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Commentary by Steven Lofchie

The SEC charged four former clearing firm officials for their roles in a series of accounting and disclosure failures stemming from decisions to extend credit to certain customers beyond what is allowed under the margin requirements. The SEC alleged that the clearing broker-dealer provided customers with nearly $100 million in margin loans secured by mostly "risky, unrated municipal bonds," such as those that were used to fund a horse racetrack operated by one of the customers. The SEC investigation found that instead of liquidating the collateral, accounting for the loan losses properly and

The SEC charged a consultant and his friend with insider trading regarding an impending acquisition of a company, in violation of Securities Exchange Act Rule 10b-5 ("Employment of Manipulative and Deceptive Devices"). The SEC alleged that the consultant to a restaurant chain tipped his friend with confidential details about its bidding process that he learned while providing executive coaching services to the chain's top management executives. The SEC charged that the consultant then purchased "risky, out-of-the-money call options" for the restaurant chain's securities and tipped his friend

The SEC Advisory Committee on Small and Emerging Companies considered (i) recommendations related to intrastate crowdfunding; (ii) the treatment of so-called "finders" that assist companies in capital-raising activities; and (iii) improving public company disclosure. In her remarks, Chair Mary Jo White noted the efforts of the SEC Division of Corporation Finance to actively consider ways to improve Securities Act Rule 147 ("'Part of An Issue,' 'Person Resident' and 'Doing Business within' for Purposes of Section 3(a)(11)"), which is the "safe harbor that issuers generally rely on for

FINRA proposed amendments to reporting rules concerning over-the-counter transactions in equity securities to FINRA Facilities to (i) allow the submission of "clearing-only, non-regulatory reports" relating to previously executed and reported transactions and (ii) exempt such reports from certain reporting requirements under FINRA rules. FINRA proposed adopting a new subparagraph (4) under FINRA Rules 7130(g), 7230A(i), 7230B(h) and 7330(h) ("Submission of Non-Tape Reports Associated with Previously Executed Trades") to create a uniquely identified category of submissions to FINRA that are

Commentary by Nihal Patel

FINRA filed a proposed rule change to amend FINRA Rule 4210 to establish margin requirements for "To-Be-Announced" transactions ("TBAs") and other forward-settling transactions in agency securities. The proposal follows on recommendations for margining in these transactions made by the New York Federal Reserve Bank's Treasury Market Practice Group ("TMPG"). The new requirements would apply to: (i) TBA transactions, inclusive of adjustable rate mortgage transactions; (ii) Specified Pool Transactions; and (iii) certain transactions in Collateralized Mortgage Obligations (collectively "Covered