Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

FINRA has filed a rule proposal with the SEC to amend Rules 5110 (Corporate Financing Rule – Underwriting Terms and Arrangements) and 5121 (Public Offerings of Securities with Conflicts of Interest). Rule 5110 generally regulates underwriting compensation and prohibits unfair arrangements in connection with the public offering of securities. Among other provisions, Rule 5110 requires members to file with FINRA information about the securities offerings in which they participate and to disclose affiliations and other relationships that may indicate the presence of conflicts of interest. Rule 5121 generally provides that members with a conflict of interest may not participate in a public offering unless the member complies with certain prescribed disclosures or other protections.

FINRA is proposing amendments to Rule 5110 to:

  • narrow the scope of the definition of “participation or participating in a public offering;”
  • modify the lock-up restrictions to exclude certain securities acquired or converted to prevent dilution; and
  •  clarify that the information requirements apply only to relationships with a “participating” member.

FINRA also is proposing amendments to Rule 5121 to narrow the scope of the definition of “control.”

Definition of “Participation or Participating in a Public Offering”

FINRA is proposing to amend the definition of “participating in a public offering” to provide that an “independent financial adviser” that provides advisory or consulting services to an issuer would not be deemed to be “participating” in the public offering of an issuer’s securities. The amendments would define “independent financial adviser” as a member that provides advisory or consulting services to the issuer and that is neither engaged in, nor affiliated with any entity that is engaged in, the solicitation or distribution of the offering.

FINRA believes independent financial advisers are not in a position to extract unreasonable underwriting terms, arrangements or compensation from issuers.

Information Requirements Apply Only to Relationships with a “Participating” Member

Rule 5110(b)(6)(A)(iii) requires filers to disclose to FINRA information about the affiliation or association with any member of the officers, directors, and certain owners of the issuer. FINRA is proposing to amend Rule 5110(b)(6)(A)(iii) to reduce the scope of this provision from requiring disclosure about the affiliation or association of the specified parties with “any member” to “any participating member.” The compensation limitations and other provisions of Rule 5110 and Rule 5121 apply only to members that participate in a public offering. Consequently, affiliations of non-participating members would not present the type of concerns that the rule is designed to address, and requiring that information about these other members be filed with FINRA is unnecessary.

ABOUT STINSON LEONARD STREET

Stinson Leonard Street LLP provides sophisticated transactional and litigation legal services to clients ranging from individuals and privately held enterprises to national and international public companies. As one of the 75 largest firms in the U.S., Stinson Leonard Street has more than 520 attorneys and offices in 14 cities, including Minneapolis, Mankato and St. Cloud, Minn.; Kansas City, St. Louis and Jefferson City, Mo.; Phoenix, Ariz.; Denver, Colo.; Washington, D.C.; Decatur, Ill.; Wichita and Overland Park, Kan.; Omaha, Neb.; and Bismarck, N.D.

The views expressed herein are the views of the blogger and not those of Stinson Leonard Street or any client.

In re Hi-Crush Partners L.P. Securities Litigation (2013 WL 6233561 (S.D.N.Y.) (December 2013) examines the interplay between Form 8-K triggering events and other disclosure obligations under securities laws.  The facts of the case arose out of the filing of a redacted customer contract as an exhibit to a registration statement without the consent of the customer.  The customer contract included a confidentiality provision.  However, the court noted the consent of the customer was not needed because the confidentiality provision contained a carve out for disclosure where “required by law or regulation.”  Here, the SEC had in fact required disclosure through the registration statement review process.

But after the offering was complete, the customer sent Hi-Crush a letter purporting to terminate the agreement, citing the alleged breach of the of the confidentiality provision.  Shortly thereafter, Hi-Crush posted an investor presentation to its web site highlighting its relationship with the customer but did not disclose the repudiation letter or hint at the existence of any uncertainty regarding the future of the contractual relationship.   On the first trading day after the dispute was made public, Hi-Crush’s shares lost approximately 26% of their value on unusually high trading volume.  Shareholder litigation ensued, including under Section 10(b) of the Exchange Act and related Rule 10b-5.

The defendants pointed to Item 1.02 of Form 8-K as the relevant source of their disclosure duty.  That part of Form 8-K requires disclosure if a material definitive agreement is terminated.  The instructions to the Form however state that disclosure is not required if the registrant believes in good faith that the definitive agreement has not been terminated.  Defendants argued no disclosure was required because the termination was invalid.

