Bridging the Weeks - April 2018 #4

by Katten Muchin Rosenman LLP
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A California federal court may be poised to dismiss an enforcement action brought by the Commodity Futures Trading Commission that could challenge the agency’s view of when financed sales of commodities to retail persons are subject to its oversight, as well as the circumstances when the Commission may bring an enforcement action against a person for purported fraud, relying on a Dodd-Frank provision of law that prohibits the use or employment of any manipulative device, scheme or artifice to defraud. Separately, the New York Attorney General's office asked 13 cryptocurrency exchanges to disclose a trove of information about their operations, when only five of the enterprises have ever obtained authority to conduct a virtual currency business from or to persons in the state. As a result, the following matters are covered in this week’s edition of Bridging the Week:

  • California Federal Court Potentially Poised to Limit CFTC’s Dodd‑Frank Fraud-Based Anti-Manipulation Authority in Monex Enforcement Action (includes Legal Weeds);
  • New York Attorney General Seeks Information From 13 Cryptocurrency Exchanges Even If No State Connection (includes My View and Compliance Weeds);
  • Trading Firm Sanctioned by CME for Trading System Breakdown That Prompted Market Spike (includes Compliance Weeds); and more.

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California Federal Court Potentially Poised to Limit CFTC’s Dodd-Frank Fraud-Based Anti-Manipulation Authority in Monex Enforcement Action

The California federal court judge hearing the enforcement action by the Commodity Futures Trading Commission against Monex Deposit Company  and other defendants for alleged fraud in connection with their financed sale of precious metals to retail persons issued a Tentative Order in late March dismissing the Commission’s complaint.  

The court’s preliminary decision – which could ultimately be issued “as is” or modified — said that actual delivery of precious metals in financed transactions to retail persons falls outside the CFTC’s authority when ownership of real metals is transferred to such persons (e.g., through book entry), even if the seller retains control over the commodities because of the financing. Moreover, the court provisionally held that the CFTC could not use the broad anti-fraud and anti‑manipulation authority enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act to prosecute acts of purported fraud except in instances where the alleged fraud affected or potentially affected the market or in cases of fraud‑based manipulation.

Last year, the CFTC sued MDC and two affiliated companies (collectively, “Monex”), along with Louis Cabrini and Michael Cabrini, the firms’ principals, in a federal court in Illinois. The Commission alleged that, in connection with Monex’s precious metals transactions, retail clients purchased and sold precious metals, paid only a portion of the purchase price, and either borrowed the difference (for purchases) or borrowed the metal (for sales). Although Monex delivered customers' precious metals to an independent warehouse and transferred title to the customers, it retained control over the commodities to protect itself in case a customer defaulted on his/her repayment or margin obligations.

The CFTC charged that these leveraged purchases and sales to retail clients constituted prohibited off-exchange futures contracts, and that Monex operated as a futures commission merchant without required registration. In making this claim, the CFTC relied on provisions of law that require all contracts for commodities for future delivery to be executed on or be subject to the rules of a designated contract market and offered and sold through a licensed broker (e.g., a futures commission merchant). (Click here to access 7 U.S.C § 2(c)(2)(D(i)), here to access 7 U.S.C. § 6(a)(1), and here to access 7 U.S.C. § 6d(a)(1).) Although the CFTC conceded these requirements do not apply to outright sales of commodities to retail persons, it said the requirements apply when the sales are financed or on leverage and a firm retains control over its customers' commodities beyond 28 days – even if to protect itself in connection with its financing – because actual delivery has not occurred within 28 days. (Click here to access 7 U.S.C § 2(c)(2)(D)(ii)(III).)

In addition, the CFTC claimed that Monex made material misrepresentations to its customers and that the misstatements constituted fraud. The CFTC based these charges on a provision of law that prohibits fraud in connection with illegal, off-exchange futures transactions (click here to access 7 U.S.C.§ 6b(a)(2)(A)), as well as the authority given to the CFTC under Dodd-Frank that prohibits the use or employment of any manipulative device, scheme or artifice to defraud and a related CFTC rule. (Click here to access 7 U.S.C § 9(1) and here for CFTC Rule 180.1.) The Dodd-Frank provision, argued the CFTC, applies to both fraud in connection with off-exchange futures transactions and to spot market transactions in commodities where there are no derivatives.

In the Tentative Order, the federal court judge rejected the CFTC’s legal foundation for its charges and granted the defendants’ motion to dismiss for two principal reasons.

First, the Court did not accept the Commission’s view that Monex’s leveraged metals transactions were like futures contracts and thus subject to provisions of law that imposed registration requirements on brokers of such contracts. The CFTC had claimed that, although Monex transferred physical metals to independent depositories for the account of the retail clients, its retention of control over the precious metals negated that it made actual delivery of the commodities. However, said the court, if this view was correct, “every financed transaction would violate Dodd-Frank… and the result would be to eliminate the Actual Delivery Exception from the [relevant law].”

The Court then ruled that, since Monex’s transactions were not prohibited off-exchange futures transactions, they were not subject to the CFTC’s traditional anti-fraud prohibition that applies to transactions in futures and not to transactions in commodities.

Second, the Court concluded that enactment of the Dodd-Frank provision, which prohibits the use or employment of any manipulative or deceptive device, was meant solely to assist the CFTC “to protect market participants and promote market integrity.” As a result, the Court declined to find that the law “so dramatically augmented the CFTC’s regulatory authority to cover all fraud in connection with retail commodity transactions...” Accordingly, Monex could not be held liable under the Dodd-Frank provision as pleaded by the CFTC. The CFTC was invited, however, to amend its complaint to plead that Monex's purported fraud was in connection with market manipulation.

The Court’s Tentative Order was subject to oral argument by the parties on March 27. A final decision is pending. (Click here for some background regarding the relevant judge's (The Hon. James Selna) practices regarding tentative orders.)

The CFTC’s action against Monex was transferred to a federal court in California from Illinois in October 2017.

(Click here for additional details on the CFTC enforcement action against Monex in the article “Retail Metals Dealer and Principals Sued by CFTC for Illegal Transactions and Fraud” in the September 10, 2017 edition of Bridging the Week.)

Legal Weeds: If adopted “as is,” the California federal court’s proposed ruling in Monex could have a chilling effect on the CFTC’s enforcement efforts against persons selling virtual currencies who do so on leverage or who engage in alleged fraudulent practices. This is because such a ruling would raise questions regarding the CFTC’s authority to bring such actions in the first place.

In 2016, the CFTC settled an enforcement action against BFXNA Inc. d/b/a Bitfinex, claiming that the firm operated a platform that enabled retail persons to buy and sell virtual cryptocurrencies and to finance their transactions. However, because Bitfinex purportedly retained control over such transactions after the financing – much like the CFTC alleged against Monex –, the CFTC alleged that actual delivery did not occur. As a result, the transactions were akin to futures contracts, and Bitfinex should have been registered as an FCM in order to engage in such activities. (Click here for further details regarding this CFTC action in the article “Bitcoin Exchange Sanctioned by CFTC for Not Being Registered” in the June 5, 2016 edition of Bridging the Week.)

Moreover, more recently, the CFTC proposed guidance that, for sales of virtual currency to retail persons, the Commission would consider “actual delivery” to have occurred solely when the person could take “possession and control” of all purchased cryptocurrency, use it freely no later than 28 days from the date of an initial transaction and do so unencumbered. This would require neither the offeror nor the seller, or any person acting in concert with such persons, retaining any interest or control in the virtual currency after 28 days from the date of the transaction. This would presumably preclude a seller from retaining control over the cryptocurrency by having authority over a wallet containing such commodity even when the seller financed the purchase. (Click here for details regarding this proposal in the article “CFTC Proposes Interpretation to Make Clear: Retail Client + Virtual Currency Transaction + Financing + No Actual Delivery by 28 Days + No Registration = Trouble” in the December 17, 2017 edition of Bridging the Week.)

If the federal court hearing the CFTC Monex action were to issue its Tentative Order “as is,” the ruling could serve as precedent for persons to challenge the CFTC’s jurisdiction over financed virtual currency transactions (as well as other financed commodity transactions) to retail persons where sellers retain control.

Additionally, the CFTC has liberally applied the Dodd-Frank law that prohibits the use or employment of any manipulative device, scheme or artifice to defraud, as well as the parallel CFTC rule. This is because the CFTC has regarded the provision of law “as a broad, catch-all provision reaching fraud in all its forms – that is, intentional or reckless conduct that deceives or defrauds market participants.” 

Relying on the these provisions, the CFTC has brought a wide range of enforcement actions, including the JP Morgan “London Whale” case, and cases based on allegations of illegal off-exchange metals transactions, claims of more traditional manipulation of wheat, allegations of spoofing and claims of insider trading. (Click here for background in the article “CFTC Brings First Insider Trading‑Type Enforcement Action Based on New Anti‑Manipulation Authority” in the December 6, 2015 edition of Bridging the Week.) More recently, in its 2017 enforcement action against Gelfman Blueprint, Inc. and Nicholas Gelfman, its chief executive officer and head trader, the CFTC claimed that the defendants’ purported fraudulent conduct running a Ponzi scheme related to Bitcoin violated these provisions of law. 

An adverse ruling as proposed in the Monex enforcement action could force the CFTC to more narrowly focus its enforcement actions under the controversial Dodd-Frank provision, leaving the Commission to bring lawsuits only where it can allege that a purported fraud affected the market or constituted fraud-based market manipulation. More likely, however, the CFTC would continue its enforcement activities “as is” and seek to resolve what would then be a split among courts’ rulings in different regions of the US regarding the scope of the relevant section of Dodd-Frank. Recently, another federal court – one in Brooklyn, New York – upheld the authority of the CFTC to exercise its enforcement authority in connection with alleged fraud in connection with spot trades in virtual currencies where the CFTC relied on the Dodd-Frank law and its own parallel rule. (Click here for details in the article “A Court, Treasury and the SEC Confirm Substantial Overlap in US Jurisdiction of Cryptocurrencies” in the March 8, 2018 edition of Between Bridges.)

Briefly:

  • New York Attorney General Seeks Information From 13 Cryptocurrency Exchanges Even If No State Connection: The New York Attorney General’s office requested information from 13 cryptocurrency exchanges regarding their operations. Only five of the exchanges possess either a BitLicense or a New York limited purpose trust company charter that would appear to enable them to conduct a virtual currency business from NY or to persons in NY. (Click here to access background on NY’s BitLicense requirements in the July 8, 2015 Financial Services Advisory, “New York BitLicense Regulations Virtually Certain to Significantly Impact Transactions in Virtual Currencies” by Katten Muchin Rosenman LLP.)​

Generally, the NY AG office’s questionnaire seeks information on the exchanges’ ownership and control, basic operations and fees, trading policies and procedures, practices regarding outages and other suspension of trading, internal controls, privacy and money laundering, and protections against risks to customer funds. Curiously, the NY AG office also asks for each exchange’s application to the NY Department of Financial Services for a limited purpose charter or BitLicense and all supplemental submissions.

In a letter to all of the exchanges, the NY AG office said that after it reviewed all received material, it would “disclose certain information in a publicly accessible format,” although it did not detail which specific information it was referencing. The NY AG office indicated it would disclose the identity of any platform that did not provide “meaningfully complete responses.”

The five cryptocurrency exchanges that the AG requested information from that either have a limited purpose charter or BitLicense are Coinbase, Inc. (GDAX), Gemini Trust Company, bitFlyer USA, Inc., Circle Financial Limited (Poloniex), and itBit Trust Company. The other exchanges that the AG requested information from are iFinex Inc. (Bitfinex), Bitstamp USA Inc., Payward, Inc., Bittrex, Inc., Binance Limited, Elite Way Developments LLP (Tidex.com), Gate Technology Incorporated (Gate.io), and Huobi Global Limited (Huobi.Pro).

Separately:

  • NASAA Warns About ICOs: The North American Securities Administrators Association issued a cautionary guidance regarding initial coin offerings aimed at the retail public. In its guidance, NASAA distinguished between utility tokens, which enable the holder to exchange a coin for a good or service in the future, and equity tokens, which entitle a holder to an interest in the revenue or ownership of the underlying project. NASAA noted, however, that “the regulatory treatment of tokens is evolving,” and that if a utility token is issued for a non-operational project or is intended to be traded on an exchange, it might fall with “the purview of securities regulation.”
  • FINRA Fines a Tezos Co-Founder: Arthur Meunier a/k/a Arthur Breitman agreed to be suspended for two years from association with any broker-dealer regulated by the Financial Industry Regulatory Authority to settle FINRA charges that, from February 2014 to April 2016, he participated in the development of Tezos, a blockchain technology project, without notifying the broker-dealer he was then employed by of such activity, as required by FINRA rules. (Click here to access FINRA Rule 3270 and here for FINRA Rule 2010.) Mr. Breitman also agreed to pay a fine of US $20,000 to resolve FINRA’s charges. According to FINRA, during the relevant time, Mr. Breitman also falsely attested to his employer broker-dealer that he had disclosed all outside activities to it, when he had not. Founders of Tezos, including Mr. Breitman, have been named in numerous class action lawsuits alleging the unlawful sale of securities and securities fraud, among other offenses. (Click here for an article on one such lawsuit, “Backers of Tezos Initial Coin Offering Named in Prospective Class Action Litigation,” in the November 12, 2017 edition of Bridging the Week.)
  • Is it a Purchase or a Cash Advance?: Brady Tucker filed a purported class action lawsuit against Chase Bank USA  N.A. for, without prior notice, charging higher cash advance fees and interest charges for purchases of virtual currencies with bank-issued credit cards than for other purchases. According to the plaintiff’s lawsuit, filed in a federal court in New York, the bank historically treated purchases of virtual currencies through virtual currency exchanges such as Coinbase as ordinary purchases and charged its standard fees and interest rates. However, alleged Mr. Tucker, without prior notice, the bank began in January 2018 to treat purchases of virtual currencies as cash advances, and charged higher interest rates and fees. Moreover, unlike ordinary credit card interest charges, interest charges on virtual currency purchases began to accrue immediately, said Mr. Tucker. Mr. Tucker claimed that Chase’s alleged unilateral action without prior notice violated applicable law (click here to access 15 U.S.C. §1637(i)(2) and here for Regulation Z enacted thereunder). Mr. Tucker seeks recovery of his purported financial damages, statutory damages and recovery of his costs of pursuing a legal remedy.
  • SEC Names New Defendant in Centra ICO Lawsuit: The Securities and Exchange Commission amended its April 2 lawsuit against Sohrab Sharma and Robert Farks in connection with the purported illicit initial coin offering by Centra Tech Inc. to add Raymond Trapani, another purported company co-founder. The SEC alleged that Mr. Trapani was the “mastermind” of the allegedly fraudulent ICO. Mr. Trapani was also named in a separate criminal action filed by the United States Attorney's Office in Manhattan, New York. (Click here for background regarding the SEC’s initial lawsuit against Mr. Sharma and Mr. Farks in the article “SEC Seeks to Halt another ICO” in the April 8, 2018 edition of Bridging the Week.)

My View: New York Attorney General’s Office, meet the NY Department of Financial Services. It’s hard to imagine that NY State is so flush with taxpayer funds that it can afford two regulators overseeing the same virtual currency activities. The NY DFS has already taken the lead in this area by adopting rules governing virtual currency businesses. Moreover,  NY already requires cryptocurrency exchanges to potentially qualify as both money transmitters and to obtain a BitLicense to do business from or with residents of the state. Dealing with another regulator in the same jurisdiction is an additional, unnecessary burden.

That being said, the questionnaire forwarded to the 13 cryptocurrency exchanges provides an excellent basis for persons to formulate their own due diligence inquiries to potential crypto asset exchanges on which they may conduct business.

Compliance Weeds: As I have previously written, regulated financial services businesses and proprietary trading entities should consider, if they have not done so already, whether they should amend existing employee personal trading polices to expressly address crypto assets. This may be appropriate even if such firms are not engaged in crypto asset activities today.

The easiest approach would be for firms to ban all personal crypto assets trading by employees because of reputational or other perceived risks. However, such a policy may impede hiring or retention of some employees, especially so-called “millennials.”

Alternatively, if firms already have policies addressing employees’ trading of securities, including participation in new offerings of securities, it might be appropriate to consider extending these policies to digital tokens issued as part of initial coin offerings that the Securities and Exchange Commission has said are likely securities. (Click here for background regarding the SEC’s views in the article “SEC Chairman Warns Lawyers Providing ‘It Depends’ Advice on ICOs” in the January 28, 2018 edition of Bridging the Week.)

Moreover, to the extent firms have existing polices addressing employees’ trading of gold or similar commodities, they may wish to extend such policies to employees’ trading of virtual currencies like Bitcoin or Litecoin.

However, because of the SEC’s views, it is not clear today what the bright line is between virtual currencies and security tokens. 

Firms that engage in crypto asset activities should consider the potential impact of employees’ front-running firms or a firm’s customers’ trading or engaging in other wrongful conduct. Firms not engaged in crypto asset activities but contemplating engagement should consider the potential implications of employees purchasing crypto assets in advance of any firm announcement with the expectation that the announcement might cause prices of relevant crypto assets to rise.

However, the monitoring of employee crypto asset activity may be difficult, as crypto asset exchanges may not be willing or able to provide statements of employee activity to employers automatically. At best, it may be up to an employee to authorize such third-party transmissions that he or she could activate or deactivate at his or her discretion.

