FINRA’s 2020 Risk Monitoring and Examination Priorities Letter

On Jan. 9, 2020, the Financial Industry Regulatory Authority (FINRA) released its 2020 Risk Monitoring and Examination Priorities Letter, in which it identifies its areas of examination focus for 2020. The cover note also highlights key changes in FINRA’s risk monitoring and examination program. These changes include the consolidation of FINRA’s three examination programs into a single risk monitoring framework. As part of this new framework, FINRA expects to categorize every FINRA member firm (“Firm”) into one of five business categories: (1) Retail; (2) Capital Markets; (3) Carrying and Clearing; (4) Trading and Execution; and (5) Diversified. Additionally, the cover note details FINRA’s plans to assign each Firm a senior agency leader who will be responsible for the Firm’s examination and risk monitoring.

As part of FINRA’s continuing efforts to provide Firms with compliance and risk management support, the president’s note also points out that this year’s Priority Letter includes a list of practical considerations and questions that Firms may use to assess and evaluate their risk management programs, as well as a new appendix with links to additional FINRA resources related to examination priorities.

Read the full GT Alert.

SEC Publishes OCIE 2020 Examination Priorities

By Richard M. Cutshall on January 9, 2020 Posted in investment advisor, Investment Regulation, OCIE, Regulatory Compliance, SEC

On Jan. 7, the SEC announced the publication of the annual Office of Compliance Inspections and Examinations (OCIE) 2020 Examination Priorities. In addition to the examination priorities themselves, the 28-page publication includes statistics related to OCIE’s 2019 examination program, touting OCIE’s completion of over 3,000 examinations covering ~15% of registered investment advisers and verification of 31 million investor accounts aggregating over $1.5 trillion in fiscal year 2019. The examination priorities themselves are a mix of perennial classics (conflicts of interest, fee and expense disclosures, never-before/not-recently-examined advisers, market infrastructure, a focus on FINRA and the MSRB), potential new hits and more recent additions (digital assets, electronic investment advice), and exams focused on newly adopted regulations (Regulation Best Interest, the interpretation of investment adviser standard of care, Form CRS).

As further discussions and guidance develop, and the staff clarifies its approach to these topics, we will be issuing clarifying GT Alerts providing guidance to our readers on the SEC staff issues and priorities identified in the release.

Read additional posts on OCIE.

New York State Department of Financial Services Proposes Guidance on Adoption or Listing of Virtual Currencies by Exchanges

By William Mack, Barbara A. Jones, Michele L. Kulerman and India L. Sneed on December 30, 2019 Posted in Blockchain, Blockchain Technology Task Force, Client Alert, Compliance, convertible virtual currency, cryptocurrency, Financial Regulation, Fintech, GT Alert

In the summer of 2015, the New York State Department of Financial Services (DFS) finalized its regulatory framework for virtual currency firms seeking to conduct certain virtual currency (VC) business activities in the state. Since then, it has issued two dozen licenses and charters involving virtual currency transmission (VC licenses). To promote efficiency and reflect the growing marketplace, DFS has now issued two proposals for which comments are due Jan. 27, 2020. The first proposal would list all current virtual currencies (coins) permitted for business activities of the VC licensees, without prior approval by DFS. The list would be updated if the coins listed have not been subject to modifications, divisions, or change after their listing on the DFS webpage. The second proposal involves a coin-listing framework that would be tailored to the specific VC licensee’s business model and risk profile to create a firm-specific coin listing or adoption policy.

Read the full GT Alert.

LIBOR Transition Newsletter – Issue 2

By Oscar Stephens, Sylvie A. Durham, Arleen A. Nand and Graeme McLellan on December 19, 2019 Posted in LIBOR

Welcome to the second issue of Greenberg Traurig’s LIBOR Transition Newsletter, which contains updates, analysis, and commentary on the latest developments relating to the highly anticipated phasing-out of LIBOR at the end of 2021 – barely two years from now. This issue covers the following:

LSTA – Concept SOFR Credit Agreement
Recent Developments
Parting Shot – What if Someone Finds the Proposed LIBOR Replacement Fallback Language “Too Long”?

Read the full LIBOR Transition newsletter – Issue 2.

SEC Proposes Conditional Exemption for Certain Activities of Registered Municipal Advisors

By Elaine C. Greenberg, William Mack and Vincent Lewis on December 18, 2019 Posted in Financial Regulation, GT Alert, SEC, Securities and Exchange Commission

Section 15 (a)(1) of the Securities Exchange Act of 1934 (Exchange Act) generally prohibits a broker or dealer from effecting “any transactions in, or to induce or attempt to induce the purchase or sale of, any security” unless such broker or dealer is registered with the Securities and Exchange Commission (SEC).

However, as is often the case in U.S. securities laws, the requirements of Section 15(a)(1) are subject to exceptions. On Oct. 2, 2019, the SEC proposed an exemptive order under Section 15(a)(2) of the Exchange Act (Release No. 34-87204) that would permit a registered municipal advisor who is not also a registered broker-dealer to solicit a single Qualified Provider (as defined below) in connection with the direct placement of an entire issuance of municipal securities without registering as a broker-dealer.

