On May 14, FINRA announced that it is launching an initiative to transform the digital platform that firms use to engage with FINRA across several programs. The Digital Experience Transformation, as it is being called, is a wide-ranging, multi-year effort to integrate and simplify brokerage firms’ digital interactions with FINRA, facilitating more efficient and effective compliance programs. The initiative is the latest outgrowth of the ongoing FINRA360 organizational improvement initiative. The project has incorporated feedback from the industry through a series of focus groups with firms, as well as a survey of more than 50 firms, which provided insights into how the industry interacts with FINRA for compliance information and management, and how the processes can be improved. The transformation, to be implemented in stages through 2022, is focused on six areas:
- Efficiency – Centralized task management designed to help compliance professionals do their work faster and at lower cost;
- Proactive Compliance – Actionable notifications for early warning of issues;
- Simplified Experience – Customized and personalized user experience tailored to the role of the user;
- Enhanced Interaction – Centralized workspace to facilitate interaction with FINRA staff;
- Flexibility and Automation – Easier machine-to-machine integration with firm systems, plus enhanced access to FINRA compliance data;
- Self Service – Access to online knowledge base and contextual support.
On May 15, FinCEN renewed its geographic targeting order (GTO) requiring title insurance companies to file reports identifying the individuals behind companies used to purchase residential real estate in covered markets in cash transactions of $300,000 or more. The GTO covers the following markets: the California counties of San Diego, Los Angeles, San Francisco, San Mateo, and Santa Clara; the Florida counties of Miami-Dade, Broward, and Palm Beach; the Illinois county of Cook; the city and county of Honolulu, Hawaii; Massachusetts counties of Suffolk and Middlesex; the Nevada county of Clark; the New York City boroughs of Bronx, Brooklyn, Manhattan, Queens, and Staten Island; the Texas counties of Bexar, Tarrant, and Dallas; and the Washington county of King. The GTO is part of an effort to combat money laundering in furtherance of the Bank Secrecy Act by tracking illicit funds and gathering information. The GTO includes instructions for completing the required reports, and it is effective May 16, 2019, through November 11, 2019.
On May 9, Commissioner Hester Peirce of the U.S. Securities and Exchange Commission (SEC) expressed concern that the SEC is moving too slowly in providing meaningful guidance for the digital token industry. Commissioner Peirce acknowledged that the SEC has provided some direction to date by: (1) issuing the DAO Investigative Report in 2017; (2) bringing a handful of enforcement actions where token offerings were deemed to be securities issuances without registration or an applicable exemption; and (3) taking “pains to provide relief where issuers have self-reported,” allowing self-reporters of securities laws violations to rescind the transactions without having a penalty imposed. Commissioner Peirce also acknowledged that both SEC Chairman Jay Clayton and Director of Corporation Finance William Hinman have provided insights on the application of 20th century securities laws to this modern technology. Commissioner Peirce also applauded the SEC’s FinHub initiative, whereby the agency provides a “common contact point and center of organization for all things financial technology at the SEC” and facilitates engagement with individuals and organizations working on crypto issues. But the commissioner still indicated her view that the SEC’s overall efforts have been a “mixed bag.” Read the Digital Currency & Blockchain Perspectives blog post.
Last week, Northeast Bank became the fourth banking organization in two years to eliminate its holding company. Previously, ZB, N.A. (now Zions Bancorporation, N.A.) (September 2018), BancorpSouth Bank (October 2017), and Bank of the Ozarks (June 2017) also eliminated their holding companies. All of the transactions were motivated, at least in part, by the desire to improve efficiency by eliminating redundant corporate infrastructure and activities, as well as the associated supervision and oversight of the holding company by the Board of Governors of the Federal Reserve System. Many banking organizations continue to maintain their holding companies, but now may be a good time to ask the question: Is the holding company worth it? For more information, read the client alert issued by Goodwin’s Banking practice.
Enforcement & Litigation
On April 28, the U.S. District Court for the Northern District of California denied certification of a putative Telephone Consumer Protection Act (TCPA) class. Revitch v. Citibank, NA., No. 14-06907 WHA (N.D. Cal. Apr. 28, 2019). The court reasoned that the case would involve “individualized inquires [of prior express consent] that would overwhelm the trial.” View the LenderLaw Watch blog post.
The Conference on Consumer Finance Law (CCFL) is a nonprofit organization founded in 1926 by members of the legal profession and the financial services industry to offer educational services, publications and research relating to consumer financial services law. This two-day conference will focus on high-quality presentations on the most pertinent issues. Financial Industry partner David Permut will be speaking at the conference. For more information, please visit the event website.
At the MBA Annual Convention, hundreds of bank CEOs, directors, and senior management decision-makers will gather for educational programs, networking events, and the annual election of association leadership. Goodwin is a sponsor and Samantha Kirby and Matt Dyckman will speak Monday, June 3. For more information, click here.
Gain knowledge of strategic solutions on Illuminating the Path for the Future at the third annual Financial Services Expo, which will be held June 3-5 at the Irving Convention Center and promises to be a power-packed event. Financial Services Industry partner Anthony Alexis will be speaking on cybersecurity on June 5. For more information, please visit the event website.