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.

The ‘Global Financial City Tokyo’ Initiatives

Posted in Tokyo Metropolitan Government

Tokyo used to be one of the biggest global financial centers, rivaling New York and London. Now, it is viewed by many as having fallen far behind Hong Kong and Singapore as an Asian financial center. However, the Tokyo Metropolitan Government (TMG) now aims to return the city to its status as a top global financial center. In its attempt to once again become a global financial city, TMG appears to be willing to solicit and accommodate demands from foreign financial players.

In June 2017, TMG released the interim report on the “Global Financial City Tokyo” Initiatives (the Initiatives). TMG is widely soliciting ideas on how to revitalize Tokyo’s financial city function and restore its shine as a global financial center. While discussions are currently ongoing to determine specific policies or measures to be included in the Initiatives, there are key items that are proposed in the interim report. For a more detailed summary of the concepts that have been proposed for discussion, please see GT AlertThe ‘Global Financial City Tokyo’ Initiatives.”

SEC and FINRA Continue to Root Out Bad Brokers

Posted in Brokers, FINRA, SEC

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 Regulatory Operations, FINRA, particularly emphasized their agencies’ focus on identifying brokers who may pose a high risk to investors, and said that both the SEC and FINRA will be increasing their examination and enforcement activities relating to high-risk and recidivist brokers. Piwowar said that the SEC will be “relentless” in rooting out such individuals through exams and enforcement, and encouraged members of the brokerage industry to alert regulators to potential bad actors and the firms that attract them. Axelrod similarly noted that FINRA will devote significant attention to firms’ hiring and monitoring procedures, including whether firms adequately diligence their candidates and establish appropriate supervisory and compliance controls. She said the agency will look closely at firms hiring brokers with compliance disclosures, or firms that have “clusters” of reps that seem to move together. “There could not be a more important place for us to spend our time and resources,” said Axelrod. FINRA’s focus on recidivist brokers is consistent with its 12th Annual Regulatory and Examination Priorities Letter released earlier this year, and indicates that it is a recurring issue that continues to impact the financial sector. It is clear that firms that are making hiring decisions should be careful to consider the issues raised in the program, and all firms must assure that they have and carry through on enhanced compliance procedures for associates with a regulatory history.


Final Florida Insurance Legislative Report Following Final Actions by Governor

Posted in Government, Insurance

Florida Governor Rick Scott has acted on all legislation approved during the 2017 Regular Session and Special Session A. As such, we have updated our final report on insurance issues.

This report provides an outline of all insurance issues that were approved and those that did not pass this year. Please note that many of the bills signed by the Governor took effect July 1.

The 2018 Regular Session will run from January 9 to March 9, and legislative committee meetings are scheduled to begin in September and run through December.

Click here to read the updated Final Florida Insurance Legislative Report.

SCOTUS to Resolve Circuit Split Over Dodd-Frank Whistleblowers

Posted in 2d Circuit, Dodd-Frank, SEC, U.S. Supreme Court

On Monday, June 26, 2017, the U.S. Supreme Court agreed to review whether the Dodd-Frank Act (DFA) prohibits retaliation against internal whistleblowers or only covers individuals who report to the U.S. Securities and Exchange Commission (the SEC).

This question has divided practitioners and lower courts alike since Dodd-Frank’s passage in 2010. As reported in our previous Alert on March 29, 2017, the Ninth Circuit Court of Appeals widened the circuit split on this question in Somers v. Digital Realty Trust Inc., 850 F.3d. 1045 (9th Cir., March 8, 2017), when it affirmed the district court’s denial of the defendant’s motion to dismiss a DFA whistleblower claim, where the whistleblower had only reported internally.

In Somers, plaintiff alleged that he was terminated based on “vague, trivial and false allegations of misconduct” after he complained to senior management that a senior vice president had allegedly eliminated some internal corporate controls in violation of SOX. The district court denied Digital Realty’s motion to dismiss the DFA claim, but certified the issue for interlocutory appeal. In a divided 2-1 decision, the Ninth Circuit panel followed a previous Second Circuit decision and concluded that the DFA’s reference to certain provisions of the Sarbanes Oxley Act (SOX) “necessarily bars retaliation against an employee of a public company who reports violations to the boss, i.e., one who ‘provide[s] information’ regarding a securities law violation to a ‘person with supervisory authority of the employee.’” Somers, 850 F.3d. at 1049.

