Client Alerts & Publications Archive

The staff of the Securities and Exchange Commission’s Division of Investment Management recently issued new guidance providing additional clarity on Rule 206(4)-2 under the Investment Advisers Act of 1940.

The staff of the Securities and Exchange Commission’s Division of Investment Management recently released guidance on disclosure, suitability and compliance obligations for automated advisers—often referred to as “robo-advisers.”

This update includes:

• Oncology Practice, Practice Manager and Physician Pay $1.7 Million to Resolve Allegations of Billing Medicare for Unapproved Chemotherapy Drugs
• Federal Regulators Issue Proposed Rule Aimed at Stabilizing Insurance Marketplaces as ACA is Debated; Trump’s “One In, Two Out” Executive Order Determined Inapplicable 
• House Republicans and Trump Administration File Joint Motion to Indefinitely Delay Resolution of Lawsuit with Potential to Dismantle ACA Insurance Exchanges 

The U.S. Court of Appeals for the D.C. Circuit made headlines following its decision in the PHH Corporation et al. v. Consumer Financial Protection Bureau case. The Court found that the CFPB’s single-director, removable-only-for-cause structure was unconstitutional. However, the Court has now vacated that order in its entirety and set the case to be heard again en banc.

On February 14, two federal lawsuits were filed in Illinois challenging the legality of the Zero Emissions Credits program provided for under Illinois’ recently passed Future Energy Jobs Act (Public Act 99-0906). 

The Financial Industry Regulatory Authority, Inc. announced the effective date of amendments to FINRA Rule 2232 requiring firms to disclose additional transaction-related information for certain fixed income securities principal transactions with retail customers.

The Municipal Securities Rulemaking Board is requesting comments on proposed amendments to its advertising rule for brokers, dealers, and municipal securities dealers and a new advertising rule for municipal advisors.

The Financial Industry Regulatory Authority, Inc. recently proposed amendments that would create a new exception to FINRA’s prohibition on projecting performance. The proposed exception to FINRA Rule 2210 would permit a firm to distribute a customized hypothetical investment planning illustration.

Investments in “unrestricted subsidiaries” are an exception to investment covenants, which have been used in an attempt to provide flexibility in restructuring a company’s capital structure.

The Supplemental Examination Procedures for Risk Management of Third-Party Relationships issued by the Office of the Comptroller of the Currency on January 24 establish detailed compliance obligations for relationships with third-party service providers.

This update includes:

• Weekly Health Care Criminal and Civil Fraud Enforcement Round-Up  
• Office of Budget Management Withdraws Proposed Omnibus Guidance for 340B Drug Pricing Program
• Failure to Respond Timely to HIPAA Notice of Proposed Determination Results in $3.2 Million Penalty
• Anthem-Cigna Merger Blocked by Federal Judge
• Joint Commission Clarifies That It Prohibits Secure Texting for Patient Orders

The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations recently published a Risk Alert listing five compliance topics most frequently identified in deficiency letters to investment advisers following exams.

The Securities and Exchange Commission is seeking comments on proposed new Municipal Securities Rulemaking Board Rule G-49 prohibiting a broker, dealer or municipal securities dealer from effecting a customer transaction in municipal securities in an amount lower than the minimum denomination of the issue stated in offering documents.

Lenders and investors in companies often have assumed that claims related to the purchase and sale of securities are subordinated to the level of the underlying security in question. However, a recent decision has raised a serious question as to when claims for damages should be deemed “arising from” the purchase or sale of a security.

“Board refreshment” is currently a hot corporate governance topic. A board of directors’ ability to “refresh” itself on a regular basis can help ensure that the board is comprised of the proper mix of directors to meet both current and long‑term needs of the board, the company and shareholders, and provide the necessary oversight of the company’s evolving corporate strategy and risks.

In this edition: 

• Mortgage Servicing Foreclosure Practices
• OCC Semiannual Risk Perspective 

With Republicans retaining control of both chambers of Congress and Donald Trump elected President, the prospects for financial regulatory reform have changed. Many observers point to the Financial CHOICE Act as the best indication of Republican Congressional aspirations for such reform. 

