Russell D Sacks Jennifer D Morton Contents What Regulators are Saying 2017 June 28 2017 Introduction 1 Securities Regulation 11 Executive Order 13772 Core Principles for Regulating the United States Financial System ID: 1029940
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1. SEC and FINRA 2017 Priorities: A Midyear UpdateRussell D. SacksJennifer D. Morton
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3. ContentsWhat Regulators are Saying 2017 | June 28 2017Introduction1Securities Regulation1.1Executive Order 13772 - Core Principles for Regulating the United States Financial System1.2Financial CHOICE Act1.3Tax Reform1.4DOL Fiduciary Rule1.5What are Regulators Doing and Saying?1.6Speeches and Statements2SIFMA Seminar (General Assembly) - Interview with Ken Bentsen, SIFMA CEO2.1SIFMA Seminar (General Assembly) - Regulatory Priorities Panel2.2SIFMA Seminar (General Assembly) - Enforcement Priorities Panel2.3FINRA Conference - Remarks from Robert W. Cook, FINRA CEO2.4
4. ContentsWhat Regulators are Saying 2017 | June 28 20174Selected Topics: Conference Panel Roundup3SIFMA Seminar - Trading panels – Equity, fixed-income, and municipal Securities3.1SIFMA Seminar - Private banking and private wealth3.2SIFMA Seminar - Investment banking compliance3.3SIFMA Seminar - Gifts and gratuities3.4FINRA Conference - Investment banking and research3.5SIFMA Seminar - Diversity & inclusion3.6
5. Introduction
6. Securities RegulationOn January 20, 2017 Donald Trump was inaugurated as the 45th President of the United StatesSince that time, there has been significant uncertainty about regulatory direction for the financial industry. Though there is widespread expectation that the President and Congress will seek some amount of financial deregulation, the scope of such deregulation is not known.President Trump issued an Executive Order (No. 13772 – Core Principles for Regulating the United States Financial System) directing the Secretary of the Treasury to review financial regulations and prepare a report on his findings. (Released June 12, 2017).Jay Clayton confirmed as Chairman of the SECNew SEC Corporation Finance Director and Deputy Director (William H. Hinman & Robert Evans III)New SEC enforcement heads named (Stephanie Avakian & Steven Peikin)Christopher Giancarlo nominated to serve as Chairman of the CFTCNew CEO at FINRAThere has also been substantial uncertainty in the financial industry as Congress considers topics such as the Financial CHOICE Act and tax reform.What Regulators are Saying 2017 | June 28 2017
7. Executive Order 13772 - Core Principles for Regulating the United States Financial SystemProvided list of seven “Core Principles” that should inform regulation of the United States financial system, including:Making regulation efficient, effective, and appropriately tailored;Restoring public accountability within federal financial regulatory agencies and rationalizing the federal financial regulatory framework; andFostering economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetryDirected the Secretary of the Treasury to prepare a report detailing a review of, among other things, the existing regulatory framework, and what is and can be done to promote the Core Principals listed in the Order.Initial report focusing on depository institutions released on June 12, 2017 detailing findings and suggesting recommendations.What Regulators are Saying 2017 | June 28 2017
8. Financial CHOICE ActIntroduced in the House of Representatives on April 26, 2017Amended version passed in the house on June 8, 2017Bill proposes a number of significant changes to United States financial regulatory framework, including:Repeal of Title II of the Dodd-Frank Act, which established the Orderly Liquidation AuthorityRegulatory “off ramp” for well-capitalized financial institutionsRestructuring of the CFPBRepeal of the DOL Fiduciary RuleWhat Regulators are Saying 2017 | June 28 2017
9. Tax ReformCurrently there are a number of competing, and often conflicting, proposals for tax reform.Tax reform affects everyone, and will affect the financial industry significantlyCurrently an overall, general feeling of caution and uncertaintyWhat Regulators are Saying 2017 | June 28 2017
10. DOL Fiduciary RuleTook effect in part on June 9, 2017Full compliance date for brokers and insurance agents is January 1, 2018Highly contested and debated topic in the regulatory, legislative, and judicial space.SEC Jay Clayton noted in a public statement that the SEC will engage with the DOL in hopes to providing robust substantive input in shaping the standard of care discussion and policymaking.What Regulators are Saying 2017 | June 28 2017
11. What are Regulators Doing and Saying?SIFMA Compliance & Legal Society Annual Seminar (March 2017)FINRA Annual Conference (May 2017)Talking and interacting with regulators in in the course of daily practiceWhat Regulators are Saying 2017 | June 28 2017
12. Speeches and Statements
13. SIFMA Seminar (General Assembly) - Interview with Ken Bentsen, SIFMA CEOPanelistsKen Bentsen, President and CEO, SIFMAMichelle Oroschakoff, Managing Director and CRO, LPL Financial LLCKey SIFMA prioritiesSenior InvestorsFollowing Washington DC:DOL Rule, tax reformBrexit consequencesHow SIFMA plans to manage prioritiesCommittee structureRetail standard of careSupport for a “best interest” standard for broker-dealersSIFMA views the SEC as the right venue for rulemaking and regulationComment letter by SIFMA regarding the DOL Rule: http://www.sifma.org/issues/item.aspx?id=8589955445What Regulators are Saying 2017 | June 28 2017