LIBOR Transition Newsletter – Issue 1

By Oscar Stephens, Sylvie A. Durham, Arleen A. Nand and Graeme McLellan on November 6, 2019 Posted in banking, European Union, Financial Regulation, Lending, LIBOR, Securities and Exchange Commission, United Kingdom

Welcome to Greenberg Traurig’s LIBOR Transition Newsletter, where we provide updates, analysis, and occasional commentary on the latest developments relating to the highly anticipated phasing-out of LIBOR at the end of 2021 – barely two years from now. Questions addressed in this issue: Why is LIBOR being phased out? What will be the immediate effect? Where are we now? Are market participants ready for LIBOR replacement? What should market participants be doing now? Documentation and Other Recent Developments.

Click here for the full LIBOR Transition Newsletter.

2019 Report on FINRA Examination Findings and Observations

By Richard M. Cutshall, William Mack and Vincent Lewis on October 30, 2019 Posted in Client Alert, Compliance, Financial Regulation, FINRA, GT Alert

In October 2019, the Financial Industry Regulatory Authority (FINRA) released its “2019 Report on FINRA Examination Findings and Observations.” FINRA publishes a report yearly to highlight its examination “findings” (i.e., findings of violations committed by member firms) detected throughout the year. In addition to findings, the 2019 Report advances further than years past and consists of “observations.” Observations (formerly known as recommendations) are suggestions to a member firm on how to improve its control environment to address weaknesses that do not typically rise to the level of a violation or cannot be tied to an existing rule.

Although the 2019 Report repeats many of the findings highlighted in previous years with respect to important topics such as suitability, anti-money laundering, segregation of assets, and best execution, the 2019 Report introduces new findings and expands upon findings made in previous reports. FINRA hopes that the 2019 Report, like previous reports, can assist member firms navigating common pitfalls such as fixed income mark-up disclosures, direct market access controls, liquidity management, and net capital calculations. FINRA’s new/expanded key findings involve hot topics such as supervision, digital communication, know-your-customer rules, cybersecurity, and business continuity plans. This GT Alert highlights certain of the new findings and observations within the 2019 Report.

Click here for the full GT Alert.

U.S. House Passes Bill That Would Require Disclosure of Beneficial Owners of U.S. Corporations and Limited Liability Companies

By Carl A. Fornaris, Marina Olman-Pal and Anthony J. Fernandez on October 29, 2019 Posted in Client Alert, Compliance, Financial Crimes Enforcement Network

On Oct. 22, 2019, the U.S. House of Representatives, in a 249 to 173 vote, passed H.R. 2513, known as the “Corporate Transparency Act of 2019.” The Corporate Transparency Act, if enacted into law, would require each person who creates a corporation or limited liability company in the United States to report, on an ongoing basis, to the U.S. Department of the Treasury, Financial Crimes Enforcement Network (FinCEN) the identities of the “beneficial owners” of the U.S. Company. The Bill generally defines “beneficial owner” as a natural person who, directly or indirectly:

exercises substantial control over a U.S. Company;
owns 25% or more of the equity interest of a U.S. Company; or
receives substantial economic benefits from the assets of a U.S. Company.

Click here for the full GT Alert.

CFTC, FinCEN and SEC Issue Joint Statement Reminding Persons in Digital Assets Space of Obligations Under Bank Secrecy Act

By Carl A. Fornaris, Marina Olman-Pal and Anthony J. Fernandez on October 23, 2019 Posted in Anti-Money Laundering, Banks, Blockchain, CFTC, Client Alert, Compliance, Financial Crimes Enforcement Network, GT Alert, SEC, white collar

On Oct. 11, 2019, the Financial Crimes Enforcement Network (FinCEN), the U.S. Commodity Futures Trading Commission (CFTC), and the U.S. Securities and Exchange Commission (SEC), published a Joint Statement on Activities Involving Digital Assets. The purpose of the Joint Statement was “to remind persons engaged in activities involving digital assets of their anti-money laundering and countering the financing of terrorism (AML/CFT) obligations under the Bank Secrecy Act (BSA).”

Click here for the full GT Alert.

Bermuda Launches Two Key Fintech Initiatives, Becomes First Nation to Accept Stable Coins for Government Payments

By Barbara A. Jones on October 22, 2019 Posted in Blockchain, Blockchain Technology Task Force, cryptocurrency, Fintech

On Oct. 16, 2019, Bermuda Premier the Hon. E. David Burt JP, MP announced that Bermuda has committed to accept, for payment of government taxes, fees, and services, 1:1 U.S.-dollar-backed digital currencies of entities licensed by the Bermuda Monetary Authority (BMA) under the 2018 Digital Asset Business Act (DABA), becoming the first nation to do so. Known for its established skill in regulating financial services, particularly in the insurance and re-insurance markets, Bermuda has in recent years sought to exploit its market experience by creating a regulatory framework around digital assets.

Click here to read the full GT Alert by Blockchain & Cryptocurrency Practice Co-Chair Barbara Jones, who is also a member of the Bermuda FinTech Advisory Board.