Regulatory Updates
On December 30, 2024, the US Department of the Treasury and the IRS issued final regulations focused on decentralized finance (DeFi) platforms and their role in digital asset transactions.
The Securities and Exchange Commission announced charges against nine investment advisors and three broker-dealers for failures by the firms and their personnel to maintain and preserve electronic communications in violation of recordkeeping provisions of the federal securities laws.
The SEC’s order finds that, from at least October 2018 until January 2022, an investment advisory firm stated in its offering materials and other documents provided to prospective and existing private fund investors that it was voluntarily complying with AML due diligence laws despite those laws not applying to investment advisors.
A broker-dealer will pay $45 million to settle charges brought by the SEC related to multiple regulatory failures, including inadequate procedures to protect customers from identity theft, failure to address cybersecurity risks, and failure to maintain required records.
A financial services firm has agreed to a $2 million settlement with New York State regulators over cybersecurity failures that exposed customers' Social Security numbers.
The SEC recently brought settled enforcement actions against two registered investment advisers for failing to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information (MNPI), in violation of Section 204A of the Investment Advisers Act of 1940 (Advisers Act) and the Compliance Rule.
On Sep. 4, 2024, FinCEN published a final rule (Final Rule) adding certain RIAs and ERAs (collectively, Covered Advisers) to the definition of “financial institution” under the regulations implementing the BSA, and imposing on Covered Advisers broad AML and CFT program requirements, as well as other BSA recordkeeping and reporting requirements.
On November 22, the SEC announced (here) that broker-dealers Webull Financial LLC, Lightspeed Financial Services Group LLC, and Paulson Investment Company, LLC agreed to settle charges that they filed with law enforcement SARs that failed to include required information.
At the heart of the statutory and regulatory framework governing transactions in derivatives in the United States is a customer asset protection regime that requires futures commission merchants (FCM) and derivatives clearing organizations (DCO) to hold customer funds in segregation.
The Securities and Exchange Commission (SEC) has adopted amendments to Rule 15c3-3, commonly known as the customer protection rule, to require certain broker-dealers to increase the frequency with which they perform computations of the net cash owed to customers and other broker-dealers (known as PAB account holders) from weekly to daily.
The SEC has recently taken a series of enforcement actions against financial firms for failing to maintain and preserve electronic communications, particularly those conducted through off-channel methods like personal devices.
Cash sweep programs, which automatically transfer uninvested cash in brokerage accounts to higher-interest accounts, are facing increased scrutiny from regulators like the SEC and FINRA, and investors.
The North American Securities Administrators Association (NASAA) is requesting public comments on proposed revisions to NASAA’s broker-dealer conduct rule entitled Dishonest or Unethical Business Practices of Broker-Dealers and Agents (“Conduct Rule”).
On November 13, 2024, the Financial Crimes Enforcement Network (FinCEN) issued FIN-2024-Alert004 to help financial institutions identify fraud schemes associated with the use of deepfake media created with generative artificial intelligence (GenAI) in response to increased suspicious activity reporting.
On Thursday, November 21, 2024, the Consumer Financial Protection Bureau (CFPB) published a final rule that will soon give it supervisory authority over large companies in the general-use digital consumer payment applications market.
The SEC recently settled charges against a registered investment advisor for violating the requirements of Rule 206(4)-1 of the Advisers Act (Marketing Rule) by circulating advertisements with paid endorsements from professional athletes that lacked required disclosures.
The Securities and Exchange Commission has charged an entity with operating as an unregistered dealer in more than $2 billion of crypto assets offered and sold as securities, violating the registration requirements of the federal securities laws designed to protect investors.
The SEC's Division of Examinations announced its 2025 priorities, focusing on areas that pose heightened risk to investors and market integrity.
Both FINRA and the SEC have expressed concerns about using social media influencers ("finfluencers") in the financial services industry, particularly regarding compliance with advertising rules, supervision, and investor protection.
The SEC has identified crypto exchange-traded products (ETPs) as an area of heightened focus for examinations. The agency is particularly concerned about the custody of crypto assets, market surveillance, pricing, and investor disclosures.
