CFTC Chair Heath Tarbert and SEC Chair Jay Clayton established a one-year pilot program to enhance coordination among agency staff on CFTC enforcement actions that may trigger the "bad actor disqualification" provisions of Rule 262(a) of Regulation A and Rule 506(d)(1) of Regulation D (the "SEC Disqualification Rules"). The rules disqualify entities from certain registration exemptions for security offerings if it is determined that, among other things, they have been the subject of certain CFTC enforcement actions.
In a joint letter, the Chairs stated that the program is intended to provide a framework for instances in which the CFTC finds it appropriate to notify the SEC that an Order should not result in disqualification under the SEC Disqualification Rules. SEC and CFTC staff will put in place the following process:
- by means of a designated CFTC Division of Enforcement staff member, the CFTC will notify a designated SEC Division of Corporation Finance ("Division") staff member "as soon as practicable" of a CFTC Order that may implicate the SEC Disqualification Rules;
- the designated CFTC staff member will provide to the designated SEC staff member all information relevant to the SEC Disqualifications Rules; and
- the designated SEC staff member will convey to the designated CFTC staff member whether the Division (i) does not object to the disqualification waiver, (ii) has comments regarding the waiver request or (iii) objects to the disqualification waiver.
The pilot program is effective immediately and will remain effective for one year.
This is good; it is an attempt by two regulators that have significantly overlapping jurisdictions and concerns to rationalize the manner in which waivers are granted.
- CFTC and SEC Joint Letter: CFTC-SEC Regulations A and D
- CFTC Press Release: CFTC and SEC Chairs Sign Joint Letter Establishing Pilot Program Relating to "Bad Actor Disqualification" Provisions of Regulations A and D
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.