- Top Lines
Today, the House of Representatives passed the National Defense Authorization Act for Fiscal Year 2024 (NDAA) in a 219-210 vote, with the bill passing mostly along party lines as opposed to with bipartisan support. Next, the legislation will head to the Senate, which is working on its own version of the NDAA, before the two chambers of Congress conference to finalize the bill’s provisions.
Sen. Kirsten Gillibrand (D-NY) and Sen. Cynthia Lummis (R-WY) reintroduced their legislation, the Lummis Gillibrand Responsible Financial Innovation Act (RFIA). Among other things, the legislation requires crypto asset exchanges to register with the CFTC, calls for risk management standards for decentralized crypto asset exchanges, safeguards consumers through enhanced disclosures and limits on crypto asset lending, closes the wash sale loophole, and codifies the criteria to determine which crypto assets are securities or commodities. The legislation also combats the use of crypto assets in illicit finance, imposes new penalties for willfully violating money laundering laws, requires stablecoins to be issued by depository institutions, and provides appropriations to federal agencies to implement the policies within the bill. The section-by-section summary is available here. A one-pager on new provisions in the legislation is available here. The bill text is available here.
- Weekly Wrap Up
The U.S. District Court for the Southern District of New York found in the Securities and Exchange Commission’s (SEC) case against Ripple Labs, CEO Brad Garlinghouse, and co-Founder and Executive Chairman Chris Larsen that XRP tokens may be part of an investment contract but distinguished that the underlying tokens are not an investment contract that fall within the definition of a security for purposes of the federal securities laws. The court stated that the offer and sale of XRP tokens from Ripple Labs to institutional investors were part of an investment contract but the sale of XRP tokens to digital asset trading platforms and their subsequent purchase by consumers did not constitute an investment contract.
Sen. Mike Rounds (R-SD) and Sen. Mark Warner (D-VA) are planning to introduce legislation aimed at stopping money laundering that involves use of digital assets.
Senate Banking Committee Ranking Member Tim Scott released a statement following the Committee’s executive session to vote on the nominations of Lisa Cook, to serve as a Member of the Board of Governors; Adriana Kugler, to serve as a Member of the Board of Governors; and Philip Jefferson, to serve as Vice Chair of the Board of Governors. “Presidential nominees should inspire confidence, have a strong respect for the rule of law, and support policies that promote the American dream. I believe only one of the three Federal Reserve nominees before us today fits this mold. The Fed faces a tall order of bringing down inflation, addressing its supervisory failures in the wake of bank collapses, and remaining an independent body focused on its dual mandate despite political pressures to do otherwise. So, if confirmed, I hope these nominees take their roles seriously, as our Federal Reserve Governors must remain apolitical for the good of the economy and country,” said Ranking Member Scott. The Ranking Member supported Philip Jefferson’s nomination and opposed the nominations of Lisa Cook and Adriana Kugler.
Vice President Kamala Harris convened consumer protection, labor, and civil rights leaders to discuss risks related to artificial intelligence (AI) and reaffirm the Administration’s commitment to protecting the American public from harm and discrimination. She was joined by White House Office of Science and Technology Policy Director Arati Prabhakar, White House Domestic Policy Advisor Neera Tanden, and White House Gender Policy Council Director Jen Klein.
The Securities and Exchange Commission (SEC) charged Celsius Network Limited (Celsius) and its founder, former CEO Alex Mashinsky, for allegedly violating registration and anti-fraud provisions of the federal securities laws. Specifically, the SEC charges that Celsius and Mashinsky failed to register the offers and sales of Celsius’s digital asset lending product, the Earn Interest Program, making false and misleading statements regarding the Earn Interest Program and Celsius’s digital token CEL, and engaging in market manipulation as it relates to CEL. The SEC is seeking an injunction to prohibit Mashinsky from participating, directly or indirectly, in the purchase, offer, or sale of any crypto asset securities or engaging in activities for the purposes of inducing or attempting to induce the purchase or sale of any crypto asset securities by others. The SEC also seeks to bar Mashinsky from acting as an officer or director of a public company and seeks monetary relief in the form of civil penalties, disgorgement of profits, and prejudgment interest. Celsius is cooperating with the SEC and has consented to the relief requested in the complaint, which includes a permanent injunction against future securities law violations. Relatedly, the Commodity Futures Trading Commission (CFTC) charged Celsius for operating as an unregistered commodity pool operator and Mashinsky as an unregistered associated person of a commodity pool operator. The CFTC and Celsius agreed to resolve the complaint against the company by imposing a permanent injunction prohibiting future violations of the Commodity Exchange Act.
The Office of the Comptroller of the Currency (OCC) announced a $60 million civil money penalty against Bank of America, N.A., for violations of law relating to its practice of assessing multiple overdraft and insufficient funds fees against customers for a single transaction. The OCC found that Bank of America charged customers tens of millions of dollars in fees on resubmitted transactions. In particular, the bank’s practices violated Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices.
The Consumer Financial Protection Bureau (CFPB) ordered Bank of America to pay more than $100 million to customers for systematically double-dipping on fees imposed on customers with insufficient funds in their account, withholding reward bonuses explicitly promised to credit card customers, and misappropriating sensitive personal information to open accounts without customer knowledge or authorization.
