The Wall Street Legal & Regulatory Feed

Securities Industry Commentator by Bill Singer Esq

April 3, 2020


In the Matter of LendingClub Corporation (TSSB Consent Order)


Giant Social-Distancing-Self-Isolation Cosmopolitan Anti-Covid19 Cocktail

There will be a re-calibration in New York after coronavirus, realty expert says / Scott Rechler, CEO and chairman of RXR Realty, joins "Squawk Box" to discuss how the real estate industry is being affect by the coronavirus outbreak (CNBC)
In his opening remarks, SEC Chair Clayton proudly states that:

Over 57 million American households are invested in our securities markets.  The interests of these individuals-our long-term Main Street investors-are the lens through which we evaluate whether we are effectively advancing the SEC's mission.  The 4,500 women and men of the SEC are committed to these investors and the integrity of our markets.  The uncertainties caused by COVID-19 have not changed our perspective or commitment.  

Truly, a lovely sentiment; however, well, you know, I might beg to differ just a tad with the SEC Chair. In my world, the uncertainties of COVID-19 have changed my perspective, my commitment, and, frankly, my world. Notwithstanding our differences on that point, I remain a steadfast supporter and fan of Clayton, who I think has done a superb job during his time at the helm of the federal regulator. I am confident that my written commentaries over the last few years will confirm the sincerity of my support for Clayton. In addressing the impact of COVID-19, Chair Clayton notes, in part, that:

Our general approach in these unprecedented circumstances is premised on putting health and safety first, as well as our firm message that the law continues to apply.  We continue to allocate our resources in the best interests of investors and our capital markets, with investor protection and market integrity front of mind.  Recognizing that challenges may impact the timing of certain filings, we also are keenly focused on ensuring that issuers and other registrants continue to provide material information to investors, including information related to the current and expected effects of COVID-19, as promptly as practicable.  In this regard, we have reminded public companies and other persons to continue to evaluate their obligations to make materially accurate and complete disclosures in accordance with the federal securities laws.[5]  And Commission staff provided guidance to assist issuers as they consider their disclosure obligations in connection with their assessment of the potential effects of COVID-19 on their operations.[6]

It is my intent to continue to apply this pragmatic, flexible, facts-and-circumstances approach to our allocation of resources and actions during this uncertain period, taking into account the advice and expertise of my fellow Commissioners and our staff, as well as the views of market participants.  In light of the dynamic nature of current circumstances, our allocation of resources may change.  In addition, we expect to provide similar, targeted relief, and make similar adjustments to timeframes, where necessary or appropriate.  Importantly, we continue to encourage engagement from market participants, including, in particular, investors.  For example, at my request, the Investor Advisory Committee will hold a meeting today to discuss, in part, the impact of COVID-19 on investors.[7]    

As to how Clayton puts his pragmatic approach into action, he offers this admonition:

Over the past ten months, the Commission and the staff have engaged extensively with broker-dealers, investment advisers, retail investors and other market participants, as well as FINRA and other regulatory partners, regarding the implementation of Reg BI and Form CRS.[11]  We believe firms with account relationships comprising a substantial majority of retail investor assets have made considerable progress in (1) adjusting their business practices, (2) supplementing and modifying their policies and procedures, and (3) otherwise aligning their operations and preparing for the requirements of Reg BI and the obligation to file and begin delivering Form CRS. 

Based on that engagement -- and because the continued implementation of these conduct and transparency initiatives, individually and collectively, will significantly benefit Main Street investors -- we believe that the June 30, 2020 compliance date for Reg BI and other requirements, including the requirement to file and begin delivering Form CRS, remains appropriate. 

Ummm . . . okay . . . sure . . . so, as best I get it, the June 30th compliance date for Reg BI and the whole Form CRS delivery is going to go ahead. As if there are no COVID-19 uncertainties. As if the world that we all think may be ending will not, in fact, end. Ya gotta lover the unbridled enthusiasm of Chair Clayton. Ya gotta love the SEC Staff's dedication to stickin' with deadlines. On the other hand, anyone wanna take the over/under as to whether that June 30th date comes off without a hitch?

