Greenberg Traurig’s Gil Rudolph and Lori S. Nugent Participate at CCFL’s Annual Consumer Financial Services Conference

Posted in CFPB, Cybersecurity, Events, TCPA

Gil Rudolph, co-chair of the Financial Regulatory and Compliance Practice, and Lori S. Nugent, shareholder, will participate in the Conference on Consumer Finance Law Annual Consumer Financial Services Conference in Ft. Worth, TX, Nov. 2-3rd. Rudolph will moderate the panel session titled “CFPB Developments” on Thursday, Nov. 2. Nugent will speak in a panel session titled “Cybersecurity” on Friday, Nov. 3. The conference program will focus on issues common to most financial services companies, including limited English proficiency, ADA accessibility, vendor management, CFPB updates, cybersecurity, fair lending, debt collection, and TCPA, among other areas. Greenberg Traurig is a sponsor of the conference.

SEC Investor Advisory Committee Considers Blockchain Technology

Posted in Blockchain, Blockchain Technology Task Force, SEC, Securities

On Oct. 12, 2017, the Investor Advisory Committee of the U.S. Securities Exchange Commission (the SEC) hosted a panel discussion on blockchain technology. The session represented another instance of the SEC’s ongoing consideration of the impact of blockchain technology on U.S. securities markets and investors.

Different perspectives on blockchain technology and its application to U.S. securities markets and transactions were shared by the panelists. The panel included Jeff Bandman, a former fintech advisor to the Commodity Futures Trading Commission; Michael Bodson, president and CEO of the Depository Trust & Clearing Corporation (DTCC); Nancy Liao, executive director for the Yale Law School Center for the Study of Corporate Law; Adam Ludwin, CEO of Chain; and Fredrik Voss, vice president of Nasdaq.

SEC Chairman Clayton, during his introduction, emphasized that the SEC continues to seek to foster innovative means to access capital, while continuing to ensure investor safety.  Accordingly, the SEC continues to examine the impact of blockchain technology, and continues to raise concerns about avenues created by blockchain technology for bad actors.

Panelists presented an overview of blockchain technology, emphasizing the cryptographic security features inherent in blockchain, which permit parties to transact without having any basis to trust the other party.  The degree of trust between parties and the existence of any external factors authenticating a party’s identity and bona fides may impact the configuration of a distributed ledger system, particularly whether a blockchain is permissioned or permissionless.

The Chairman of DTCC considered the impact of blockchain technology on market infrastructure, and emphasized that DTCC has made plans to consider blockchain and to align its use of technology with its overall objectives.  DTCC continues to evaluate blockchain applications despite speculation that blockchain does not support a central party performing clearinghouse functions.

Several themes arose from the discussion:

  • Cryptocurrency offerings remain subject to scrutiny.
    • Members of the Investor Advisory Committee expressed skepticism about arguments that Initial Coin Offerings (ICOs) generally constitute anything other than investment contracts that should be subject to regulation.
  • Widespread blockchain implementation is years away.  Panelists emphasized that, despite the attention surrounding blockchain, they do not yet consider blockchain technology to be “enterprise-ready” and not ready for widespread implementation.  Blockchain remains in an evolutionary phase.
    • For adoption to specific financial market functions, blockchain requires:
      • Scalability – DTCC legacy systems handle 100 million transactions per day/25,000 per second;
      • Interoperability — with other blockchain ledgers and legacy systems; and
      • Established governance protocols (relating to access, the ability to terminate operation of an erroneous smart contract, etc.).
    • Any blockchain implementation must demonstrate the capacity to handle real-world transactions.
      • Blockchain solutions will be benchmarked against existing technological systems and processes.
        • Replacing existing payment, online storage, and other services with blockchain products may often not result in performance improvements.
        • Blockchain products and smart contracts may lack the robustness to replace all relevant functions handled by a legacy IT system.
      • Nasdaq has deployed blockchain ledger technology to manage private company capitalization tables. It will eventually commence proof of concept work to address public market trades.
    • Investment in existing systems has been massive.  Projects to reduce settlement times to T + 2 were implemented over a 5 year period.  Replacing legacy systems without appropriate transition planning would result in system write-offs in the billions of dollars.
  • Blockchain may change the rules of engagement for regulators. Regulators may be permitted and/or require direct, real-time access to blockchain records.
    • Parties may provide dedicated “regulator nodes” or “auditor nodes”
    • Real-time access could facilitate earlier detection of wrongdoing and earlier intervention
    • Obstacles to regulator adoption of blockchain:
      • Common standards are required so that data will be available in consistent and comprehensible ways.
      • Government procurement rules intended to protect against corruption and promote transparency can be burdensome and inefficient.

