The Federal Trade Commission (FTC) will hold public hearings on March 25-26 in Washington, DC, on “Competition and Consumer Protection in the 21st Century.” Titled, “The FTC’s Role in a Changing World,” the hearings pose downstream risk to the fintech community, especially to smaller enterprises that may lack the resources and knowledge to comply with any complex new regime.
When the US Court of Appeals for the Second Circuit issued its decision in Madden v. Midland Funding in 2015, it sent shockwaves through the financial community for its unexpected ruling that nonbank assignees of a national bank did not get the benefit of National Bank Act “preemption” permitting lenders to charge any interest rate provided it does not exceed the rate permitted in the bank’s home state. After an unsuccessful attempt to get the US Supreme Court to review the decision, the Second Circuit’s decision remains binding precedent in federal courts sitting in New York, Connecticut, and Vermont. The case returned to the district court and has quietly been litigated over the last two years. On March 1, the final chapter began when the parties filed a motion for preliminary approval of a settlement of the action, as described below.
Our postings on All Things FinReg sometimes can take us far afield – in this case, to India.
Multinational companies, including those in the financial services and technology worlds, incorporate or acquire Indian subsidiaries to lower their costs and access a vast and growing market for customers and talent. If you want to be in India, however, you’ll need to understand and engage with the complex—and sometimes mystifying—local regulatory regime, because not doing so may cost you, as well as your banks and other financial services providers.
A recent letter from a bipartisan group of 31 state attorneys general to the Federal Trade Commission (FTC) asks the agency to both continue and enhance its various identity theft rules. The group, led by attorneys general Ellen Rosenblum (D-OR) and Kevin Clarkson (R-AK), points to the challenges presented by emerging technologies being regulated by dated rules. While the concept of regulatory obsoleteness is not new, the speed at which new technologies now emerge means that rules can become dated quickly.
Recent action by the Consumer Financial Protection Bureau (CFPB) may bring some relief to fintech developers and the broader financial services industry as new products run into otherwise insurmountable regulatory hurdles that do not take into account or adapt to new technologies.
In a recent announcement by the CFPB’s Office of Innovation, its director has proposed the creation of a “Disclosure Sandbox” to encourage trial disclosure programs.
The greatest concern for many new developers and possible funding sources for those developers is that a new and innovative product may not be able to provide disclosures in the same way that traditional products have done, simply because consumer device sizes are shrinking while the amount of information regulators are requiring to be displayed without “clicking through” many screens is increasing. This poses a conundrum for the developer, which must reconcile competing issues and demands, including the size of a device screen, the limits of human eyesight—and patience!—and the demands of regulators.
The Financial Industry Regulatory Authority (FINRA) has once more filed a rule change with the US Securities and Exchange Commission (SEC) to further delay the effective date of certain changes to its maintenance margin rule for covered agency transactions (e.g., to-be-announced transactions, specified pool transactions, transactions in collateralized mortgage obligations) until March 25, 2020. Final implementation of the rule’s requirements to collect margin on covered agency transactions was scheduled for March 25, 2019, which itself was a delay from a previous compliance date of June 25, 2018. As with the other delays, the new postponement was filed for immediate effectiveness and FINRA, in delaying the rule changes, said that it “is considering, in consultation with industry participants and other regulators, potential amendments to the requirements of [amended Rule 4210].” FINRA further states that it “believes that this is appropriate in the interest of avoiding unnecessary disruption to the Covered Agency Transaction market. Of note, the risk limit determinations of amended Rule 4210 that became effective on December 15, 2016, are not affected by the proposal.” In considering further changes to the Rule 4210 margin collection requirements, FINRA appears to be reacting to industry concerns regarding the competitiveness of certain FINRA members in this market.
The Joint Committee of the European Supervisory Authorities (the ESAs) issued a report on 7 January 2019 on the status of regulatory sandboxes and innovation hubs following consultations with national regulators across the European Union.
The report compares the innovation hubs and regulatory sandboxes established in 21 EU member states and three EEA states, flagging too that Hungary and Spain are in the process of establishing regulatory sandboxes.
Two years ago, we wondered in our blog post whether the staff of the US Securities and Exchange Commission (SEC) would have to further extend no-action relief to permit a broker-dealer to rely on an SEC registered investment adviser (RIA) to perform the broker-dealer’s customer identification program (CIP) requirements. And . . . here we are.
On December 12, the SEC staff issued the latest in a series of letters to the Securities Industry and Financial Markets Association (SIFMA). The letters conditionally extend no-action relief to allow a broker-dealer to rely on RIAs to perform some or all of the broker-dealer’s CIP requirements as well as the broker-dealer’s obligations under beneficial ownership requirements that went into full effect in May 2018.
The US Senate has confirmed Kathy Kraninger to serve as the second director of the Bureau of Consumer Financial Protection (BCFP). She will serve a five-year term ending in December 2023, unless she is terminated for cause by the president. Thus, Kraninger will lead the agency through at least the first two years of the next presidential term.
Kraninger is currently an associate director of the Office of Management and Budget (OMB) where she reports to Mick Mulvaney, the OMB director and also the current acting director of the BCFP. She has previously served in other noncareer (political) positions in the Senate, the US Department of Homeland Security, and the US Department of Transportation.
The staff of the Securities and Exchange Commission’s (SEC) Division of Trading and Markets (Staff) issued a no-action letter on October 29 to the Financial Industry Regulatory Authority (FINRA), which, in effect extends the effective date of recent changes to FOCUS reporting by registered broker-dealers. In August 2018, the SEC adopted amendments regarding, among other things, broker-dealer reporting with respect to reporting of extraordinary gains, the cumulative effect of changes in accounting principles, and comprehensive income reported on broker-dealer annual reports (i.e., Rule 17a-5). The amendments are scheduled to become effective for all filings made on and after November 5, 2018.