Coinbase filed a petition in a federal appeals court requesting a review of a decision by the U.S. Securities and Exchange Commission to deny the crypto exchange's request for new rules for the digital asset sector, Reuters reported. The five-member commission, in a 3-2 vote, said Friday it would not propose new rules because it fundamentally disagreed that current regulations are "unworkable" for the crypto sphere, as Coinbase has argued.
Wall Street's top regulator on Wednesday adopted new rules aimed at reducing systemic risk in the $26 trillion U.S. Treasury market by forcing more trades through clearing houses, while offering some concessions following industry pushback, Reuters reported. The five-member U.S. Securities and Exchange Commission voted 4-1 yesterday to finalize the new rules, proposed over a year ago, marking the most significant overhaul in decades of the world's largest bond market, a global benchmark for assets. The reforms, which require some cash Treasury and repurchase or "repo" agreements to be centrally cleared, are part of a broader government effort to fix structural issues regulators believe are causing market volatility and liquidity problems. They will become effective in phases by June 2026. "Today is the most significant day for U.S. Treasury market structure in decades. The SEC's final rule will reassemble the way that the Treasury market functions," said Nathaniel Wuerffel, head of market structure at BNY Mellon, a major Treasury market participant.
Three hedge fund associations sued the U.S. Securities and Exchange Commission (SEC) on Tuesday in a bid to vacate two new rules aimed at boosting transparency of short-selling, or trades that earn investors a profit if a stock price falls, Reuters reported. In October, the SEC issued the rules aimed at boosting transparency of short selling and securities lending, two connected activities. The groups say the SEC took conflicting stances with the rules, in one case allowing for transaction reports to be aggregated in order to protect investors' positions, yet at the same time requiring other transaction reports to disclosed individually. The case, filed in the 5th U.S. Circuit Court of Appeals, is the second brought by the hedge fund groups against the SEC in recent months. Wall Street has been fighting a raft of new financial regulations in court. In their suit, the groups argue the SEC did not take into account the interconnected nature of the two rules and adopted contradictory approaches, adding as such the rules will harm investors. They also added the rules violate the Administrative Procedure Act, which requires agencies to justify their rules and consider feedback.
The Securities and Exchange Commission is asking investment advisers how they use and oversee artificial intelligence, as agency head Gary Gensler continues to express skepticism about the technology, the Wall Street Journal reported. The SEC’s examinations division has sent requests for information on AI-related topics to several investment advisers, part of a process known as a sweep. The agency wants details on topics including AI-related marketing documents, algorithmic models used to manage client portfolios, third-party providers and compliance training, according to one such letter obtained by Vigilant Compliance, a regulatory compliance consulting firm. Karen Barr, the head of the Investment Advisers Association, confirmed that her trade group has heard about the SEC outreach to advisers on the use and governance of AI. The agency’s exercise could be “extremely helpful as the commission considers policy issues relating to these emerging technologies,” she said. The existence of a sweep doesn’t mean the agency suspects misconduct. An SEC spokesman said the agency’s examinations aren’t public and it doesn’t confirm or deny their existence.
The U.S. Securities and Exchange Commission (SEC) is next week expected to vote to adopt a major rule forcing more trading of U.S. Treasuries through clearing houses, in a long-anticipated move aimed at boosting the resilience of the market, Reuters reported. According to a notice, the agency will vote Wednesday on the rule. It's part of a broader push by regulators to fix structural problems that have increased volatility and created liquidity crunches in the $25 trillion Treasuries market. Most notably, Treasury market liquidity all but evaporated in March 2020 as COVID-19 pandemic fears gripped investors, prompting the Federal Reserve to prop up the market, although other crunches in recent years have also fueled regulators' concerns. Reuters reported in late October that the SEC was expected to soon finalize the clearing rule, which was first proposed in September 2022. A central clearer acts as the buyer to every seller, and seller to every buyer, guaranteeing the transaction in case one party defaults. Advocates for central clearing say it makes markets safer. The proposal applied to cash Treasury and repurchase agreements traded by broker dealers and hedge funds. It's partly aimed at reining in debt-fueled bets by hedge funds, Reuters reported.
