Announcements and analysis of key fintech, regulatory and compliance issues as they unfold.
Article – Private Capital Market Update
This month, The Division of Economic and Risk Analysis (DERA) of the U.S. Securities and Exchange Commission issued a report to Congress regarding the impacts of the Dodd-Frank Act on the access to capital for consumers, investors, and businesses as well as market liquidity. The 315-page report addresses several impacts and includes notable statistics on unregistered offerings, including Title III, Regulation Crowdfunding.
From the enactment of the Dodd-Frank Act in 2010 through December 31, 2016, there was approximately $20 trillion in capital formation through registered offerings and approximately $11 trillion of capital formed through unregistered offerings.
The amount of capital raised through Title II amendments to the JOBS Act, under Regulation D, Rule 506(c) (i.e. the general solicitation rule), which was implemented in September, 2013, represents 5,374 issuers participating, 5,474 offerings, with $70 billion of capital raised as reported in initial Form D filings.
The amount of capital raised through Title III of the JOBS Act, under Regulation Crowdfunding, suggests pre-revenue growth firms are beginning to use Title III as a crowdfunding method of raising capital. Table 7 of the report details the amounts raised under Title III from effectiveness of the rule through December 31, 2016, which represents 163 in total offerings, 28 completed offerings, 156 issuers participating, with approximately $8 million of capital raised.
Of the Title III offerings over the observation period, the distribution of Title III crowdfunding securities types were:
Equity: 36%
Simple Agreement for Future Equity (“SAFE”): 26%
Debt 20%
Units: 7%
Convertible: 6%
Misc.: 5%
The amount of capital raised through Title IV of the JOBS Act, under Regulation A, from the initial 18 months post effectiveness, DERA estimates that 56 issuers participated with approximately $314 million of capital raised.
Please see the report that can be accesses here for complete and accurate information. https://www.sec.gov/files/access-to-capital-and-market-liquidity-study-dera-2017.pdf
Investment Advisors – Form ADV, Part 1 Revised
Reminder that Form ADV Part 1 was revised as part of Release No. IA-4509; File No. S7-09-15. Find helpful links below.
https://www.sec.gov/rules/final/2016/ia-4509.pdf
https://www.sec.gov/rules/final/2016/ia-4509-form-adv-summary-of-changes.pdf
https://www.sec.gov/divisions/investment/iard/iardfaq.shtml
Speaking Engagement: 2017 NSCP Spring Conference
Join Brandon Klerk, Founder of Halyard Compliance LLC, at the National Society of Compliance Professionals (NSCP) Spring Conference for an interactive panel on Due Diligence of Third Parties. The conference will be held on Tuesday, May 23rd, 2017, in Chicago, IL at the Federal Reserve Bank of Chicago.
This session will dig into reviewing the reputation, standards, quality and benefit of a product or service. In addition, attendees will receive useful tools for conducting a review of third parties. The session will also focus on:
Assessing the due diligence of vendors, products and sub-advisor relationships
Due diligence processes at large and small firms; partnering with business units to follow the processes
Gathering information and documentation, including standard questionnaires, RFPs and onsite visits for new and existing relationships.
Red flags that require escalation and the impact to the due diligence process
Recent Developments in Funding Portal Regulations
FINRA Requests Comment on Rules Impacting Capital Formation (Regulatory Notice 17-14)
FINRA is requesting comment and industry input on rules impacting capital formation, including those rules related to Regulation Crowdfunding and FINRA’s Funding Portal rules. FINRA is interested in industry perspectives in several areas, including whether FINRA’s rules are effective and responsive to the problems that the rules were intended to address. This is an opportunity for the funding portal industry to comment on FINRA’s approach to the implementation and enforcement of funding portal rules and regulations.
SEC Adopts JOBS Act Amendments to Help Entrepreneurs and Investors (SEC Press Release 2017-78)
Sections 4(a)(6) and 4A of the Securities Act set forth dollar amounts used in connection with the crowdfunding exemption, and Section 4A(h)(1) states that such dollar amounts shall be adjusted by the SEC not less frequently than once every five years to reflect the change in the CPI-U published by the BLS (Bureau of Labor Statistics). The SEC has adopted amendments to Rules 100 and 201(t) of Regulation Crowdfunding and Securities Act Form C to reflect the required inflation adjustments. The Commission approved the new thresholds which became effective when they were published in the Federal Register on April 12, 2017. Please see the linked Press Release and Federal Register rule release for additional information.
New Rule Proposal: Advertising Rules for Municipal Advisors and Dealers
The MSRB proposes new Rule G-40 for Municipal Advisor (MA) advertising requirements. The MSRB also proposes amendments to MSRB Rule G-21 on dealer advertising requirements.
