Confidential Financial Information of Non-Party Customers Placed at Risk When Litigants Subpoena FINRA Enforcement Files

Posted in Financial Regulation, FINRA, Litigation, SEC, Securities

An increasingly common tactic among claimants’ lawyers in Financial Industry Regulatory Authority (FINRA) arbitrations is to issue subpoenas to securities regulators, including FINRA itself, calling for the production of investigative files. This is accomplished by asking the arbitration panel to issue a subpoena pursuant to FINRA Rule 12512 (or Rule 13512 in an employee versus firm case). The respondent firm typically opposes the issuance of such a subpoena on a number of grounds, including the fact that securities regulators have much broader investigative powers than do private litigants and often demand and collect large amounts of personal confidential information (PCI) about customers and employees who may not be parties to the arbitration in which the subpoena is sought.

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Lex Machina’s Securities Litigation Report 2017 Names Greenberg Traurig a Top Federal Securities Defense Firm

Posted in Financial Services Litigation, Securities

According to the report issued last week, Greenberg Traurig is among the top 15 firms in the United States, defending national and global financial institutions against bet-the-company securities litigation cases. The report found that securities case filings rose 23 percent from 2015 to 2016, to 1,144 cases. According to Lex Machina, securities litigation is relatively steady compared to other areas of the law, with little variability from year to year. The number of securities cases in a given year tends to depend on macroeconomic trends, so if there is little variability in the national economy, litigation would be expected to remain the same, but a downturn could result in an increase in securities suits.

GT attributes its strength in this area to the fact that the firm has one of the broadest and deepest securities litigation practices in the country. The firm has been lead defense counsel in hundreds of securities class actions, derivative lawsuits, and SRO, state and SEC investigations and enforcement actions. These include some of the largest and most complex regulatory actions ever filed and one of the most highly publicized securities fraud cases in recent times. The firm has one of the most experienced and largest teams in the United States representing both market leading broker-dealers and Directors and Officers to final award or judgment in thousands of securities arbitrations and trials throughout the country. The team has tried some of the largest arbitration cases to verdict, including numerous matters involving more than $100 million. The attorneys regularly handle matters before the Financial Industry Regulatory Authority Dispute Resolution, American Arbitration Association, National Futures Association, and state and federal courts across the country.

President Trump to Nominate CFTC Acting Head J. Christopher Giancarlo

Posted in Commodities, Dodd-Frank

President Trump has announced his intention to nominate Commodity Futures Trading Commission (CFTC) acting head J. Christopher Giancarlo as permanent chairman. This news is of high importance for the alternative investment community, which will be impacted by  Giancarlo’s regulatory vision for the agency and Dodd-Frank reform.  As a Republican commissioner at the agency since 2014, and more recently as its interim chairman, Giancarlo has openly criticized crucial portions of the Dodd-Frank Act. While a president does not have the power to unilaterally repeal an Act such as Dodd-Frank, a vote by Congress could. In this case, however, it does not appear that the necessary votes for such action are there. The alternative investment community is focusing on the impact that Chairman Giancarlo could have on the agency’s plans regarding the enforcement of Dodd-Frank and its related rules.

Greenberg Traurig’s Koichiro Ohashi to Speak About Fintech in Connection to Luxembourg and Japan

Posted in Events, Fintech

Koichiro Ohashi, shareholder in the Tokyo office of international law firm Greenberg Traurig, LLP will participate in a program titled, “A taste of FinTech From 2 Angles … and 2 Sides of The World” on March 14 in Luxembourg. The discussion will address the challenges and opportunities of Fintech in Luxembourg and Japan.

Greenberg Traurig to Participate at the FIBA Anti-Money Laundering Compliance Conference

Posted in Cybersecurity, Events, Financial Regulation, Gaming

Greenberg Traurig is proud to sponsor and participate at the FIBA (Florida International Bankers Association) Anti-Money Laundering Compliance Conference March 6 – 8 at the InterContinental Miami. Rudolph W. Giuliani, chair of the firm’s Cybersecurity, Privacy and Crisis Management Practice and former New York City Mayor, will deliver the keynote address on how the 2016 elections impact regulatory reform. Greenberg Traurig’s Mark Clayton and Carl Fornaris will also speak at the conference.