The court disagreed, noting that the instructions to Form 8-K do not establish there is never a duty to disclose invalid contract terminations under securities laws.  According to the court, the SEC decoupled the issue of disclosure under Item 1.02 and the disclosures required Section 10(b). Continuing, the court stated “Compliance with affirmative disclosure obligations does not negate the other basis for a potential duty to disclose under the securities laws—‘to prevent existing disclosures from being misleading.’”  Thus publication of the investor presentation triggered a duty to make additional disclosures about the purported termination because “it was highly material to investors because it nevertheless put 18.2% of Hi–Crush’s revenues at risk.”

The case was heard by the court on a motion to dismiss basis.  It is important to note that this is not a final decision on the merits.

ABOUT STINSON LEONARD STREET

Stinson Leonard Street LLP provides sophisticated transactional and litigation legal services to clients ranging from individuals and privately held enterprises to national and international public companies. As one of the 75 largest firms in the U.S., Stinson Leonard Street has more than 520 attorneys and offices in 14 cities, including Minneapolis, Mankato and St. Cloud, Minn.; Kansas City, St. Louis and Jefferson City, Mo.; Phoenix, Ariz.; Denver, Colo.; Washington, D.C.; Decatur, Ill.; Wichita and Overland Park, Kan.; Omaha, Neb.; and Bismarck, N.D.

The views expressed herein are the views of the blogger and not those of Stinson Leonard Street.

Two GAAP alternatives for private companies have been released by FASB.  The alternatives were created by the Private Company Council, or PCC. The alternatives are:

  • FASB Accounting Standards Update No. 2014-02, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill, permits a private company to subsequently amortize goodwill on a straight-line basis over a period of ten years, or less if the company demonstrates that another useful life is more appropriate. It also permits a private company to apply a simplified impairment model to goodwill. Goodwill is the residual asset recognized in a business combination after recognizing all other identifiable assets acquired and liabilities assumed.
  • ASB Accounting Standards Update No. 2014-03, Derivatives and Hedging (Topic 815): Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps—Simplified Hedge Accounting Approach, gives private companies—other than financial institutions—the option to use a simplified hedge accounting approach to account for interest rate swaps that are entered into for the purpose of economically converting variable-rate interest payments to fixed-rate payments.

The PCC determines alternatives to existing nongovernmental U.S. GAAP to address the needs of users of private company financial statements, based on criteria mutually agreed upon by the PCC and the FASB. Before being incorporated into U.S. GAAP, PCC recommendations will be subject to a FASB endorsement process. The PCC also serves as the primary advisory body to the FASB on the appropriate treatment for private companies for items under active consideration on the FASB’s technical agenda.

ABOUT STINSON LEONARD STREET

Stinson Leonard Street LLP provides sophisticated transactional and litigation legal services to clients ranging from individuals and privately held enterprises to national and international public companies. As one of the 75 largest firms in the U.S., Stinson Leonard Street has more than 520 attorneys and offices in 14 cities, including Minneapolis, Mankato and St. Cloud, Minn.; Kansas City, St. Louis and Jefferson City, Mo.; Phoenix, Ariz.; Denver, Colo.; Washington, D.C.; Decatur, Ill.; Wichita and Overland Park, Kan.; Omaha, Neb.; and Bismarck, N.D.

The views expressed herein are the views of the blogger and not those of Stinson Leonard Street.

The AICPA has issued additional guidance regarding the independent private-sector audit, or IPSA, which is required in some circumstances under the conflicts minerals rules.  (Note that AICPA’s guidance is only applicable to Attestation Engagements under the GAO Government Auditing Standard. Issuers may elect to have their IPSA conducted as either (1) an attestation engagement performed by or under direction of a CPA or (2) a performance audit whcih can be peformed by a wider range of professionals and gudiance on such performance audits is forthcoming from the Auditing Roundtable).

For those issuers that choose to use an Attestation Engagement for their IPSA, the guidance is useful because it describes audit procedures to be used and what is beyond the scope of the IPSA.

