International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Thursday, July 11, 2019

EU Adopts Regulation on Foreign Direct Investments

Skadden Law Form reports and analyzes here: On March 19, 2019, the European Union adopted a regulation for the screening of foreign direct investments into the EU (the Regulation).1 The Regulation sets forth national security factors that EU member states (Member States) and the EU Commission (the Commission) may consider when assessing foreign direct investments by non-EU investors. The Regulation entered into force on April 10, 2019, and will have direct effect in Member States from October 11, 2020.


The Regulation covers only investments by non-EU investors in the EU and does not extend to intra-European foreign investment flows. The Regulation broadly defines foreign direct investment as:

“an investment of any kind by a foreign investor that aims to establish or maintain lasting and direct links between the foreign investor and the entrepreneur to whom or the undertaking to which the capital is made available in order to carry out an economic activity in a Member State, including investments that enable effective participation in the management or control of a company carrying out an economic activity.”

Each Member State is responsible for establishing the appropriate criteria, through national legislation, for transactions that may qualify as foreign direct investments pursuant to their national law (e.g., acquisition of control, ownership thresholds, influence on sensitive activities or industries, etc.).

Read the full Skadden Law Form reports and analyzes here

July 11, 2019 in AML, Financial Regulation | Permalink | Comments (0)

Wednesday, July 10, 2019

State Street overcharged approximately 5,000 RICs for SWIFT messages by a total of over $110 million from 1998 to 2015

From 1998, and lasting into 2015, State Street overcharged its mutual fund clients and other registered investment companies (together, “RICs”) for certain reimbursable expenses, and reflected those overcharges in records of RIC clients. State Street acted as a custody bank for RICs. State Street entered into contracts with its RIC clients providing that State Street would bill them for outof-pocket expenses that State Street incurred in providing services to the RICs.

Instead, State Street charged the RICs a total of over $170 million more than State Street’s costs. The overcharges included expenses related to Society of Worldwide Interbank Financial Telecommunication (or “SWIFT”) messages, a secured messaging network used by banks and other financial institutions. State Street misled RICs by identifying SWIFT messages as an out-of-pocket expense in client fee schedules and invoices while in reality State Street applied a large undisclosed markup to SWIFT billings. State Street overcharged approximately 5,000 RICs for SWIFT messages by a total of over $110 million from 1998 to 2015.

State Street has been carrying out a process to reimburse RICs for the overcharges described above, including reasonable interest thereon. State Street’s reimbursement to RICs for
overcharges invoiced to RICs in or after October 2011 (the “affected RICs”) will satisfy the disgorgement and prejudgment interest ordered below in Section IV.B of the Order. State Street has provided a written description of its reimbursement methodology to the affected RICs and the Commission staff.

July 10, 2019 in Financial Regulation | Permalink | Comments (0)

Saturday, July 6, 2019

Joint Statement on CFTC-SEC Portfolio Margining Harmonization Efforts

Commodity Futures Trading Commission Chairman J. Christopher Giancarlo and Securities and Exchange Commission Chairman Jay Clayton issued the following joint statement:

“We and our colleagues at the CFTC and the SEC are committed to working together to ensure that our regulations are effective, consistent, mutually reinforcing, and efficient. In certain cases, these important objectives are best served by harmonizing our rules. We believe we should explore whether portfolio margining is an area where increased harmonization would better serve our markets and our investors. We have asked our staffs to work together to assess the potential for portfolio margining of uncleared swaps with security-based swaps, to consider further efficiencies in cleared swaps and security-based swaps portfolio margining, and to explore expanding portfolio margining to futures and cash equity positions. We are particularly interested in identifying opportunities for efficiency that also will ensure robust investor protection and market integrity. In the near future, staff at our two agencies will be seeking further input from the public regarding these issues, including soliciting written comments and conducting additional market outreach.”

July 6, 2019 in Financial Regulation | Permalink | Comments (0)

Wednesday, July 3, 2019

Merrill Lynch Commodities Pays $25 Million for Deceptive Trading Practices on U.S. Commodities Markets

Merrill Lynch Commodities Inc. (MLCI), a global commodities trading business, has agreed to pay $25 million to resolve the government’s investigation into a multi-year scheme by MLCI precious metals traders to mislead the market for precious metals futures contracts traded on the Commodity Exchange Inc. (COMEX), announced Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office.

According to MLCI’s admissions, beginning by at least 2008 and continuing through 2014, precious metals traders employed by MLCI schemed to deceive other market participants by injecting materially false and misleading information into the precious metals futures market.  They did so by placing fraudulent orders for precious metals futures contracts that, at the time the traders placed the orders, they intended to cancel before execution.  In doing so, the traders intended to “spoof” or manipulate the market by creating the false impression of increased supply or demand and, in turn, to fraudulently induce other market participants to buy and to sell futures contracts at quantities, prices and times that they otherwise likely would not have done so.  Over the relevant period, the traders placed thousands of fraudulent orders.

