Investment Management, Trading & Markets Updates – December 2021 | Alston & Bird


NFA adds questions on virtual currency and micro-contracts to annual questionnaire

On December 6, 2021, the National Futures Association (NFA) issued Notice I-21-42 to inform NFA members that new questions have been added to the annual Membership Cash / Physical Virtual Currency Questionnaire, virtual currency derivatives and micro-contracts. transactions. The new questions aim to respond to the increased interest and activity in virtual currency products and micro-contracts. Since the Annual Questionnaire is to be completed annually and updated throughout the year to reflect significant changes in business activity, the NFA asks all CPO, CTA, FCM, FDM and IB members to respond to new questions as soon as possible to avoid unnecessary inquiries. .

SEC Releases Report on Market Structure Conditions for Equities and Meme Stocks and Options

On October 18, 2021, the Securities and Exchange Commission (SEC) released a staff report on the structural conditions of the stock and options market in early 2021, focusing on GameStop Corp’s January 2021 trading activity. (GME). GME’s stock prices have skyrocketed to new highs and garnered considerable attention, leading to GME becoming known as “meme stock”. As the episode progressed into January, several retail brokers temporarily banned certain activity on some of these stock and options memes. GME has experienced a number of factors that have impacted the actions of memes in general: (1) significant price movements; (2) large volume changes; (3) high short-term interest; (4) frequent mentions of Reddit; and (5) significant coverage in the mainstream media. Since the stock memes episode raised several questions about the structure of the market, the report also provides insight into the structure of the stock and options market for individual investors. The report concludes by identifying several areas of the market structure and regulatory framework that may be considered for a potential study, including: (1) the forces that may cause a brokerage to restrict trade; (2) digital engagement practices and order flow payment; (3) trading in dark pools and wholesalers; and (4) the dynamics of the short selling market.

SEC announces app results for fiscal 2021

On November 18, 2021, the SEC announced its enforcement results for fiscal 2021, which ended September 30. In fiscal 2021, the SEC filed 434 new enforcement actions, an increase of 7% from 2020. These new actions have covered the entire securities waterfront, including against threats. emerging in the crypto and SPAC spaces. The SEC also secured judgments and orders for nearly $ 2.4 billion in rebates and more than $ 1.4 billion in penalties, a 33% decrease and a 33% increase, respectively, from 2020. Fiscal year 2021 also set a whistleblower record, with the SEC awarding a total of $ 564 million to 108 whistleblowers. There have also been several noteworthy enforcement actions in new areas, such as actions involving securities using decentralized finance or ‘DeFi’ technology, securities law violations on the ‘dark web ‘, accusing an alternative data provider of securities fraud, failure to timely report and provide CRS forms, and action against an order and execution management system provider that facilitated trading electronic for not registering as a broker.

SEC Proposal on Electronic Record Keeping Requirements

On November 18, 2021, the SEC released proposed changes to the electronic record keeping and prompt filing requirements applicable to brokers, securities swap brokers (SBSDs) and major participants in securities swaps. titles (MSBSP). The proposal would align the SEC rule with current technology. Currently, the SEC’s Broker and Broker Electronic Document Retention Rule requires companies to keep electronic documents exclusively in a non-rewritable, non-erasable format. The proposed changes would add an audit trail alternative to this rule, allowing electronic records to be preserved in a way that allows for the re-creation of an original recording if it is altered, overwritten or deleted. The comment period for this proposal will be open until January 3, 2022.

SEC adopts changes to application of universal proxy rules, excluding registered investment firms and BDCs

On November 17, 2021, the SEC passed changes to the proxy rules that require the use of universal proxy cards in contested elections. The new rules will come into effect for shareholder meetings held after August 31, 2022 and will require companies and dissidents to list on their proxy cards all duly appointed director candidates: board nominees, board nominees, dissidents and any candidate for access to proxies. The rule was first proposed in 2016 and was largely adopted in its proposed form with one main change: a dissenter is required to declare that he will solicit holders of at least 67% of the voting rights with the right to vote in the election of directors.

In particular, the new rules will not apply to elections held by registered investment companies and business development company (BDC) funds. The SEC said that since the funds were not included in the original proposal, and based on the comments received by the SEC on the proposal, further consideration was needed to determine whether this new rule should work. apply to funds. The SEC encouraged industry participants, and in particular registered closed-end funds and BDCs, to continue an active dialogue with the SEC to explain the fundamental differences between activism in a corporate operating context and activism in a fund context.

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