Audit Objectives

The guidance describes the interrelationship of the two audit objectives of the IPSA which are:

  • whether the design of the issuer’s due diligence framework as set forth in the Conflict Minerals Report (CMR), with respect to the period covered by the report, is in conformity with, in all material respects, the criteria set forth in the nationally or internationally recognized due diligence framework used by the issuer, and
  • whether the issuer’s description of the due diligence measures it performed as set forth in the Conflict Minerals Report, with respect to the period covered by the report, is consistent with the due diligence process that the issuer undertook.

Audit Procedures

Appropriate procedures relating to the first objective may include, but are not limited to:

  • Ask management to identify how the design of the issuer’s due diligence framework is set forth in the conflicts minerals report, or CMR.
  • Identifying the nationally or internationally recognized due diligence framework used as the basis for the issuer’s due diligence framework. (Note: As of December 2013, the OECD framework is the only nationally or internationally recognized framework.)
  • Obtaining management’s assertion that the design of the company’s due diligence framework, for the period covered by the Conflict Minerals Report, conforms in all material respects to the OECD framework.
  • Obtaining from management documentation of the design of the issue’s due diligence framework as set forth in the CMR, with respect to the period covered by the report.
  • Inquiring of management how the design of their due diligence framework conforms to the OECD framework.
  • Evaluating whether the design is in conformity, in all material respects, with the OECD framework.
  • Obtaining management representations that the design of the due diligence framework conforms, in all material respects, to the OECD framework.

Appropriate procedures relating to the second audit objective may include, but are not limited to:

  • Obtaining management’s assertion that the description of the due diligence measures that the issuer performed is consistent with the due diligence process that the issuer undertook for the period covered by the CMR.
  • Inquiring of management as to, and inspecting documentation identifying, the specific due diligence process undertaken.
  • Obtaining documentation supporting the description of the reported due diligence measures disclosed or planned to be disclosed in the CMR.
  • Performing procedures (such as inquiry, recalculation, observation, and inspection) and obtaining evidence that the description of the due diligence measures performed was consistent, in all material respects, with the due diligence process the issuer undertook. The nature and extent of the specific procedures to be performed are determined, and will vary, based on management’s description of its due diligence measures.
  • Obtaining management representations that the description of the due diligence measures it performed as set forth in the CMR, with respect to the period covered by the report, is consistent, in all material respects, with the due diligence process that the issuer undertook.

Matters Outside Scope of Auditors Examination

Only the portion of the CMR that describes the design of the issuer’s due diligence framework and the due diligence measures that the issuer performed is within the scope of an IPSA.

Accordingly, the auditor’s examination would not include a number of matters, including an evaluation of:

  • Matters relating to the issuer’s reasonable country of origin inquiry, including the design, operating effectiveness and results thereof.
  • The consistency of the due diligence process that the issuer undertook with either the design of the issuer’s due diligence framework or the nationally or internationally recognized due diligence framework used by the issuer.
  • The completeness of the issuer’s description or operating effectiveness of the due diligence measures performed.
  • Whether the reader can determine if the due diligence process the issuer undertook is consistent with the nationally or internationally framework used by the issuer.

As the focus of the auditor’s objectives is on the design of the issuer’s due diligence framework and the due diligence measures undertaken by the issuer, and not on the conclusions that the issuer drew from such procedures, the auditor’s examination does not address the issuer’s conclusions about:

  • The conflict minerals necessary to the functionality or production of the product manufactured or contracted to manufactured.
  • Which conflict minerals were outside the supply chain at January 31, 2013.
  • The issuer’s products subject to due diligence.
  • The source or chain of custody of conflict minerals and the suppliers thereof.
  • Whether its products were DRC conflict free, not DRC conflict free, DRC conflict free undeterminable, or not been found to be DRC conflict free.

Hat tip to Broc Romanek (subscription required) and The Elm Consulting Group International LLC for pointing out this development.

ABOUT STINSON LEONARD STREET

Stinson Leonard Street LLP provides sophisticated transactional and litigation legal services to clients ranging from individuals and privately held enterprises to national and international public companies. As one of the 75 largest firms in the U.S., Stinson Leonard Street has more than 520 attorneys and offices in 14 cities, including Minneapolis, Mankato and St. Cloud, Minn.; Kansas City, St. Louis and Jefferson City, Mo.; Phoenix, Ariz.; Denver, Colo.; Washington, D.C.; Decatur, Ill.; Wichita and Overland Park, Kan.; Omaha, Neb.; and Bismarck, N.D.

The views expressed herein are the views of the blogger and not those of Stinson Leonard Street.

The Madoff Victim Fund, or MVF, is the vehicle that the United States Department of Justice, or DOJ,  will use to distribute more than $4 billion in assets forfeited to the United States to victims of the crimes involving Madoff Securities. These funds were obtained for victims by the United States Attorney for the Southern District of New York through forfeiture actions against various persons involved with Madoff Securities.

The Special Master charged with administering the MVF has announced procedures on how victims can make a claim against the MVF.  The claims procedure is an additional procedure that must be undertaken in addition to the SIPC claims procedure.  All claims must be mailed to the Madoff Victim Fund and postmarked no later than February 28, 2014.

More information and the claim forms can be found at the MVF website.

What Are the Principle Differences From the SIPC Procedure?

SIPC denied all claims by indirect investors in Madoff Securities through “feeder funds” or other entities.  Only direct account holders were eligible for SIPC claims.  However, indirect investors through feeder funds and other entities will be eligible to make claims against the MVF.

Direct account holders who have allowed SIPC claims are also eligible to make claims, unless they have already recovered the full amount of their loss. One exception to this is “conduits,” “feeder funds,” or other indirect investment vehicles that had direct accounts with Madoff Securities may not meet the eligibility standards if the invested funds belonged to underlying investors rather than to the conduit itself.  Though “conduits” will generally not meet the definition of “victim” for purposes of MVF, to facilitate the administrative process of documenting losses, conduits will be allowed to submit claims on behalf of their underlying investors. Individual investors are urged to submit their own claims however.

The SIPC trustee generally looked at claims on an account-by-account basis.  The claim forms indicate a different process may apply for the MVF.  MVF will aggregate the deposits and withdrawals in multiple accounts of a single investor, and among multiple investors, wherever DOJ determines that there is a “unity of interest” between two or more investors or accounts. Where a unity of interest is determined to exist, these accounts will be consolidated for purposes of determining the combined “net loss.”

Who Will Be the Primary Beneficiary of Distributions From the MVF?

Because of the Special Master’s plan to distribute the MVF as disclosed to date, I expect indirect investors will be the primary beneficiaries of distributions from the MVF.  The simple reason is they have not yet been compensated for any loss.

As to direct account holders, I expect the primary beneficiaries will be those who had all or a portion of their SIPC claim denied because they received a so called “preference payment.”  I expect the same will not always be true for direct account holders who had all or a portion of their claim denied because it was a “fraudulent conveyance.”  The reason is the Special Master will use a “cash-in, cash out” methodology that likely mirrors, at least in part, the calculation of the claw-back for the fraudulent conveyance.  However, this will be a fact specific inquiry, and different victims may have different results.

Eligibility and Calculation of Loss

To complete a claim to the MVF, you must be able to document that you suffered a “pecuniary loss” on your investments.  The starting point for measuring a person’s pecuniary loss will be the aggregate of all deposits of cash that the person made into Madoff Securities. All withdrawals that were made from Madoff Securities are then subtracted from that amount, irrespective of whether the person thought they were withdrawing principal or only profits earned on the account.  According to the Special Master, persons who withdrew more than they put in have already recovered the entire amount that was taken from them, and they are not eligible to recover more.

Once your original “net loss” is known, the DOJ’s regulations require all “collateral recoveries” you have already received, or that you will receive in the future, to be deducted from the MVF claim. Collateral recoveries include any payments you received from SIPC, all bankruptcy distributions (directly or through an intermediary) on all accounts you held, insurance or class action recoveries, or any other form of compensation you have received.

A person who lost money because a Madoff investor could not complete a gift or a contractual obligation is not a “victim,” as any loss they suffered came about indirectly rather than directly. Under DOJ regulations, a general creditor is also not a victim.

How Will Distributions Be Made?

MVF payouts will be based on a victim’s loss as a percentage of all eligible losses.  The exact mechanics are still being developed by the Special Master and will not be finalized until the claims process is completed. However, the Special Master currently intends to approach the process in phases once the claims process is complete. MVF already has the data on allowed bankruptcy claims and distributions to date on those claims. To supplement this bankruptcy claims data, the Special Master must determine the eligible losses of indirect investors and other victims whose claims were denied in the bankruptcy, but who file claims with the MVF.