In petitioning for a writ of certiorari to the U.S. Supreme Court, Digital Realty emphasized that the anti-retaliation provision of DFA, 15 U.S.C. § 78u-6(h)(1), only prohibits retaliation against a “whistleblower” and that the DFA defines “whistleblower” as an “individual who provides … information relating to a violation of the securities laws to the Commission, in a manner, established by rule or regulation, by the Commission.” 15 U.S.C. 78u-6(a)(6) (emphasis added). Digital Realty took issue with the SEC’s regulation under DFA which attempts to define “whistleblower” “not by reference to the statutory definition of ‘whistleblower,’ but rather by reference to the activity protected by that provision.” Digital Realty argued that the Ninth Circuit’s decision threatens to render obsolete SOX’s anti-retaliation scheme “because the Dodd-Frank Act affords whistleblowers several distinct advantages that the Sarbanes-Oxley Act does not” and the Ninth Circuit decision would have DFA protect all of the same conduct protected by SOX (and more).

Several amicus briefs have been filed in support of Digital Realty’s petition to the Supreme Court, including from the U.S. Chamber of Commerce, which argued that the Ninth Circuit’s interpretation of the DFA “would greatly expand the number of employees authorized to pursue the enhanced remedies of the Act, and the period of time for which they may sue for retaliation, without yielding the law enforcement benefits Congress intended when it enacted a ‘bounty’ and heightened protections for persons who complain to the Securities and Exchange Commission.” The Chamber also argued that “[t]he interpretation of the Dodd-Frank Act espoused by the Ninth and Second Circuits has profound implications for employers across the country and in every industry. If allowed to stand, it would severely disrupt the carefully constructed anti-retaliation programs established by Congress, and open the door to countless lawsuits that Congress never intended Dodd-Frank to cover.”

Other commentators have countered that narrowing the protection of internal whistleblowing may result in more whistleblowers disclosing securities law violations directly to the SEC, without any internal disclosure, thereby dealing a pyrrhic victory to employers should Realty Trust prevail before the Supreme Court.

Of particular interest to Supreme Court watchers is the possibility that Somers may provide an opportunity for the Court to revisit its Chevron deference doctrine, which is a doctrine under which courts may, under certain circumstances, defer to administrative agencies’ interpretations of allegedly ambiguous statutes. In ruling that the DFA whistleblower protections covered internal reporting, the Ninth Circuit stated that to the extent there was any ambiguity in the statute, the SEC’s regulation, 17 C.F.R. § 240.21F-2 (Rule 21F-2), which interpreted the DFA to protect those who made only internal disclosures, was entitled to Chevron deference.

The Court’s newest member, Justice Gorsuch, has expressed skepticism of the Chevron doctrine, once referring to it during his time on the Tenth Circuit Court of Appeals as the “elephant in the room” and stating that “[m]aybe the time has come to face the behemoth.” Guitierrez-Brizuela v. Lynch, No. 14-9585, at *15 (10th Cir. 2016) (Gorsuch, J., concurring). Justice Gorsuch has also called Chevron “a judge-made doctrine for the abdication of the judicial duty.” Id. * 8. Notably, among Monday’s orders, Justice Gorsuch issued a dissent in Mathis v. Shulkin in which he raised questions about a presumption of competence allowed to another government agency, the Department of Veteran Affairs, and noted that the presumption’s “days may be numbered.” See Matthis v. Shulkin, No. 16-677, 582 U.S. ____ (2017), *2 (Gorsuch, J.) (dissenting).

The Supreme Court may also view Somers as an opportunity to cabin King v. Burwell, 135 S.Ct. 2480, 2489 (2015), a decision interpreting provisions of the Patient Protection and Affordable Care Act (ACA). King was relied upon by the Ninth Circuit to reconcile the express definition of “whistleblower” in the DFA with its holding, as King had held that terms can have different operative consequences in different contexts. Of course, in King, such an approach may have been guided by a desire to avoid vitiating an entire statutory scheme, while in the whistleblower context individuals who are not covered by the DFA would still have SOX remedies if retaliated against following an internal report. In fact, in his dissent in Somers, Judge Owens wrote that “[i]n my view, we should quarantine King and its potentially dangerous shapeshifting nature to the specific facts of that case to avoid jurisprudential disruption on a cellular level.” Somers, 850 F.3d. at 1051 (Owens, J.) (dissenting).