14. SIFMA Seminar (General Assembly) - Regulatory Priorities PanelPanelistsModerated by: Allan Cohen, EVP & Global Head of Compliance, Goldman, Sachs & Co.Susan Axelrod, EVP of Regulatory Operations, FINRABryan Bennett, Associate Regional Director, SEC Los AngelesJames Bergin, Deputy GC and SVP, Federal Reserve Bank of NYRodgin Cohen, Senior Chairman, Sullivan & Cromwell LLPAndrea Seidt, Commissioner, Ohio Department of SecuritiesWhat Regulators are Saying 2017 | June 28 2017
15. SIFMA Seminar (General Assembly) - Regulatory Priorities PanelRegulatory direction“People as policy”No wholesale elimination of regulationFuture of the “broken windows” policyFINRA focusing on core workKey priorities of global regulatorsCybersecurityFinancial Crime and AMLMarket integrityCapital and liquidityCulture, conduct, and reputational riskSales practicesOperational riskMunicipal advisor activityHigh risk and recidivist financial advisorsFocus on CybersecurityWhat Regulators are Saying 2017 | June 28 2017
16. SIFMA Seminar (General Assembly) - Enforcement Priorities PanelPanelistsModerated by: Robert Khuzami, Parner, Government & Internal Investigations, Kirkland & Ellis LLPStephanie Avakian, Deputy Director, Division of Enforcement, SECStephen Cutler, Vice Chairman, JPMorgan Chase & Co.Gretchen Lowe, Principal Deputy Director, CFTCSusan Schroeder, Deputy Chief of Enforcement, FINRAAndrew Weissmann, Chief of the Criminal Division’s Fraud Section, DOJWhat Regulators are Saying 2017 | June 28 2017
17. SIFMA Seminar (General Assembly) - Enforcement Priorities PanelAgency prioritiesNo major shift to enforcement prioritiesRising profile of cybersecurity issuesPerennial concerns regarding financial fraud and insider tradingFocus on budget constraintsEnforcement issues and changing leadershipMany agencies with new leadershipSECFINRACFTCMany positions yet unfilledStacking of penaltiesAgency enforcement pipelinesWhat Regulators are Saying 2017 | June 28 2017
18. FINRA Conference - Remarks from Robert W. Cook, FINRA CEOKey FINRA prioritiesReview of FINRA operations - Three key questionsFINRA’s policies and programsFINRA’s organization and operationsFINRA’s engagement with stakeholdersFINRA360— Top-to-Bottom Review ProgramWhat Regulators are Saying 2017 | June 28 2017
19. FINRA Conference - Remarks from Robert W. Cook, FINRA CEOKey FINRA prioritiesReview Rulebook to identify areas for improvementSupporting Technology InnovationReview impact of fintech-related business models and tools on investors as well as broker-dealer operationsProviding New Compliance Tools and ResourcesCompliance CalendarVendor DirectoryExam Findings ReportEnhancing Communication and EngagementWhat Regulators are Saying 2017 | June 28 2017
20. Selected topics: Conference Panel Roundup
21. SIFMA Seminar - Trading panels – Equity, fixed-income, and municipal SecuritiesEquity and Fixed Income tradingVolcker Rule Possible amendmentAdvancements in technology and cybersecurityFirm culture and complianceLitvak caseEquity market structureData FeedsShould exchanges be SROs?CATWhat Regulators are Saying 2017 | June 28 2017
22. SIFMA Seminar - Trading panels – Equity, fixed-income, and municipals securitiesMunicipal securitiesMCDC issuer settlement takeaways and muni advisor enforcementMSRB rulemakingMunicipal advisor rulemakingRule G-42 – Duties of Non-Solicitor Municipal AdvisorsRule G-37 - Political Contributions and Prohibitions on Municipal Securities Business and Municipal Advisory Business (Pay-to-play rule)What Regulators are Saying 2017 | June 28 2017
23. SIFMA Seminar - Private banking and private wealthDiminished capacity/elderly investorsRetail Standard of Care/DOL Fiduciary RuleRegulation by entities other than the SEC, FINRA, and the CFTCRobo-Advisor issuesWhat Regulators are Saying 2017 | June 28 2017
24. SIFMA Seminar - Investment banking complianceConflicts and related disclosuresConfidential information/information barriersRaising capital in the private marketsDue diligence developmentsCybersecurityWhat Regulators are Saying 2017 | June 28 2017
25. SIFMA Seminar - Investment banking complianceIPO Allocation (Rule 5131)Anti-briberySupervisionOther legal issuesWhat Regulators are Saying 2017 | June 28 2017
26. SIFMA Seminar - Gifts and gratuitiesWhat Regulators are Saying 2017 | June 28 20172005 FINRA Memo, “Improving Examination Results”Noted that a primary concern is “patterns of excessive gifts, which may improperly influence business decisions.”NASD Notice to Members 06-69, Gifts and GratuitiesDiscusses some of the more common compliance weaknesses observed by FINRAFINRA Regulatory Notice 16-29, Gifts Gratuities and Non-Cash Compensation RulesRequested comment regarding changes to Rules 3220-3222Seeks to potentially consolidate Rules 3220-3222 into a single ruleWould raise gift limit from $100 to $175 per yearWould include a de minimis threshold below which firms would not have to keep records of gifts given or receivedWould incorporate existing guidance and interpretive letters into the rules.
