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US Securities and Exchange Commission adopts rules to enhance liquidity risk management, data reporting and quality of information by investment companies

On 13th October, 2016, the Securities and Exchange Commission voted to adopt changes to modernize and enhance the reporting and disclosure of information by registered investment companies and to enhance liquidity risk management by open-end funds, including mutual funds and exchange-traded funds (ETFs). These changes will enhance the quality of information available to investors and will allow the Commission to more effectively collect and use data reported by funds. Moreover it will also promote effective liquidity risk management and will enhance disclosure regarding fund liquidity and redemption practices. The new rules are part of the Commission’s initiative to enhance its monitoring and regulation of the asset management industry.

The new rules will more effectively manage liquidity risk and will enhance data reporting for mutual funds, ETFs and other registered investment companies. With these rules, registered funds will be required to file a new monthly portfolio reporting form (Form N-PORT) and a new annual reporting form (Form N-CEN) that will require census-type information. The information will be reported in a structured data format, which will allow the Commission and the public to better analyze the information. The rules also will require enhanced and standardized disclosures in financial statements and will add new disclosures in fund registration statements relating to a fund’s securities lending activities.

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Unregistered Securities transactions in US

Israel based Bank Leumi have been inducing several securities transactions for US customers over a decade without registering itself as an investment adviser or broker dealer. As per the SEC’s order, Bank Leumi le-Israel B.M, Leumi Private Bank, and Bank Leumi (Luxembourg) S.A. violated Section 15(a) of the Securities Exchange Act of 1934 and Leumi Private Bank violated Section 203(a) of the Investment Advisers Act of 1940. Moreover, Bank Leumi has made $3.3727 million unlawful profits from its U.S. cross-border business. Bank Leumi disgorged $3.307 million of those profits in a deferred prosecution agreement with the U.S. Justice Department in December 2014. Bank Leumi must disgorge the remaining $65,700 in its settlement with the SEC plus $8,713.20 in interest and a $1,517,715 penalty. The SEC’s order also finds that Bank Leumi maintained several hundred securities accounts that were beneficially owned by U.S. customers and managed more than $500 million in securities assets for U.S. customers.

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24 October 2016
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