Remember in July of this year when the Securities and Exchange Commission (SEC) said in its Decentralized Autonomous Organization (DAO) Report that "U.S. federal securities laws may apply to various activities, including distributed ledger technology, depending on the particular facts and circumstances, without regard to the form of the organization or technology used to effectuate a particular offer or sale"? No? Well, apparently no one else did either.
For the first time in my memory, the Congress passed a joint resolution to disapprove a final regulation of a federal agency—in this case the CFPB and the rule was related to arbitration clauses in contracts for consumer financial products. In addition, the agencies amended certain definitions under CRA and these changes should be reflected in CRA policies and procedures at banks. Both the OCC and FDIC published final rules on requirements for Qualified Financial Contracts and introduced required language for larger banks.
Last week, the DFS announced an enforcement action and charges against the NY Branch of Habib Bank, a Pakistani bank that had been doing business in NY for almost 40 years.
With a straight face, President Trump has issued an executive order on June 20th that would expand Apprenticeship opportunities in the US in order to expand jobs. The CFTC has adopted some final rules on records administration and its whistleblower program. It has also introduced a new project to evaluate its system of rules to see where simplification is warranted. FinCEN is moving against a Chinese bank that helps North Korea.
Yesterday the Fed published a proposed guidance document for its expectations for board of directors of banks. The release only applies to the boards of banks with over $50 billion in consolidated assets, but the intent of the Fed is to ease up on directors at all banks. The proposal was issued after an extensive review of the activities of bank boards and reflects independent directors’ dissatisfaction with the burdens that the regulators have been placing on bank directors.
In the wild west of token sales, that some refer to as "initial token offerings," on July 25, the SEC finally jumped into the fray and said . . . well, actually, not that much. The SEC investigated Slock.it, a decentralized autonomous organization (DAO) organized under German law, and issued a Report of Investigation in which the SEC concluded that Slock.it violated U.S. federal securities laws in issuing its tokens because, in the view of the SEC, the Slock.it tokens are securities under U.S. securities laws and were sold without being registered with the SEC or pursuant to an effective exemption from registration.
Foreign Investment Funds
At the end of last week, the Fed and the other banking agencies issued an interpretation that applied to investments in certain foreign funds by foreign banking organizations that are subject to the Volcker rule. Such banks may control what is kno
wn as an excluded foreign fund until July 21, 2018, without having the investments made by such fund being subject to the Volcker rule. Under the Fed’s interpretation of the Volcker rule, certain investment funds sold exclusively outside the U.S. would be deemed subject to the Volcker rule if these funds were controlled by a foreign bank that was itself subject to the Volcker rule.
Topics: Volcker Rule
Just yesterday, the House of Representatives passed a version of a new banking bill (the “Choice Act”). The Choice Act makes scores of efforts to cut back on the regulatory regime created under Dodd-Frank Act. Many of the changes are of principal interest to domestic banks but the provisions dealing with regulatory relief will be of interest to foreign banks doing business in the U.S.
Donald Trump has made this newsletter obsolete. This covers two months and there are almost no new or even proposed rules. In fact, I am covering developments that in the past were deemed so picayune that I would have left them out. The CFPB has published 30 pages of corrections and elaborations to a rule that was “finalized” in 2015—will it ever end.
Donald Trump was not kidding when he said he was going to stem the tide of new regulations affecting American businesses. The effect in the banking area has been an astounding collapse in activity at the banking agencies. During the first four months of 2017 there has been a dramatic reduction in new and proposed regulations. A comparison to 2016 will highlight these differences across the 10 federal agencies that we follow in order to prepare the regulatory newsletter.