William Mack

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FinCEN Issues Guidance on Application of Regulations to Certain Business Models Involving Convertible Virtual Currencies

On May 9, 2019, the Financial Crimes Enforcement Network of the U.S. Department of the Treasury (FinCEN) issued “interpretive guidance” addressing how FinCEN’s money services business (MSB) regulations apply to a variety of business models that use convertible virtual currency (CVC) (2019 FinCEN Guidance). This is the first significant guidance FinCEN has issued regarding the … Continue Reading

SEC Approves Final Regulation Best Interest, Form CRS

On June 5, 2019, the Securities and Exchange Commission (SEC) voted 3-1 to adopt a series of proposals intended to “substantially enhance” the standards of conduct for financial professionals. First and foremost, the SEC adopted Regulation Best Interest (Reg BI), a new rule establishing an updated standard of conduct for broker-dealers and associated persons of … Continue Reading

FINRA’s 2019 Risk Monitoring and Examination Priorities Letter

On Jan. 22, 2019, the Financial Industry Regulatory Authority (FINRA) released its 14th Annual Risk Monitoring and Examination Priorities Letter, where it identifies its areas of examination focus for 2019. The FINRA president’s cover note points out the addition to the title of a reference to “risk monitoring.” While the Priority Letter describes the multiple … Continue Reading

FINRA Releases 2018 Annual Regulatory and Examinations Priorities

As it does every January, FINRA released its annual Regulatory and Examinations Priorities Letter identifying areas of examination focus for the coming year, recurring challenges faced by firms, and possible risks impacting the financial sector. FINRA’s 2018 exam priorities for the first time identify cryptocurrencies and related initial coin offerings (ICOs). Other first-mentions include technology governance, … Continue Reading

Regulators Weigh in on Digital Assets, Tokens, Securities, and Derivative Instruments Used in ICOs

The rise of blockchain technology ventures raising money preternaturally through initial coin offerings and token generation events (collectively, ICOs) is a capital formation disruptor, one which has and will continue to spawn considerable futures, fortunes, failures — and frauds. Blockchain-based ICOs have, through 121 offerings closed during January-August 2017, raised over $1.78 billion, with an … Continue Reading

Details on the CFTC’s New Self-Reporting Policy

On Sept. 25, 2017, the Program on Corporate Compliance and Enforcement and the Institute for Corporate Governance and Finance at New York University School of Law hosted a policy speech by James McDonald, Director of the Division of Enforcement, United States Commodity Futures Trading Commission (CFTC). Mr. McDonald presented the CFTC’s new self-reporting and cooperation … Continue Reading

SEC and FINRA Continue to Root Out Bad Brokers

On Thursday, July 27, regulators and industry professionals gathered in Washington, D.C. to discuss the current regulatory environment, cybersecurity, and other hot topics at the SEC and FINRA’s 2017 National Compliance Outreach Program for Broker-Dealers. The panelists, including SEC Commissioner Michael Piwowar, FINRA President and CEO Robert Cook, and Susan Axelrod, the Executive Vice President of … Continue Reading

FINRA’s 2017 Annual Regulatory and Examination Priorities

On Jan. 4, 2017, FINRA released its 12th annual Regulatory and Examination Priorities Letter in which it identifies its areas of examination focus for 2017, recurring challenges faced by firms, and possible risks impacting the financial sector. FINRA’s 2017 exam priorities do not appear to be revolutionary or new relative to its pronouncements during the … Continue Reading

Not Every Broker-Dealer is an EB-5 Broker-Dealer

Nearly all U.S. broker-dealers are members of the Financial Industry Regulatory Authority (FINRA).  FINRA regulates, and provides oversight and guidance for its member firms.  When a broker-dealer becomes a FINRA member, they enter into a membership agreement which, among other things, specifies which financial products and services the broker-dealer is permitted to offer to its … Continue Reading

SEC and FINRA Name EB-5 as a Priority in 2016

Earlier this month, the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) each published their 2016 exam priorities letters. Each agency publishes an exam priority letter annually in which they identify topics of examination focus for the coming year, recurring challenges faced by firms, and perceived areas of heightened risk to … Continue Reading

SEC Charges Attorneys Across the Country for Acting as Unlicensed Securities Brokers

Last week, the U.S. Securities and Exchange Commission (SEC) announced a series of enforcement actions against lawyers across the country, charging them with offering EB-5 investments and receiving compensation while not registered to act as brokers. According to the SEC, the attorneys and firms involved in these matters assisted in the facilitation of investment sales … Continue Reading

SEC Files a Complaint and TRO against Seattle Developer Alleging Misuse of EB-5 Funds

Yesterday, the SEC filed a civil action and a motion for a temporary restraining order (“TRO”) against a well-known Seattle EB-5 developer.  The SEC alleges, inter alia, that a developer used funds from one EB-5 project for other projects under his control without informing investors. In addition, the SEC claims that the developer used investors’ … Continue Reading

New FINRA Rule 2040 Becomes Effective

Yesterday, the new FINRA Rule 2040 became effective.  The rule was approved by the SEC earlier this year.  Rule 2040(c) requires a broker-dealer who sells EB-5 securities to disclose to investors the amount of fees paid to foreign finders.  In addition, a broker-dealer must receive written acknowledgement from an investor which shows that the investor is aware … Continue Reading

Who Can Source Investors For EB-5 Projects: The World of Finders, Consultants, Attorneys, and Broker Dealers

Use of EB-5 as part of the capital stack for an EB-5 project is a highly complicated prospect. Identifying the right Regional Center or forming a Regional Center and structuring the project so that it is compliant with the myriad of USCIS/DHS rules is a daunting endeavor. The other very real concern for these projects is … Continue Reading

SEC Charges two Businesses for Acting as Unlicensed Broker-Dealers in EB-5 sales

Yesterday, the U.S. Securities and Exchange Commission (SEC) ordered a US-based foreign finder operation to cease and desist from operation as an unlicensed broker-dealer.  The charges are some of the first against brokers handling investments in the EB-5 Immigrant Investor Program and follow earlier SEC actions against fraudulent EB-5 offerings. According to the SEC’s order, … Continue Reading

New York State Releases Final BitLicense Regulation

On June 3, 2015, the New York State Department of Financial Services (DFS) published its final BitLicense regulation. The regulation requires that firms engaged in “Virtual Currency Business Activity” that involves New York State or a New York resident apply to DFS for a BitLicense within 45 days of its effective date. In this Alert, … Continue Reading

U.S. Securities Regulators Take Notice of EB-5

After a nationwide conference call of industry participants sponsored by agencies of the U.S. government and several years of cautionary discussions, through its recent actions, the agency that regulates securities sales in the United States, the Securities and Exchange Commission (SEC), and its self-regulatory arm, the Financial Industry Regulatory Authority (FINRA), have made compliance with … Continue Reading
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