Carl Fornaris, co-chair of the firm’s Financial Regulatory and Compliance Practice will moderate the panel, “Lessons Learned from the U.S. Treasury Department’s Recent Enforcement Actions Against Financial Institutions in the Region” March 8 from 4:15 p.m. – 5:30 p.m. Mark Clayton, co-chair of the firm’s Global Gaming Practice will speak on the panel, “Compliance Standards for Casinos and Money Service Businesses” March 7 from 11:25 a.m. – 12:40 p.m.


High-End, Cash-Only Real Estate Sales in Six Major Metropolitan Areas Remain Subject to Mandatory AML Reporting Requirements

Posted in Financial Crimes Enforcement Network, Real Estate

On Feb. 23, 2017, the Financial Crimes Enforcement Network of the U.S. Department of the Treasury (FinCEN) extended by an additional six months its existing Geographic Targeting Orders (GTOs) that require U.S. title insurance companies, their subsidiaries and agents (collectively, the Title Insurance Companies) to identify the natural persons behind shell companies used to pay “all cash” for high-end residential real estate in six major metropolitan areas.

To read more, please see GT AlertHigh-End, Cash-Only Real Estate Sales in Six Major Metropolitan Areas Remain Subject to Mandatory AML Reporting Requirements.”

U.S. Court of Appeals for D.C. Circuit Vacates Panel Decision in PHH v. CFPB, Grants Rehearing En Banc

Posted in CFPB

On Feb. 16, 2017, the U.S. Court of Appeals for the D.C. Circuit granted the request for en banc review by the Consumer Financial Protection Bureau (CFPB) in the PHH v. CFPB matter.[1]  The order vacates the prior judgment by a three-judge panel that the CFPB’s structure was constitutionally infirm, and which remedied that infirmity by making the CFPB’s director removable at the discretion of the president.  Accordingly, until the full Court issues its ruling, the CFPB director can only be removed for cause.

The Court directed the parties to brief three specific issues, each of which relates to constitutional questions:

1) Is the CFPB’s structure as a single-director independent agency consistent with Article II of the Constitution and, if not, is the proper remedy to sever the for-cause provision of the statute?

2) May the court appropriately avoid deciding that constitutional question given the panel’s ruling on the statutory issues in this case?

3) If the en banc court, which has today separately ordered en banc consideration of Lucia v. SEC, 832 F.3d 277 (D.C. Cir. 2016), concludes in that case that the administrative law judge who handled that case was an inferior officer rather than an employee, what is the appropriate disposition of this case?

Question 1 directly addresses the core ruling of the three-judge panel – that the single-director structure of the CFPB was unconstitutional and that the appropriate remedy was to make the CFPB director removable at the discretion of the president, similar to other executive agencies.  As this was the core ruling on appeal, the fact that the Court is seeking briefing on this topic is entirely expected.

Question 2 addresses a point raised by Judge Henderson in her separate opinion, which concurred in the outcome but which dissented on the Constitutional questions.  Judge Henderson’s opinion was that there was no reason for the Court to even reach the question of whether the CFPB’s structure was constitutional.  As the Court was already granting PHH complete relief in ruling in its favor on the interpretation of RESPA, Judge Henderson argued that there was no reason for the Court to reach the constitutional questions.  If the full court were to agree with Judge Henderson’s logic, then the ruling for PHH would be upheld, but the challenge to the CFPB’s structure would not be addressed by the Court.

Question 3 also addresses a point raised by a concurring opinion, in this case that of Judge Randolph.  Judge Randolph agreed with the ruling against the CFPB, but on the independent grounds that the administrative law judge (ALJ) who issued the initial ruling against PHH was an “inferior officer” under the meaning of the Appointments Clause of the Constitution,[2] which requires that such officers be appointed by the president, courts of law, or the heads of departments.  Because the ALJ was not so appointed, but was instead assigned by the SEC’s chief ALJ pursuant to an agreement between the CFPB and the SEC, Judge Randolph would have declared the proceeding against PHH unconstitutional for that separate rationale.  This question of the Constitutional status of ALJ’s is clearly an area of interest to the court, given that the Court granted en banc rehearing on the same day on the Lucia v. SEC case raising similar questions regarding the Appointments Clause of the Constitution.

