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US Regulatory Updates

US Regulatory Research

U.S. Congress

House Financial Services Committee GOP Members Send Letter on Consolidated Audit Trail

On 23 April, U.S. House Committee on Financial Services (“House Financial Services Committee”) members Barry Loudermilk (R-GA), Bill Huizenga (R-MI), French Hill (R-AR), Warren Davidson (R-OH), and Ted Budd (R-NC) sent to Securities and Exchange Commission (“SEC”) Chairman Jay Clayton a letter urging the Commission not to collect personally identifiable information (“PII”) as part of the Consolidated Audit Trail (“CAT”) surveillance mechanism. The letter states that while the representatives support the initiative, “Main Street investors’ PII” should not be collected.

Senator Brown Sends Letter to President Trump Regarding FDIC’s Board of Directors

On 23 April, Senator Sherrod Brown (D-OH), the Ranking Member of the U.S Senate Committee on Banking Housing and Urban Affairs (“Senate Banking Committee”), sent a letter to President Trump urging him “to nominate a full slate of members to the board of the Federal Deposit Insurance Corporation (FDIC).” Brown expressed concerns about certain current board members and unfilled seats on the board.     

SEC & Securities

SEC Approves Amendment to FINRA Custodian Rule for Broker-Dealers Withdrawing from Registration

On 22 April, the SEC approved amendments to the Financial Industry Regulatory Authority’s (“FINRA”) Rule 4570 regarding the designation and responsibilities of persons identified as custodians of the books and records for broker-dealers that withdraw from SEC registration.

SEC Publishes Agenda for 2019 FinTech Forum

On 24 April, the SEC published its agenda for the 2019 FinTech Forum, which will be convened by the SEC’s Strategic Hub for Innovation and Financial Technology (“FinHub”) to discuss distributed ledger technology and digital assets. The agenda consists of four panels entitled: (i) “Capital Formation Considerations”; (ii) “Trading and Markets Considerations”; (iii) “Investment Management Considerations”; and (iv) “Distributed Ledger Technology Innovations: Industry Trends and Specific Use Cases for Financial Markets.”

SEC Publishes Final Rule Extending Compliance Date for Reg NMS Amendments

On 24 April, the SEC published a final rule extending the compliance date for recently adopted amendments to Rule 606 of Regulation National Market System (“Reg NMS”), which requires broker-dealers to disclose additional information regarding the handling of customer orders. The SEC noted that it has extended the compliance date from 20 May 2019 until 30 September 2019, because “some [broker-dealers] have determined that additional time is needed to complete the systems changes and implement business process changes necessary to comply with the amended rule.” The extension applies only to Rule 606 amendments; the compliance date for other Reg NMS amendments remains 20 May 2019.

SEC Announces Members of Small Business Capital Formation Advisory Committee

On 25 April, the SEC announced the inaugural members of its Small Business Capital Formation Advisory Committee (the “Committee”), which will hold its first meeting on 6 May 2019. The Commission-appointed Committee consists of individuals from “an experienced and diverse set of companies, entrepreneurs, and investors,” according to a joint statement from SEC Chairman Jay Clayton and SEC Commissioners Robert Jackson, Hester Peirce, and Elad Roisman. The SEC’s Advocate for Small Business Capital Formation, Martha Legg Miller, will also be a member of the Committee.

CFTC & Derivatives

CFTC Approves Proposed Amendments to Regulations Relating to Certain SDR and Data Reporting Requirements

On 25 April, the Commodity Futures Trading Commission (“CFTC”) approved a proposed rule to amend its regulations related to swap data repository (“SDR”) operations and governance. The proposal represents the first rulemaking as part of the Division of Market Oversight’s Roadmap to Achieve High Quality Swaps Data (the “Roadmap”), which was published in July 2017. In an effort to streamline CFTC regulations governing SDRs, the proposed rule would, among other things: (i) update requirements for SDRs to verify swap data with reporting counterparties; (ii) update requirements to correct swap data errors and omissions for SDRs, reporting counterparties, and other market participants; and (iii) update and clarify SDR operational requirements to ensure that data is available to the CFTC and the public.

o   On 25 April, CFTC Chairman Chairman J. Christopher Giancarlo issued a statement regarding the proposal, noting: “[c]ompletion of these and the other changes proposed by the Roadmap will result in more complete, more accurate, and higher-quality data available to the CFTC and to the public; streamline data reporting; and help the CFTC perform its regulatory responsibilities.”

o   On 25 April, CFTC Commissioner Rostin Behnam issued a statement of concurrence with the proposed rule, while noting concern regarding the CFTC’s re-interpretation of certain statutory provisions. He highlighted that the proposal would amend a CFTC regulation regarding the duties of SDR chief compliance officers “in a way that deviates from the plain language of the statute” and would introduce “new standards [that] may deviate from Congressional intent.” He also noted: “[t]he Commission has, of late, begun a practice of re-interpreting statutory provisions with a somewhat flippant regard for their underlying purpose and rationales in order to lessen the burdens that are rarely substantiated by anything more than a call for change . . . I believe that we should be mindful that our role is not to bend too easily to unsupported claims of burden or complexity.”

