On June 5, 2019, the SEC adopted Regulation Best Interest (“Reg. BI”), which not only required the disclosure of interest, but also imposed a standard of conduct on broker-dealers (“BDs”) when making a recommendation to a retail customer of any securities transaction or investment strategy.
The California Consumer Privacy Act (CCPA) is one of the most consequential data privacy laws passed to date in the U.S. and will require significant changes to the way many U.S. companies manage the personal information of their customers. The CCPA may apply to businesses even if they do not have a physical presence in California if they meet certain requirements, such as having 50,000 customers based in the state. Failure to comply with the CCPA when it enters into force in 2020 could result in costly fines or private lawsuits.
Four of our securities lawyers predict in this client alert that the SEC will scrutinize offshore activity more aggressively going forward following a recent ruling in the Tenth Circuit’s Court of Appeals.
On November 2, 2018, the Securities and Exchange Commission (the “Commission”) amended Rules 605 and 606 under Regulation NMS to require additional disclosures by broker-dealers to customers regarding the handling of their orders. The Commission stated that the amended rules would provide more detailed information to customers—with a focus on institutional customers—thereby allowing a more effective assessment of how broker-dealers are carrying out their best execution obligations and the impact of a broker-dealer’s order routing decisions on the quality of their executions. The Commission noted its particular concern with regard to information leakage and potential conflicts of interest in order routing decisions.
U.S. Securities and Exchange Commission Chairman Jay Clayton recently reminded us that corporate culture and the “tone from the top” remain important to regulators, even in this enforcement-lite environment. Speaking about financial firm culture before the New York Fed, Clayton predicted pain for firms whose cultural compass diverges from the commission’s.
The Supreme Court held on June 21, 2018 in Lucia v. SEC that Securities and Exchange Commission (SEC or Commission) Administrative Law Judges (ALJs) are “inferior officers” subject to the Appointments Clause of Article II of the U.S. Constitution rather than regular federal employees. Such inferior officers must be appointed to their positions by the President, a court of law, or a head of department. At issue in Lucia was that SEC ALJs had been appointed by SEC staff members, not the Commission.
Arbitration in the cryptocurrency world promises to be very different from traditional “securities” arbitrations against broker-dealers. The latter are conducted pursuant to the strict rules and procedures of the Financial Industry Regulatory Authority. In contrast, the parties likely to be involved in cryptocurrency disputes have far greater freedom in determining which disputes are arbitrable, the particular arbitration forum and venue for resolving the disputes, and the applicable procedures and remedies. The article attached, which appeared in Law360 on May 30, examines the predispute arbitration clauses that certain major digital asset exchanges require customers to agree to as a condition of opening an account, and considers how arbitrations in the cryptocurrency world will differ from traditional securities arbitration and the ramifications for industry participants.