It is worth noting that the Court did not specifically request briefing on the propriety of the director’s interpretation of RESPA or the relevant statute of limitations.  While nothing precludes the full Court from reconsidering that issue, the fact that no briefing was requested on it, along with the fact that all three judges in the previous panel decision agreed to overturn the director’s ruling, suggests an uphill climb for the bureau as to the merits of its position on RESPA.

The court will hear oral argument on May 24, 2017.


[2] U.S. Const. Art. II, §2, cl. 2.

NY Governor’s Proposed Budget Forecasts Increased Regulation of Fintech

Posted in Fintech

In his proposed budget for fiscal year 2017-2018, New York Governor Andrew Cuomo advanced changes to the New York Banking Law that would give the Department of Financial Services (NY DFS) increased licensing authority over online and marketplace lenders.[1] The proposed budget would prohibit any entity from engaging in the business of making loans in New York of $25,000 or less to individuals for personal, family, household, or investment purposes except as authorized by regulations issued by the Superintendent of NY DFS and after first obtaining a license. Similar restrictions would be imposed on entities making business loans of less than $50,000. If enacted, this requirement would take effect Jan. 1, 2018.

According to the proposal, an entity would be considered to be engaging in the business of making loans in New York even if it is not the lender, but instead an entity that “purchases or otherwise acquires from others loans or other forms of financing, or arranges or facilitates the funding of loans” to individuals residing in the state of New York. Depending on the regulations eventually issued by the NY DFS, this change in the law could require companies currently engaging in small-balance lending to NY borrowers to cease their activities in New York until they obtain a license. Obtaining such a license could take a significant amount of time, and cause a significant interruption to the entity’s business, unless the NY DFS were to authorize entities to continue business while the license application is pending.

The New York Legislature is in the process of completing hearings on the Governor’s proposed budget. The Senate and Assembly is each expected to introduce and pass legislation that stakes out the House’s position on the Governor’s proposals on or before March 15. From there, negotiations will begin in earnest between the Legislature and the Executive, with the goal of reaching a budget agreement on or before March 31, 2017.

This development further highlights the significance of the plan by the Office of the Comptroller of the Currency (OCC) to charter financial technology companies under a special-purpose federal charter.[2] Any entity granted a federal banking charter would be largely exempted from such state licensing requirements, just as federally chartered banks are not typically subject to state licensing. The preemption of state licensing and regulatory authority was cited by the Conference of State Bank Supervisors as one of reasons that they were “firmly opposed” to any special-purpose federal charter for Fintech companies.[3] While the requirements of an OCC charter may prove to be unpalatable or difficult to satisfy for certain Fintech companies, if the licensing regulations promulgated by the NY DFS impose similar regulatory burdens, or if other states follow suit with similar or more stringent requirements, then the comparative appeal of an OCC charter is likely to improve.

[1] at Part EE.

[2] See GT Alert, “OCC Consideration of Special Purpose Fintech Charters Draws Rapid Reaction from State Banking Regulators,” Dec. 15, 2016.

[3] See Letter to Comptroller Curry from the Conference of State Bank Supervisors dated Nov. 14, 2016, p. 2.


No Action Relief Regarding Variation Margin Rules

Posted in CFTC, Tax

Yesterday, the U.S. Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) announced the issuance of a time-limited no-action letter stating that, from March 1, 2017 to September 1, 2017, DSIO will not recommend an enforcement action against a swap dealer (SD) for failure to comply with the variation margin requirements for swaps that are subject to a March 1, 2017 compliance date. The DSIO no-action letter does not postpone the March 1, 2017 compliance date for variation margin, rather it allows market participants a grace period to come into compliance.  The alternative investment community should address this letter in conjunction with separately issued CFTC no action letters as well as EMIR’s variation margin requirements which target March 1st. Check with your counsel on “real time” developments that directly affect your portfolio.

The alternative investment community is thrilled given that these new rules require that initial margin be segregated from variation margin which produces opportunity costs to both sides.  Netting allows parties to benefit from heavily in-the-money positions in light of large initial margin amounts due at trading. Another major issue with the variation margin rules is the shorter delivery and resolution period. Are our back offices truly ready and is this rule actually benefiting our community or hurting our bottom line?! Irrespective of the opportunity costs or benefits to tax payers and investors alike, the alternative investment community undoubtedly welcomes the extra time to become compliant.

