In addition to releasing a finalized No-Action Letter (NAL) Policy, the Consumer Financial Protection Bureau (CFPB) also issued a revised Trial Disclosure Policy and Compliance Assistance Sandbox Policy on September 10.

Trial Disclosure Policy

Through its revised Trial Disclosure Policy, the CFPB has created the CFPB Disclosure Sandbox. Now, entities seeking to improve consumer disclosures may conduct in-market testing of alternative disclosures for a limited time upon permission by the CFPB. The Dodd-Frank Act gives the CFPB the authority to provide certain legal protections for entities to conduct trial disclosure programs. The new policy largely streamlines the application and review process, provides greater protection from liability (which also extends to agents of the waiver recipient), and allows for a time-limited extension for successful disclosure tests.

Read More

The Consumer Financial Protection Bureau (CFPB) finalized its revised No-Action Letter (NAL) Policy and issued its first NAL under the revised policy on September 10, in response to a request by the US Department of Housing and Urban Development (HUD) on behalf of more than 1,600 housing counseling agencies (HCAs) that participate in HUD’s housing counseling program.

Read More

The Consumer Financial Protection Bureau (CFPB), working in partnership with multiple state regulators, announced on September 10 that it has launched the American Consumer Financial Innovation Network (ACFIN) to strengthen coordination among federal and state regulators in order to facilitate financial innovation. ACFIN is a network of federal and state officials and regulators with authority over markets for consumer financial products and services. The CFPB invited all state regulators to join ACFIN, and the initial members of ACFIN are the attorneys general of Alabama, Arizona, Georgia, Indiana, South Carolina, Tennessee, and Utah. The network may include state attorneys general, state financial regulators, and federal financial regulators.

According to the CFPB’s press release, ACFIN “enhances shared objectives such as competition, consumer access, and financial inclusion. Additionally, ACFIN promotes regulatory certainty for innovators, benefiting the US economy and consumers alike. The network also seeks to keep pace with market innovations and help ensure they are free from fraud, discrimination, and deceptive practices.”

Read More

Regulators on both sides of the Atlantic continue to monitor and address cryptoasset and distributed ledger technology activities. We recently posted on the guidance issued by the US Financial Crimes Enforcement Network on cryptocurrencies and in another post touched upon differences in the regulatory treatment of cryptoassets across jurisdictions. Today we report on two new developments relating to the treatment of cryptoassets by UK and US regulators.

Read More

A working group composed of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the US Department of the Treasury’s Financial Crimes Enforcement Network issued a joint statement on July 22 that is intended to provide greater clarity regarding the risk-focused approach used by examiners for planning and performing Bank Secrecy Act (BSA)/anti-money laundering (AML) examinations.

Read More

On the theory that three’s a charm, our third and final blog on Hong Kong private equity activities will take a look at Asset Management (Type 9) activities, which are among the most relevant regulated activities for private equity firms in Hong Kong.

 Asset Management (Type 9) covers managing, on a discretionary basis, portfolio of securities for and on behalf of a third party. If a private equity firm is licensed by the SFC to carry out the regulated activity of asset management, then in addition to being able to exercise discretionary portfolio management, such firm is able to rely on what is commonly referred to as the “incidental exemption” and market funds under its management or sub-management, without the need to obtain a separate Type 1 license. The Type 9 license is therefore very flexible.

Read More

In our first blog on Hong Kong private equity licensing, we looked at Dealing in Securities (Type 1). This second blog deals with Advising on Securities (Type 4).

Advising on Securities (Type 4) includes not only giving advice on acquiring or disposing of securities, but also advising on the terms or conditions on which securities should be acquired or disposed of. There is an important "intra-group" exemption for the requirement for a Type 4 license, and many private equity firms have traditionally relied on this to conduct advisory activities in Hong Kong. This exemption is available if advice on securities is provided by the private equity firms in Hong Kong to (i) any of its wholly-owned subsidiaries; (ii) a holding company which wholly owns the private equity firms; or (iii) wholly-owned subsidiaries of its holding company. The recipient of the advice, recommendation, or research should assess the advice, recommendation or research (as the case may be) and has the discretion to reject it, before issuing the material to its own clients in its own name. In other words, the recipients must assess the advice, and not merely rubber-stamp it.

Read More

In keeping with our interest in global financial regulatory developments, in this and two blog posts to follow, we examine recent regulatory developments and responses in the active Hong Kong private equity markets.

Historically, the most popular setup of private equity firms in Hong Kong involve a Hong Kong onshore investment adviser providing advice to an offshore investment manager or a general partner in the Cayman Islands. The Hong Kong investment adviser will typically be a wholly owned subsidiary of the offshore entity. If structured in this manner and subject to certain additional parameters, the Hong Kong investment adviser will be able to operate without any licence in Hong Kong as the Hong Kong investment adviser will be able to rely on what is commonly referred to as the “intra-group” exemption.

Read More

In its continued efforts to learn what broker-dealers and their employees are doing in the digital asset space, FINRA has effectively reissued a regulatory notice requesting that broker-dealers keep FINRA apprised of their digital asset activities.

 Last July, FINRA issued Regulatory Notice 18-20 where it requested that broker-dealers notify their regulatory coordinators about their and their registered representatives’ digital asset activities. Although not an exhaustive list, some activities FINRA wants information about include the following:

Read More

On July 8, the staffs of the Division of Trading and Markets (TM) of the US Securities and Exchange Commission and of the Office of General Counsel of the Financial Industry Regulatory Authority, Inc. issued a joint statement on broker-dealer custody of digital assets that are also securities (Joint Statement). As explained in, and for purposes of, the Joint Statement, a “digital asset” refers to an asset that is issued and transferred using distributed ledger or blockchain technology, including, but not limited to, so-called “virtual currencies,” “coins,” and “tokens.” While all digital assets are not securities under the federal securities laws, a digital asset that is a security is referred to as a “digital asset security” in the Joint Statement. While the Joint Statement provides some insight on the issues under consideration by regulators regarding custody, it does not identify specific circumstances under which a broker-dealer could custody digital asset securities in a manner consistent with the financial responsibility rule applicable to broker-dealers.

Read More