Policy Patty Toolkit 

Making the world a little more compliant one toolkit at a time.


SEC Actions for November 7, 2018

Posted on November 8, 2018 at 8:05 AM

Here are some actions taken by the SEC on November 7th:

Citibank to Pay More Than $38 Million for Improper Handling of ADRs

The SEC announced that Citibank N.A. has agreed to pay $38.7 million to settle charges of improper handling of “pre-released” American Depositary Receipts (ADRs). ADRs – U.S. securities that represent foreign shares of a foreign company – require a corresponding number of foreign shares to be held in custody at a depositary bank. The practice of “pre-release” allows ADRs to be issued without the deposit of foreign shares provided brokers receiving them have an agreement with a depositary bank and the broker or its customer owns the number of foreign shares that corresponds to the number of shares the ADR represents. The SEC found that Citibank improperly provided ADRs to brokers in thousands of pre-release transactions when neither the broker nor its customers had the foreign shares needed to support those new ADRs. Such practices resulted in inflating the total number of a foreign issuer’s tradeable securities, which resulted in abusive practices like inappropriate short selling and dividend arbitrage that should not have been occurring.

Read More:
https://www.sec.gov/news/press-release/2018-255" target="_blank">https/www.sec.gov/news/press-release/2018-255
https://www.sec.gov/litigation/admin/2018/33-10571.pdf" target="_blank">https/www.sec.gov/litigation/admin/2018/33-10571.pdf

SEC Charges ITG With Misleading Dark Pool Subscribers

The SEC announced that ITG Inc. and its affiliate AlterNet Securities Inc. have agreed to pay $12 million to settle charges arising from ITG’s misstatements and omissions about the operation of the firm’s dark pool, POSIT, and ITG’s failure to establish adequate safeguards and procedures to protect POSIT subscribers’ confidential trading information. The order found that despite assuring subscribers that it would maintain the confidentiality of their trading information, ITG improperly disclosed the confidential dark pool trading information of firm clients. For example, from 2010 to 2015, ITG sent daily Top 100 Reports for the prior day’s trading activity. The reports identified the top 100 stocks for which certain orders were submitted to POSIT and the top 100 stocks for which certain orders were executed. ITG informed some high frequency trading firms that they could use these Top 100 Reports to identify “potential unsatisfied liquidity needs” in the dark pool, despite assuring subscribers that ITG would not signal their trading intentions.

Read More:
Releasehttps://www.sec.gov/news/press-release/2018-256" target="_blank">

Investor Testing of the Proposed Relationship Summary for Investment Advisers and Broker-Dealers

In connection with our ongoing efforts to help address investor confusion about the nature of their relationships with investment advisers and broker-dealers, the SEC’s Office of the Investor Advocate made available a report on investor testing conducted by the RAND Corporation. The investor testing gathered feedback on a sample Relationship Summary issued in April 2018 as part of a package of proposed rulemakings and interpretations designed to enhance the quality and transparency of investors’ relationships with investment advisers and broker-dealers. The report is available for review and comment on the SEC’s website.

Read More:
https://www.sec.gov/news/press-release/2018-257" target="_blank">https/www.sec.gov/news/press-release/2018-257
https://www.sec.gov/about/offices/investorad/investor-testing-form-crs-relationship-summary.pdf" target="_blank">https/www.sec.gov/about/offices/investorad/investor-testing-form-crs-relationship-summary.pdf

Categories: General