Obiamaka Madubuko to Speak at the American Bar Association’s Section International Law Fall Conference, Miami, FL

Posted in Cybersecurity, Events, Virtual Currency

Greenberg Traurig Shareholder Obiamaka P. Madubuko will participate in the American Bar Association’s Section International Law Conference in Miami, Florida on Oct. 26. Madubuko will moderate the panel titled “How Smart is Your Smart Phone Really? Managing Digital Payment Risk on Mobile Devices.” This panel will explore how to manage digital payment risk on mobile devices, touching on topics such as the growth and regulation of the fintech industry, growing threat of cyber-attacks and ransomware, data privacy, ownership and information sharing challenges, the rise of virtual currencies and online wallets, cross-border issues, and attendant privacy, corruption and fraud risks related to the use of smartphones and other mobile devices to make digital payments in our increasingly ever-connected world. Madubuko’s co-panelists include Erika Brown Lee, Senior Vice President, Privacy and Data Protection at Mastercard Inc., Dan Adams, Enterprise Mobility Manager at AT&T, and Thomas Haggerty, Cyber Crimes Unit Chief Prosecutor at the Office of the State Attorney General for the State of Florida. To learn more and to register, please click here.

Greenberg Traurig’s Carl Fornaris and William Mack Participate at FMA’s Legal and Legislative Issues Conference

Posted in CFTC, FINRA, Firm News, SEC

Shareholders Carl A. Fornaris and William B. Mack of global law firm Greenberg Traurig, LLP will be participating at the Financial Markets Association’s 2017 Treasury and Capital Markets Legal and Legislative Issues Conference, Oct. 25 – Oct. 26. Mack is also a member of the conference’s 2017 Program Planning Committee.

Fornaris will be moderating, “Recent Developments in BSA/AML/OFAC Regulation and Enforcement.” The discussion will review new rules and guidance; examine ongoing compliance problems; and review significant matters from the last year. Mack will moderate, “Securities General Counsel.” The panel includes general counsel from FINRA; U.S. Commodity Futures Trading Commission; U.S. Securities and Exchange Commission; National Futures Association; and Municipal Securities Rulemaking Board. The discussion will review key regulatory and supervisory issues and expectations; general updates; and provide an overview of rulemakings that have impacted, or will impact, capital markets and securities activities.

Nanette Aguirre to Speak at the Meeting of the Americas 2017 Conference

Posted in Brokers, Firm News

Greenberg Traurig Shareholder Nanette Aguirre will participate in The Florida Alternative Investment Association (FLAIA) Meeting of the Americas 2017 Conference on Thursday, Oct. 19, in Miami, Florida. The conference will bring together investors, allocators, and fund managers from the United States, Latin America, and Canada to discuss opportunities, debate the substantive issues surrounding the current state-of-play, and provide perspectives on the exchanges, broker-dealers, and other trading venues that facilitate capital flows. Aguirre will speak on the panel session titled “Hedge Fund & Private Equity Across the Americas – Alternative Investment Focus.”

Details on the CFTC’s New Self-Reporting Policy

Posted in CFTC, Client Alert, Corporate Governance

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 policy.  The new policy was originally announced in January 2017 and is the first update to the CFTC’s cooperation guidelines since 2007.  The new policy is a by-product of CFTC’s recognition of its limited enforcement resources and the belief that self-reporting incentives will strengthen CFTC’s ability to efficiently investigate misconduct and combat fraud.

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Fred Karlinsky, Rich Fidei, and Jamey Zellner Co-Author Cybersecurity Update in Reactions Magazine

Posted in Cybersecurity, Insurance

Fred Karlinsky, shareholder and co-chair, Insurance Regulatory and Transactions Practice; Rich Fidei, shareholder; and Jamey Zellner, practice group attorney, have co-authored an cybersecurity update article in Reactions magazine. Cybersecurity has emerged over the past several years as one of, if not the greatest threat to the insurance industry, with multiple high-profile data breaches of insurance companies and other entities demonstrating the potential scope of the threat. The growing threat has prompted both industry and regulators to devote additional resources to cybersecurity preparedness. Regulators are stepping up their evaluations of insurers’ cybersecurity measures, and are issuing additional guidance and creating new requirements that insurance entities must comply with. To read the entire article, please click here.

New Bill Introduced in the U.S. Senate to Require the Disclosure of Ultimate Beneficial Owners of Corporations and LLCs Formed or Registered in the United States

Posted in Anti-Money Laundering, Client Alert, Financial Crimes Enforcement Network, Risk Management

On August 2, 2017, United States Senators Marco Rubio (R-FL) and Ron Wyden (D-OR) jointly introduced Senate Bill 1717, entitled the “Corporate Transparency Act of 2017” (the “Act”).  The Act was referred to the U.S. Senate Committee on Banking, Housing and Urban Affairs.  The Act would amend Title 31 of the United States Code, to require the collection of beneficial ownership information for corporations and limited liability companies (“LLCs”) formed or registered in the United States.  A companion bill was introduced in the House of Representatives on June 28, 2017, by Representative Carolyn B. Maloney (D-NY), and was referred to the House Committee on Financial Services.

