On December 14th, the SEC provided one adopted amendment, two proposed amendments, and two proposed rules. The large number of announcements should cause raised attention throughout the industry as firms continue to try staying up to date with an increasingly aggressive regulatory environment.
- Amendments to Rule 10b5-1 to enhance protections against insider trading
- Different cooling periods will be required for directors, officers, and non-issuers to have an affirmative defense against insider trading.
- Directors and officers must certify in their Rule 10b5-1 plan that they do not have MNPI about the issuer and that the plan is adopted in good faith.
- Multiple overlapping plans, and multiple plans will be significantly limited.
- Increased disclosures requiring quarterly disclosures of use of plans, annual disclosures of registrant’s insider trading policies and procedures.
- Amendments to Rule 605 to enhance required disclosures of order execution
- The entities subject to Rule 605 would expand to single-dealer platforms, entities that operate proposed qualified accounts, and BDs that introduce or carry 100,000+ customers
- There are significant updates to the scope and content of the monthly reports required under the Rule.
- Amendment to Rule 612 to enhance opportunities for investors to receive best pricing
- Variable minimum pricing increments would apply to quoting and all trading for NMS stocks.
- Access fee caps would have reduced limits based off the NMS stock’s pricing.
- Any national securities exchange that imposes fees or provides rebates based on volume would need to set those thresholds prior to any assessment of fee or rebate.
- Odd-lot information and round lot information under the MDI rule would have accelerated reporting requirements, and SIPs would be required to collect, consolidate, and disseminate this information.
- New Rule (Regulation NMS) to enhance competition for investor order execution
- Certain orders from individual investors will have exposure to competition before internal execution by any trading center that restricts order-by-order competition.
- Restricted competitions trading centers would be required to expose orders to competition in a “qualified auction” operated by an open competition trading center, with multiple requirements established to define a qualified auction.
- Proposed Rule 1100, 1101 and 1102 for a “Best Execution Standard for BDs”
- Rule 1100- Broker-dealers would be required to ascertain the best market for a security ordered so that the price is as favorable as possible to the customer.
- Rule 1101- BDs must establish, maintain, and enforce written policies and procedures to comply with Rule 1100, address how they will determine the best market for securities ordered, and review the execution quality of customer transactions at least quarterly
- Rule 1102 – Annual reviews of their best execution policies and procedures with documentation.
Vigilant’s Final Conclusion
As the SEC continues to increase their activity in the regulatory environment, it is vital for firms to stay up to date on all regulatory changes that could affect their business operations. As more and more adopted/proposed rules/amendments are announced from the SEC, many compliance policies and procedures could require significant revision along with new adoptions (if applicable to your Firm).
Falling out of compliance can be incredibly costly for firms, and many firms may benefit from outsourced compliance support to aid in their business goals. Vigilant provides services to help alleviate your compliance department in navigating and staying up to date with the complex regulatory environment, offering decades of industry experience working with regulators to help your firm adjust to the rapid regulatory changes that occur.