Weekly RoundUp April 14, 2022

President Biden Signs Executive Order Banning New Investments in Russia

Editor's Note
In This Issue. President Biden issued an executive order banning new investments in Russia in response to Russia’s continued war against Ukraine; the Federal Deposit Insurance Corporation (FDIC) issued a notification to all FDIC-supervised financial institutions intending to engage in crypto-related activities; the U.S. Securities and Exchange Commission (SEC) announced new fee rates applicable to most securities transactions for the fiscal year; the SEC recently published a bulletin reiterating the standards of conduct applicable to broker-dealers and investment advisers when making account recommendations to retail investors; and the SEC’s Examinations Division staff recently published its list of examination priorities for 2022. These and other developments are discussed in more detail below. 
Editor's Note
Editor's Note
Editor's Note

Regulatory Developments

President Biden Signs Executive Order Banning New Investments in Russia

On April 6, President Biden issued an executive order imposing expansive new sanctions on Russia in response to Russia’s continued war against Ukraine. The order prohibits, in relevant part, “new investment in the Russian Federation by a United States person, wherever located.” The order may have implications for new investments in Russia by U.S. registered funds, as the order broadly defines the term “United States person” to include any entity (including trusts and corporations) organized under the laws of the United States. The order, however, does not define the scope of what constitutes a “new investment” in the  “Russian Federation.” Pursuant to the order, the scope of the prohibition is subject to any further regulatory guidance from the U.S. Treasury Department, although no such guidance has been published as of the date this report was prepared. In the context of a prior sanction on Russia imposing an energy investment ban, the U.S. Treasury Department’s Office of Foreign Assets Control issued guidance construing the term “new investment” broadly to be “a commitment or contribution of funds or other assets for, or a loan or other extension of credit to, new energy sector activities (not including maintenance or repair) located or occurring in the Russian Federation.” 

Notification of Engaging in Crypto-Related Activities

On April 7, the FDIC issued FIL-16-2022 (Letter) titled “Notification and Supervisory Feedback Procedures for FDIC-Supervised Institutions Engaging in Crypto-Related Activities.” The Letter instructs all FDIC-supervised financial institutions intending to engage in or are presently engaging in any activities involving or related to crypto or digital assets to “promptly” provide notice to the FDIC along with “all necessary information that would allow the FDIC to engage with the institution regarding related risks.” The Letter also encourages financial institutions that are engaging or considering to engage in crypto and digital assets to inform their state regulator as part of the notification process; however, that is not a requirement.

The FDIC noted that as a result of the inconsistency between definitions associated with crypto assets and crypto-related activities and the rapidly changing nature of the crypto space, it is becoming increasingly complicated and difficult to identify these assets and activities. As such, the FDIC is finding it increasingly difficult to appropriately assess the safety and soundness regarding consumer protection and financial stability. The FDIC believes that these notification requirements will help mitigate potential risks of engaging in crypto-related activities.

“Crypto-related activities may pose significant safety and soundness risks, as well as financial stability and consumer protection concerns.”
- FDIC

SEC Announces Fee Rate Advisory #1 for Fiscal Year

On April 8, the SEC announced that, effective May 14, 2022, the fee rates applicable to most securities transactions will be set at $22.90 per $1 million. As noted by the SEC in its press release, this new fee rate is a “substantial increase” from the current rate of $5.10 per million, which is in effect through May 13, 2022. The SEC stated that the new fee rate of $22.90 per million “represents a return to levels similar to those prior to 2021,” noting prior fee rates of $22.10 per million and $22.70 per million in 2020 and 2019, respectively. Self-regulatory organizations should be aware of this change and review the Order Making Fiscal Year 2022 Annual Adjustments to Transaction Fee Rates for additional information.

SEC Staff Provides Guidance on Broker-Dealer and Investment Adviser Standards of Conduct for Account and Rollover Recommendations to Retail Investors 

The SEC recently published a bulletin reiterating the standards of conduct applicable to broker-dealers and investment advisers when making account recommendations to retail investors.

Read the client alert for a summary of the SEC staff’s views.

SEC Examinations Division Publishes 2022 Priorities

The SEC Division of Examinations recently published its list of priorities for 2022. Significant focus areas for 2022 include:

  • Private Fund Advisers
  • ESG
  • Reg. BI, Form CRS, and Fiduciary Duty
  • Information Security and Operational Resiliency 
  • Emerging Technologies and Crypto Assets

Read the client alert for more details on these areas of focus and those related to broker-dealers.

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Editors
Nicole Griffin
Samantha M. Kirby
William McCurdy

Contributors
Geoff Anghelone
Nico Ramos
Andrew Zutz