President Trump Signs Executive Order Establishing “Core Principles” of Financial Regulation and Addressing the DOL Fiduciary Rule

Posted in Financial Regulation

On Friday, Feb. 3, 2017, President Trump signed an executive order entitled, “Core Principles for Regulating the United States Financial System.” While the Order was widely characterized as commencing a roll-back of financial regulations, including the Dodd-Frank Act and the Fiduciary Rule,[1] the text of the actual order is more modest.  It instead sets forth a set of “Core Principles” which it directs the Secretary of the Treasury and the Financial Stability Oversight Council to consider in reviewing existing laws and regulations and to report back to the President within 120 days on steps which may be needed to support those Core Principles.  The Core Principles set forth are:

  1. empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;
  2. prevent taxpayer-funded bailouts;
  3. foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;
  4. enable American companies to be competitive with foreign firms in domestic and foreign markets;
  5. advance American interest in international regulatory negotiations and meetings;
  6. make regulation efficient, effective, and appropriately tailored; and
  7. restore public accountability within Federal regulatory agencies and rationalize the Federal regulatory framework.[2]

The Order has no immediate impact on existing regulations, other than to direct regulatory agencies to enforce a set of priorities. While certain aspects of Dodd-Frank can be addressed by executive agencies, significant changes would likely require congressional action, such as the “Financial CHOICE Act” being advocated for by House Financial Services Committee Chairman Jeb Hensarling. Regardless, the order provides insight into which aspects of the existing regulatory framework are likely to survive or be jettisoned if the White House is successful in implementing its objectives.

On Feb. 3 President Trump also signed an Executive Order addressing the Department of Labor (DOL) Fiduciary Rule. The final memo (attached) is addressed to the Secretary of Labor and states that the President has made it a priority to empower Americans to make their own financial decisions and save for their own well-being. The memorandum states that the Rule “may significantly alter the manner in which Americans can receive financial advice, and may not be consistent with the policies of my Administration.” The President directs the Secretary of Labor to conduct a new economic and legal analysis to determine whether the rule: (i) has or is likely to harm investors by reducing access to savings offerings; (ii) has resulted in dislocations and disruptions in the retirement services industry that may adversely affect investors or retirees; and (iii) is likely to cause an increase in litigation and increase in the prices that investors must pay to gain access to retirement services. This echoes many of the concerns voiced by opponents of the Rule. The memo further states that if the Secretary of Labor concludes that the rule is likely to result in any of the consequences described above or if the DOL concludes for any other reason that the rule is inconsistent with the administration’s priority to empower Americans to make their own financial decisions, then the DOL shall publish a proposed rule for notice and comment “rescinding or revising” the Rule. Contrary to earlier reports, the final memo does not contain any language directing the DOL to delay Rule implementation 180 days. It appears that the administration may have removed originally reported explicit implementation delay language before releasing the memorandum late Friday afternoon, possibly relying on the Jan. 23, 2016 memorandum by Chief of Staff Reince Priebus ordering all executive department and agency heads to institute a moratorium on new rules and delaying finalized rule effective dates 60 days. This would potentially push the Rule implementation date to June, although there is some uncertainty as to the application of this memorandum to the Rule.

The Order does not send a clear message as to the fate of the Rule and it does not put a deadline on when the Secretary of Labor must make the determinations described in the memo. That being said, the Order reflects many opponents’ criticisms of the Rule and provides the Secretary of Labor with broad discretion to propose a rule that rescinds or revises the Rule if he concludes “for any other reason” that the Rule is inconsistent with the President’s priority with respect to American investors. For now there is an acting Secretary of Labor, but the confirmation hearings for the President’s appointee as Secretary of Labor, Andrew Puzder, CEO of CKE Restaurants that owns Hardees and Carl’s Jr. restaurants, were delayed again last week to an undetermined date.

Commentary regarding the Order indicates that “insiders” think this Order will result in the implementation of the Rule being delayed and that the Rule ultimately will be rescinded by a subsequent rule. Others believe complete rescission is unlikely for a rule that is advertised as protecting the American investing public. In any case the process will take time.


[1] See, e.g., “Trump Signs Actions to Begin Scaling Back Dodd-Frank,” Wall Street Journal, February 3, 2017,

[2] Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs,