Corporate And Financial Weekly Digest - March 18, 2011


Edited by Robert L. Kohl and David A. Pentlow SEC/CORPORATE

Amendments to Dodd-Frank Act Introduced in House

On March 16, members of the Capital Markets Subcommittee of the House Financial Services Committee introduced several bills designed to amend or supplement the Dodd-Frank Wall Street Reform and Consumer Protection Act, including those described below:

The Burdensome Data Collection Relief Act, H.R. 1062, would repeal the requirements of Section 953(b) of the Dodd-Frank Act, which requires publicly traded companies to disclose their median annual total compensation of all employees.

The Small Company Capital Formation Act, H.R. 1070, would amend Section 3(b) of the Securities Act of 1933 to increase the offering threshold for companies exempted from Securities and Exchange Commission registration under Regulation A from $5 million to $50 million. The Small Company Capital Formation Act also requires the SEC to review the offering amount limitation every two years and, if the SEC decides not to increase such offering threshold, report to the Committee on Financial Services of the House of Representatives and the Committee on Banking of the Senate its reasons for not increasing the amount.

The Small Business Capital Access and Job Preservation Act, H.R. 1082, would amend Section 203 of the Investment Advisers Act to exempt advisers to private equity funds from the registration requirements imposed on such advisers under the Dodd-Frank Act. The Small Business Capital Access and Job Preservation Act does, however, require advisers to private equity funds to maintain records and provide the SEC with annual or other reports as necessary and appropriate in the public interest and in the protection of investors even if not formally registered with the SEC.

A discussion draft of the Asset-Backed Market Stabilization Act provides for the repeal of Section 939G of the Dodd-Frank Act and the restoration of Rule 436(g) of the Securities Act of 1933, which was repealed by such section. Rule 436(g) of the Securities Act provided that the security rating assigned to a class of securities by a credit rating agency is not considered part of the registration statement prepared or certified by an expert. The repeal of Rule 436(g) in effect required issuers to obtain and file a consent from the credit rating agency with any registration statement if ratings are to be disclosed. Since rating agencies refused to provide such a consent, the asset-backed securities market effectively ceased to function, forcing the SEC to issue a temporary no-action letter on July 22, 2010, and a permanent no-action letter on November 23, 2010.

Click here to read the press release from the Capital Markets Subcommittee.

Click here to read the Burdensome Data Collection Relief Act.

Click here to read the Small Company Capital Formation Act.

Click here to read the Small Business Capital Access and Job Preservation Act.

Click here to read the discussion draft of the Asset-Backed Market Stabilization Act.


FINRA Proposes Registration, Qualification and Continuing Education Requirements for Certain Member Firm Operations Personnel

The Financial Industry Regulatory Authority is seeking comments on a proposal to require registration of certain individuals of a member firm who perform and oversee member operations functions. Accordingly, FINRA is proposing to adopt a new representative registration category and qualification examination for "Operations Professionals," which generally would include those persons who are engaged in, responsible for or supervising certain member operations functions specified in the proposed rule, such as activities relating to client account data, maintenance of funds, account management and stock loan and securities lending. Any person required to register as an Operations Professional (subject to certain exceptions) would be required to pass a new Operations Professional qualification examination, a principles-based exam with a regulatory focus to test, among other things, the person's understanding of his professional responsibilities, before such registration may become effective.

In addition to the licensing and exam requirements, FINRA also is proposing to expand its continuing education requirements to require that Operations Professionals be subject to FINRA's Regulatory Element and Firm Element training as set forth in proposed FINRA Rule 1250. Persons subject to the new Operations Professional registration category would be considered associated persons of a member firm irrespective of their employing entity, and would be subject to all...

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