Archives: Regulatory Compliance

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SEC Scrutinizes Pumping of Blockchain-Related Securities

The U.S. Securities and Exchange Commission (“SEC”) is continuing to increase its scrutiny of companies that might be taking advantage of investor excitement for blockchain and cryptocurrency (ICO) deals to inflate their share prices and raise funds.  On January 8, 2018, the SEC suspended trading in the securities of Hong Kong-based UBI Blockchain Internet, Ltd. … Continue Reading

CFTC Issues Proposed Interpretation on Retail Virtual Currency Transactions

“Virtual currencies,” such as bitcoin and ether, qualify as “commodities” under the Commodity Exchange Act (“CEA”).[1]  The extent that such products are subject to regulation by the U.S. Commodity Futures Trading Commission (“CFTC”) depends upon whether the products are traded in the spot (or cash) market, on a forward basis, or as the underlying of … Continue Reading

New York Regulator’s Suit Challenging OCC Fintech Charter Dismissed as Premature

On Tuesday December 12, 2017, a federal judge dismissed without prejudice a suit filed by the New York Department of Financial Services (NYDFS) against the Office of the Comptroller of the Currency (OCC) challenging the OCC’s proposed new special-purpose fintech charter.  Judge Naomi Reice Buchwald of the U.S. District Court for the Southern District of … Continue Reading

ICOs Must Remain Aware of Regulatory Enforcers

Digital assets, popularly referred to as “cryptocurrencies”, “coins”, and “tokens”, continue to provoke regulatory attention and create discord amongst regulators. Recent actions by the U.S. Commodity Futures Trading Commission (“CFTC”) and the U.S. Securities and Exchange Commission (“SEC”) demonstrate that activities by the issuers of tokens may draw scrutiny from either or both agencies. As … Continue Reading

Security Implications for Blockchain Technology Reviewed by SEC

On October 12, 2017, the U.S. Securities and Exchange Committee (“SEC”) held an Investor Advisory Committee (“IAC”) meeting to consider, among other things, blockchain technology and the implications for securities markets.1 The meeting covered a broad range of topics relating to blockchain and distributed ledger technology (“DLT”), including initial coin offerings (“ICO”), post-trade processing, and … Continue Reading

ICOs Receive Guidance from Abu Dhabi FSRA

Earlier this month, the Financial Services Regulation Authority of the Abu Dhabi Global Market joined the ranks of various regulatory agencies from countries, including Australia, Canada, and the United States that have addressed ICOs, by issuing Supplementary Guidance on the regulation of ICOs and virtual currencies. The Guidance offers parameters for classifying, for legal and … Continue Reading

Regulatory Authorities Respond to Coin Offering Endorsements

Floyd Mayweather, a world famous boxing champion, recently used his Twitter and Instagram accounts to help a company raise more than $30 million in an initial coin offering (“ICO”).1 Other celebrities have similarly capitalized on their “influencer” status by promoting digital tokens to their Twitter and Instagram followers. Token issuers raised over $3 billion via … Continue Reading

SEC Files Complaint Against Trader Involving Bitcoin Conversion Scheme

On October 30, 2017, the U.S. Securities and Exchange Commission (“SEC”) filed a complaint in federal court against a day trader for allegedly committing fraud and market manipulation during which the trader utilized a digital currency exchange in a supposed attempt to cover his tracks. The SEC claims that defendant’s associate obtained unauthorized access to … Continue Reading

Suitability of Swaps Documentation to the Blockchain Considered by ISDA

On August 3, 2017, the International Swaps and Derivatives Association (“ISDA”) released a whitepaper that considers whether derivative contracts could operate on a blockchain (the “Whitepaper”).[1]  The Whitepaper, titled “Smart Contracts and Distributed Ledger – A Legal Perspective,” concludes that many of the provisions of the ISDA Master Agreement and related documentation can be translated … Continue Reading

Supreme Court Holds New York Credit Card Surcharge Statute Regulates Speech

In the ongoing skirmishes between card networks and merchants in the surcharge world, the U.S. Supreme Court has just issued a significant ruling on a novel theory. Merchants in the State of New York sought to charge consumers higher fees for purchases made by credit cards. New York state law contains a prohibition on the … Continue Reading

Illinois Releases Proposed Guidance on Application of State Money Transmission Law to Digital Currency Activities

On November 30, 2016, the Illinois Department of Financial and Professional Regulation (IDFPR) issued a proposed “Digital Currency Regulatory Guidance” (the Guidance) regarding the application of the Illinois Transmitters of Money Act (TOMA) to various digital currency activities. The Guidance applies only to “decentralized digital currencies,” which are not issued by a particular person or … Continue Reading

