All Things FinReg

The US District Court for the Northern District of California ruled on December 20, 2022, that the Commodity Futures Trading Commission (CFTC) properly served the defendant, Ooki DAO, by posting summons documents in Ooki DAO’s online discussion forum and in its help chat box. Commodity Futures Trading Comm'n v. Ooki DAO, No. 3:22-cv-05416-WHO, 2022 BL 454541, 2022 U.S. Dist. Lexis 228820 (N.D. Cal. Dec. 20, 2022), Court Opinion (the Order).
The FDIC Board of Directors issued a proposal on December 13 amending and updating the rules regarding the use of the official FDIC sign and advertising statements to better reflect the modern consumer banking landscape. As noted in a memorandum from the FDIC staff, the update is also meant to address the growth of the fintech sector and partnerships between banks and fintechs. The proposed rule also seeks to clarify instances when FDIC deposit insurance coverage is being misrepresented to consumers.
The SEC’s Division of Corporation Finance recently posted new compliance and disclosure interpretations concluding that any registered broker-dealer acting as an authorized participant (AP) for any ActiveShares exchange-traded fund (ETF) may rely on the Commission’s disaggregation guidance to separately report ownership of securities acquired in a confidential brokerage account (Confidential Account) with a nonaffiliated brokerage firm (AP Representative), for the benefit of the AP.
On December 14, 2022, the US Securities and Exchange Commission (SEC) proposed a fundamental restructuring of the US equity markets in the form of two rule amendments and one new rule proposal (the Equity Market Proposals). In addition, the SEC proposed new Regulation Best Execution (Proposed Regulation Best Ex) under the Securities Exchange Act of 1934 (Exchange Act). The comment period for each rule proposal will remain open until the later of March 31, 2023, or 60 days after the applicable proposing release is published in the Federal Register.
The Consumer Financial Protection Bureau (CFPB or Bureau) has proposed a registry in which certain nonbank financial institutions must deposit copies of certain federal, state, and local orders. The proposed rule would also require a subset of larger nonbank financial institutions already subject to the Bureau’s supervisory authority to designate an individual to attest to compliance with such orders.
Just shy of a month since FTX declared bankruptcy, the US Securities and Exchange Commission’s (SEC’s) Division of Corporation Finance (Division or staff) published informal guidance on how public companies could be asked to address the possible impact of financial distress in the cryptoasset market. The guidance includes a “sample” crypto-specific comment letter focused on disclosure that public companies should consider providing in filings made under the Securities Act of 1933 (Securities Act) and Securities Exchange Act of 1934 (Exchange Act), as applicable.
At its next open meeting on December 14, 2022, the US Securities and Exchange Commission is expected to propose a series of rules and rule amendments that have the potential to fundamentally reshape the structure of the US securities markets.
The Senate Agriculture, Nutrition & Forestry Committee held a hearing, “Why Congress Needs to Act: Lessons Learned From the FTX Collapse,” on December 1, 2022, receiving testimony from Commodity Future Trading Commission (CFTC) Chairman Rostin Behnam. With the exception of very few exchanges during the Q&A portion of the hearing, the committee, which asked several questions about the CFTC’s oversight of FTX’s CFTC-registered affiliate, LedgerX, was supportive of the CFTC and did not lay much blame at the feet of the regulator. Rather, many senators were most eager to discuss robust, “whole of government” oversight and regulation of the digital asset economy.
The House of Representatives and the Senate took the first steps in response to the collapse of FTX this week. The Senate Agriculture Committee has announced a hearing at which the chair of the Commodity Futures Trading Commission (CFTC) will testify, while the House Financial Services Committee announced its intention to hold bipartisan oversight hearings and to take testimony from companies and individuals involved, including Sam Bankman-Fried, Alameda Research, Binance, FTX, and related entities, among others. Separately, a spokesperson from the US Senate Committee on Banking, Housing, and Urban Affairs stated that the committee would also hold oversight hearings into the FTX bankruptcy.
FINRA has announced that it is conducting a targeted examination of broker-dealer practices related to retail communications about “crypto asset” products and services. As part of this sweep, FINRA is asking broker-dealers for all retail communications that were distributed or made available by a broker-dealer or its affiliates on behalf of the broker-dealer that refer or relate to crypto assets or services involving crypto transactions or the holding of cryptocurrency during the period of July 1, 2022, to September 30, 2022.