MLCI entered into a non-prosecution agreement (NPA) and agreed to pay a combined $25 million in criminal fines, restitution and forfeiture of trading profits.  Under the terms of the NPA, MLCI and its parent company, Bank of America Corporation (BAC), have agreed to cooperate with the government’s ongoing investigation of individuals and to report to the Department evidence or allegations of violations of the wire fraud statute, securities and commodities fraud statute, and anti-spoofing provision of the Commodity Exchange Act in BAC’s Global Markets’ Commodities Business, whose function is to conduct wholesale, principal trading and sales of commodities.  MLCI and BAC also agreed to enhance their existing compliance program and internal controls, where necessary and appropriate, to ensure they are designed to detect and deter, among other things, manipulative conduct in BAC’s Global Markets Commodities Business.

The Department reached this resolution based on a number of factors, including MLCI’s ongoing cooperation with the United States and MLCI and BAC’s remedial efforts, including conducting training concerning appropriate market conduct and implementing improved transaction monitoring and communication surveillance systems and processes.

The Commodity Futures Trading Commission (CFTC) announced a separate settlement with MLCI today in connection with related, parallel proceedings.  Under the terms of the resolution with the CFTC, MLCI agreed to pay approximately $25 million, which includes a civil monetary penalty of $11.5 million, as well as restitution, and disgorgement, with restitution and disgorgement credited for any such payments made to the Department.  In addition, the CFTC order imposes upon MLCI other remedial and cooperation obligations in connection with any CFTC investigation pertaining to the underlying conduct. 

As part of the investigation, the Department obtained an indictment against Edward Bases and John Pacilio, two former MLCI precious metals traders, in July 2018.  Those charges remain pending in the U.S. District Court for the Northern District of Illinois.  See United States v. Edward Bases and John Pacilio, 18-cr-48 (N.D. Ill.).  All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Download MLCI Non-prosecution Agreement and Attachments

July 3, 2019 in Financial Regulation | Permalink | Comments (0)

Thursday, June 27, 2019

Does DOL’s HRA Proposal Go Far Enough? Bloink & Byrnes Go Thumb to Thumb

full debate transcript available here: The two professors argue over whether the proposal to expand HRAs helps small businesses and their workers.

June 27, 2019 in Financial Regulation | Permalink | Comments (0)

Tuesday, June 25, 2019

The 10 Key Facts to Understanding Annuities

a slide show presentation by William Byrnes & Robert Bloink 

  1. There are four broad ways to classify an annuity
  2. There are four parties to an annuity contract
  3. There are Deferred Annuities, and then there are Longevity Annuities
  4. read the full slideshow and accompanying analysis paper on ThinkAdvisor here

June 25, 2019 in Financial Regulation | Permalink | Comments (0)

Friday, June 21, 2019

A debate: SECURE Act’s Change of RMD Rules: Bloink & Byrnes Go Thumb to Thumb

Read the full debate on ThinkAdvisor here: The bill would raise the existing age threshold from 70 1/2 to age 72 for IRAs. Is this just a giveaway to wealthy retirees?

By Robert Bloink and William H. Byrnes

June 21, 2019 in Financial Regulation | Permalink | Comments (0)

Tuesday, June 18, 2019

Who’s Responsible for Your Parents’ Nursing Home Cost? It’s Not Who You Think...

Regardless of these factors, clients have to be reminded about the importance of LTC planning—and that this is not always an issue that’s only relevant for those clients nearing retirement.

As clients’ parents age, we should remember that children may, in some cases, be held financially responsible for their parents’ nursing home costs—and that this is no longer an outlandish idea, but one that has actually been legally enforced in the courts within the last five years. Providing clients with viable LTC insurance alternatives can help them avoid the shock of unexpectedly facing the financial burden of paying for parents’ nursing home costs—whether they are legally obligated to do so, or simply want to help their parents receive the best care possible.

Full analysis on ThinkAdvisor here

June 18, 2019 in Financial Regulation | Permalink | Comments (0)

Monday, June 17, 2019

Retirees Beware: IRS Pension Buyout Stance Shifts (Again) analysis by Robert Bloink & William Byrnes

The lump sum payment versus annuity stream question has long been an issue for those clients fortunate enough to have access to a traditional pension—but the choice is one that clients usually face as they approach retirement, rather than once they have already begun to receive annuity payouts.

The recent IRS change of course on this issue may add complications into the mix and encourage lump sum offers for retired clients who are already in pay status. Because lump sum offers have historically been an attractive way for pension plan sponsors to reduce the financial exposure associated with the plan itself, a new crowd of retired clients may soon be facing the choice of whether to accept a lump sum or continue with annuity payouts—and making sure that choice is informed will be vital to protecting these clients’ future financial security.

read the full analysis here on ThinkAdvisor

June 17, 2019 in Financial Regulation | Permalink | Comments (0)

Friday, June 7, 2019

Department of Justice Opens Review of ASCAP and BMI Consent Decrees

As part of The Department of Justice’s ongoing review of legacy antitrust judgments, the Antitrust Division today announced that it has opened a review of its consent decrees with The American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI).  For more than seventy-five years, these decrees have governed the process by which these two organizations license rights to publicly perform musical works.  The purpose of the Division’s review is to determine whether the decrees should be maintained in their current form, modified, or terminated.

