

The proposed rules come in the wake of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which places two new categories of covered entities (i.e., “swap dealers” and “major swap participants”) under the CFTC’s jurisdiction.  Under the proposals, those entities would be subject to certain GLBA privacy rules that regulate the treatment of consumers’ nonpublic personal information, and sections of the FCRA that address affiliate marketing and data disposal.

The Securities and Exchange Commission recently adopted its final rule on "proxy access," perhaps the most sweeping reform in decades regarding the way directors of public companies are elected. On September 21, 2010, Hunton & Williams hosted a panel on the SEC's proxy access rule and related corporate governance implications of the Dodd-Frank Wall Street Reform Act. Panelists included a proxy solicitor, senior in-house counsel of a public company, an executive compensation consultant and our corporate governance attorneys.

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On August 25, 2010, the Securities and Exchange Commission (“SEC”) adopted final rules to facilitate nominations of directors by shareholders, including so-called “proxy access” rules. As adopted, the rules permit any shareholder or group of shareholders that has owned three percent or more of the company’s voting stock for at least three years to include director nominees in that company’s proxy materials. Shareholders will be entitled to include the greater of one nominee or the number of nominees that represent twenty-five percent of the total number of the company’s directors. As explained in the SEC’s 451-page release, the rules are mandatory and will become effective sixty days after publication in the federal register, though the SEC granted a three-year reprieve to “smaller reporting companies.” The rules fundamentally affect the manner in which directors are elected and deserve close attention.

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As reported in BNA’s Privacy Law Watch on July 29, 2010, three bills were introduced by House Republicans to repeal Section 929I of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).  Section 929I of the Dodd-Frank Act has been a source of controversy because it gives the SEC significant latitude to sidestep FOIA requests by providing that the SEC "shall not be compelled to disclose" certain information it obtains pursuant to the '34 Act when conducting surveillance, risk assessments or other regulatory and oversight activities.

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A number of regulatory and legislative developments will alter the municipal securities market significantly in the upcoming months. Among these developments are amendments to Rule 15c2-12 of the Securities and Exchange Act of 1934 that will enlarge the continuing disclosure obligations of municipal bond issuers, increased post-issuance diligence obligations for issuers of Direct Pay Build America Bonds, guidance on potential offsets by the Federal government to subsidy payments owed to issuers of Direct Pay BABs, and the effects of the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This client alert summarizes these recent developments and offers an overview of consequent changes in the operation of the municipal marketplace for the remainder of this calendar year.

In addition, this alert addresses the status of the extension of authorization for certain tax credit bond structures originally enacted by the American Recovery and Reinvestment Act of 2009 ("ARRA"), including Build America Bonds and Recovery Zone Bonds, as well as the extension of certain favorable tax law provisions under ARRA relevant to municipal bonds in general.

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This week, President Obama signed into law the "Dodd-Frank Wall Street Reform and Consumer Protection Act" (the "Act"). The Act contains a number of significant provisions that affect the securitization industry. One change with immediate effect is the repeal of Rule 436(g) of the Securities Act of 1933, which currently excludes NRSROs from being treated as "experts" when their ratings are included in a registration statement. The legislation also contains a 5 percent risk retention requirement for securitizations, other than those involving "qualified residential mortgage" or loans originated under approved underwriting standards indicating low credit risk. The Act calls for the issuance of regulations regarding the application of risk retention provisions and the specification of underwriting standards. We will be monitoring these developments and will provide updates to you as the picture becomes clearer.

Title VII of H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"), substantially alters the regulation of over-the-counter ("OTC") derivatives markets. Financial reform, particularly as it relates to derivatives, had the initial purpose of mitigating systemic risk and interconnection concerns in the financial markets. Congress and regulators, nevertheless, are taking the opportunity in Dodd-Frank to address other perceived issues in the OTC derivatives markets and in the commodities sector.

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Today President Barack Obama signed into law the financial overhaul legislation known as the Dodd-Frank Wall Street Reform and Consumer Protection Act (HR 4173).  Now that the bill has become law, today marks the beginning of study periods and rule making time frames in the bill for various regulators.
 
Click here for the legislation as passed by Congress.

On July 15, 2010 the Senate passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act"), which represents the most sweeping change to banking law since Congress adopted the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), if not before. FIRREA was the congressional action designed to "forever prevent" another banking catastrophe. Many statements from the late 1980s, such as the elimination of "too big to fail" ("TBTF"), have echoed in the debate over "systemically important" financial institutions. Hopefully, the Act's Financial Stability Oversight Council and the orderly liquidation authority over nonbanks that pose systemic risk will have more success than the FIRREA tools that were not effectively employed to prevent the subprime bubble.

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On July 15, 2010, the United States Senate approved a comprehensive regulatory reform bill entitled the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"). The United States House of Representatives approved Dodd-Frank on June 30, 2010. President Obama is expected to sign Dodd-Frank into law on July 21, 2010.

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On July 15, 2010, the Senate approved the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act"), previously passed by the House on June 30, 2010. President Obama signs the Act into law on July 21, 2010. The Act includes expansive financial industry regulatory reforms, including new restrictions on the private investment fund activities of banking entities and their affiliates, known as the "Volcker Rule." The Volcker Rule will have a significant impact on these entities and their participation in the private investment fund industry.

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On July 15, 2010, the Senate approved the "Dodd-Frank Wall Street Reform and Consumer Protection Act" (the "Act"), previously passed by the House on June 30, 2010. President Obama is expected to sign the Act into law on July 21, 2010. The Act includes expansive financial industry regulatory reforms, including the "Private Fund Investment Advisers Registration Act of 2010" (the "PFIARA"). The PFIARA is similar to a prior version of the PFIARA introduced by Sen. Christopher Dodd (D-CT) in the Senate in March and included in H.R. 4173, which was originally passed by the House on December 11, 2009. The PFIARA will have a significant impact on advisers to certain private funds, including hedge funds, private equity funds, venture capital funds and various other investment vehicles, by (1) requiring the registration of certain unregistered advisers under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and (2) imposing additional reporting and disclosure requirements on investment advisers, including those already registered under the Advisers Act. The PFIARA lays out a framework for regulation of private fund advisers, but delegates to the Securities and Exchange Commission ("SEC") rulemaking authority for many of the details concerning the types of advisers that will be facing additional regulatory burden. As a result, private investment fund advisers will need to run their businesses with a renewed focus on compliance.

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Today the Senate approved the financial overhaul legislation known as the Dodd-Frank Wall Street Reform and Consumer Protection Act (HR 4173).  Before today's 60 to 39 vote, the legislation was approved by the House of Representatives on June 30th after clearing the House-Senate conference on June 29th.  The legislation must first be signed by President Barack Obama before becoming law.  The signing ceremony is expected the week of July 19th.
 
Click here for the approved legislation.