“Rule G-40 would be substantially similar to the amended Rule G-21 but would have specific language altered to align with MA practices and would not address product advertisements, new issue product advertisements, and municipal fund security product advertisements because the MSRB said it does not think MAs prepare those.” – Bond Buyer 2/17/17
“The amendments to Rule G-21 would make explicit and enhance many of the MSRB’s fair dealing obligations by mandating six requirements be met, including that an advertisement be fair and balanced as well as provide a sound basis for evaluating the municipal security. They also would require that an advertisement provide a balanced treatment of the benefits and risks associated with a municipal security.” – Bond Buyer 2/17/17
RESOURCE: 2017 Industry Conferences and Events
2017 INDUSTRY CONFERENCES AND EVENTS
9th Annual SPA and MoFo Structured Products Conference
January 24, 2017, New York, NYC
SIFMA AML and Financial Crimes Conference
February 8-9, 2017, New York, NYC
March 2–3, 2017, Washington, D.C.
March 19–22, 2017, San Diego, CA
April 5–7, 2017, Washington, D.C.
SIFMA Equity Market Structure Conference
April, 26 2017, New York, NYC
April 24, 2017, Newport Beach, CA
May 8-11, 2017, Boca Raton, FL
May 9, 2017, New York, NY
Schwab Compliance Solutions National Conference>
May 11-12, 2017, Key Biscayne, FL
May 16–18, 2017, Washington, D.C.
May 23, 2017, Chicago, IL
May 25, 2017, Coconut Grove
June 5-6, 2017, New York, NY
June 12, 2017, Toronto, ON
June 26, 2017, Chicago, IL
2017 Advertising Regulation Conference
October 5 – 6, 2017 • Washington, DC
October 16–18, 2017, Washington, D.C.
Impact — Schwab Showcase Expo>
November 14–17, 2017, Chicago, IL
OTHER EVENTS – Dates and Locations Pending:
Date Pending, 2017, New York, NY
FINRA Cybersecurity Conference
Date Pending, 2017, New York, NY
FINRA District Compliance Events
Dates Pending, 2017, various
SEC/FINRA Compliance Outreach Program for Broker-Dealers
Dates Pending, 2017, Washington D.C. (New York, Atlanta, Dallas, Boston, Chicago and San Francisco)
2016 NSCP National Conference
Join Brandon Klerk, Founder of Halyard Compliance LLC, at the NSCP National Conference October 17th – 19th. Workshops, labs, and forum discussions are led by experienced industry veterans sharing the practical implementation of compliance policies and procedures.
Crowdfunding Conference: FUND Conference
Interested in crowdfunding? Join Brandon Klerk, Founder of Halyard Compliance LLC, at the FUND Conference in Chicago, September 27-29. Early bird tickets now available (www.fundconference.com). Use our code when you purchase tickets: HAYCOMP50
Hope to see you there!
Speaking Engagement: National Compliance Conference
Join Brandon Klerk, Founder of Halyard Compliance LLC, on November 9th – 11th in Orlando, FL for an interactive session on understanding the critical components of establishing and maintaining a “Culture of Compliance” as put forth by FINRA.
Industry Insights Session: What Does a “Culture of Compliance” REALLY mean? Participate in an interactive panel discussion led by Brandon Klerk and other industry experts. Better understand the critical components of establishing and maintaining a “Culture of Compliance” as put forth by FINRA.
Final DOL fiduciary rule released today!
Timetable: The effective date is June 7th, 2016, which is 60 days after it is published in the Federal Register on April 8th, 2016. Notwithstanding any possible applicability postponement(s), the rule is scheduled to apply to transaction on or after April 10th, 2017 (with certain phase-ins through January 2018).
Quick References:
Speaking Engagement: 2016 National Conference, Charles Schwab Compliance Solutions
“Leveraging Schwab Compliance Technologies®
Thursday May 5, 1:45 p.m. – 2:45 p.m.
Are you getting the most out of your instance of Schwab Compliance Technologies (SCT)? During this session we will focus on the Personal Trading and Case Management modules.
Personal Trading: We will discuss how to effectively leverage business rules, maintain your direct feeds, and resolve missing account exceptions.
Case Management: We will discuss key differences between Case and Affirmations and demonstrate how firms are using Case as an integral component of their Compliance program.
This interactive session is designed for both beginners and experts and will provide a forum for all attendees to share best practices and insights.”
Register Here: https://event.schwab.com/rsvp/invitation/invitation.asp?id=/m1312deb-12ROB3FHDKSV5
Speaking Engagement: 2016 National Conference
Join Brandon Klerk, Founder of Halyard Compliance LLC, at the Charles Schwab Compliance Solutions 2016 National Conference on May 5th – 6th in Austin, TX for an interactive session designed for both beginners and experts and will provide a forum for all attendees to share best practices and insights. Session details are below:
“Leveraging Schwab Compliance Technologies®
Thursday May 5, 1:45 p.m. – 2:45 p.m.