Swiss Government establishing “crypto-bank” as new category of Financial Institution and creating new FinTech company license

On, November 2, 2016, during its weekly meeting, the Swiss Federal Council (the Council), the executive council which serves as the collective executive head of the government of Switzerland, requested an easing of the Swiss regulatory framework for providers of innovative financial technologies (FinTech).  The Council stated that it desires forward thinking comprehensive solutions for … Continue Reading

State AGs Double Down Focus on Financial Services, including FinTech

State attorneys General (AGs) continue to emerge as major regulators of financial services and show little sign of being cowed by their federal  counterparts….or efforts to preempt state authority. This week, representatives of the consumer protection divisions of the AGs of nearly all 50 states plus officials from the FTC and CFPB met in Phoenix … Continue Reading

CFPB Takes Enforcement Action Against FinTech Lender

Robert Jaworski reviews the September 27, 2016, Consumer Financial Protection Bureau (CFPB) Consent Order (the “Order”) with Flurish, Inc d/b/a LendUp (LendUp), a startup online lending company based in San Francisco that offers single-payment loans and installment loans in 24 states. The Order sends a powerful message to online lenders to make sure their legal houses … Continue Reading

CFPB Moves Forward With Proposal To Ban Class Action Waivers In Arbitration

The Consumer Financial Protection Bureau has published its long anticipated 377-page proposed rule to bar banks and regulated financial institutions from including class action waivers in mandatory arbitration provisions in consumer contracts. Mandatory arbitration clauses, and class action waivers, are pervasive in financial contracts. According to a study by the CFPB in 2015 arbitration clauses … Continue Reading

Marketplace Lending : Summary of Industry Comments

Reed Smith has issued the first comprehensive white paper discussing the comments submitted in response to Treasury’s July 2015 Request for Information (RFI) on marketplace lending. The RFI, entitled “Public Input on Expanding Access to Credit through Online Marketplace Lending,” sought public comment on the FinTech business models applicable to online lending, the potential for … Continue Reading

Payday Lender SOL

On January 15, 2016, the CFPB Office of Enforcement asserted that claims pursued in administrative enforcement actions are not subject to the three-year statute of limitations set forth in the Consumer Financial Protection Act, signaling that the agency is willing to target long-ago violations when seeking restitution and penalties. The CFPA — also known as Title … Continue Reading

Banks and FinTech : More Than Meets the Eye

On December 16, 2015, the Office of the Comptroller of the Currency (OCC) issued its semiannual risk assessments for federally chartered financial institutions (PDF here). Relevant to FinTech, the OCC noted: Banks are increasingly adopting innovative products, services, and processes in response to the evolving needs for financial services and growing competition from other banks and … Continue Reading

CFPB Files Lawsuit Alleging Deceiving Consumers About the Cost of Short-Term Loans

The Consumer Financial Protection Bureau (CFPB) announced this week that it has filed an administrative lawsuit against defunct online lender Integrity Advance and its CEO for allegedly deceiving consumers about the cost of short-term loans. Integrity Advance was a Delaware-based online lender which originated and serviced short-term, small-value, loans to consumers. The CFPB alleges that … Continue Reading

Crowdfunding : trick or treat?

On Halloween eve, three years after authorization by the JOBS Act, the SEC finally adopted rules permitting small ventures and business startups to raise up to $1 million over a 12-month period by selling shares to the investing public through crowdfunding offerings conducted on Internet fundraising portals. Qualifying businesses and intermediary portals will be subject … Continue Reading

Treasury Unsure of Use of Facebook ‘Likes’ in Lending Decisions

The increased use of Yelp reviews, Facebook “likes” and other social media interactions to determine a borrower’s creditworthiness has caught the attention of regulators in US Department of Treasury, amid concerns that the data is too subjective and could result in discriminatory lending patterns if not used properly. On October 29, Antonio Wiess, an advisor … Continue Reading

Breath of Fresh Air in Dismissal of ‘Silly’ TCPA Litigation

After the FCC’s omnibus ruling drastically increasing the scope of the TCPA’s definition of autodialer, TCPA litigation has become a fight about consent. This has resulted in plaintiffs creating novel theories of consent–that it only applied to certain calls, or at certain time periods, etc. If adopted, such a rule would create a headache for any … Continue Reading

Georgia Court Rules B2B Companies Within CFPB’s Regulatory Power

On September 1, 2015, the Consumer Financial Protection Bureau (“CFPB”) won an important decision in which a federal court, for the first time, interpreted the meaning of “recklessly provid[ing] substantial assistance” under the Consumer Financial Protection Act (“CFPA”). Perhaps since it was an order denying the defendants’ motions to dismiss released just before the Labor … Continue Reading
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