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US Regulatory Research

US Regulatory Updates

US Regulatory Update


President Reimposes Sanctions on Iran

On 6 August, President Trump reimposed certain sanctions with respect to Iran, including the prohibitions against: (i) the acquisition of U.S. bank notes by Iran, and (ii) transactions related to the Iranian rial.  

FinCEN Extends Limited Exception from Beneficial Ownership Requirements

On 8 August, the Financial Crimes Enforcement Network (“FinCEN”) of the Department of the Treasury issued a thirty-day extension of the limited exception from the beneficial ownership rule applicable to covered financial institutions.  The exception applies for certain certificates of deposit or loan accounts established before the rule’s applicability date of 11 May 2018.

FinCEN Director Delivers Prepared Remarks at the 2018 Chicago-Kent Block (Legal) Tech Conference

On 9 August, FinCEN Director Kenneth A. Blanco delivered prepared remarks at the 2018 Chicago-Kent Block (Legal) Tech Conference.  Among the topics addressed by Mr. Blanco included: (i) the applicability of Bank Secrecy Act requirements, specifically those regarding countering the financing of terrorism (“CFT”) and anti-money laundering (“AML”), to both domestic and foreign convertible virtual currency money transmitters; (ii) collaboration with federal regulatory agencies, such as the Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”), to ensure that businesses involved in Initial Coin Offerings (“ICOs”) meet all of their AML and CFT obligations; (iii) examination and supervision of currency money transmitters; (iv) the importance of cross-border information sharing through forums such as the Egmont Group of Financial Intelligence Units, and cross-industry information sharing through programs such as FinCEN Exchange; and (iv) the importance of Suspicious Activity Reports and Currency Transaction Reports to help FinCEN identify emerging threats and typologies in the virtual currency space.

SEC & Securities

FINRA Publishes First Annual Industry Snapshot

On 9 August, the Financial Industry Regulatory Authority (“FINRA”) announced the publication of its first annual statistical report on brokerage firms, registered individuals and regulated market activity.  The snapshot provides a high-level view of the industry, reporting on the number of FINRA-registered individuals, the overall revenues of firms, trading activity, and the marketing of products and services.  According to the report, the total number of FINRA-registered firms declined year-on-year from 2013 to 2017, with a decrease from 3,835 registered in 2016 to 3,726 firms registered in 2017; the total number of registered representatives also declined from 635,902 in 2016 to 630,132 in 2017.

SEC Offers Guidance to Investors on Traditional and Non-Traditional Index Funds

On 6 August, the SEC released two investor bulletins on index funds:

  • Traditional index funds.  In this bulletin, the SEC identified three risks of investing in traditional index funds: (i) lack of flexibility, (ii) tracking error, and (iii) underperformance.  The SEC also advised investors to be aware that not all index funds have lower costs than actively managed funds.
  • Non-traditional index funds.  This bulletin covered index funds such as smart beta funds, quant funds, and “environmental, social and governance” (“ESG”) funds.  The SEC described the difference between these vehicles and traditional index funds in the context of correlation to market, returns, diversification, complexity, and cost.  The SEC urged investors to consider these differences and the actual cost of any fund when making an investment decision.

Comment Period Closes on SEC Regulation Best Interest

On 7 August, the comment period expired for the SEC’s proposed Regulation Best Interest, which requires broker-dealers to act in the best interest of retail customers.  While the proposed regulation, which received more than 4,000 comments, has been largely supported by the financial services industry, the regulation has received criticism for its ambiguity from industry groups such as the Securities Industry and Financial Markets Association (“SIFMA”), as well as from Senator Elizabeth Warren (D-MA) and SEC Commissioner Hester Peirce.  A number of consumer groups that supported the Department of Labor’s Fiduciary Rule have also expressed opposition to the proposed rule in its current form.  Comments will be reviewed by SEC staff who will recommend potential next steps for the Commission.

President Trump Likely to Nominate Allison Lee as Democratic SEC Commissioner

On 6 August, it was announced that a former SEC enforcement attorney, Allison Lee, is being considered to replace Democratic Commissioner Kara Stein, whose term expired in 2017.  According to the Wall Street Journal, Senate Minority Leader Chuck Schumer (D-NY) recommended Ms. Lee for the role.  She previously worked at the SEC for over a decade and served as a legal adviser to Commissioner Stein from 2013 to 2015.  If formally nominated by the Trump Administration, Ms. Lee’s nomination will need to be confirmed by the Senate.  Elad Roisman is currently awaiting confirmation by the Senate for his nomination as a Republican Commissioner at the SEC.

CFTC & Derivatives

CFTC Proposes Rules to Simplify Process for Foreign Clearing Organizations to Obtain DCO Registration Exemption

On 8 August, the CFTC announced a proposed rule to establish a regulatory framework within which non-U.S. clearing organizations may obtain an exemption from registration as a derivatives clearing organization (“DCO”).  Chairman Giancarlo issued a statement noting that the amendments were proposed in keeping with the CFTC’s “Keep It Simple Stupid” (“KISS”) initiative, which was first announced by Chairman Giancarlo in March 2017.  Chairman Giancarlo emphasized that the proposed amendments illustrate the CFTC’s “continued efforts to foster cross-border cooperation and show deference to home country regulation that is deemed comparable to the Commission’s regulations.”  Comments must be received on or before sixty days after publication of the proposed rule in the federal register; the proposal is expected to be published on August 13, 2018.



·        13 Aug: Comments due on the CFTC’s de minimis exception to the “swap dealer” definition.

Ianthe Zabel
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