The Special Master currently expects that it will make an initial round of payments to bring all victims up to some minimum baseline percentage recovery of loss, such as 25%, before making any payments to victims who have already received more than that amount. It will then make further rounds of payment with an objective of leveling out recoveries among all eligible victims until MVF’s resources are fully distributed.

Treatment of SIPC Recoveries

The Special Master will deduct payments received from the bankruptcy trustee or SIPC in calculating the applicable loss.  The calculation of loss will also be adjusted for reserves being held by the SIPC trustee (currently $4.5 billion) until certain matters are settled.  Because of the anticipated distribution mechanics, it is expected that those who received money in the SIPC claim process may be paid later than those who did not.

Will the MVF Bring Lawsuits Against Claimants Like the SIPC Trustee Did?

In the past, the Special Master has said it would not.

Will Settlements With the SIPC Trustee Govern Potential Recoveries From the MVF?

In the past, the Special Master has said the answer is “not necessarily.”   According to the Special Master, because the MVF is completely separate from the SIPC process, settlement agreements previously reached by the Trustee with any party do not bind the MVF. Therefore, it will be up to the Special Master in the first instance, and ultimately to the DOJ, to review any such agreements independently and decide what effect, if any, they should have on the forfeiture distribution process.

Submitting a Claim If You Had A Direct Account With Madoff

Form DIR is for individual investors with an approved claim in the Madoff Securities bankruptcy (or who held a direct account but did not file a bankruptcy claim). MVF will be sending “pre-populated” Form DIRs to individuals who have allowed bankruptcy claims with unrecovered losses. Individuals receiving a pre-populated form will need to review the form for accuracy, supplement it with some additional information, and return the signed claim.  The pre-populated forms have not been mailed at this date and you can check the MVF website for updates.

If you had a bankruptcy claim that was denied, you have to file a new claim with MVF, including supporting documentation.

Submitting a Claim If You Had an Indirect Investment

Form IND is for individuals who invested in Madoff Securities indirectly through a feeder fund, a bank, a family trust, a “friends and family” investment group, or other funds or products. The Special Master expects Form IND will be appropriate for approximately 90% of applicants. The Special Master has stated if you have any doubt about what form to use, use Form IND.  Pooled investment vehicles can file a claim on behalf of their investors on Form PV. However, the Special Master strongly recommends that individual investors who lost their funds in the fraud should file their own individual claim, rather than relying on any current or former money manager, feeder fund or any other entity to file claims on their behalf.  The MVF will integrate the data from any dual filings.

Submitting a Claim if You Were a Feeder Fund Etc.

Form PV is solely for feeder funds, trust companies, insurance companies, banks or other entities that sold or managed an investment product that commingled the funds of many individuals. Claims on Form PV are for the benefit of the underlying customers of such entities, who will receive any payments directly from MVF rather than through the intermediaries. If you are an individual, you should NOT file on Form PV.

What If I Cannot Find All of the Information to Submit a Claim?

The Special Master has stated “Go ahead and file even if you don’t have some bit of information . . . Our advice to all who lost funds is to fill out as much of the Form as you can, and attach the documentary records concerning your investment.”

Disclaimer

The information above was obtained primarily from the MVF website.  This blog does not constitute legal advice.  If you need legal advice, consult a lawyer.

ABOUT STINSON LEONARD STREET

Stinson Leonard Street LLP provides sophisticated transactional and litigation legal services to clients ranging from individuals and privately held enterprises to national and international public companies. As one of the 75 largest firms in the U.S., Stinson Leonard Street has more than 520 attorneys and offices in 14 cities, including Minneapolis, Mankato and St. Cloud, Minn.; Kansas City, St. Louis and Jefferson City, Mo.; Phoenix, Ariz.; Denver, Colo.; Washington, D.C.; Decatur, Ill.; Wichita and Overland Park, Kan.; Omaha, Neb.; and Bismarck, N.D.

The views expressed herein are the views of the blogger and not those of Stinson Leonard Street.

 

The indications are the SEC may discontinue publication of its time-honored daily News Digest.  It has not been published since mid-December.  It’s really not surprising since most of the information included in the publications is already available on the “What’s New” page, and many did not understand the need for the compendium of filings which concluded the publication.