o   On 25 April, CFTC Commissioner Dawn D. Stump issued a statement in support of “the Proposal going out for comment, with the caveat that the other aspects of the swaps data ‘Roadmap’ are published in quick succession.” Stump noted that she “do[es] not agree with all the policy and procedural choices in th[e] Proposal.” Specifically, she expressed concern regarding: (i) “certain of the underlying assumptions” driving the proposal; (ii) the “the lack of details and nebulous description of certain obligations in many parts of the Proposal;” (iii) the imposition of “immense additional burdens on swap data repositories (SDRs) and all types of reporting counterparties (RCPs), particularly without commensurate streamlining of regulatory obligations in the rest of the Commission’s swap data reporting rule set;” and (iv) a lack of regulatory harmonization between the SEC and CFTC.

o   On 25 April, CFTC Commissioner Berkovitz issued a statement supporting the proposed rule, which he noted “acknowledge[s] areas where the Commission’s existing swap data reporting rules are not working as effectively as they might.” He highlighted that the proposal intends to: “clarify and strengthen the obligations of SDRs and reporting counterparties by requiring SDRs to provide reporting counterparties with regular reports on open swaps to ‘verify the accuracy and completeness of swap data reported to SDRs.’” In the context of proposed changes to the regulatory duties of SDR chief compliance officers, Berkovitz acknowledged that the CFTC “should be vigilant that changes to compliance or other requirements made in the name of efficiency do not diminish the self-regulatory foundation of the Commission’s oversight of derivatives markets.”

CFTC and SEC Issue Investor Alert Regarding Websites Related to Digital Assets

On 26 April, the CFTC’s Office of External Affairs and the SEC’s Office of Investor Education and Advocacy published an investor alert (dated 24 April) entitled “Watch Out for Fraudulent Digital Asset and ‘Crypto’ Trading Websites.” The alert intends to “warn investors to scrutinize investment opportunities through websites purporting to operate advisory and trading businesses related to digital assets.”  Warning signs of investment fraud identified in the alert include, among others: (i) “guaranteed” high investment returns; (ii) complicated jargon and language that is difficult to understand; (iii) sellers that are unlicensed or not registered with the SEC; and (iv) investments that sound “too good to be true.”

Bank Regulators

Fed Requests Comments on Proposal to Simply and Increase Transparency of Rules for Determining Control of a Banking Organization

On 23 April, the Federal Reserve (“Fed”) held an open meeting in which it requested comments on a proposed rule to revise the Fed’s regulations related to determining whether a company has the ability to exercise a controlling influence over another company for purposes of the Bank Holding Company Act (“BHCA”) or the Home Owners’ Loan Act (“HOLA”). Under the BHCA and HOLA, if a company controls a depository institution, such company becomes subject to the Fed’s supervision and regulation. Under the current framework, the definition of control is determined by a three-pronged test that includes a subjective determination by the Fed of whether a company “directly or indirectly exercises a controlling influence over the management or policies of the other company,” a determination that usually requires taking into account specific facts of each case. The proposed rule would establish a tiered framework that is designed to codify and “incorporate the major factors and thresholds that the [Fed] has typically viewed as presenting controlling influence concerns” based on an investor’s ownership percentage in the targeted depository institution. Comments on the proposed amendments are due 60 days after their publication in the Federal Register.  


CFPB Submits Remittance Rule Assessment Report

On 24 April, the Consumer Financial Protection Bureau (“CFPB”) issued a revised assessment report on its Remittance Rule, which took effect in 2013 and provides “certain protections to consumers that send remittance transfers from the United States to another country.” Pursuant to the Dodd-Frank Act, the Bureau must review certain of its rules within five years after they take effect. The original Remittance Rule assessment report was issued in October 2018. This revised report corrects an understatement of the dollar volume of remittance transfers by banks in the original report.

CFPB Issues RFI on Remittance Rule

On 25 April, the CFPB issued a request for information (“RFI”) on two aspects of its Remittance Rule related to (i) changing the remittance transfer providers covered in the rule and (ii) the expiration of a temporary exception in the rule that allows certain institutions to estimate certain figures they are required to disclose when sending remittance transfers. The public will have 60 days to comment after the RFI is published in the Federal Register.


o   April 29: Comments are due on the SEC’s proposed rule regarding solicitations of interest prior to a registered public offering.

o   April 30: The Senate Banking Committee will hold a hearing entitled “Guidance, Supervisory Expectations, and the Rule of Law: How do the Banking Agencies Regulate and Supervise Institutions.”

o   May 1:  The House Financial Services Committee’s Subcommittee on Diversity and Inclusion will convene a hearing entitled “Good for the Bottom Line: A Review of the Business Case for Diversity and Inclusion.”

o   May 2: Comments are due on the SEC’s proposed rule regarding “fund of funds” arrangements.

o   May 2: SEC Chairman Clayton will participate in a fireside chat at the Investment Company Institute’s General Membership Meeting.

o   May 15: The House Financial Services Committee’s Subcommittee on Investor Protection, Entrepreneurship and Capital Markets will convene a hearing entitled “Promoting Economic Growth: A Review of Proposals to Strengthen the Rights and Protections for Workers.”

o   May 16: The House Financial Services Committee will convene a hearing entitled “Oversight of Prudential Regulators: Ensuring the Safety, Soundness and Accountability of Megabanks and Other Depository Institutions.”

Ianthe Zabel
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