The Federal Deposit Insurance Corporation (FDIC) announced that FDIC-supervised financial institutions are encouraged to voluntarily conduct and submit self-assessments of their diversity policies and practices by September 30, 2023 In accordance with Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The SEC adopted amendments to certain rules that govern money market funds under the Investment Company Act of 1940. The amendments will increase minimum liquidity requirements for money market funds to provide a more substantial liquidity buffer in the event of rapid redemptions. The amendments will also remove provisions in the current rule that permit a money market fund to suspend redemptions temporarily through a gate and allow money market funds to impose liquidity fees if their weekly liquid assets fall below a certain threshold. Statements on the amendments were issued by Chair Gary Gensler, Commissioner Caroline Crenshaw, Commissioner Mark Uyeda, Commissioner Jaime Lizárraga, and Commissioner Hester Peirce.
Rep. Patrick McHenry (R-NC), Chairman of the House Financial Services Committee, Rep. Andy Barr (R-KY), Chairman of the Subcommittee on Financial Institutions and Monetary Policy, Rep. Bill Huizenga (R-MI), Chairman of the Subcommittee on Oversight and Investigations, and Sen. Tim Scott (R-SC), Ranking Member of the Senate Committee on Banking Housing, and Urban Affairs led a bicameral group of 132 members of Congress in filing an amicus curiae brief to the Supreme Court in Consumer Financial Protection Bureau, et al., v. Community Financial Services Association of America, Limited, et al. The brief urges the Court to uphold the Fifth Circuit’s decision that the CFPB’s funding structure is unconstitutional and to make the Bureau’s funding subject to congressional appropriations.
Secretary of the Treasury Janet L. Yellen announced the appointment of Andrea Gacki, the Director of the Office of Foreign Assets Control (OFAC), as the Director of the Financial Crimes Enforcement Network (FinCEN).
The Board of Governors of the Federal Reserve System published their 2022 Annual Report to Congress.
The House of Representatives passed three pieces of bipartisan financial services legislation to facilitate capital formation and mint a commemorative coin in honor of the 250th anniversary of the United States Marine Corps. The financial services bills passed by the House include: H.R. 2622, a bill to amend the Investment Advisers Act of 1940 to codify certain Securities and Exchange Commission no-action letters that exclude brokers and dealers compensated for certain research services from the definition of investment adviser, and for other; H.R. 1548, the Improving Access to Small Business Information Act; and H.R. 1096, the 250th Anniversary of the United States Marine Corps Commemorative Coin Act.
Federal Reserve Board Vice Chair for Supervision Michael S. Barr delivered a speech entitled Holistic Capital Review at the Bipartisan Policy Center. Vice Chair Barr reported on his holistic review of capital for large banks and outlined steps that he believes are appropriate to update capital standards.
Sen. JD Vance (R-OH), Sen. Cynthia Lummis (R-WY), and Sen. Roger Marshall (R-KS) announced they will introduce the Financial Regulatory Accountability Act to establish an Inspector General within the Treasury Department. The IG’s office would oversee allegations of regulatory abuse and misconduct by financial regulators. The Senators say the bill would shield banks from regulatory pressure to cut off customers like crypto firms, gun manufacturers, and oil and gas companies.
The Department of Education announced it will notify more than 804,000 borrowers that they have a total of $39 billion in Federal student loans that will be automatically discharged in the coming weeks. In total, the Biden-Harris Administration has approved more than $116.6 billion in student loan forgiveness for more than 3.4 million borrowers.
The Federal Trade Commission (FTC) has opened an investigation into OpenAI over possible violation of consumer protection laws, focusing on whether OpenAI has “engaged in unfair or deceptive practices relating to risks of harm to consumers, including reputational harm.”
The CFPB filed an amicus brief with the State of Maine arguing that determining whether a loan is covered by the Truth in Lending Act (TILA) requires assessing the borrower’s primary purpose in entering into the transaction and that this inquiry is not controlled by language in the loan documents. The CFPB’s related blog post can be found here.
The CFPB held a hearing on medical debt, covering the effects of medical billing and collection practices on consumers. CFPB Director Rohit Chopra’s prepared remarks can be found here.
In February, following the Office of Information and Regulatory Affairs’ (OIRA) publication of the Fall 2022 Unified Agenda of Regulatory and Deregulatory Actions (the Unified Agenda), we outlined key anticipated CFPB rulemakings included in the Unified Agenda, notable litigation involving the agency, anticipated Congressional action, and enforcement actions.
- ICYMI
President Biden nominated Virginia Solicitor General Andrew Ferguson and Utah Solicitor General Melissa Holyoak to fill Republican slots at the Federal Trade Commission (FTC).
U.S. Senators Sherrod Brown (D-OH), Bob Menendez (D-NJ), Jack Reed (D-RI), and Tina Smith (D-MN) sent a letter to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra urging him to take action to protect consumers from scams and fraud caused by artificial intelligence (AI) and machine learning in consumer financial products. The lawmakers raised concerns over AI voice cloning technology which can allow scammers to fraudulently access consumers’ finances including their bank accounts.
Sanctions against Russia are likely to accelerate in the wake of the Wagner Group’s drive on Moscow given the internal “cracks” within the Russian system that the Administration alleges. China remains a focus of both the Administration and Congress, while Iran remains a point of contention. Read more in our latest Sanctions Watch here.
Need to catch up on what happened last week? Check out our July 7th newsletter here.