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by Susan S. Krawczyk, Eric A. Arnold, Michael B. Koffler, Clifford E. Kirsch, and Holly H. Smith
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act), bringing to a close the national debate over the appropriate regulation of the financial markets that began with former Treasury Secretary Henry Paulson's white paper in March 2008. We would like to share with you our thoughts on the likely impact of the Act on broker-dealers.
Impact on a Broker-Dealer's Relationship with Customers
Several provisions of the Act are likely to have a significant effect on the relationship between broker-dealers and their customers, particularly retail customers. However, all of these changes will first require rulemaking before they take effect. Firms interested in anticipating the impact may want to consider the following.
Impact on a Broker-Dealer's Relationship with its Registered Persons
A few provisions of the Act may have an impact on broker-dealers' relationships with their registered persons. Again, these provisions are not expected to have immediate effect.
Participation in Private Offerings
Broker-dealers participating in private offerings should be aware of a few changes affecting these offerings.
Impact on Sales Activities and Marketing Materials
A few provisions of the Act are likely to affect sales and marketing activities.
A few provisions of the Act may have an impact on broker-dealers' operational activities.
What's In, What's Out?
The Act appears to have the effect of changing the status of certain financial and investment products and financial professionals under the federal securities laws.
Impact on Regulators
The Act authorizes changes in the operations and authority of a number of securities regulators. Some of the noteworthy changes are noted below.
What Changes Today vs. What Requires Rulemaking
Many of the changes contemplated by the Act will not become effective until studies have been completed and implementing rules have been adopted and take effect. For now, the only changes discussed above with immediate effect are those relating to the change in the accredited investor net worth calculation and in SEC operations and authority.
Appendix A below provides a countdown of rulemakings and studies that may be of interest to broker-dealers.
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Visit www.regulatoryreformtaskforce.com for roadmaps and resources to understand when and how the Dodd-Frank Wall Street Reform and Consumer Protection Act will impact you.
If you have any questions about this development, please feel free to contact any of the attorneys listed below or the Sutherland attorney with whom you regularly work.
Eric A. Arnold 202.383.0741 email@example.com
Clifford E. Kirsch 212.389.5052 firstname.lastname@example.org
Michael B. Koffler 212.389.5014 email@example.com
Susan S. Krawczyk 202.383.0197 firstname.lastname@example.org
Holly H. Smith 202.383.0245 email@example.com
Peter J. Anderson 404.853.8414 firstname.lastname@example.org
Keith J. Barnett 404.853.8384 email@example.com
Bruce Bettigole 202.383.0165 firstname.lastname@example.org
Cheryl L. Haas-Goldstein 404.853.8521 email@example.com
Patricia A. Gorham 404.853.8298 firstname.lastname@example.org
Deborah G. Heilizer 202.383.0858 email@example.com
Neil S. Lang 202.383.0277 firstname.lastname@example.org
S. Lawrence Polk 404.853.8225 email@example.com
Stephen E. Roth 202.383.0158 firstname.lastname@example.org
Brian L. Rubin 202.383.0124 email@example.com
Amelia Toy Rudolph 404.853.8797 firstname.lastname@example.org
W. Scott Sorrels 404.853.8087 email@example.com
Bryan M. Ward 404.853.8249 firstname.lastname@example.org
Deadline for Rule Changes
7-22-10 (the Effective Date)
Change in net worth calculation for accredited investor definition
Effective date for application of MSRB rules to municipal advisors
180 days after the Enactment Date (1-17-11)
SEC rules implementing streamlined proceedings for self-regulatory organization rulemakings
1 year after the Enactment Date (7-21-11)
SEC exemptive rule for venture capital advisers
SEC rules revising notice requirement for missing security holders
SEC rules disqualifying felons and other bad actors from Reg D Offerings
SEC rules revised to remove references to credit ratings
Increase in assets-under-management threshold for investment adviser registration with SEC
Qualified client thresholds adjusted for inflation
2 years/24 months after the Enactment Date (7-21-12)
Implement recommendations from Study on Investor Access to Information on Advisers and Broker-Dealers
SEC rules prescribing customer notice for securities lending practices and compensation
SEC Study Due
150 days after the Enactment Date (12-18-10)
SEC Organizational Study and Reform
Study on Enhanced Investment Adviser Exams
6 months after the Enactment Date (1-21-11)
Study on Standard of Care and Related Matters for Broker-Dealers and Investment Advisers
Study on Improved Investor Access to Information on Advisers and Broker-Dealers
Study and Report on Real -Time Reporting for Short Sales
18 months after the Enactment Date (1-21-12)
Study on Extraterritorial Private Rights of Action
Study Regarding Financial Literacy Among Investors
Study on Short Selling
GAO Study Due
180 Days after the Enactment Date (1-17-11)
Study on Financial Planners and Use of Financial Designations
Study on Securities Litigation (private rights of action)
Study on SEC Revolving Door
Study of Person-to-Person Lending
Study on Self-Regulatory Organization for Private Funds
15 months after the Enactment Date (10-21-11)
Study on Proprietary Trading
Study Regarding Mutual Fund Advertising
Study on Conflicts of Interest (between investment banking and analyst functions)
Study of Municipal Markets
Study on Creation of Independent Professional Analyst Organization
Study of Increased Disclosure to Municipal Securities Investors
3 years after the Enactment Date (7-21-13)
Study on Custody Rule Costs
Study and Report on Accredited Investors
© 2010 Sutherland Asbill & Brennan LLP. All Rights Reserved.This communication is for general informational purposes only and is not intended to constitute legal advice or a recommended course of action in any given situation. This communication is not intended to be, and should not be, relied upon by the recipient in making decisions of a legal nature with respect to the issues discussed herein. The recipient is encouraged to consult independent counsel before making any decisions or taking any action concerning the matters in this communication. This communication does not create an attorney-client relationship between Sutherland and the recipient.