Lenders and investors in companies often have assumed that claims related to the purchase and sale of securities are subordinated to the level of the underlying security in question. However, a recent decision has raised a serious question as to when claims for damages should be deemed “arising from” the purchase or sale of a security.

President Trump issued a memorandum directing the Department of Labor to conduct an analysis of the fiduciary rule’s potential impact. Depending on the results of its examination, the memorandum instructs the DOL to publish for notice and comment a proposed rule to rescind or revise the rule. 

This update provides general information regarding say-on-pay frequency, summarizes the current say-on-pay frequency policies and positions of several large asset managers and pension funds, leading proxy advisory firms and certain corporate governance advocates, and presents practical considerations for boards to help facilitate discussion.

The Department of Labor released on January 13 two sets of frequently asked questions to provide additional guidance on its new fiduciary rule. One set of FAQs is directed at consumers to better help them understand the Rule. The other set of FAQs is directed at financial service providers to address the regulation defining “investment advice.” 

This updated includes:

• Weekly Health Care Criminal and Civil Fraud Enforcement Round-Up
• $2.2 Million HIPAA Settlement Demonstrates Importance of Conducting Required HIPAA Security Risk Assessments and Implementing ePHI Safeguards
• CBO Releases Report on How Repealing Portions of the ACA Would Affect Health Insurance Coverage and Premiums

In a decision that deals a potential blow to holdout noteholders in out-of-court restructurings, the United States Court of Appeals for the Second Circuit adopted a narrow interpretation of Section 316(b) of the Trust Indenture Act.

In one of his first Presidential acts, President Trump has named Commissioner Ajit Pai as Chairman of the Federal Communications Commission. Chairman Pai has become well-known for his dissenting opinions during his time with the FCC, including his dissent to the most recent Telephone Consumer Protection Act Omnibus Ruling and Order issued in July 2015.

The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations recently released its Examinations Priorities for 2017.

The municipal industry has seen a significant change in recent years with the increased activity of the SEC Enforcement Division and, in particular, its Public Finance Abuse Unit. This is an updated version of an article Chapman attorney Kelly Kost authored for the October 2016 issue of the Illinois GFOA Newsletter. 

On January 17, 2017, the Internal Revenue Service released new safe harbor guidelines for determining whether a management contract results in private business use of property for purposes of the federal income tax rules relating to tax-exempt bonds.

On January 10, 2017, the Securities and Exchange Commission (SEC) issued a cease-and-desist order (Order) to the Port Authority of New York and New Jersey (Port Authority) under which the Port Authority acknowledged that it acted negligently in failing to disclose certain risks in official statements for over $2.3 billion of bonds issued between January 2012 and June 2014.

This update includes:

• Weekly Health Care Criminal and Civil Fraud Enforcement Round-Up
• New Rule Imposes Civil Monetary Penalties on Drug Manufacturers That Overcharge Safety Net Providers for 340B Outpatient Drugs
• Senate Takes Step Towards Dismantling Affordable Care Act

The beginning of each year provides an opportunity for investment advisers to review annual compliance and regulatory matters, including issues related to private investment funds and commodity pools. This alert briefly summarizes some of the primary issues that advisers might consider in their 2017 annual review and update processes.

The Financial Industry Regulatory Authority, Inc. recently issued its annual Regulatory Examination Priorities Letter. This alert summarizes some of the more significant issues FINRA’s letter raises. 

Considering the flurry of activity in the fintech arena, is there a place for banks and, if so, what role can banks play? Given that marketplace lending is the most developed form of fintech today, it can be analyzed to see how banks do play important roles and employ different strategies dealing with this emerging market segment.

The New York Court of Appeals issued a decision holding that when two parties agree to the material terms of a sale, the parties have entered into a binding agreement, even though the sale remains subject to the execution of a written sales agreement.