The recitals in the Act note that few states obtain meaningful information about the beneficial owners of the corporations and LLCs formed under their laws, and that criminals have exploited these weaknesses in state formation procedures to conceal their identities when forming corporations or LLCs in the United States, and have used the newly created entities to commit crimes such as terrorism, drug trafficking, money laundering, tax evasion, securities fraud, financial fraud, and acts of foreign corruption.

The Act would direct the U.S. Department of the Treasury to issue regulations requiring entities formed or registered in the United States to declare their beneficial owners – natural persons who, directly or indirectly, exercise substantial control over the company or have a substantial interest in, or receive substantial economic benefit from, the company.  The Act would require that beneficial owners: (i) be identified by name; (ii) disclose a current residential or business street address; and (iii) provide a unique identifying number from a non-expired U.S. passport or a non-expired U.S. driver’s license (foreign persons must provide a copy of their non-expired foreign government-issued passport).

The Act would apply to both new and currently existing corporations and LLCs.  However, the Act exempts a number of businesses that already provide beneficial ownership information in their normal course of business.  Examples of businesses exempt from the Act include companies registered under Section 12 of the Securities Exchange Act of 1934, depository institutions, credit unions, bank holding companies, broker-dealers, exchange/clearing agencies, investment companies, insurance companies, public accounting firms, entities registered with the Commodity Futures Trading Commission, and  businesses that employ more than 20 full-time employees in the United States, have more than $5,000,000 in gross receipts or sales, and have a physical office in the United States.

The Act would allow for states to participate in the collection of beneficial ownership information voluntarily.  However, companies or LLCs formed in states that will not collect beneficial owner information as described above would be required to disclose information regarding their beneficial owners directly to the U.S. Department of the Treasury, Financial Crimes Enforcement Network.

Congress has made previous attempts to pass similar ultimate beneficial ownership legislation, but these have never made it past a committee of either house.  It is unclear whether this bill will have a better chance of passing.


August 2017 Cybersecurity & Risk Alert from SEC

Posted in Cybersecurity, OCIE, Risk, SEC

On August 7, 2017, the SEC’s Office of Compliance Inspections and Examinations (OCIE) issued its third National Exam Program Risk Alert of the 2017 calendar year, detailing OCIE’s findings and observations from its Cybersecurity 2 Initiative. This Cybersecurity 2 Initiative, the name for OCIE’s second round of cybersecurity examinations, builds on OCIE’s prior 2015 Cybersecurity 1 Initiative, and includes more robust validation and testing of cybersecurity controls to evaluate how well firms implement and follow their cybersecurity-related policies and procedures.

This latest OCIE Risk Alert summarizes the exam staff’s findings after conducting examinations of 75 firms, consisting of broker-dealers, investment advisers and investment companies registered with the SEC and includes three key sections. First, the staff provided a summary of its exam observations, including discussions of the use by registrants of risk assessments, penetration testing, tools to monitor loss of personal data, and other policies, procedures and methods for dealing with cybersecurity and related business continuity issues. Second, the staff noted that the vast majority of examinations uncovered one or more cybersecurity-related issues, and highlighted certain of the more prevalent issues observed by the staff. Finally, and perhaps most notably, the staff provided a list of “several elements that were included in the policies and procedures of firms that the staff believes had implemented robust controls.” When creating and implementing cybersecurity programs, other registrants may benefit from considering these good practices identified by the staff. We will be publishing a more detailed summary and analysis of the August 2017 Risk Alert, and in particular these guideposts for registrants consideration, in the coming week.

The August 2017 Risk Alert is the second cybersecurity-related Risk Alert issued by OCIE this year (the May 2017 Risk Alert dealt with ransomware issues), and with the September 2015 Risk Alert is the fifth expressly dealing with cybersecurity since 2014 when OCIE announced its Cybersecurity Preparedness Initiative, the results of which were summarized in a February 2015 Risk Alert. It is safe to say that not only has the SEC’s interest in cybersecurity issues faced by broker-dealers, investment advisers and investment companies not waned but, as is the case in almost every industry, it has intensified.

Financial industry participants registered with or subject to oversight by the SEC need to take notice of the spate of information on this topic produced by the SEC and be mindful of the concepts discussed by OCIE in these releases when creating, reviewing and/or modifying their cybersecurity policies and procedures to comply with and meet SEC regulatory requirements and expectations.

John Kaufmann Authors ‘Caveat Re-Emptor’

Posted in Capital Markets

John Kaufmann, Of Counsel at Greenberg Traurig, has authored an article titled “Caveat Re-Emptor” for Volume 15, Issue 1 of CCH’s Journal of Taxation of Financial Products. The article examines the treatment of both “capital markets repos” (i.e., sale-repurchase transactions entered into with respect to liquid property, using standard documentation) and what he refers to as “bespoke repos” (highly engineered, one-off sale-repurchase transactions entered into with respect to illiquid assets). The article concludes that, although both types of transaction are referred to as “repos,” they are as different from each other as apples and crankshafts, and advisors should not rely on cases and guidance regarding one type of repo to analyze the other type of repo. To view the article, please click here.