MVA White Collar Defense, Investigations, and Regulatory Advice Blog

The Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”) (collectively, the “Agencies”) jointly proposed a rule (the “Proposed Rule”) that would impact existing confidential reporting obligations of private equity funds and other collective investment vehicles not registered as an “investment company” (referred to as, “Private Funds”). The rule proposes changes to the Form PF, a non-public report for certain SEC-registered investment advisers to Private Funds, which get submitted to the SEC (and CFTC ...

A Bloomberg article last week suggests potentially more bad news is on the way for Coinbase Global Inc. (“Coinbase”). Coinbase is reportedly facing an investigation by the U.S. Securities and Exchange Commission (“SEC”) into whether it let customers trade digital assets that the SEC believes should have been registered as securities. Rumors of investigations by the SEC do not necessarily suggest problems for the company at the center of those rumors, but the timing of a recent SEC complaint (SEC v. Wahi) may explain why this report had such a negative effect on Coinbase’s ...

On June 8, 2022, the New York State Department of Financial Services (“NYDFS”) released industry guidance applicable to U.S. dollar-backed stablecoins issued by NYDFS-regulated entities (the “Guidance”). The Guidance focuses on NYDFS requirements relating to the redeemability of these stablecoins, the asset reserves that back them (the “Reserves”), and auditor examination and attestations regarding management’s assertions concerning the sufficiency of the Reserves.  

By way of background, a stablecoin is a type of digital asset that is intended to ...

Late last month the Securities and Exchange Commission (“SEC”) charged JP Morgan, UBS and Trade Station with violations of Regulation S-ID based on a range of  inadequacies in their identity theft red flag policies and procedures. https://www.sec.gov/news/press-release/2022-131 The violations at issue might seem less than critical, such as not updating policies, merely copying over examples of red flags from Reg S-ID’s Appendix A, not incorporating specific policies into the red flag program, covering all accounts instead of conducting specific account assessments, and not providing sufficient detail in board reports. Although the SEC did not note any failure by these broker-dealers and investment advisors to actually detect and respond to identity theft red flags, the resulting orders and fines (up to $1.2 million), underline the SEC’s seriousness about protecting investors from cybercrime by requiring broker dealers and investment advisors to up their game and focus on the details.

In response to ever increasing reports of forgery and falsification of records in the digital signature space, FINRA issued Regulatory Notice 22-18. This Notice reminds FINRA members of relevant regulatory obligations, while also addressing misuse scenarios and identification methods, in order to help members mitigate risk in this area.

In the Notice, FINRA highlights that forgery occurs when an individual “signs or affixes, or causes to be signed or affixed,” the name of another person to a document without that person’s prior permission. FINRA further stated that ...

On March 17, 2022, FINRA issued Regulatory Notice 22-10 (“Notice”), which reminds FINRA member firms and their associated persons of the scope of supervisory liability for Chief Compliance Officers (“CCO”). The Notice discusses this liability in the context of FINRA Rule 3110, which among other things, requires FINRA member firms to establish and maintain a system (including written procedures) to supervise the activities of each associated person in a manner that is reasonably designed to achieve compliance with applicable securities laws, regulations, and FINRA ...

In the fourteen years since the 2008 financial crisis, significant actions have been taken by Federal banking agencies to make the largest financial institutions more resilient and less likely to fail and to require planning that would facilitate their orderly resolution, if necessary. These risk mitigation measures are tailored, however, with the most stringent requirements, and highest regulatory expectations, appropriately reserved for the eight U.S. banks designated as posing the greatest risk to financial stability (global systemically important banks, or GSIBs ...

On March 30, 2022, the U.S. Securities and Exchange Commission’s (“SEC”) Division of Examinations released its exam priorities for fiscal year 2022 (the “2022 Priorities”). As in years past, these exam priorities naturally follow from SEC rulemakings, statements, risk alerts and other guidance issued in the past year, and reflect practices or topics that may pose higher risk for referral to the SEC’s Division of Enforcement.

The 2022 Priorities include broader thematic “Significant Focus Areas,” which may be applicable to both broker-dealers and registered ...

Late last year, news services reported on the results of the efforts of a black couple living in Northern California to challenge what they believed was an initial, discriminatory low-ball appraisal of their home. To test their theory, the couple “whitewashed” their home by removing artwork and replacing family photos with those of a white neighbor, who acted as the homeowner during a second appraisal from another company. The couple filed a discrimination lawsuit against the initial appraiser after the second appraisal came in almost half a million dollars higher. Recent ...

On March 21, 2022, the U.S. Securities and Exchange Commission (“SEC”) announced a proposed rule (the “Proposed Rule”) that will require registrants to make certain climate disclosures in their registration statements and periodic filings with the SEC. Chairman Gary Gensler stated that the goal of the Proposed Rule is to “provide investors with consistent, comparable, and decision-useful information for making their investment decisions, and it would provide consistent and clear reporting obligations for issuers.” The Proposed Rule would require three main ...