Securities and Exchange Commission Chair Gary Gensler has warned businesses against “AI washing,” or making false artificial intelligence-related claims, likening it to the greenwashing phenomenon that has been the target of an agency crackdown, the Wall Street Journal reported. Gensler said yesterday that securities laws bar phony claims and require companies to give “full, fair and truthful” disclosures. “Don’t do it,” Gensler said at a conference hosted by The Messenger, a news outlet. “One shouldn’t greenwash and one shouldn’t AI wash.” “AI washing” has emerged as an informal term that describes businesses’ making unfounded AI claims to the public, akin to greenwashing, which refers to companies making unfounded representations about environmental sustainability. The explosive growth in the number and sophistication of AI applications has led to concerns that marketing claims might not match what companies are delivering. The Federal Trade Commission in February warned companies across the economy that it would be on the lookout for bogus AI claims in advertising, from exaggerations of AI-powered products’ capabilities to outright fabrications that a product incorporates AI technology.
Companies have long used employee nondisclosure agreements to protect proprietary information. Now, regulators are trying to ensure that clauses in those agreements don’t also serve to inhibit whistleblowers from reporting potential corporate wrongdoing, the Wall Street Journal reported. In recent months, the U.S. Securities and Exchange Commission has taken a number of actions against companies whose various employment contracts have language that might hold employees back from reporting misconduct to regulators. A watershed moment came in September, when the SEC fined hedge fund D.E. Shaw $10 million. Startled by the size of the fine, some companies are taking a second look at the confidentiality provisions and nondisparagement clauses in their various employment contracts. In particular, they are trying to determine whether the language might be seen as squelching whistleblower tips, say lawyers who defend companies in whistleblower cases and others representing the informants themselves. “I think that the commission’s action is having an impact, and I expect there will be more,” said Stephen Kohn, a partner at law firm Kohn, Kohn & Colapinto who represents whistleblowers. The SEC’s recent focus on nondisclosure clauses also highlights the importance of whistleblowers to its enforcement efforts. The information, particularly from corporate insiders, has become a key source for the SEC, which can then monitor events in real time and police the market, said Gurbir Grewal, the SEC’s enforcement division chief.
The U.S. Securities and Exchange Commission said that Mallinckrodt failed to tell investors it had potentially overcharged Medicaid for its flagship drug, but the regulator waived a $40 million civil penalty partly because the pharmaceutical company agreed to hire a compliance consultant, the Wall Street Journal reported. The SEC said in an administrative proceeding Thursday that the Centers for Medicare and Medicaid Services informed Mallinckrodt as early as 2016 that the company was using an incorrect rebate rate for its sales of Acthar Gel, a drug used to treat several rare autoimmune diseases, which meant it was overcharging state Medicaid programs for the drug. Mallinckrodt, which didn’t admit or deny the SEC’s findings, agreed to hire a compliance consultant to conduct a comprehensive review of the company’s disclosure and internal accounting controls, as well as implement the consultant’s recommendations. The SEC said that it wouldn’t impose the $40 million penalty because of Mallinckrodt’s financial position and because it had committed to retain a consultant. The company in November announced it had completed its financial restructuring and emerged from chapter 11 bankruptcy.
When top Biden administration officials gathered last month at the Justice Department to announce a $4.3 billion legal resolution with Binance, one powerful regulator was absent, the Wall Street Journal reported. Attorney General Merrick Garland was there. So was Treasury Secretary Janet Yellen. But Securities and Exchange Commission Chair Gary Gensler wasn’t, even though he has his own legal beef with Binance. The SEC sued the world’s largest cryptocurrency exchange in June and wasn’t involved in the monthslong settlement talks that led Binance and its founder, Changpeng Zhao, to plead guilty and settle Treasury’s civil charges. Even before the SEC sued Zhao, Binance and its U.S. affiliate, the parties couldn’t come close to agreeing on settlement terms. Before suing Binance, regulators wanted the company to accept an injunction that would stop Binance.US from offering trading in many of the crypto assets on its platform, people familiar with the matter said. “That would sort of be the end of Binance.US,” said Lee Reiners, a lecturing fellow in economics at Duke University. Another hurdle: The SEC alleged that Binance violated investor-protection laws by selling BNB, its own crypto token, in 2017. Settling that claim would make it nearly impossible to trade BNB in the U.S. and could hurt its value around the world.
