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Dodd-Frank Act

SEC Commissioner Piwowar Speaks On The IPO Market

Nominate Us For ABA Journal’s Top Blog- HERE

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On May 16, 2017, SEC Commissioner Michael Piwowar gave the opening remarks to the SEC-NYU Dialogue on Securities Market Regulation. The focus of the SEC-NYU Dialogue was the current state of and outlook for the U.S. IPO market. Mr. Piwowar specifically spoke about reviving the U.S. IPO market.

The declining IPO market has been a topic of review lately, and was one of the main points discussed at the SEC’s Investor Advisory Committee meeting held on June 22. SEC Chair Jay Clayton weighed in at the Investor Advisory Committee, stating that he is “actively exploring ways in which we can improve the attractiveness of listing on our public markets, while maintaining important investor protections.” Mr. Clayton’s words echoed his statements made to the Senate confirmation hearing prior to his swearing in as chair.

This blog summarizes Commissioner Piwowar’s speech and of course offers my views and commentary.

Commissioner Piwowar’s Opening

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July 18, 2017

Financial Choice Act 2.0 Has Made Progress

On June 8, 2017, the U.S. House of Representative passed the Financial Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs Act (the “Financial Choice Act 2.0” or the “Act”) by a vote of 283-186 along party lines. Only one Republican did not vote in favor of the Act. On May 4, 2017, the House Financial Services Committee voted to approve the Act. A prior version of the Act was adopted by the Financial Services Committee in September 2016 but never proceeded to the House for a vote.

The Financial Choice Act 2.0 is an extensive, extreme piece of legislation that would dismantle a large amount of the power of the SEC and strip the Dodd-Frank Act of many of its key provisions. The future of the Act is uncertain as it is unlikely to get through the Senate, although a rollback of Dodd-Frank remains a priority to the current administration. It is also possible that parts of the lengthy

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June 13, 2017

The Acting SEC Chair Has Trimmed Enforcement’s Subpoena Power

In early February 2017, acting SEC Chair Michael Piwowar revoked the subpoena authority from approximately 20 senior SEC enforcement staff. The change leaves the Director of the Division of Enforcement as the sole person with the authority to approve a formal order of investigation and issue subpoenas. Historically, the staff did not have subpoena power; however, in 2009 then Chair Mary Shapiro granted the staff the power, in the wake of the Bernie Madoff scandal. Chair Shapiro deemed the policy to relate solely to internal SEC procedures and, as such, passed the delegation of power without formal notice or opportunity for public comment.

This is the beginning of what I expect will be many, many changes within the SEC as the new administration changes the focus of the agency from Mary Jo White’s broken windows policies to supporting capital formation. The mission of the SEC is to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation. Although

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April 4, 2017

The Financial Choice Act 2.0

On February 9, 2017, the Chair of the House Financial Services Committee issued a memo outlining changes to the Financial Choice Act, dubbing the newest version the Financial Choice Act 2.0. The memo was not intended for public distribution but found its way in any event, causing a great deal of anticipation as to the amended Act itself. The actual amended Act has not been released as of the date of this blog.

Introduction

As a reminder, the Financial Choice Act, which was passed by the House Financial Services Committee on September 13, 2016, is an extensive, extreme piece of legislation that would dismantle a large amount of the power of the SEC and strip the Dodd-Frank Act of many of its key provisions. As first written, it would not be feasible for the Act to pass into law, but it certainly illustrates the extreme views of members of the House on the state of current over-regulation.

Moreover,

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March 28, 2017

SEC Completes Inflation Adjustment To Civil Penalties

The SEC has completed the first annual adjustment for inflation of the maximum civil monetary penalties administered under the SEC. The inflation adjustment was mandated by the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015, which requires all federal agencies to make an annual adjustment to civil penalties.

The SEC adjusted civil penalties that can be imposed under the Securities Act of 1933, Securities Exchange Act of 1934, Investment Company Act of 1040, Investment Advisors Act of 1940 and Sarbanes-Oxley Act of 2002. Under the Sarbanes-Oxley Act of 2002 civil penalties are those imposed by the PCAOB in disciplinary proceedings against its accountant members.

