My initial posts on re-proposed Rule 18f-4 reflect my generally favorable reactions to the SEC’s attempt to develop a practical, hence imperfect, means of implementing the limitations on senior securities required by Section 18 of the Investment Company Act of 1940. My initial series of post written at the time Rule 18f-4 was first proposed attempted to explain some of the inherent difficulties of this task. Read the full article on our sister blog Asset Management ADVocate.

On April 6, 2020, the Commodity Futures Trading Commission (“CFTC”) Office of Customer Education and Outreach (“OCEO”) published an additional customer advisory (“Advisory”) cautioning the public regarding potential fee scams. OCEO noted that many of these schemes are now targeting individuals that may be financially impacted by the Coronavirus pandemic. OCEO previously published a Customer Advisory on March 31, 2020 regarding potential fraudulent schemes posing to take advantage of market volatility related to the pandemic. (See our blog post on this advisory here).

Continue Reading CFTC Publishes New Customer Advisory Cautioning Away From Potential Coronavirus-Related Fee Scams

Three federal bank regulatory agencies – the FRB, FDIC, and OCC – today announced two COVID-19 related actions to support the U.S. economy and allow banking organizations to continue to lending to households and businesses:

  • Allow early adoption of the “standardized approach for measuring counterparty credit risk,” or “SA-CCR,” which is a new way for banking organizations to measure counterparty credit risk, in pertinent part, from derivatives; and
  • Provide certain banks with an additional two years to transition to the new “current expected credit loss,” or “CECL,” an accounting standard that is used for purposes of determining how much regulatory capital a bank has to set aside.

This blog post provides additional information about these announcements.

Continue Reading Bank Regulators Announce Actions to Support Economy

In the midst of the COVID-19 pandemic, the financial markets have experienced significant volatility. During the course of this volatility, exchanges have halted trading multiple times after declines in trading trigged circuit breakers. In addition, trading floors are transitioning to electronic trading in efforts to prevent the transmission of COVID-19 on physical trading floors. With the recent turmoil, this post provides a high-level summary of the various types of circuit breakers and what can be expected.

Read the full article on our sister blog Asset Management ADVocate.

Federal and state bank regulators today issued an interagency statement to provide additional information to financial institutions (“FIs“) that are working with borrowers affected by the Coronavirus Disease 2019 (“COVID-19“).

This post will provide a bullet point summary of this statement.

Continue Reading Federal and State Regulators Issue Statement Encouraging Banks to Work with Borrowers Affected by COVID-19

Equity derivatives are used by a wide range of buy-side firms.  For example, public companies use equity derivatives on their own shares for treasury management purposes (for example, share repurchase transactions and other stock buy-back programs).  Also, investment managers and their clients use equity derivatives in pursuit of investment objectives and related strategies.

Given the unprecedented levels of market volatility, counterparties to equity derivatives should consider analyzing their trade confirmations to determine whether market events could result in:

  • The termination of a particular transaction prior to its scheduled termination date; or
  • An additional payment by one of the counterparties.

In addition, it is a good idea to make sure that any payment or pricing provisions that reference a particular rate (like the Fed Funds Effective Rate) will function as intended in the current low interest rate environment.

Continue Reading Equity Derivatives and Market Volatility: Check Trade Confirmations to Determine Whether Early Termination or Additional Payments May Be Required

The Federal Deposit Insurance Corporation (FDIC) today issued an “FAQ” to financial institutions entitled, Frequently Asked Questions for Financial Institutions Affected by the Coronavirus Disease 2019 (Referred to as COVID-19).

The FDIC has highlighted the following items in respect of this FAQ:

  • The FDIC encourages financial institutions to work with customers affected by COVID-19 in a prudent manner, especially borrowers from industry sectors particularly vulnerable to the volatility in the current economic environment and small businesses and independent contractors that are reliant on affected industries.
  • A financial institution’s prudent efforts to modify the terms on existing loans for affected customers will not be subject to examiner criticism.

Continue Reading Payment Accommodations Under Commercial Loans by Banks to Borrowers: Remember the Related Interest Rate Hedge Documentation

On March 9, 2020, FINRA released Regulatory Notice 20-08 (the “Regulatory Notice”) providing guidance and limited relief to its member broker-dealers during the COVID-19 pandemic. In particular, the Regulatory Notice requests that broker-dealers evaluate their compliance with FINRA Rule 4370, which requires broker-dealers to create, maintain, and update upon any material change, BCPs (Business Continuity Plans) identifying procedures relating to emergency or significant business disruption. Continue Reading FINRA Issues Notice Regarding Business Continuity Planning During COVID-19 Outbreak

The U.S. Commodity Futures Trading Commission (CFTC) yesterday announced that its Division of Market Oversight (DMO) has granted temporary no-action relief to designated contract markets (DCMs) and swap execution facilities (SEFs).

In a related press release, CFTC Chairman Heath P. Tarbert stated that, “These prudent, targeted, and temporary actions will help facilitate orderly trading and liquidity in our derivatives markets. The CFTC remains squarely focused on promoting their integrity, resilience, and vibrancy through sound regulation.”

This post summarizes this no-action relief.

In addition, we have prepared the attached Overview of COVID-19 Relief Provided by the CFTC to SEFs and DCMs to supplement the information presented in this post.

Continue Reading CFTC Provides COVID-19 No-Action Relief to DCMs and SEFs

On March 18, 2020, the U.S. Commodity Futures Trading Commission (“CFTC”) Office of Customer Education and Outreach (“OCEO”) published a Customer Advisory warning market participants away from potential fraudulent schemes that may arise to take advantage of market volatility related to COVID-19.

In a related Press Release, CFTC Chief Communications Officer and Director of Public Affairs Michael Short stated, “[d]uring this period of market volatility, we want to ensure the public has important information to help detect and stop fraud”.

Continue Reading CFTC Staff Publish Customer Advisory on Fraudulent Schemes in Wake of Coronavirus Pandemic