Whether the Court uses the Somers case to delve into Chevron deference or the statutory construction principles set forth in King, the Court’s long-awaited consideration of this issue should provide a definitive answer on whether internal whistleblowers may rely on the anti-retaliation provisions of the DFA. Of course, a decision one way or another may potentially lead Congress to enact legislative changes to the law.

U.S. House Financial Services Committee Hearing on Flood Insurance Reform and Passes Legislation

Posted in Government, Insurance, Tax

On June 7, 2017, the U.S. House Financial Services Committee held a hearing entitled “Flood Insurance Reform: A Taxpayer’s Perspective.” The hearing examined the National Flood Insurance Program (NFIP) and six legislative concepts to reform the program. Witnesses discussed how the reforms would strengthen taxpayer protections; provide greater private market access, competition, and consumer choice; enhance mitigation efforts; encourage flood mapping fairness; address consumer costs and affordability; and incorporate NFIP claims processing reforms.

Please click here to read the GT Alert reviewing the testimony and the measures that were passed by the Committee.

Resolving the FDCPA Circuit Split: Purchasers, Participles, and Policy

Posted in FDCPA, U.S. Supreme Court

On June 12, 2017, the United States Supreme Court held that purchasers of debts originated by another are not “debt collectors” under the Fair Debt Collection Practices Act (FDCPA). Henson v. Santander Consumer USA Inc., No. 16–349, 2017 WL 2507342 (U.S. June 12, 2017). Justice Gorsuch, in his first opinion, writes the Court found it “hard to disagree with the Fourth Circuit’s interpretive handiwork.” The opinion came down to a textual and grammatical interpretation of Congress’s 1977 statute. A unanimous court decided respondent Santander did not qualify as a debt collector under the FDCPA because it does not regularly seek to collect debts “owed . . . another.” Id. at *3.

In Henson, four Maryland consumers, the petitioners, brought action against Santander. The petitioners obtained car loans from CitiFinancial Auto and subsequently defaulted on those loans. Santander purchased the defaulted loans from CitiFinancial Auto and then attempted to collect on the loan in ways the consumers alleged were prohibited under the FDCPA.

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GT’s Carl Fornaris Moderates Panel at IAGA, Featured in Gambling Compliance

Posted in Gaming

The International Association of Gaming Advisors (IAGA) held its 36th annual International Gaming Summit May 30-June 1, 2017. The IAGA Summit brings leaders from all global gaming sectors together, providing a unique opportunity to discuss recent and significant issues and challenges facing the gaming industry. At the Summit, Greenberg Traurig’s Carl A. Fornaris, co-chair of the Financial Regulatory & Compliance Practice, participated in a panel titled “Don’t Gamble with your anti-Money Laundering (AML) Compliance Program.” The discussion reviewed recent developments in AML compliance efforts initiatives worldwide, including recent FATF Mutual Evaluation Report of the United States, regulatory examination priorities, and priorities of the new Trump Administration and their impact on the AML regulatory regime.

The panel discussion was featured in Gambling Compliance’s article, “Casino AML Compliance Continues to Evolve.”

To access the full article, please click here.

Greenberg Traurig to Participate in a Panel Discussion on the Alternatives Investment Industry & President Trump’s Administration

Posted in Events

Greenberg Traurig Shareholders Nanette Aguirre and Alan Slomowitz will be participating in a panel discussion that is co-hosted by GT, The New York Family Office, and the Private Funds Roundtable on May 24 in GT’s New York Office. The discussion will focus on the Alternatives Investment Industry and President Trump’s administration. Insights will be provided on low-correlation alternative investment strategies that put the emphasis on “alternative,” including structured credit, and will explore the potential impact of the expected regulation or deregulation under the current administration on these and other alternative investment strategies.

Greenberg Traurig to Host Atlanta-Israel Fintech Innovation Conference

Posted in Events, Financial Regulation, Fintech

Carl A. Fornaris, co-chair of the Financial Regulatory and Compliance Practice, will participate in the GT-hosted second annual Atlanta-Israel FinTech Innovation Conference, which connects leading Israeli companies in the financial technology sector with Georgia-based corporate partners. The conference will be held May 22 – 23, and will provide networking and new business opportunities for participants. Fornaris will speak on the panel session titled “The Fintech Regulatory Landscape” on May 23. The firm’s involvement is being led by Shareholder David Schulman, a leader of the Emerging Technology Practice in the Atlanta office.