The penalty increase applies to civil monetary penalties (“CMP”). A CMP is defined as “any penalty, fine, or other sanction that: (1) is for a specific amount, or has the maximum amount, as provided by federal law; and (2) is assessed or enforced by an agency in an administrative proceeding or by a federal court

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March 21, 2017

House Passes Creating Financial Prosperity For Business And Investors Act

On December 5, 2016, the U.S. House of Representatives passed the Creating Financial Prosperity for Businesses and Investors Act (H.R. 6427) (the “Act”), continuing the House’s pro-business legislation spree. The Act is actually comprised of six smaller acts, all of which have previously been considered and passed by the House in 2016. The Act is comprised of: (i) Title I: The Small Business Capital Formation Enhancement Act (H.R. 4168); (ii) Title II: The SEC Small Business Advocate Act (H.R. 3784); (iii) Title III: The Supporting American’s Innovators Act (H.R. 4854); (iv) Title IV: The Fix Crowdfunding Act (H.R. 4855); (v) Title V: The Fair Investment Opportunities for Professionals Experts Act (H.R. 2187); and (vi) Title VI: The U.S. Territories Investor Protection Act (H.R. 5322).

Title I: The Small Business Capital Formation Enhancement Act (H.R. 4168)

This Act requires the SEC to respond to the findings and recommendations of the SEC’s annual Government-Business Forum on Small Business Capital Formation, which

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February 7, 2017

House Passes Accelerated Access To Capital Act

On September 8, 2016, the U.S. House of Representatives passed the Accelerating Access to Capital Act. The passage of this Act continues a slew of legislative activity by the House to reduce regulation and facilitate capital formation for small businesses. Unlike many of the House bills that have been passed this year, this one gained national attention, including an article in the Wall Street Journal. Although the bill does not have a Senate sponsor and is not likely to gain one, the Executive Office has indicated it would veto the bill if it made it that far.

Earlier this year I wrote about 3 such bills, including: (i) H.R. 1675 – the Capital Markets Improvement Act of 2016, which has 5 smaller acts imbedded therein; (ii) H.R. 3784, establishing the Advocate for Small Business Capital Formation and Small Business Capital Formation Advisory Committee within the SEC; and (iii) H.R. 2187, proposing an amendment to the definition of accredited investor. See

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November 15, 2016

House Continues To Push For Reduced Securities Regulation

House Appropriations Bill

The House continues its busy activity of passing legislation designed to reduce securities and market regulations. In early July, the House passed H.R. 2995, an appropriations bill for the federal budget for the fiscal year beginning October 1st. No further action has been taken.  The 259-page bill, which is described as “making appropriations for financing services and general government for the fiscal year ending September 30, 2017, and for other purposes” (“House Appropriation Bill”), contains numerous provisions reducing or eliminating funding for key aspects of SEC enforcement and regulatory provisions.

Earlier this year, I wrote this BLOG about three House bills that will likely never be passed into law. The 3 bills include: (i) H.R. 1675 – the Capital Markets Improvement Act of 2016, which has 5 smaller acts imbedded therein; (ii) H.R. 3784, establishing the Advocate for Small Business Capital Formation and Small Business Capital Formation Advisory Committee within the SEC; and (iii) H.R. 2187, proposing

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October 4, 2016

SEC Whistleblower Awards Pass $100 Million As It Continues To Crack Down On Confidentiality Provisions In Employment Agreements

The SEC has proudly announced that including a $22 million award on August 30, 2016, its whistleblower awards have surpassed $100 million. The news comes in the wake of two recent SEC enforcement proceedings against companies based on confidentiality and waiver language in employee severance agreements. Like two prior similar actions, the SEC has taken the position that restrictive language in confidentiality, waiver or settlement agreements with employees violates the anti-whistleblower rules adopted under Dodd-Frank.

Background – The Dodd-Frank Act Whistleblower Statute

The Dodd-Frank Act, enacted in July 2010, added Section 21F, “Whistleblower Incentives and Protection,” to the Securities Exchange Act of 1934 (“Exchange Act”). As stated in the original rule release, the purpose of the rule was “to encourage whistleblowers to report possible violations of the securities laws by providing financial incentives, prohibiting employment related retaliation, and providing various confidentiality guarantees.” Upon enactment of Section 21F, the SEC established the Office of the Whistleblower and created the SEC Whistleblower

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September 27, 2016

House Passes More Securities Legislation

In what must be the most active period of securities legislation in recent history, the US House of Representatives has passed three more bills that would make changes to the federal securities laws. The three bills, which have not been passed into law as of yet, come in the wake of the Fixing American’s Surface Transportation Act (the “FAST Act”), which was signed into law on December 4, 2015.

The 3 bills include: (i) H.R. 1675 – the Capital Markets Improvement Act of 2016, which has 5 smaller acts imbedded therein; (ii) H.R. 3784, establishing the Advocate for Small Business Capital Formation and Small Business Capital Formation Advisory Committee within the SEC; and (iii) H.R. 2187, proposing an amendment to the definition of accredited investor. None of the bills have been passed by the Senate as of yet.

Meanwhile, the SEC continues to finalize rulemaking under both the JOBS Act, which was passed into law on April 5,

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March 15, 2016

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