  • Trading Firm Sanctioned by CME for Trading System Breakdown That Caused Market Spike: Virtu Financial Global Markets, LLC agreed to pay a fine of US $75,000 to resolve a disciplinary action brought by the Chicago Mercantile Exchange claiming that on October 16, 2015, because of a programing error, an automated trading system malfunctioned and sold a Eurodollar futures contract, causing a 74-tick price movement. The exchange claimed that although Virtu’s alternative trading system automatically locked down after the “aberrant activity,” the firm unlocked the ATS by error, causing further price anomalies.

Unrelatedly, DBF GP, LLC, the general partner of a hedge fund, and David Lambert, the firm’s manger, consented to a fine of US $20,o00 by Cboe Futures Exchange and disgorgement of US $19,500 in connection with Mr. Lambert’s trading for DBF, whereby he purportedly entered orders for CFE VX futures that prompted price changes on Cboe’s corresponding options exchange. Mr. Lambert then allegedly traded against the options exchange’s participants at the non-bona prices and cancelled his futures orders.

DBF and Mr. Lambert agreed to be jointly and severally liable for the CFE fine. Mr. Lambert also agreed to a six-month trading suspension on all exchanges owned by Cboe Global Markets. The alleged conduct occurred on “several occasions” from July 30 through September 5, 2014.

Additionally, Shung-Han Liu and Ali Abbassi, both non-members, agreed to fines and trading suspensions imposed by the New York Mercantile Exchange for alleged spoofing-type trading activity. Mr. Abbassi purported disruptive trading occurred from April through June 2016. He consented to a fine of US $5,000 and a three-month all-CME Group trading suspension. Mr. Liu’s alleged wrongful conduct – which included using another person’s Tag 50 identification for one side of his trades – took place from October 7 through December 16, 2016. He was fined US $40,000 for his conduct and agreed to a 10-business-day all-CME Group trading suspension.

Also, a member firm of both the Chicago Board of Trade and CME was fined by both exchanges US $30,000, in aggregate, for misreporting open interest in various products on both exchanges on numerous dates in January 2017, and on the CBOT only in June 2017.

Compliance Weeds: The CFE disciplinary action is unusual because it appears to entail the placement of purported spoofing orders on a futures exchange to induce non-bona fide prices on a securities exchange. The alleged executions prompted by the futures orders appear to have occurred on Cboe's affiliated securities exchange.

Spoofing-type trading activity may occur across asset classes to the extent products are correlated. To the extent firms monitor for disruptive trading conduct, attention should be paid to the potential of problematic cross-asset activity.

More Briefly:

  • SEC Proposes New Regulation to Ensure Broker-Dealers and Associated Persons Act in Best Interest of Retail Clients: The Securities and Exchange Commission proposed a number of measures to help minimize perceived investor confusion between broker-dealers and investment advisers. These measures include:
  • adoption of a new proposed rule, entitled “Regulation Best Interest,” that will require broker-dealers when recommending a securities transaction or investment strategy to a retail client to act in the customer’s best interest. A broker-dealer would comply with its obligations if it reasonably discloses the material terms of the scope and terms of its relationship with a retail client, has a reasonable basis to believe a recommendation is in the retail client’s best interest, and has policies and procedures reasonably designed to eliminate material conflicts of interest with any recommendation;
  • issue of a new proposed interpretation regarding a standard of conduct for investment advisers to satisfy their fiduciary duty to their clients; and
  • adoption of a new proposed rule that would require investment advisers and broker-dealers to provide retail investors with a relationship summary, explaining differences in the types of services they offer, the legal standards of conduct that apply to each, the fees a client might pay and certain conflicts that may exist. 

The rule would also prohibit standalone broker-dealers from using the terms “adviser” or “advisor” in their names or title. The SEC will accept comments on its proposals for 90 days after their publication in the Federal Register.