This update includes:

• Weekly Health Care Criminal and Civil Fraud Enforcement Round-Up
• Food and Drug Administration Delays Off-Label Promotion Guidance 
• 21st Century Cures Act Signed into Law 

The staff of the Securities and Exchange Commission’s Division of Investment Management has released guidance focused on disclosure issues and certain procedural requirements associated with mutual funds implementing intermediary‑specific variations to sales loads and adding new share classes.

The Municipal Securities Rulemaking Board recently published guidance on broker-dealer obligations when executing transactions involving a registered investment adviser that is authorized to exercise full discretion to buy and sell municipal securities on behalf on an account holder.

In a December 13 interview, the chief of Securities and Exchange Commission’s public finance abuse unit stated that the SEC does not expect to recommend any further settlements under its Municipalities Continuing Disclosure Cooperation initiative. Instead, the public finance abuse unit will focus on those issuers and underwriters that did not self-report disclosure violations under the initiative.

This update includes:

• Weekly Health Care Criminal and Civil Fraud Enforcement Round-Up
• OIG Issues Long-Awaited Final Rule with Revisions to the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements
• Despite Industry Pushback, FDA Finalizes Policy Regarding Public Notification of “Emerging” Medical Device Safety Issues   

On Friday, Comptroller of the Currency Thomas Curry announced that the Office of the Comptroller of the Currency will issue limited-purpose bank charters to qualified fintech companies.

This update includes:

• Weekly Health Care Criminal and Civil Fraud Enforcement Round-Up
• CMS Releases National Health Expenditure Data for 2015 
• UMass Settles Potential HIPAA Violations Following Malware Infection
• Highlights of the OIG Semi-Annual Report to Congress

The Municipal Securities Rulemaking Board recently issued an interpretive notice announcing its interpretation that if a dealer engages in a transaction with a customer in a municipal security that bears market discount, the dealer must disclose the existence of market discount to its customer as part of the “time of trade disclosure” required under MSRB Rule G-47. 

In this edition:

• Deposit Insurance Determination Rule
• FFIEC Revises Its Consumer Compliance Rating System
• Servicemembers

On November 22, Judge Mazzant III issued a preliminary injunction halting the Department of Labor's impending overtime rule from going into effect nationwide. The rule would raise the salary basis threshold for “white collar” overtime exemptions from $455 per week ($23,660 annually) to $921 per week ($47,892 annually).

The Securities and Exchange Commission recently approved Financial Industry Regulatory Authority, Inc. and Municipal Securities Rulemaking Board rule amendments requiring broker-dealers to disclose trade compensation for certain fixed income securities principal transactions with retail customers. 

In a break from recent decisions, on November 17, the Third Circuit Court of Appeals reversed the District Court’s decision in the Energy Future case, finding that make-whole premiums were in fact payable upon a “redemption” even if such redemption occurred after a bankruptcy filing and the automatic acceleration of the underlying debt where the applicable indentures did not otherwise provide.

This update includes:

• Weekly Health Care Criminal and Civil Fraud Enforcement Round-Up
• House Republicans Urge Federal Agencies to Cease Rulemaking until President-Elect Trump Takes Office
• OIG Releases Its Fiscal Year 2017 Work Plan

This update includes:

• Full Repeal of Affordable Care Act Unlikely 
• CMS Hosting a MACRA Quality Payment Program Informational Call Tomorrow
• Jury Convicts Home Health Agency Owner in $13 Million Medicare Fraud Conspiracy

This update includes:

• Medical Device Manufacturer Pleads Guilty to Misbranding and Agrees to Pay $36 Million to Resolve Criminal Liability and False Claims Act Allegations
• Federal District Court Blocks CMS Rule Banning Pre-Dispute Binding Arbitration Clauses
• CMS Releases CY 2017 Final Rule Implementing Changes to Medicare Outpatient Prospective Payment System
• Fewer Hospitals to Receive Value-Based Purchasing Program Bonuses in 2017

The Financial Industry Regulatory Authority, Inc. recently filed proposed rule changes with the Securities and Exchange Commission to amend FINRA Rule 4512 and adopt FINRA Rule 2165.