Custody rules for investment advisers. New rules, already in effect, added requirements for investment advisers having actual or "deemed" (for example, access) custody to client assets. (See SEC amends investment adviser custody rules)

US money market funds. New rules already in effect tightened the operations of US money market funds (please see US money market fund reform initiatives adopted).

Short sales. A reinstated "uptick rule" will be implemented this quarter. The new rule places certain restrictions on short selling when a stock is experiencing a drop of 10% or more from the previous day's closing price. (Please see Short sales: a new circuit breaker)

"Pay to play" rules for investment advisers. New rules for political contributions by advisory firms and their personnel, and the use of placement agents to market to state and local government investors, come into effect this quarter. (Please see SEC adopts rules targeting "Pay to Play" practices by investment advisers)

Registration form for investment advisers. The newly overhauled Form ADV comes into effect this quarter. (Please see SEC finalises ten year effort to overhaul Form ADV for investment advisers)

Large traders. New rules that would require IDs and reporting for large traders (defined as a firm or individual whose transactions in exchange-listed securities equal or exceed two million shares or US$20 million during any calendar day, or 20 million shares or US$200 million during any calendar month) were proposed April 2010. The large trader reporting system enhances the SEC's ability to identify large market participants, collect information on their trades, and analyse their trading activity. (Please see SEC proposes large trader reporting system)

"Rule 12b-1" overhaul for US mutual funds. The SEC would revamp how mutual funds and their investors compensate intermediaries; the rulemaking was subject to scathing industry criticism and is presumed dead at least until the SEC completes its Dodd-Frank rulemaking cycle. (Please see In rule 12b-1 overhaul, SEC proposes dramatic changes to mutual fund distribution arrangements)

Investment adviser registration. The SEC will soon finalise new registration rules for US and non-US fund managers and other currently unregistered investment advisers; the underlying registration requirements mandated by Dodd-Frank come into effect July 2011. (Please see Dodd-Frank Act Rulemaking: SEC proposes new exemptions and disclosure requirements for investment advisers)

Whistleblowers. The SEC proposed Dodd-Frank whistleblower reporting, protection and bounty provisions in November 2010; citing budget constraints the SEC simultaneously announced it would not be opening the Congressionally mandated whistleblower office. (Please see SEC: SEC proposes new whistleblower program under Dodd-Frank Act)

Investment adviser "SRO" study. As required by Dodd-Frank, the SEC currently has a study open on the merits of an industry funded self-regulatory organisation for investment advisers. Such an SRO is opposed by investment advisers, who see expense and duplicative regulation, and supported by broker-dealers and by the existing broker-dealer FINRA. Results are expected mid-January 2011.

Investment adviser/broker-dealer harmonisation study. As required by Dodd-Frank, the SEC has a study open on the merits of harmonising the currently separate regulatory regimes for investment advisers and broker-dealers. Perhaps most controversial is the possibility of applying a "fiduciary duty" to broker-dealers.

Specialised enforcement units formed. January 2010 kicked off with a reorganisation of the SEC's enforcement division to include specialist units tasked with spearheading the agencies efforts in different industry areas. These include a new asset management unit. (Please see SEC: SEC names new specialised unit chiefs and head of new office of market intelligence)

Insider trading investigations. The news has been dominated by a string of aggressive SEC insider trading investigations, prompting firms of every stripe to tighten procedures; there is every indication that 2011 will see continued activity. (Please see YouTube: Robert Khuzami on 2010 enforcement priorities)

Volcker Rule. Subject to a multi-year phase-in period, the Volcker Rule provisions of Dodd-Frank will limit the relationships that banking organisations can have with hedge funds and private equity funds. (Please see Shearman & Sterling's banking group's article in this PLC edition titled Busy agenda ahead for US banking regulatory agencies in 2011.)

Systemic risk. Dodd-Frank's newly established Financial Stability Oversight Council, a council of senior US financial regulators, has begun meetings to identify companies to be subject to heightened systemic risk regulation. Investment managers and investment funds are not currently viewed as direct targets of this initiative, but the statutory authority granted the new council is broad enough to potentially extend systemic risk oversight and regulation of asset management industry participants. (Please see Shearman & Sterling's banking group's article in this PLC edition titled Busy agenda ahead for US banking regulatory agencies in 2011.)

Brumberg, Mackey & Wall, P.L.C. (17 May 2010) and Nemzoff & Company, LLC (30 November 2010). The SEC staff gave guidance as to the perennial question of what types of activities require broker-dealer registration; the staff declined to conclude that broker-dealer registration was not required if Brumberg, Mackey & Wall, P.L.C., a law firm, and Nemzoff & Company, a consulting company for not-for-profit hospitals, engaged in the limited referral activities described in their request letters in exchange for transaction-based compensation. (Please see SEC: Letter of no-action request and SEC: Letter of no-action request of of Nemzoff & Company LLC.)

IPO allocations. FINRA adopted Rule 5131, which prohibits the allocation by a FINRA member (a category comprising nearly all SEC-registered broker-dealers) of new issue securities to any account (which can include an investment fund) in which an executive officer or director of a particular company of a public or covered non-public company has a beneficial interest of more than 25% of such account. (Please see SEC approves FINRA Rule regarding IPO allocation practices)

Comprehensive regulation of derivatives. Dodd-Frank will establish a comprehensive new regulatory framework for over-the-counter (OTC) derivatives. Authority over these products will be divided between the CFTC and the SEC. These new requirements are expected to change significantly the way the OTC derivative market operates, and include the following (for each of the notes below, please see Dodd-Frank Wall Street Reform and Consumer Protection Act: implications for derivatives).

Registration and regulation of “swap dealers” and "major swap participants". Firms that deal in OTC derivatives, take substantial net positions in OTC derivatives or create significant counterparty credit exposure will be required to register with the SEC and/or the CFTC and be subject to federal supervision and substantive regulation, including as to capital, margin, business conduct, documentation, recordkeeping and reporting.

Clearing and trading requirements. Some broad category of OTC trades will be required to be cleared through a regulated clearinghouse and traded on a regulated exchange or a regulated swap execution facility. A limited exemption from these requirements will be available for non-financial end-users of derivatives that are hedging commercial risk in connection with their business activities. Cleared OTC derivatives will generally have to be carried through a futures commission merchant or broker-dealer.

New margin and segregation requirements. Uncleared OTC trades may become subject to new margin requirements, although the extent to which such requirement will apply to non-financial end-users remains uncertain. Dealer counterparties will be required to offer third-party segregation of initial margin for uncleared swaps. These provisions are intended to address concerns raised in the wake of the Lehman Brothers insolvency with respect to the treatment of collateral held by insolvent brokers and dealers.

Position limits. The SEC and CFTC may impose position limits with respect to certain OTC and cleared derivative contracts.

Reporting requirements. OTC derivatives will have to be reported to a swap data repository, and pricing and other key economic data for OTC derivatives will be disseminated publicly.