Financial Services Weekly News - September 2015 #3

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Regulatory Developments

CFTC Grants Temporary Registration as SEF to LedgerX Bitcoin Options Exchange and Clearing House

On Sept. 10 the CFTC announced that it had issued an Order of Temporary Registration as a Swap Execution Facility to LedgerX LLC. As a next step, the Commission will undertake a substantive review of LedgerX’s application for full registration. LedgerX says that when it is registered, it will be “the first federally regulated bitcoin options exchange and clearing house to list and clear fully-collateralized, physically-settled bitcoin options for the institutional market.”

NYDFS Reaches Agreements with 4 Major Banks on Record-Keeping and Other Requirements in Connection with Symphony Platform

On Sept. 14, the New York Department of Financial Services (NYDFS) announced agreements with four banks, Goldman Sachs Bank, Deutsche Bank, Credit Suisse and Bank of New York Mellon, on record-keeping and other requirements relating to the Symphony Communications LLC chat and messaging platform. The NYDFS had been concerned about the potential effect of Symphony’s marketed “guaranteed data deletion” service on regulatory investigations. The announcement contains links to the agreements with each of the four banks. The NYFDS regulates banks and insurance companies. Broker-dealers are regulated in New York by the New York State Attorney General.

Conference of State Bank Supervisors Releases Model Regulatory Framework for Virtual Currency Activities

The Conference of State Bank Supervisors (CSBS) has releasedPolicy Statement on Virtual Currency Activities (Policy Statement). CSBS released a draft of the Policy Statement in Dec. 2014, and the final Policy Statement takes into account comments on the draft Policy Statement that CSBS received from virtual currency trade groups, traditional financial services trade groups and others. The Policy Statement contains a definition of virtual currency and a description of the types of virtual currency related activities that should fall within the ambit of state regulation, and it addresses recommended regulatory practices with respect to licensing, financial strength of virtual currency firms, consumer protection, cybersecurity, anti-money laundering, supervision and other matters.

Enforcement & Litigation

FINRA Sanctions Broker Representatives As a Result of Crackdown on Broker Migration Between Risky Firms

FINRA announced on Sept. 15 that as a result of a 2014 onsite examination, it found securities violations including various misleading sales pitches, customer account churning and other business misconduct at Global Arena Capital Corp. It has barred seven former registered representatives from the securities industry, suspended an eighth person whose bar will become effective in October, and barred two former branch managers from serving in a principal capacity. The actions are a result of FINRA's continued focus on tracking groups of brokers that move from one risky firm to another. FINRA said that it had employed a risk-based approach to identify certain brokers who had moved from HFP Capital Markets LLC – a firm that FINRA later expelled – to Global Arena and were then subject to heightened regulatory scrutiny during a 2014 exam.

 

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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