- Top Lines
The Consumer Financial Protection Bureau (CFPB) issued two Advisory Opinions related to requirements in the Fair Credit Reporting Act (FCRA). The first advisory opinion underscores that to trigger a consumer reporting agency’s file disclosure requirements, a consumer does not need to use specific language. The advisory opinion also highlights the requirements regarding the information that must be disclosed to a consumer when providing their file disclosure. The second advisory opinion relates to background screening practices. It affirms that a consumer reporting agency that reports public record information is not using reasonable procedures to assure maximum possible accuracy under the FCRA if it does not have procedures in place that: (1) prevent reporting information that is duplicative or that has been expunged, sealed, or otherwise legally restricted from public access; and (2) include any existing disposition information if it reports arrests, criminal charges, eviction proceedings, or other court filings.
Following President Biden’s veto of the Congressional Review Act resolution to overturn the CFPB’s rule on small business lending pursuant to Section 1071 of the Dodd-Frank Act, the Senate voted 54-45 to override the veto, falling short of the ⅔ vote required. Note that due to ongoing litigation, according to the CFPB, all deadlines for compliance with the small business lending rule are stayed for all covered financial institutions.
Senator Sherrod Brown (D-OH), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, released a statement that the outcome “is a win for the engines of our economy: small businesses and entrepreneurs.”
- End of Week Wrap Up
The Federal Trade Commission (FTC) adjusted the maximum civil penalty dollar amounts for violations of 16 provisions of law the FTC enforces, as required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.
The Securities and Exchange Commission (SEC) approved the listing and trading of 11 spot bitcoin exchange-traded product (ETP) shares. SEC Chair Gary Gensler stated that the action is cabined to ETPs holding one non-security commodity, bitcoin and should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities. Chair Gensler further stated that the approval does not signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws.
The Chairman of the House Financial Services Committee, Patrick McHenry (R-NC), the Chairman of the Subcommittee on Oversight and Investigations, Bill Huizenga (R-MI), the Chairman of the Subcommittee on Digital Assets, Financial Technology and Inclusion, French Hill (R-AR), and the Chairman of the Subcommittee on Capital Markets, Ann Wagner (R-MO), sent a letter to Chair Gensler demanding a briefing on the SEC’s compromised X account, which led to a false tweet announcing the approval of Bitcoin ETFs on January 9.
Commissioner Hester Peirce and Commissioner Mark Uyeda issued statements regarding the application while Commissioner Caroline Crenshaw issued a statement dissenting.
The SEC charged Shanchun Huang with manipulative trading in the stock of Future FinTech Group Inc., using an offshore account shortly before he became Future FinTech’s CEO in 2020. The SEC also charged Huang with failing to disclose his beneficial ownership of Future FinTech stock as well as transactions in such stock.
The SEC charged investment bank Morgan Stanley & Co. LLC and the former head of its equity syndicate desk, Pawan Passi, with a multi-year fraud involving the disclosure of confidential information about the sale of large quantities of stock known as “block trades.” The SEC also charged Morgan Stanley with failing to enforce its policies concerning the misuse of material non-public information related to block trades.
The SEC’s order concerning Morgan Stanley censures the firm, and orders it to pay approximately $138 million in disgorgement, approximately $28 million in prejudgment interest, and an $83 million civil penalty. The SEC’s order concerning Passi orders him to pay a $250,000 civil penalty, and imposes associational, penny stock, and supervisory bars.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal resolutions with Morgan Stanley and Passi. The SEC’s ordered disgorgement and prejudgment interest for Morgan Stanley will be deemed partially satisfied by the forfeiture and restitution paid by the firm, which totals $136,531,223, pursuant to its criminal resolution.
The Public Company Accounting Oversight Board (PCAOB) announced the appointment of James Cappoli as General Counsel. The PCAOB’s General Counsel provides legal services and advice about all PCAOB operations and manages the Office of the General Counsel (OGC) to execute the organization’s statutory mandate. Prior to his current appointment, Mr. Cappoli served as the PCAOB’s Acting General Counsel.
The Financial Industry Regulatory Authority Investor Education Foundation (FINRA Foundation) released a new report, Investors of Color in the United States. The report examines the behavior and attitudes of investors of color based on data from FINRA Foundation’s National Financial Capability Study coupled with a series of focus groups conducted with young Black/African American, Hispanic/Latino, and Asian American/Pacific Islander investors.
House Financial Services Committee Chairman Patrick McHenry (R-NC) and Ranking Member Maxine Waters (D-CA) announced the formation of the Committee’s bipartisan Working Group on Artificial Intelligence (AI), led by Digital Assets, Financial Technology and Inclusion Subcommittee Chairman French Hill (R-AR) and Subcommittee Ranking Member Stephen F. Lynch (D-MA). The bipartisan AI Working Group will explore how AI is impacting the financial services and housing industries.
Senate Banking Committee Chairman Sherrod Brown and Sens. Ron Wyden (D-OR), Chair of the Senate Finance Committee; Jack Reed (D-RI), Chair of the Senate Armed Services Committee; Raphael Warnock (D-GA); Tina Smith (D-MN); John Fetterman (D-PA); Tim Kaine (D-VA); Chris Van Hollen (D-MD); Catherine Cortez Masto (D-NV); and Bob Menendez (D-NJ) called on the Department of Housing and Urban Development (HUD) and the CFPB to review the gap in mortgage approval rates between White applicants and Black and Hispanic applicants at Navy Federal Credit Union reported in December.
The House of Representatives passed five pieces of bipartisan financial services legislation intended to confront the economic threat posed by the Chinese Communist Party (CCP), combat terrorism financing, and decrease global reliance on Russian agriculture exports.
The bills passed include:
– H.R. 540, the Taiwan Non-Discrimination Act of 2023;
– H.R. 803, the PROTECT Taiwan Act;
– H.R. 839, the China Exchange Rate Transparency Act of 2023;
– H.R. 6370, the OFAC Licensure for Investigators Act; and
– H.R. 4768, the No Russian Agriculture Act.
New York State Department of Financial Services (NYDFS) Superintendent Adrienne A. Harris announced that Genesis Global Trading, Inc. will pay an $8 million penalty to New York State for compliance failures that violated DFS’s virtual currency and cybersecurity regulations and left the company vulnerable to illicit activity and cybersecurity threats.
- ICYMI
The Commodity Futures Trading Commission’s (CFTC) Technology Advisory Committee (TAC) Subcommittee on Digital Assets and Blockchain Technology released a report entitled Decentralized Finance. The comprehensive report defines the characteristics of DeFi; policy objectives, benefits, and risks; issues for policymakers and industry related to DeFi; and recommendations. The report finds that government and industry should take timely action to work together, across regulatory and other strategic initiatives, to better understand DeFi. The report also presents detailed recommendations to combat illicit finance, and to mitigate risks to investors, consumers, market integrity, and financial stability.
TAC sponsor CFTC Commissioner Christy Goldsmith Romero issued a statement on the report, stating that she hopes it “can serve as a first step to facilitate a dialogue between policymakers and industry particularly because DeFi remains at the center of illicit finance risks, cyber hacks and theft.” Commissioner Goldsmith Romero also delivered an opening statement at the TAC’s January 8 meeting.
Need to catch up on what happened earlier this week? Check out our January 10th Midweek Update here.