Are you getting the most out of your instance of Schwab Compliance Technologies (SCT)? During this session we will focus on the Personal Trading and Case Management modules.
Personal Trading: We will discuss how to effectively leverage business rules, maintain your direct feeds, and resolve missing account exceptions.
Case Management: We will discuss key differences between Case and Affirmations and demonstrate how firms are using Case as an integral component of their Compliance program.
This interactive session is designed for both beginners and experts and will provide a forum for all attendees to share best practices and insights.”
Register Here: https://event.schwab.com/rsvp/invitation/invitation.asp?id=/m1312deb-12ROB3FHDKSV5
2016 FINRA & SEC Examination Priorities
Focusing on everything from “firm’s culture” to “cyber-security”. Contact Halyard for insights on how to better evidence your firm’s “culture” during a regulatory examination. Read these regulatory releases here:
https://www.sec.gov/about/offices/ocie/national-examination-program-priorities-2016.pdf
https://www.finra.org/industry/2016-regulatory-and-examination-priorities-letter
Speaking Engagement: NSCP National Conference
Join Brandon Klerk, Founder of Halyard Compliance LLC, at the NSCP National Conference November 1st – 4th for a panel discussion with other industry experts on Complex Products and Alternative Investments. Attend the session to hear about how to identify these products on your system, doing the diligence, surveying the suitability, regulator expectations and more.
Speaking Engagement: The Strategic Leadership Group
Brandon Klerk, Founder of Halyard Compliance LLC, speaks to the The Strategic Leadership Group (“SLG”), a longstanding group that has periodic calls where industry, lawyers and regulatory/law enforcement personnel discuss topical issues around anti-money laundering, fraud and related issues. Mr. Klerk will join other industry experts for a panel discussion on FinCEN’s Proposed AML Regulations for Investment Advisers. The FinCEN announcement and proposed regulation can be found here, respectively: https://www.fincen.gov/news_room/nr/pdf/20150825.pdf & https://www.fincen.gov/statutes_regs/frn/pdf/1506-AB10_FinCEN_IA_NPRM.pdf
Speaking Engagement: Thomson Reuters Compliance and Risk Forum
Join Brandon Klerk, Founder of Halyard Compliance LLC, for the Thomson Reuters Compliance and Risk Forum 2015 on September 30th at the Palmer House in Chicago. Mr. Klerk will join other industry experts for a panel discussion on “Training as the Cornerstone of an Effective Compliance Program“. Attend the session to hear about:
“Your compliance and ethics training program sets the tone and delivers the expectations for your workforce. As the most standardized and pervasive employee interaction, training should be the root of all initiatives that are designed to drive a culture of compliance and ethics in your business. Whether it is tone, compensation, enforcement or policy and procedure management, effective training can serve as the cornerstone. During this session, panelists will examine:
• Promoting and measuring employee engagement
• Addressing regulatory learning fatigue
• Fostering an ethical and compliant workforce
• Defining and delivering ROI”
https://info.risk.thomsonreuters.com/2015-Roadshow-Chicago?elq=00000000000000000000000000000000&elqCampaignId=&elqaid=5851&elqat=2&elqTrackId=e4979017cef84683bdb9870303554b58
Speaking Engagement: FINRA National Conference
Join Brandon Klerk, Founder of Halyard Compliance LLC, at the FINRA National Conference in Washington D.C. May 27-29th for a panel discussion with FINRA and SEC staff members on Alternative Investments and Complex Products. Attend the session to hear about private placements, structured products and other alternative investment products, and to hear regulatory perspectives and industry-effective practices regarding these products. This session will be available via broadcast.
Speaking Engagement: NSCP Mid-West Regional Conference
Join Brandon Klerk, founder of Halyard Compliance LLC, on May 7th at the Federal Reserve Bank of Chicago for the National Association of Compliance Professionals (NSCP) Mid-West regional conference for two panel discussions, Essential Compliance Skills and Managing Broker-Dealer Regulatory Examinations.
Essential Compliance Skills
Communication
Achieve business “partner” status
The art of why not versus cannot
They have a question, but I don’t know the answer; how not to lose credibility
Your role in helping management understand compliance risk
BD – Regulatory Exams
Current exam priorities: What regulators are looking for
Preparing for the exam and responding to the exam requests
Demonstrating your Culture of Compliance and an effective control environment
Preparation and management of the entire exam process
What to expect for an exit interview and resolving deficiencies
Start your journey
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