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.

The US Securities and Exchange Commission (SEC) issued a concept release on June 18 that seeks comment to "simplify, harmonize, and improve" regulations surrounding the sale of securities in nonpublic offerings, or private placements. The concept release seeks comments on a variety of topics relating to the existing exempt offering framework, including whether the current framework should be modified to address unique challenges, gaps, and complexities in capital formation within specified industries, geographical locations, demographics, and other factors. The 211-page concept release covers the accredited investor definition; exemptions for Regulation D, Regulation A, intrastate, and crowdfunding offerings; pooled investment funds; and secondary trading along with the concept of integration of exempt offerings.

We are always looking to identify good forums for keeping abreast of global fintech developments and trends. One such interesting platform was Cross-Border Fintech: Regulation & the Law 2019, held in London on June 6, where we heard some great insights into the current market trends in and the future of fintech. The conference was well attended, with representatives of many industry leaders, authorities, and industry bodies in attendance. The participation of many on the front lines of fintech from financial institutions, fintech startups, and industry bodies created a forum to share innovative ideas and trends that allowed participants—including us—to keep up with the latest innovation.

Practitioners, academics, and entrepreneurs joined SEC regulators at the 2019 FinTech Forum hosted by the SEC’s Strategic Hub for Innovation and Financial Technology (FinHub) on May 31 in Washington, DC. Panelists discussed a range of considerations on digital assets, including capital formation, trading and markets, investment management, and innovations in distributed ledger technology (DLT). In keeping with a positive trend that has emerged among the federal financial regulatory agencies, the forum demonstrated the SEC’s desire for industry engagement and the depth of its knowledge in the emerging technology.

The latest nail in the coffin for Operation Choke Point was added on May 22 by the Federal Deposit Insurance Corporation (FDIC) when it issued a press release announcing its resolution of a lawsuit against it by several payday lenders. Plaintiff payday lenders, echoing the generalized complaint regarding Operation Choke Point, had alleged that coordinated efforts by FDIC and US Department of Justice (DOJ) officials forced them out of the financial system by having their banking relationships terminated and, in some cases, having their bank accounts shut down.

The Financial Crimes Enforcement Network (FinCEN) recently issued guidance consolidating current FinCEN regulations, rulings, and guidance about cryptocurrencies and money services businesses (MSBs) under the Bank Secrecy Act (BSA). Along with the May 9 guidance, FinCEN issued an advisory to assist financial institutions in identifying and reporting suspicious activity or criminal use of cryptocurrencies.

The Consumer Financial Protection Bureau (CFPB, the Bureau) today issued a Notice of Proposed Rulemaking (the Proposal) to establish implementing regulations for the Fair Debt Collection Practices Act (FDCPA). Although it has been more than 40 years since President Jimmy Carter signed the FDCPA into law, if implemented, these would be the first authoritative regulations to clarify key aspects of what is permissible under the federal debt collection laws.

The US Court of Appeals for the Ninth Circuit on May 6 upheld the constitutionality of the structure of the Consumer Financial Protection Bureau (CFPB). In CFPB vs. Seila Law LLC, a panel of the court determined that the limitation on the president’s authority to remove the CFPB director, other than for cause, did not impede the president’s authority under the US Constitution’s Appointments Clause. Citing longstanding US Supreme Court precedent established in Humphrey’s Executor v. United States, 295 U.S. 602 (1935) (upholding President Franklin Roosevelt’s removal of an FTC Commissioner), and Morrison v. Olson¸487 U.S. 654 (1988) (upholding the Independent Counsel Act as then constituted), the Ninth Circuit panel concluded that the CFPB’s structure is constitutionally permissible.

Stepping in to fill a perceived regulatory and enforcement void at the federal level, the governor of New York and his acting superintendent of the New York Department of Financial Services (DFS) have created a division within DFS that amounts to a mini-(federal) Consumer Financial Protection Bureau (CFPB). Because there are few major financial institutions that do not have significant business contacts with New York, the new division will have broad-based authority over large volumes and many types of financial consumer transactions, and its impact will not be held back by the current federal administration’s commitment to “regulatory rollback.”

The Consumer Financial Protection Bureau (CFPB) recently advised that it has significantly changed its Civil Investigative Demand (CID) process to increase transparency and to better permit targets and subjects to understand the nature of an investigation. The changes will bring the CFPB into compliance with opinions rendered by two Federal Circuit courts as well as policy changes implemented by the Federal Trade Commission (FTC). The change may well have some persuasive impact on other enforcement agencies, such as state attorneys general, who enforce many of the same laws as the CFPB and generally have CID authority as well.