SEC Will Hold a Series of Roundtables About the New Proxy Rules
4.24.2007 The SEC will host a series of roundtable discussions in May on shareholder rights and the federal proxy rules.
The first of three roundtables will take place on May 7, 2007 and will consist of panels addressing:
- The federal role in upholding shareholders' state law rights
- The purpose and effect of the federal proxy rules
- Non-binding proposals under the proxy rules
- Binding proposals under the proxy rules
The second and third roundtables on proxy voting will take place on May 24 and 25, 2007, respectively.
The roundtables will begin at 9:00 a.m. and will be held in the Auditorium at the SEC's headquarters at 100 F Street, NE, Washington, D.C. The roundtables will be open to the public with seating on a first-come, first-served basis. Doors will open at 8:30 a.m. and visitors will be subject to security checks. The roundtable discussions also will be available via webcast on the Commission's Web site at www.sec.gov.
Please click http://www.sec.gov/news/press/2007/2007-71.htm to access the press release announcing the roundtables.
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Identity Theft Initiatives Announced
4.23.2007
Attorney General Alberto R. Gonzales and Federal Trade Commission
Chairman Deborah Platt Majoras today announced the completion of the
President's Identity Theft Task Force strategic plan to combat
identity theft.
The strategic plan is the result of an unprecedented federal effort to
formulate a comprehensive and fully coordinated plan to attack this
widespread and destructive crime. The plan focuses on ways to improve
the effectiveness of criminal prosecutions of identity theft; enhance
data protection for sensitive consumer information maintained by the
public sector, private sector, and consumers; provide more
comprehensive and effective guidance for consumers and the business
community; and improve recovery and assistance for consumers.
The specific
recommendations outlined in the Strategic Plan include the following:
- reduce the unnecessary use of Social Security numbers by federal
agencies, the most valuable commodity for an identity thief;
- establish national standards that require private sector entities to
safeguard the personal data they compile and maintain and to provide
notice to consumers when a breach occurs that poses a significant risk
of identity theft;
- implement a broad, sustained awareness campaign by federal agencies
to educate consumers, the private sector and the public sector on
methods to deter, detect and defend against identity theft; and
- create a National Identity Theft Law Enforcement Center to allow law
enforcement agencies to coordinate their efforts and information more
efficiently, and investigate and prosecute identity thieves more
effectively.
The Task Force's recommendations also include several legislative
proposals designed to fill the gaps in current laws criminalizing the
acts of many identity thieves, and ensure that victims can recover the
value of the time lost attempting to repair damage inflicted by
identity theft. These proposals include the following actions:
- amending the identity theft and aggravated identity theft statutes
to ensure that identity thieves who misappropriate information
belonging to corporations and organizations can be prosecuted;
- adding new crimes to the list of offenses which, if committed by
identity thieves in connection with the identity theft itself, will
subject those criminals to a two-year mandatory sentence available
under the "aggravated identity theft" statute;
- broadening the statute that criminalizes the theft of electronic
data by eliminating the current requirement that the information must
have been stolen through interstate communications;
- amending existing statutes to assure the ability of federal
prosecutors to charge those who use malicious spyware and keyloggers;
and
- amending the cyber-extortion statute to cover additional, alternate
types of cyber-extortion
The Identity Theft Task Force, co-chaired by the Attorney General and
the FTC Chairman, was established by Executive Order of the President
on May 10, 2006, and is now comprised of 17 federal agencies and
departments, including the SEC.
Please click http://www.sec.gov/news/press/2007/2007-69.htm to access a copy of the press relase announcing the identity theft initiatives.
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ICI Makes Recommendations to Department of Labor About ERISA Cross-Trading Exemptions
4.18.2007 The Investment Company Institute ("ICI"), the trade group for the investment company industry, generally supported guidance issued by the U.S. Department of Labor ("DOL") concerning cross-trading exemptions for investment advisers subject to ERISA because they are fiduciares. The ICI, however, made certain recommendations to clarify DOL's guidance.
DOL recently adopted an interim final rule on cross-trading policies and procedures. This rule was adopted under the statutory exemption for cross trading enacted in the Pension Protection Act ("PPA"). Many investment advisers manage separate accounts or collective funds that hold "plan assets" subject to ERISA fiduciary responsibility rules and such advisers often engage in cross trading on behalf of their clients.
Cross trading involves the portfolio management decision to purchase or sell a security and the decision on how to execute the transaction. Portfolio management decisions are made based on what is in the interests of the particular accounts. The ICI noted that trading decisions relating to cross trading are largely automatic, based on matching buy and sell orders received from portfolio managers on particular securities. The ICI also noted that in many respects, the DOL rules track the conditions of Rule 17a-7 under the Investment Company Act of 1940 in regards to the requirements for an investment manager's policies and procedures on cross trading.
