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Federal Reserve Bank of New York announces first subscription date of loan facility program
On May 20, the Federal Reserve Bank of New York announced the first loan subscription date for the Term Asset-Based Securities Loan Facility (TALF) and released an expanded set of Frequently Asked Questions and other documents relating to the facility’s operations. The first subscription date will be June 17, 2020, and the first closing date will be June 25, 2020. The FAQs contain information on why the TALF was established, how the TALF will work, borrower eligibility, eligible collateral, eligible underlying assets, master trust requirements, credit ratings, collateral review, interest rates, and loan subscription and closing, among other things.
Louisiana Securities Division extends operations guidance
On May 18, the Louisiana Office of Financial Institutions, Securities Division, updated guidance (previously discussed here) regarding its operations to extend the guidance to June 5, 2020, in light of the Louisiana governor’s extension of the state of emergency until that date. The guidance addresses, among other things, submission of registration and fees, conduct of remote examinations, and processing of licensing and registration applications.
SEC issues exemption for broker-dealer TALF Agents
On May 15, the SEC granted an exemption to broker-dealers designated by the Federal Reserve Bank of New York (NY Fed) as Term Asset-Backed Securities Loan Facility (TALF) Agents from certain requirements of Section 11(d)(1) of the Exchange Act. As previously covered by InfoBytes, under the TALF, the NY Fed will provide loans to U.S. companies that are secured by certain eligible consumer and small business asset-backed securities, such as student loans, auto and credit card loans, loans guaranteed by the SBA and certain other assets. The exemption for broker-dealers was requested by the NY Fed on May 12, because Section11(d)(1) would prevent TALF Agents from arranging nonrecourse loans in which the broker-dealer participated as a member of a selling syndicate or group.
The SEC granted the exemption with respect to asset-backed securities that are or may be designated as “eligible collateral,” declaring that any broker-dealer designated as a TALF Agent and participating in TALF 2020 is exempted from the requirements of Section 11(d)(1).
SEC charges two companies with fraudulent Covid-19 claims
On May 14, the SEC announced separate charges against two companies claiming to offer products to combat the Covid-19 virus in violation of the antifraud provisions of federal securities laws. One of the SEC’s complaints alleges the company issued a press release on March 31 advertising finger-prick Covid-19 tests that could be used at home and in schools, when in actuality the tests could be administered only in consultation with a medical professional and were not intended for home use by the general public. Moreover, the company failed to disclose the product was not authorized by the U.S. Food and Drug Administration. In the second complaint, the SEC alleges a company and its owner issued press releases claiming to sell, through a public and private partnership, thermal scanning equipment to detect fevers, that would help to “break[] the chain of virus transmission through early identification of elevated fever, one of the key early signs of COVID-19.” However, the SEC argues the company did not have an agreement to sell the product, nor did it have a partnership with any government entities.
In both complaints, the SEC alleges that the false or misleading statements materially affected the price of each company’s stock after the releases were made. The SEC is seeking permanent injunctive relief and civil penalties against both companies.
Tennessee extends timeline for bank examinations and authorizes virtual shareholder meetings during pandemic
On May 12, Tennessee Governor Bill Lee issued Executive Order No. 36 suspending or amending a variety of statutory and regulatory requirements to facilitate the treatment and containment of Covid-19. These include, among other things, extending examination cycles for financial institutions, extending timing requirements for securities registrations, and allowing for virtual shareholder meetings. The order will be in effect until June 30, unless amended or revised.
District of Columbia Department of Insurance, Securities and Banking issues FAQs on mortgage deferment
The District of Columbia Department of Insurance, Securities and Banking issued responses to frequently asked questions (FAQs) regarding the residential and commercial mortgage deferment program under the District of Columbia’s Covid-19 Response Supplemental Emergency Amendment Act of 2020. The FAQs provide guidance on, among other things, which entities and financial institutions are considered mortgage lenders under the act and therefore subject to the requirements, mortgage lenders’ obligations under the act, how borrowers should apply for the mortgage deferment plan, and record-keeping requirements under the act.
SEC issues $2 million whistleblower award
On May 4, the SEC announced a nearly $2 million award to a whistleblower in an enforcement action. According to the SEC’s press release, the whistleblower’s “information and assistance helped the agency bring a successful enforcement action and allowed investors to recover much of their money.” The formal order also states that the whistleblower, among other things, provided new information regarding an investigation into ongoing fraud, which informed the SEC’s need to “expeditiously seek a temporary restraining order and asset freeze to prevent further investor loss.” The whistleblower also suffered hardships.
As of May 4, the SEC has awarded 82 individuals a total of approximately $450 million in whistleblower awards since its first award in 2012.
Alabama Securities Commission extends relief provided to registrants affected by Covid-19
The Alabama Securities Commission has extended a temporary order providing relief to registrants affected by Covid-19 to May 15, 2020, in light of the Alabama governor’s issuance of the April 28, 2020 “Safer at Home” order. The temporary order was originally covered here.
SEC's temporary amendments to expedite capital raises through securities offerings
On May 4, the SEC announced it plans to make temporary amendments to Regulation Crowdfunding to enable small businesses impacted by Covid-19 to expeditiously “meet their funding needs through the offer and sale of securities.” After receiving feedback from its Small Business Capital Formation Advisory Committee, the SEC decided that small businesses may have difficulty in quickly raising urgently needed capital in short time frames due to current requirements. The temporary final rule provides relief to these small business issuers by, among other things, easing some Regulation Crowdfunding requirements—provided the issuers meet certain criteria—so that they can measure investor interest in the offering before committing the time and taking on the expense of creating “full offering materials” including financial statements. Further, in addition to other time saving measures pursuant to the temporary final rule, the offering does not need to remain open for 21 days or longer, but rather can close once sufficient binding commitments are received to meet its target, allowing the small business issuers to access the funds from the offering faster than they could under existing rules. The amendments are effective as of May 4 and terminate on March 1 for offerings made between May 4 and August 31.
Louisiana Office of Financial Institutions, Securities Division, issues update on operations
On May 1, the Louisiana Office of Financial Institutions, Securities Division, issued an update regarding its current operations during the statewide “stay at home” order. In particular, (i) paper copies of registration documents and payment of related fees can be mailed to the LOFI, and certain filings can be submitted electronically; (ii) examinations are being conducted remotely using phone and email correspondence in lieu of traditional on-site examinations; (iii) licensing staff continue to process licensing and registration applications through the CRD/IARD systems; and (iv) enforcement staff are limiting in-person contacts with witnesses and regulatory partners, and are using telecommunications technology to complete tasks remotely.