Regulatory Developments

CFTC Staff Replaces Recently Streamlined No-Action Relief Process for Delegating CPOs with Self-Executing No-Action Relief

The CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO) announced that CFTC Staff Letter 14-126 introduces self-executing no-action relief from registration for a commodity pool operator (CPO) that delegates certain activities to a registered CPO under specified conditions.  The relief in Staff Letter 14-126 replaces the streamlined process for registration no‑action relief in CFTC Staff Letter 14-69 but maintains the same criteria for relief subject to certain clarifications.   The DSIO will no longer consider requests for no-action relief submitted pursuant to Letter 14-69, including any that are pending. Instead, each CPO should assess its ability to rely on Staff Letter 14-126.  Under Staff Letter 14-126, persons who received no-action letters pursuant to Staff Letter 14-69 may continue to rely on them.

FINRA Announces Effective Date of Amendments to the Arbitration Codes to Expand Arbitrators’ Authority to Make Referrals During an Arbitration Proceeding

In Regulatory Notice 14-42 FINRA announced that amendments to the FINRA Arbitration Codes expanding the authority of arbitrators to make referrals to FINRA enforcement during arbitration proceedings would become effective on October 27, 2014. The rule amendments, which were approved by the SEC in Release No. 34-73319 on October 8, permit arbitrators to make a referral, during an arbitration, of any matter or conduct that has come to the arbitrator’s attention during a hearing, which the arbitrator has reason to believe poses a serious threat, whether ongoing or imminent, that is likely to harm investors unless immediate action is taken. Previously the rules limited the ability of arbitrators to make referrals until the conclusion of an arbitration case. The Notice discusses the requirement for disclosure of mid-case referrals to the parties and the process for requesting recusal of the referring arbitrator. The amended rules are in Attachment A to the Notice.

Enforcement & Litigation

SEC Institutes Administrative Proceedings Against Former Compliance Officer Over Alleged Alteration of Documents Requested in SEC Insider Trading Investigation

The SEC announced that it had instituted contested administrative proceedings against Judy K. Wolf, a former Wells Fargo Advisors compliance officer, alleging that she had altered documents regarding her review of trading in Burger King stock by one of the firm’s registered representatives and certain of his customers, and thereby caused the firm to violate the books and records requirements of the Securities Exchange Act and Investment Advisers Act when the firm produced those records in response to a request from the SEC staff.   The alleged document alteration was a consideration in the SEC’s settlement of administrative proceedings against the firm regarding the inadequacy of “look back” reviews of trading in employee accounts and in customer and client accounts after market‑moving announcements to detect the misuse of material nonpublic information received by registered representatives and advisory personnel from firm customers and advisory clients.  In re Judy K. Wolf, SEC Release No. 34-73350 (Oct. 15, 2014).