The IcI requested DOL to provide clarification and additional guidance on the following:
- urging the DOL to clarify that the exemption applies to cross trading between accounts managed by affiliated investment managers and to pooled funds where at least one participating plan has assets of at least $100 million;
- making several suggestions to streamline the required policies and procedures and enhance their compatibility with Rule 17a-7;
- requesting that the Department revise the interim rule to permit annual determinations on whether a plan meets the $100 million asset requirement; and
- recommending that the Department use its existing exemptive authority to go beyond the statutory exemption and permit plans of all sizes to enjoy the benefits of cross trading.
Please click http://www.ici.org/new/07_dol_cross_cvr.html#TopOfPage to access a copy of the ICI letter.
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New Anti-Money Laundering Tool Available
4.16.2007 The SEC announced the
availability of a new compliance tool to assist anti-money laundering
(AML) compliance efforts by broker-dealers.
Broker-dealers have compliance obligations under statutory and
regulatory provisions and related rules of the securities self-
regulatory organizations (SROs). The AML Source Tool, developed by the
SEC's Office of Compliance Inspections and Examinations (OCIE),
compiles and organizes key AML laws, rules and related guidance
applicable to broker-dealers and provides links to these materials to
promote easy accessibility.
It should be noted that the SEC has not proposed or adopted AML rules applicable to investment advisers or hedge funds. Many advisers, however, have voluntarily adopted AML procedures.
Please click
http://www.sec.gov/about/offices/ocie/amlsourcetool.htm to access the AML tool.
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SEC Enforcement Director Speaks at Mutual Fund Directors Conference
4.12.2007 SEC Enforcement Director Linda Thomsen spoke at the Mutual Fund Directors Forum 7th Annual Policy Conference in Washington, D.C. Director Thomsen began her speech by noting that independent directors of mutual funds are the watchdogs tasked with providing an independent check on fund management. She stated that when directors encounter problems or violations at a mutual fund complex, they can play an important role in overseeing efficient and effective remediation at a pace and in a manner that the SEC could not hope to replicate.
She spoke about the factors her Division consider when deciding what part of an organization to bring an enforcement action against. When serious misconduct occurs at a registered entity, the SEC often inclined to charge and sanction that entity. She discussed one mutual fund case where the SEC decided that the underlying conduct was so serious that it should bring charges against individuals at the fund complex and not the entity because the entity cooperated. She read from the administrative order:
"In doing so, the Commission explained that it did not sue PFTC [the entity] "because of its swift, extensive and extraordinary cooperation in the Commission's investigation of the transactions that are the subject of the Commission's complaint. PFTC's cooperation consisted of prompt self-reporting, an independent internal investigation, sharing the results of that investigation with the government . . ., terminating and otherwise disciplining responsible wrongdoers, providing full restitution to its defrauded clients, paying for the attorneys' and consultants' fees of its defrauded clients, and implementing new controls designed to prevent the recurrence of fraudulent conduct."
Other topics that were addressed included the directors interaction with the chief compliance officer, fund portfolio trading and insider trading.
Please click http://www.sec.gov/news/speech/2007/spch041207lct.htm to access a copy of the speech.
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SEC Investment Management Director Speaks at PLI Conference
4.12.2007 Investment Management Director Buddy Donohue spoke at the 2007 Practicing Law Institute Investment Management Institute conference in New York. Director Donohue began by characterizing this period of mutual fund regulation as a time of normalcy, and the staff will be focusing on the review and refinement of its regulatory inventory. He emphasized that part of the Division's objective in embarking on this review is to enable the Division to focus on achieving its regulatory goal of investor protection without overburdening firms and investors with regulations that may no longer be necessary or effective.
He stated that the Division's disclosure reform initiative is a top priority for Chairman Cox and plays a key role in what Chairman Cox has called the Commission's "war on complexity" in the information that investors receive. The initiative has two interconnected components — the first is mutual fund disclosure reform and the second is interactive data tagging.
For the mutual fund disclosure reform component, the Division is preparing a recommendation to the SEC that would permit funds to offer securities pursuant to a streamlined disclosure document to be delivered to investors electronically or on paper, while requiring more detailed information to be available on the Internet or delivered in paper upon request. The streamlined disclosure document that the Division is considering could include key information investors need to make informed decisions, such as fees and expenses, risks, investment objectives and strategies, and historical returns.
