05.19.2011
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Updates
SEC Proposes Rule regarding Inflation Indexing of Performance Fee
On Tuesday, May 10, 2011, the Securities and Exchange Commission (the "SEC") proposed a rule raising dollar thresholds required before investment advisers are able to charge their clients performance fees. This adjustment is required under Section 418 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act"), which requires the SEC to issue an order to adjust for inflation these dollar amount thresholds by July 21, 2011, and every five years thereafter. Rule 205-3 under the Investment Advisers Act currently allows advisers to charge performance fees when the client has at least $750,000 under management with the adviser, or when the adviser reasonably believes the client has a net worth exceeding $1.5 million. The proposed SEC order would raise these levels to $1 million for assets under management and $2 million for a client's net worth. Section 418 of the Dodd-Frank Act alters these thresholds to $1 million and $2 million respectively. Additional amendments to Rule 205-3 are also proposed by the SEC, including the method for calculating future inflation adjustments of the dollar amount tests, and the exclusion of the value of a person's primary residence from the calculation of the person's net worth.
Federal Reserve Proposes Rule regarding Foreign Remittance Transfer Protections
On Thursday, May 12, 2011, the Federal Reserve Board proposed a rule aimed at creating new protections for consumers sending remittance transfers to recipients in foreign jurisdictions. The proposed rule requires that remittance transfer providers make certain disclosures to senders, particularly regarding fees and exchange rates, and would provide error resolution and cancellation rights for senders of remittances. The proposed rule is made under Regulation E (Electronic Fund Transfer), as mandated by the Dodd-Frank Act.
Read the Federal Reserve press release
CFTC Proposes Regulations Implementing Statutory Framework in Commodity Exchange Act
On Thursday, May 12, 2011, the Commodity Futures Trading Commission (the "CFTC") proposed regulations that would implement the new statutory framework presented by the Commodity Exchange Act, which was added by the Dodd-Frank Act. The regulations, among other things, require the adoption of capital requirements for certain swap dealers and major swap participants, as well as related financial condition reporting and recordkeeping. Existing capital and financial reporting regulations for futures commission merchants that register as swap dealers or major swap participants will be amended. The proposed regulations will also include requirements for futures commission merchants to provide supplemental financial reporting, in furtherance of the requirements of Section 724 of the Dodd-Frank Act.
SEC Proposes Rules and Amendments Regarding Credit Ratings
On Wednesday, May 18, 2011, the SEC proposed new rules and amendments to existing rules governing credit ratings and Nationally Recognized Statistical Rating Organizations. In addition, the Commission is proposing a new rule and form that would apply to providers of third-party due diligence services for asset-backed securities, and proposing amendments to existing rules and a new rule that would require issuers and underwriters of asset-backed securities to make the findings and conclusions of any third-party due diligence report obtained by the issuer or underwriter publicly available. The proposed regulations implement Sections 932, 936, and 938 of the Dodd-Frank Act.
© 2011 Perkins Coie LLP