27. FINRA Conference - Investment banking and research Material Nonpublic Information and Information BarriersSEC Staff Summary Report on Examinations of Information BarriersResearch-related IssuesEquity RulesFixed-Income RulesDesk Commentary Safe HarborFINRA Regulatory Notice 17-16Supervision IssuesWhat Regulators are Saying 2017 | June 28 2017
28. SIFMA Seminar - Diversity & inclusionGeneral counsel roundtableBecoming a diversity leaderThe importance of D&I in the client, regulatory and judiciary spacesEffective and inclusive leadershipEqual pay initiativesWhat Regulators are Saying 2017 | June 28 2017
29. Q & A
30. HighlightsManage by alerts not reportsDashboards deliver greater oversightCustom questionnaire builderContinuous updates to the softwareEnhanced control 100% data capture24/7/365 supportScalable into the futureWhat Regulators are Saying 2017 | June 28 2017
31. ContactMyComplianceOfficewww.mycomplianceoffice.comPhone: (866) 951-2279advance@mycomplianceoffice.com@mycomplianceShearman & SterlingRussell Sacks - PartnerT: +1 212 848 7585rsacks@shearman.comJennifer Morton - CounselT: +1 212 848 5187jennifer.morton@shearman.com What Regulators are Saying 2017 | June 28 2017
32. SpeakersWhat Regulators are Saying 2017 | June 28 2017Russell Sacks - PartnerT: +1 212 848 7585rsacks@shearman.com Russell Sacks, a partner in the global Financial Institutions Advisory & Financial Regulatory Group, provides advice to market participants on a worldwide basis with respect to regulatory, transactional, trading and markets issues, with particular emphasis on U.S. regulation of securities broker-dealers, alternative trading systems, clearing agencies, and exchanges. Prior to joining Shearman & Sterling, he served as law clerk to The Honourable Justice Allen M. Linden of the Federal Court of Appeal in Ottawa, Canada.Bar AdmissionNew YorkEducationUniversity of Toronto, Faculty of Law, LL.B., 1998, with HonorsColumbia College, B.A., 1994, magna cum laude Jennifer Morton - CounselT: +1 212 848 5187jennifer.morton@shearman.com Jennifer Morton, a Counsel in the global Financial Institutions Advisory & Financial Regulatory Group, provides advice to US and non-US banks and broker-dealers on regulatory, transactional, trading and markets issues. She has participated in the formation of brokerage firms, and her responsibilities include the representation of the firm’s underwriting clients under the rules of the Financial Industry Regulatory Authority (FINRA) and the state securities laws. Ms. Morton also advises on the formation and structuring of private wealth management businesses.Bar AdmissionNew YorkEducationFordham University School of Law, J.D.; Editor-in-Chief, Fordham International Law JournalConnecticut College, B.A.
33. Shearman & SterlingAs one of the first law firms to establish a presence in key international markets, Shearman & Sterling has led the way in serving clients wherever they do business. This innovative spirit and the experience we have developed over more than 140 years make us the “go-to” law firm. From major financial centers to emerging markets, we have the reach, depth and global perspective necessary to advise our clients on their most complex worldwide business needs.ABU DHABIBEIJINGBRUSSELSDUBAIFRANKFURTHONG KONGLONDONMenlo parkMILANNEW YORKPARISROMESAN FRANCISCOSÃO PAULOSaudi ARABIA*SHANGHAISINGAPORETOKYOTORONTOWASHINGTON, DCThese materials provide general information on our firm and the legal developments described above. They are intentionally summary in nature and do not represent legal advice.What Regulators are Saying 2017 | June 28 2017
34. Thank you