Regulations

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There is universal acknowledgement that anti-money laundering (“AML”) monitoring has become progressively costlier (both in terms of time and money) since the Bank Secrecy Act (“BSA”) was passed nearly five decades ago, and that compliance has become increasingly burdensome, especially for smaller regional and community institutions. According to the Financial Crimes Enforcement Network (“FinCEN”), nearly one million suspicious activity reports (“SAR”) were filed in 2016 (up from 669,000 in 2013). According to a 2016 report by the Heritage Foundation, the cost of compliance with current AML rules could be as much as $8 billion a year. Notwithstanding the tremendous resources spent on AML compliance, money laundering is still rampant. The U.N. has estimated that the amount of money laundered every year is between $800 billion and $2 trillion dollars. However, according to a 2011 report issued by the U.N. Office on Drugs and Crime, less than one percent of this amount is seized by law enforcement.
Continue Reading New Legislation Introduced in 2017 Signals the Beginning of a Strong Push for AML Reform

Blockchain technology (“Blockchain”), also known as Distributed Ledger Technology, stands poised to transform the future of the financial industry. Generally speaking, Blockchain enables the creation of a continuously growing ledger of transactions that is resistant to alteration and ensures the integrity of new transactions through a system of checks-and-balances built into the system’s code. The combination of its speed, versatility, and built-in security features lend the technology well to applications in the financial industry. In a timely effort, the Financial Industry Regulatory Authority (“FINRA”) recently gathered top U.S. financial regulators and industry stakeholders to participate in its 2017 Blockchain Symposium. In a series of engaging discussions, panelists hashed out the potential benefits and pitfalls of the dynamic technology.
Continue Reading FINRA Fetes Emerging Blockchain Technology at Industry Conference

Procedural History

In August 2016, the Department of Homeland Security proposed an “International Entrepreneur” parole rule that would allow qualifying foreign entrepreneurs to develop and grow their start-up companies in the United States. After public comment, the rule was finalized and released in the closing days of the previous Administration.
Continue Reading Dear Congress: Your District Needs a New E-4 Visa for Promising Entrepreneurs

Earlier this month, FINRA announced changes to its Sanction Guidelines through Notice to Members 17-13. FINRA’s Sanction Guidelines are used by FINRA disciplinary hearing panels to decide what, if any, sanctions to impose in those enforcement actions in which a rule violation is found. FINRA enforcement staff and members of the defense bar utilize the guidelines in settlement negotiations.
Continue Reading FINRA Updates Its Sanction Guidelines

The SEC has launched a dedicated team to oversee FINRA, according to remarks by Marc Wyatt, Director of the SEC’s Office of Compliance Inspections and Examinations (“OCIE”). Congress has vested the SEC with the power to supervise FINRA, including the authority to inspect and examine. The new unit, named FINRA and Securities Industry Oversight (“FISIO”), is headed by Kevin Goodman, head of the SEC’s broker-dealer exam program. On Oct. 17, 2016, Wyatt spoke at the National Society of Compliance Professionals 2016 National Conference in Washington, D.C., where he made the announcement. According to Wyatt, the new FISIO team includes “roughly 40 people” throughout the country, and consolidates the SEC’s oversight of FINRA “into a single group.” The FISIO team will oversee FINRA to ensure “that it’s fulfilling its mandate in terms of evaluating its member broker-dealers.” On a separate panel at the event, Goodman noted that before FISIO, the SEC examined FINRA through “programmatic” exams focused on a particular FINRA operation (e.g., exams, enforcement, dispute resolution programs) and “oversight” exams that assessed “the quality of the individual examinations” that FINRA conducts on broker-dealers. According to Goodman, FISIO will “combin[e] those two functions into one,” which he described as “not only powerful but efficient as well.”
Continue Reading Watching the Detectives: The SEC Launches a Dedicated FINRA Oversight Unit

On February 16, 2016, Secretary of Homeland Security Jeh Johnson announced interim guidelines and procedures for sharing cyber threat indicators under the Cybersecurity Information Sharing Act of 2015 (“CISA”). Because the guidelines are voluntary, the next question is, should your company share information with the Government?
Continue Reading To Share or Not to Share (with the Government)? That is the Question: DHS Announces Interim Guidelines for Sharing Cyber Threat Indicators

On February 11, 2016, the Financial Industry Regulatory Authority (“FINRA”) filed a proposed rule with the Securities and Exchange Commission (“SEC”) that would require individuals who “design, develop or significantly modify algorithmic trading strategies” (or “ATS”) as well as individuals responsible for the “day-to-day supervision or direction of the development process,” to pass a qualification exam and register with FINRA as securities traders. During the comment period, FINRA clarified that the rule would not apply to every person who touches or is otherwise involved in the design of a trading system, but that it would be up to each firm to determine who is primarily responsible for the design of the ATS system.  The rule defines ATS as “any program that generates and routes (or sends for routing) orders (and order-related messages, such as cancellations) in securities on an automated basis” and identifies eight typical programs that it would consider an ATS.  (FINRA Reg. Notice 15-06.)  The rule was prompted by FINRA’s concern that programmers be properly educated in securities regulations in order to avoid inaccurate orders, inadequate risk management controls, and other problematic conduct. Commentators criticized the proposal as having a “potential chilling effect” by “discouraging well-qualified developers from participating in the design, development or modification of algorithmic trading strategies, and even from affiliating with FINRA member firms.”
Continue Reading REGULATORS, QUANT UP! New Rules from FINRA, SEC and CFTC Target Automated Algorithmic Trading

The Department of Health and Human Services (HHS) and other Federal Departments and Agencies closed the comment period for the Federal Policy for the Protection of Human Subjects notice of proposed rulemaking (NPRM) on January 6, 2016 after extending the initial period due to robust response. The proposed rulemaking is the most sweeping since 1991 when HHS codified The Common Rule, 45 C. F. R. part 46, and recognizes the changed research environment with many multisite studies and the expansion of research with more data accessible through technology. The NPRM seeks to further the principles of autonomy and beneficence by protecting privacy and improving the consent process in the new world of research while creating avenues to lessen the administrative burden and to promote research.  
Continue Reading HHS Recognizes Changing Environment of Research

Everything old is new again.  On January 1, 2016, the New York Stock Exchange (“NYSE”) – now owned by Intercontinental Exchange, Inc. – will be taking back some of the regulatory responsibilities it yielded to the Financial Industry Regulatory Authority (“FINRA”), starting in 2007 when the NYSE and National Association of Securities Dealers (“NASD”) merged their self-regulatory functions.  The goal then was to address inefficiencies and overlap that often resulted from the concurrent oversight by these two self-regulatory organizations (“SROs”).
Continue Reading Forward to the Past: NYSE Returns to Regulation

On January 15, 2015, the Department of Treasury’s Office of Foreign Assets Control (OFAC) amended the Cuban Assets Control Regulations to implement changes in U.S. policy toward Cuba announced by President Obama on December 17, 2014.
Continue Reading OFAC Issues Cuban Asset Control Regulations Focused on the U.S. Financial Sector