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Jacko Law Group Blog

Blog Update: Foreign Exchange Swaps and Foreign Exchange Forwards Will Not be Included in Swap Definition

The Commodity Exchange Act (‘‘CEA’’), as amended by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (‘‘Dodd-Frank Act’’), authorizes the Secretary of the Treasury (‘‘Secretary’’) to issue a written determination that foreign exchange swaps, foreign exchange forwards, or both, should not be regulated as swaps under the CEA. On November 20th, the Secretary decided to do just that, and used its power to exclude foreign exchange swaps and foreign exchange forwards from the definition of a swap. Thus, this decision removes these securities from the new swap regulatory regime set up by Dodd-Frank (as discussed in the previous blog entitled “Will You Need to Register as a “CTA” in the New Year?”).

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California Department of Corporations Announces Proposed Changes to Investment Adviser Custody Rule

The California Department of Corporations (“DOC”) recently proposed amendments to the California investment adviser custody rule, Section 260.237 of Title 10 of the California Code of Regulations. The October 18, 2012 announcement follows an initial invitation for comments on the proposed changes issued by the DOC on July 8, 2011. The proposed changes are in response to, and incorporates provisions from, the recently adopted amendments to the Securities and Exchange Commission’s (“SEC”) Custody Rule, and the North American Securities Administrators Association’s (“NASAA”) Model Custody Rule.

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SEC Settlement Highlights Importance of Seeking Best Execution

Last week the SEC settled an enforcement action against Chicago Registered Investment Adviser Tilden Loucks & Woodnorth LLC, its affiliated registered broker-dealer, LaSalle St. Securities, LLC, and Tilden’s retired founder, 87 year-old Ralph B. Loucks. The action was instituted as a result of Tilden’s failure to seek best execution for its clients and its failure to disclose the nature of the commissions charged to clients by the affiliated broker-dealer. The SEC’s order instituting the settlement states that during the time period in question most trades for Tilden’s clients were executed by LaSalle, with commission charges to clients averaging more than $143 per trade despite the fact that the majority of consisted of purchases and sales of large cap equities.

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NASAA Releases Annual Survey of Enforcement Activity by State Regulators

Last week the Enforcement Section of the North American Securities Administrators Association (NASAA) issued its annual enforcement survey, providing an overview of state enforcement efforts in 2011. The survey concludes that 6,121 investigations were conducted by the 48 responding regulators last year, resulting in 2,602 enforcement actions, more than $2.2 billion in investor restitution orders, and criminal jail sentences of 1,662 years. State regulators also reported the withdrawal of nearly 2,800 licenses and the denial, revocation or suspension of another 774 licenses. Of note, of the 2,602 enforcement actions 399 were brought against investment advisory firms, nearly double the prior year.

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