The second component of disclosure reform would provide investors with a complementary ability to access more detailed information about a fund through the use of interactive data. Recently, the Investment Company Institute ("ICI") released for public review a draft taxonomy that it developed for tagging the key disclosure data contained in the risk/return summary that is at the front of every mutual fund prospectus. This information, including investment objectives and strategies, costs, risks, and historical performance is critical to an investor's informed investment decision. With this development the ICI has made great strides towards the creation of a technological tool that has the potential to enhance the way in which information is provided to mutual fund investors. In February, the SEC issued a proposing release requesting comment on permitting funds to use the new taxonomy developed by the ICI to tag their risk return summaries in the Commission's voluntary interactive data filing program. The comment period closed on March 14th, and we are in the process of reviewing the comment letters. The voluntary risk return summary tagging program would allow us to test the usefulness of the interactive tagging system, as well as identify any deficiencies of the system. I am very hopeful that this initiative is successful.
He noted that the Division is now working with the Department of Labor to extend the application of these reforms to the disclosures made to participants in 401(k) plans.
Different 401(k) participants receive varying levels of information, from full prospectuses and shareholder reports to one-page charts containing limited data and information. Director Donohue believes that 401(k) participants investing in funds would benefit greatly from standardized information about fund investments — if that standardized information is clear and meaningful.
He also spoked about amendments to the books and records rules for investment companies and investment adviser, complex instruments and Rule 12b-1.
Please click http://www.sec.gov/news/speech/2007/spch041207ajd.htm to access a copy of the speech.
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Mutual Fund Portfolio Manager Is Accused of Engaging in Prohibited Personal Trading
4.9.2007 The SEC brought administrative and cease-and-
desist proceedings against Geoffrey Brod. Brod was formerly a
portfolio manager at Aeltus Investment Management, LLC (now known as
ING Investment Management Co.), a registered investment adviser. The SEC alleges that, from 1999 to 2003,
Brod concealed his own stock trading, including trading in stocks held
by mutual funds he managed, by failing to disclose his trades and
falsifying internal reports. During this period, Brod executed but
failed to disclose approximately 3,500 trades in public company stocks
and made about $410,000 in profit from these trades.
The SEC alleges that through this conduct Brod willfully violated
Section 17(j) of the Investment Company Act of 1940 and Rules 17j-1(b)
and 17j-1(d) thereunder. A hearing will be scheduled before an Administrative Law Judge to
determine whether such allegations are true, to afford the respondent
an opportunity to establish defenses to the allegations, to determine
whether remedial action is appropriate and in the public interest, to
determine whether respondent should be ordered to cease and desist
from committing or causing violations of and any future violations of
the securities laws, and to determine whether respondent should be
ordered to pay disgorgement.
Please click http://www.sec.gov/divisions/investment/noaction/2007/gsam031307-3c7.htm to access a copy of the no-action letter.
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Proposals on Securities Ticker Symbols Announced
5.5.2007 The SEC received two proposed national market system plans
from separate groups of stock exchanges relating generally to
securities symbols. In addition, Nasdaq has filed with the Commission
a separate proposal to permit a company in certain circumstances to
retain its symbol when transferring its listing to Nasdaq from another
stock exchange.
Securities symbols are a key element in the operation of a national
market system, and essential to the dissemination of trade information
in a common format. Historically, security symbols have been assigned
under an informal understanding among the listing markets. It has been
the practice of the New York Stock Exchange to list companies using 1-
, 2- and 3-character symbols. Other exchanges, including the American
Stock Exchange and regional exchanges, have also listed companies
using 3-character symbols. Nasdaq has always listed companies using 4-
and 5-character symbols.
The two competing
proposals relating generally to symbols are:
- Limit the use of 1-, 2- and 3-character symbols to those listing
markets that traditionally used those symbols. This proposal does not
address the use of 4- and 5-character symbols. This propsal is supported by Amex, NYSE and NYSE Arca; and
- Permit any listing market to use 1-, 2-, 3-, 4- or 5-
character symbols. is supported by Nasdaq, NASD, the
National Stock Exchange and the Philadelphia Stock Exchange.
Please click http://www.sec.gov/news/press/2007/2007-63.htm to access the press release about the stock ticker symbols.
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SEC's Division of Investment Management Names New Chief Accountant
4.3.2007 Richard F. Sennett was named as the new Chief Accountant of the Division of Investment Management. As Chief Accountant, Mr. Sennett will be primarily responsible for oversight of the financial reporting and accounting practices of registered investment companies.
Since 2002 Mr. Sennett has been an Assistant Chief Accountant in the Division of Investment Management where he has worked on a variety of accounting issues related to investment companies, and was instrumental in the development and implementation of the Division's Sarbanes-Oxley annual report review process. Prior to coming to the Commission, he was Vice President and Senior Manager for Fund Accounting at Deutsche Bank Global Fund Services.
Mr. Sennett, 36, graduated with a Bachelor of Business Administration degree in accounting from Loyola College in Maryland in 1992 and is a Certified Public Accountant. He succeeds Brian Bullard who left the Commission in December 2006.
Please click http://www.sec.gov/news/press/2007/2007-61.htm to access the press release announcing the appointment.
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