Financial Institutions

On March 3, 2021, the U.S. Securities and Exchange Commission (“SEC”) Division of Examinations (the “Division”)—formerly the Office of Compliance Inspections and Examinations—released its 2021 Examination Priorities (“2021 Priorities”).  The 2021 Priorities generally retain perennial risk areas as the Division’s core focus, but do include several new and emerging risk areas reflecting broader policy shifts under new SEC leadership.

The 2021 Priorities include:  retail investors; information security and operational resilience; financial technology (“Fintech”), including digital assets; anti-money laundering; transition from the London Inter‑Bank Offered Rate (“LIBOR”); several areas covering registered investment advisers and investment companies; market infrastructure; and oversight of the Financial Industry Regulatory Authority and Municipal Securities Rulemaking Board programs and policies.  Although not formal priorities, the Division will also focus on climate-related risks and environmental, social and governance (“ESG”) matters in light of recent market developments and broader attention in these areas.
Continue Reading Turning the Page: Highlights of the SEC’s Division of Examination’s 2021 Priorities

In December 2020, the FDIC approved a Final Rule to reframe the definition and exceptions for “brokered deposits”. Historically, the FDIC has broadly defined virtually any third party connecting a depositor with a bank as a “deposit broker” and the resulting deposits as “brokered deposits”. The Final Rule responds to long-standing industry criticisms seeking to

On August 21, the Financial Crimes Enforcement Network, together with the federal banking agencies, released a statement to clarify banks’ customer due diligence obligations for politically exposed persons. The Statement affirms that (i) there is no regulatory requirement, and no supervisory expectation, for banks’ Bank Secrecy Act / anti-money laundering programs to include “unique, additional

On July 22, 2020, the Office of the Comptroller of the Currency (“OCC”) published an interpretive letter clarifying that providing cryptocurrency custody services to customers is a permissible activity for national banks and federal savings associations.  This letter marks an important milestone in the expansion of permissible banking activities related to digital assets.
Continue Reading OCC Interpretation Opens the Door for Banks to Enter the Crypto Custody Business

On October 11, 2019, the leaders of the Commodity Futures Trading Commission, Financial Crimes Enforcement Network, and Securities and Exchange Commission issued a joint statement to remind businesses that engage in digital asset activities of their anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”) obligations under the Bank Secrecy Act (“BSA”).

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On May 2, 2019, a court in the Southern District of New York (“SDNY”) held that the Office of the Comptroller of the Currency (“OCC”) lacked the statutory authority to charter nondepository special purpose national banks (the so-called “FinTech Charter”).  In denying, with one exception, the OCC’s motions to dismiss claims by New York’s Department of Financial Services (“DFS”), the Court held that the OCC could not charter a nondepository “national bank” because the National Bank Act “unambiguously requires that, absent a statutory provision to the contrary, only depository institutions are eligible to receive national bank charters from the OCC.”  
Continue Reading Federal District Court Rules OCC Lacks Authority to Issue FinTech Charters

On April 3, 2019, staff of the Securities and Exchange Commission released (1) a framework providing principles for analyzing whether a digital asset constitutes an investment contract, and thus a security, as defined in SEC v. W.J. Howey Co. and (2) a no-action letter permitting TurnKey Jet, Inc., without satisfying registration requirements under the Securities

The United States offers an innovative and diverse marketplace along with a sound infrastructure for new cryptocurrency and digital asset businesses.  However, the U.S. regulatory framework for digital asset businesses creates significant barriers to innovation and risks frittering away the potential benefits of the U.S. markets’ creativity. One of the chief challenges for today’s cryptocurrency businesses, especially those offering exchange, trading, or custody services, is the fragmented and inconsistent state law framework currently applied to many of those businesses. 
Continue Reading The Conference of State Banking Supervisors Seeks to Improve Consistency of FinTech Regulation, but Questions Remain

On February 26, 2019, Steven Maijoor, the Chair of the European Securities and Markets Authority (ESMA), delivered a keynote speech to the 3rd Annual FinTech and Regulation conference in Brussels.  In his speech, he highlighted ESMA’s recent initiatives in the crypto-asset and distributed ledger technology (DLT) space and noted ongoing areas of focus.
Continue Reading ESMA Chair Delivers Keynote Speech on Crypto Assets and Distributed Ledger Technology

On November 12, 2018, the Monetary Authority of Singapore (“MAS”) released guidelines for financial services firms to consider when they make decisions related to artificial intelligence and data analytics (“AIDA”).  The guidelines, entitled “Principles to Promote Fairness, Ethics, Accountability and Transparency (FEAT) in the Use of Artificial Intelligence and Data Analytics in Singapore’s Financial Sector” (the “Principles”), are believed to be the first AIDA guidelines issued by a central bank or financial regulator, and emphasize the importance of fairness, ethics, accountability and transparency in how firms utilize AIDA with respect to their customers. 
Continue Reading Meet FEAT: Singapore’s New AI and Data Analytics Principles for the Financial Sector