We queried SEC spokesman John Nester about whether the publication was going to be deep-sixed because of redundancy and by e-mail he responded “We’re evaluating, but yes, one of the considerations is that all the info is already available on the website in real time.”

It’s OK with us.

Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.

The Office of Financial Research, or OFR, has released the Interagency Data Inventory of data that member agencies of the Financial Stability Oversight Council collect from industry. The Interagency Data Inventory project is an initiative of the Data Committee of the Financial Stability Oversight Council, or FSOC, to catalog the data that FSOC member agencies purchase from vendors, collect from industry, or derive from other data. FSOC member agencies may use the inventory for identifying data gaps and for improving research and analysis to understand threats and vulnerabilities in the financial system. The portion of the inventory relating to data collected from industry is provided to promote public understanding of financial regulatory data collections. 

Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.

The SEC has announced that compliance with the final municipal advisor registration rules will not be required until July 1, 2014, the date on which the first set of municipal advisors will be required to register under the final rules.

According to the SEC, it balanced the goals of enhancing the quality of municipal securities advice and protecting investors and municipalities in the municipal securities market, when taking this action to give market participants additional time to analyze, implement, and comply with the final rules.

The SEC approved the final rules last year under the Dodd-Frank Act to provide an effective municipal advisor registration regime. The rules require municipal advisors to register with the SEC if they provide advice to municipal entities or certain other persons on the issuance of municipal securities, or about certain investment strategies or municipal derivatives.

Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.

The SEC has announced its examination priorities for 2014, which cover a wide range of issues at financial institutions, including investment advisers and investment companies, broker-dealers, clearing agencies, exchanges and other self-regulatory organizations, hedge funds, private equity funds, and transfer agents.

The staff will continue the 2012 initiative to examine a significant percentage of the advisers registered since the effective date of Section 402 of the Dodd-Frank Act. The five key focus areas of these examinations are marketing, portfolio management, conflicts of interest, safety of client assets, and valuation. The vast majority of these new registrants are advisers to hedge funds and private equity funds that were not registered or regulated by the SEC prior to the Dodd-Frank Act, and have never been examined by the SEC. The staff will also continue to prioritize examinations of private fund advisers where the staff’s analytics indicate higher risks to investors, or where there are indicia of fraud, broker-dealer status concerns, or other serious wrongdoing.

Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.

 

On December 26, 2013, the SEC granted its second waiver from disqualification from reliance on Regulation D because of prohibited conduct under new Rule 506(d).   The waiver was granted to a Broker-Dealer alleged to have paid about $430,000 in soft dollars to one of its Clients for improper purposes that were outside of the Exchange Act Section 28(e) safe harbor for the use of commission credits for certain research and brokerage expenses.  Allegedly, the soft dollar payments were used to pay personal obligations of the Client’s president to his ex-wife, to pay sham-rent in the president’s home, and to pay for the president’s personal time share property.  Despite nearly overwhelming red flags in the payment review process, the Broker-Dealer approved the payments. 

A December 26, 2013 Exchange Act Release indicates that the Broker-Dealer and the SEC agreed to settle the matter, with the Broker-Dealer paying about $800,000 in penalties and agreeing to a number of undertakings.  Nevertheless, the Exchange Act Release constitutes an administrative order relating to conduct prohibited by Rule 506(d).

On the same day that the Exchange Act Release was made public, the Broker-Dealer requested by letter, and the SEC granted, a waiver from the disqualification from future reliance on Regulation D.  Since all of this happened on December 26, 2013, the waiver was likely a part of the settlement discussions between the Broker-Dealer and the SEC.

The reasons for the granting of the waiver include:

  • The conduct alleged to have occurred did not relate to a Regulation D offering and allegedly occurred more than three years ago;
  • Pursuant to the settlement agreement, the Broker-Dealer would engage a consultant to review the relevant soft dollar policies and procedures, under SEC supervision, and the Broker-Dealer would agree to adopt all changes recommended by the consultant;
  • Barring the broker-dealer from participation in Regulation D offerings would have an adverse effect on third parties that rely on the Broker-Dealer; and
  • For a period of five years, the Broker-Dealer would provide disclosure of the settlement order to purchasers in Regulation D offerings that the Broker-Dealer would have been disqualified from participating in.

Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.