In the Matter of LendingClub Corporation (Consent Order, Texas State Securities Board / REG20-CAF-01)
https://www.ssb.texas.gov/sites/default/files/LendingClubOrder_04012020_entered.pdf
Without admitting nor denying the findings or conclusions, LendingClub Corporation voluntarily consented to the entry by the Texas State Securities Board of a Consent Order whereby the company's Dealer application was approved, the company was reprimanded and ordered to pay a $400,000 the administrative fine and to contribute $25,000 to State's Investor Education Fund of the Investor Protection Trust. As set forth in part in the TSSB Consent Order, LendingClub allows qualified borrowers to obtain unsecured loans and Notes, which are "special, limited obligations" of only LendingClub. Since going public on the NYSE in 2014, LendingClub took the position that the Notes are covered securities because the represent "a security of the same issuer that is equal in seniority or that is a senior security" to a NYSE-listed security. The Consent Order found that LendingClub must be registered as a dealer in Texas to sell federal covered securities such as the Notes, and, in fact, the company was not so duly-registered during said sales. 

Department of Justice and Department of Health and Human Services Partner to Distribute More Than Half a Million Medical Supplies Confiscated from Price Gougers (DOJ Release)
https://www.justice.gov/opa/pr/department-justice-and-department-health-and-human-services-partner-distribute-more-half
DOJ and the Department of Health and Human Services announced the distribution of hoarded personal protective equipment ("PPE"), including approximately 192,000 N95 respirator masks, to the New Jersey Department of Health, the New York State Department of Health and the New York City Department of Health and Mental Hygiene. The owner of the hoarded PPE will be paid fair market value for the supplies. As set forth in part in the DOJ Release:

The FBI discovered the supplies during an enforcement operation by the Department of Justice's COVID-19 Hoarding and Price Gouging Task Force on March 30 and alerted HHS which used its authority under Defense Production Act (DPA) to order that the supplies be immediately furnished to the United States.  In addition to the N95 respirator masks, the supplies found included 598,000 medical grade gloves and 130,000 surgical masks, procedure masks, N100 masks, surgical gowns, disinfectant towels, particulate filters, bottles of hand sanitizer, and bottles of spray disinfectant.

http://www.brokeandbroker.com/5149/whole-worker/
Just as I would not approve of Amazon/Whole Foods threatening to lock out its employees if they didn't agree to half pay during the pandemic, just as I would be angered if the conglomerate imposed a doubled charge for healthcare upon its employees -- I am equally troubled by the employees thinking that a rising death count is an opportunity to demand double pay. During these times, it may well be that double or triple pay is in order for many employees in many industries. I don't dispute that. But walking out of grocery stores during this pandemic strikes me as using unfair leverage or unconscionable means. Our medical heroes deserve increased pay and bonuses. When I see nurses and doctors protesting, however, they are only complaining about the health and safety of themselves and their patients. I have yet to see a nurse or doctor refuse to return to an ICU unless the AFL-CIO or Change to Win organizes the hospital's staff. I have yet to see a nurse or doctor threaten a sick-out unless they were given double pay. Accordingly, Whole Worker's sick-out comes off as half-assed.

https://www.cnbc.com/2020/04/02/chanos-says-he-is-still-maximum-short-tesla-even-with-drop-in-last-month.html
How is this news? Why are you publishing this story when it's little more than a short-seller talking his book -- and in a time of a killer pandemic? I don't own Tesla. I don't have any issues with short selling. I do think that CNBC needs to show a tad more responsibility so that it doesn't sink to the level of click bait. Jim Chanos being "still" short is little more than General Francisco Franco still being dead. Why isn't CNBC also running that story about the Spanish Dictator?





Food Prices Slump Most Since 2015 as Coronavirus Hits Demand (Bloomberg by Agnieszka de Sousa and Megan Durisin)
https://www.blooamberg.com/news/articles/2020-04-02/food-prices-slump-most-since-2015-as-coronavirus-hits-demand?srnd=premiu
As reported in part in the Bloomberg Article:

The FAO Food Price Index, a global gauge of prices, dropped 4.3% in March, the United Nations' Food & Agriculture Organization said Thursday. That's the steepest decline since August 2015. Food costs fell as government restrictions on freedom of movement exacerbated demand destruction for oil, which pressures biofuels consumption. Biofuels are a key source of demand for sugar and vegetable oils.

An interesting aspect of the worldwide foodstuffs decline is whether the deflationary pressures of reduced consumer demand will at some point be offset by the inflationary pressures of state and private hoarding, attendant climate changes; e.g., the expanding South American drought impacting corn and soy, and China's return to the Ag markets as that country emerges from its bout with the pandemic.

The SEC, CFTC, FDIC, OCC, and Federal Reserve will consider comments submitted before May 1, 2020, on their proposal to modify the Volcker rule's general prohibition on banking entities investing in or sponsoring hedge funds or private equity funds.

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