  • CFTC and Department of Justice Bring Legal Actions Against Operators of Alleged Fraudulent Scheme Involving Binary Options and a Virtual Currency: The Commodity Futures Trading Commission brought an enforcement action against Blake Kantor a/k/a Bill Gordon and other defendants for purportedly selling binary options to retail persons while not being appropriately registered as futures commission merchants, and later, offering some customers an opportunity to purchase a virtual currency known as an "ATM" coin, all as part of a fraudulent scheme. According to the CFTC, the defendants also misappropriated at least some of their customers’ funds. Concurrent with filing its legal action, the CFTC obtained an emergency order freezing the defendants’ assets, while the US Attorney’s Office in Brooklyn, New York indicted Mr. Kantor for his role in the alleged fraud. According to both the CFTC and the Department of Justice, Mr. Kantor solicited funds from customers for trading binary options, and then manipulated the trades to the customers’ disadvantage. Mr. Kantor then persuaded some customers to use balances in their binary options account to purchase ATM coins. The CFTC and the DOJ filed their legal actions in a federal court in Brooklyn.
  • ICE Futures Europe Warns of Incomplete Documentation and Audit Trails in Connection with EFRP Transactions: ICE Futures Europe issued a reminder that persons engaging in the exchange for related position transactions must, upon request, provide the exchange “sufficient supporting documentation and a complete audit trail in relation to the transactions concerned.” The exchange noted that during post‑trade reviews, it had learned of the failure “by a number of Members” to comply with exchange requirements related to documentation.
  • Canadian Securities Regulators Propose Registration Scheme for OTC Dealers and Advisers: The Canadian Securities Administrators proposed new registration requirements for dealers and advisers engaging in over-the-counter derivatives businesses, to the extent they are not already registered under another regulatory scheme or have their head office or principal place of business outside Canada. CSA also proposed measures to reduce risks to market participants; requirements for principal staff members to have specific education, training and experience; and registration obligations for firms and individuals. Only persons required to register under the new requirements would be subject to the other new requirements. CSA will accept comments through September 17. 
  • CME Group to Offer TACOs: The CME Group proposed that, effective May 14, it will offer Basis Trades at Cash Open (TACO). This functionality will permit traders to enter into Chicago Mercantile Exchange E-mini S&P 500 futures contracts that are priced at a differential to the next regularly scheduled special opening quotation of the cash index underlying the relevant futures contract. Block trades will be permitted for TACO transactions. (Click here for additional information.)

For further information

Canadian Securities Regulators Propose Registration Scheme for OTC Dealers and Advisers:
http://www.osc.gov.on.ca/documents/en/Securities-Category9/csa_20180419_93-102_rfc-derivatives-registration.pdf

California Federal Court Potentially Poised to Limit CFTC’s Dodd-Frank Fraud-Based Anti-Manipulation Authority in Monex Enforcement Action:
https://www.cacd.uscourts.gov/sites/default/files/documents/JVS/TR/17-1868%2C%20CFTC%20v.%20Monex%2C%20TENTATIVE%20Order%20re%20MTD%2C%20MPI%2C%20Mtn%20to%20exclude%2C%2003-27-18.pdf

CFTC and Department of Justice Bring Legal Actions Against Operators of Alleged Fraudulent Scheme Involving Binary Options and a Virtual Currency:

CME Group to Offer TACOs:
http://www.cmegroup.com/notices/market-regulation/2018/04/RA1803-5.pdf

ICE Futures Europe Warns of Incomplete Documentation and Audit Trails in Connection with EFRP Transactions:
https://www.theice.com/publicdocs/circulars/18069.pdf

New York Attorney General Seeks Information From 13 Cryptocurrency Exchanges Even If No State Connection:
https://ag.ny.gov/press-release/ag-schneiderman-launches-inquiry-cryptocurrency-exchanges
https://ag.ny.gov/sites/default/files/virtual_markets_integrity_initiative_questionnaire.pdf

SEC Proposes New Regulation to Ensure Broker-Dealers and Associated Persons Act in Best Interest of Retail Clients:
https://www.sec.gov/rules/proposed/2018/34-83062.pdf
https://www.sec.gov/rules/proposed/2018/ia-4889.pdf
https://www.sec.gov/rules/proposed/2018/34-83063.pdf

Trading Firm Sanctioned by CME for Trading System Breakdown That Caused Market Spike:

Ali Abbassi:
http://www.cmegroup.com/notices/disciplinary/2018/04/NYMEX-16-0478-BC-ALI-ABBASSI.html#pageNumber=1
FCM:
http://www.cmegroup.com/notices/disciplinary/2018/04/cbot-17-0642-bc-citigroup-global-markets-inc-.html#pageNumber=1
http://www.cmegroup.com/notices/disciplinary/2018/04/cme-17-0642-bc-citigroup-global-markets-inc-.html#pageNumber=1
Shung-Han Liu:
http://www.cmegroup.com/notices/disciplinary/2018/04/NYMEX-17-0628-BC-SHUNG-HAN-LIU.html#pageNumber=1
Virtu:
http://www.cmegroup.com/notices/disciplinary/2018/04/cme-16-0403-bc-virtu-financial-global-markets-llc.html#pageNumber=1

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

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