Insights on Current Policy Issues
Insider Trading Bills in the 114th Congress
By David E. Franasiak, Joel G. Oswald, and Hanna Laver
On December 10, 2014, the U.S. Court of Appeals for the Second Circuit reversed the insider trading convictions of two former hedge fund managers. The court held an individual can only be convicted of insider trading for trading on confidential information if he or she knew the original tipper disclosed it in exchange for a personal benefit. The Court denied a request for an en banc rehearing on April 3, 2015. The only remaining option is to appeal to the Supreme Court, but legal analysts assert that is unlikely. A recent U.S. District Court decision applying the Second Circuit ruling requires the SEC meet a tougher standard at trial for what constitutes insider trading. Judge Jed Rakoff also suggested Congress should formally define insider trading, saying “if unlawful insider trading is to be properly deterred, it must be adequately defined.” In light of the December ruling, several bills were introduced in Congress that would modify the Securities Exchange Act of 1934 to strengthen its prohibitions on trading on material or inside information.
Potential Integrity Verification Process Requirements for Liquid Pipelines
By Frank Vlossak.
The Pipeline and Hazardous Materials Safety Administration (PHMSA) has begun an effort to develop requirements for hazardous liquid pipeline operators to verify the integrity and maximum operating pressure of their pipelines. The initiative is based on a parallel effort targeting natural gas pipelines. PHMSA has not yet developed the integrity verification process (IVP) proposal as a notice of proposed rulemaking (NPRM), however the details provided in a draft flow chart indicate the requirements of a rule could be significant.
MSRB and FINRA Proposals on Disclosure of Pricing Reference Information for Fixed Income Securities
By David E. Franasiak, Joel G. Oswald and Rebecca L. Konst
On November 17, 2014 the Financial Industry Regulatory Authority (FINRA) and the Municipal Securities Rulemaking Board (MSRB) released companion proposals to “require disclosure of pricing reference information on customer confirmations for transactions in fixed income securities.” The MSRB proposal covers municipal bonds and the FINRA proposal covers fixed income securities in general. FINRA and the MSRB are taking a coordinated approach to this rulemaking and their proposals are substantially similar though apply to their different portions of the market.
Senate and House to Consider Keystone XL Pipeline Legislation
By Frank Vlossak.
In the next two weeks, both the House and Senate are expected to take up legislation to approve TransCanada’s Keystone XL pipeline. With 60 or more Senators expected to vote to invoke cloture and end any filibuster, both chambers are on track to approve the legislation. It is likely however that President Obama will veto the bill, although the Administration has yet to explicitly threaten such action. If the President vetoes the bill, it is unlikely that proponents have sufficient votes to override the veto.
2014 Midterm Election Guide
Follow the results on Election Night with the Williams & Jensen 2014 Midterm Election Guide. The Guide includes all Senate, House and governors’ races, as well as sections highlighting the most competitive election contests and a guide to state poll closing times.
Department of Commerce Action on Condensate Exports
By Frank Vlossak.
The Department of Commerce has allowed the export of the light hydrocarbon known as condensate, approving an interpretation of current law that allows export of lightly-processed condensate as a refined product. While the action by the Department of Commerce may allow economical processing and export of growing domestic condensate production, it does not necessarily signal a broader loosening of the 1975 restrictions on crude oil exports.
U.S. Regulation: The Securities and Exchange Commission’s Initiatives and Update on Swaps
Funding the Securities and Exchange Commission
With the enactment of the Dodd-Frank Act in 2010, the responsibilities of the Securities and Exchange Commission (SEC) have grown. New or expanded areas of SEC regulatory authority include the regulation of securities-based swaps, increased corporate governance and disclosure requirements, registration of certain private funds, registration of municipal financial advisers and swap advisers, the Volcker Rule prohibitions, additional regulations for credit rating agencies, and securitization requirements. The SEC’s Fiscal Year 2015 budget request is $1.7 billion, an increase of 26 percent from the FY 2014 enacted amount of $1.35 billion. The SEC budget, which is appropriated to the SEC by Congress, is entirely funded through the collection of securities transaction (options and equity transaction) fees, known as Section 31 fees. The Section 31 fee fluctuates, reflecting the combination of changes in dollar volume trading and the SEC funding levels as set by Congress through annual appropriations bills.
Health-Related Provisions in President Obama’s Proposed FY2015 Budget
This detailed summary of the health care provisions in President Obama’s FY2015 budget request spans all federal agencies including the Departments of Defense, Health and Human Services, Homeland Security, Treasury, Labor, Justice, and Veterans’ Affairs, as well as the Environmental Protection Agency and the National Science Foundation.
“Small Cap Liquidity Reform Act”
On February 11, the House passed the “Small Cap Liquidity Reform Act” (H.R.3448) by a vote of 412 to 4. Introduced by Representatives Sean Duffy (R-WI) and John Carney (D-DE), the legislation would require the Securities and Exchange Committee to conduct a five-year pilot program to allow the stocks of emerging growth companies (EGCs) to quote in 5 or 10 cent increments (“tick size”).