ASCAP and BMI are the two largest performing rights organizations in the United States.  Their primary function is to pool the copyrights held by their composer, songwriter, and publisher members or affiliates and collectively license public performance rights to music users such as radio and television stations, streaming services, concert venues, bars, restaurants, and retail establishments.  The Antitrust Division first entered into consent decrees with ASCAP and BMI in 1941 and they have since been modified – the ASCAP decree most recently in 2001 and the BMI decree in 1994.  The decrees require ASCAP and BMI to issue licenses covering all works in their repertory upon request from music users.  If the parties are unable to agree on an appropriate price for a license, the decrees provide for a “rate court” proceeding in front of a U.S. district judge.  Neither decree contains a termination date.

“The ASCAP and BMI decrees have been in existence in some form for over seventy-five years and have effectively regulated how musicians are compensated for the public performance of their musical creations,” said Makan Delrahim, Assistant Attorney General for the Antitrust Division.  “There have been many changes in the music industry during this time, and the needs of music creators and music users have continued to evolve.  It is important for the Division to reassess periodically whether these decrees continue to serve the American consumer and whether they should be changed to achieve greater efficiency and enhance competition in light of innovations in the industry.”   

The Antitrust Division has posted an invitation for public comment on its public website (, inviting interested persons, including songwriters, publishers, licensees, and other industry stakeholders to provide the Division with information or comments relevant to whether the ASCAP and BMI decrees should be modified, terminated, or retained unchanged.  The period for public comment ends on July 10, 2019.

June 7, 2019 in Financial Regulation | Permalink | Comments (0)

Thursday, June 6, 2019

SEC Passes Regulation Best Interest by 3-1 Vote

Read the ThinkAdvisor analysis here: The Securities and Exchange Commission passed by a 3-1 vote Wednesday its controversial Regulation Best Interest, which SEC Chairman Jay Clayton said would “substantially enhance the broker-dealer standard of conduct beyond existing suitability obligations.”

The agency also passed by a 3-1 vote the three other prongs of the advice-standards package — the Form CRS Relationship Summary, the Standard of Conduct for Investment Advisers, and a new Interpretation of “Solely Incidental.”

SEC Commissioner Robert Jackson, a Democrat, dissented, stating that his hope was that the rules the SEC announced Wednesday would leave “no doubt that investors come first. Sadly, I cannot say that. Today’s rules maintain a muddled standard. Today’s rules simply do not require that investors’ interests come first.”

Jackson stated that he couldn’t vote for any of the four prongs of the plan put forth Wednesday. Neither Reg BI nor the advisor recommendations “requires Wall Street to put investors’ interest first,” Jackson said.

By Melanie Waddell article here.


June 6, 2019 in Financial Regulation | Permalink | Comments (0)

Standalone LTCI Premiums Skyrocket, but Alternatives Abound - analysis by Robert Bloink & William Byrnes

Premiums on standalone long-term care insurance policies have been steadily increasing for years—and the qualification requirements attached to the policies have made standalone LTC difficult to obtain for even younger clients. read analysis here

The newest development in the LTC planning arena, however, can have a significant impact on clients who already maintain standalone LTC policies—state approvals of rate increases at an alarmingly rapid rate have led to situations where clients can no longer afford to maintain LTC policies that they may have had in effect for years.  For this particular group of clients, LTC planning may be even more important than for clients who never purchased the insurance to begin with—meaning that advisors should become well-versed in the alternatives that might present viable solutions for clients who can no longer afford to maintain their standalone LTC policies.

READ THINK ADVISOR Advisors should become well-versed in the alternative solutions for clients who can no longer afford LTC policies.

June 6, 2019 in Financial Regulation | Permalink | Comments (0)

Saturday, May 18, 2019

International Competition Network Adopts Framework for Competition Agency Procedures and Recommended Practices on Investigative Process

At its annual conference, the International Competition Network (ICN) established a Framework on Competition Agency Procedures (CAP) that reflects the commitment by its participants to uphold fundamental procedural fairness principles and adopted Recommended Practices for Investigative Process that offer aspirational guidance and norm-setting principles on procedural fairness. The ICN also presented reports on vertical mergers, vertical restraints, competition agency design, and private enforcement, the Department of Justice and the Federal Trade Commission (FTC) announced today. The ICN announced that the United States will host the 2020 ICN annual conference in Los Angeles, California.

The ICN held its 18th annual conference, hosted by Colombia’s Superintendence of Industry and Commerce, on May 15-17, 2019, in Cartagena, Colombia. Nearly 500 delegates from more than 80 jurisdictions participated, including competition experts from international organizations and the legal, business, academic, and consumer communities. The Department of Justice’s delegation was headed by Assistant Attorney General Makan Delrahim, and FTC Chairman Joseph J. Simons led the FTC delegation. The conference highlighted the achievements of the ICN working groups on cartels, mergers, unilateral conduct, competition advocacy and agency effectiveness, and featured discussion of the challenges of digitalization.

The conference approved two significant instruments to promote and strengthen procedural fairness in competition agency proceedings. The CAP came into effect on May 15, 2019, with the ICN announcing 62 participating agencies. The CAP establishes fundamental, procedural fairness principles that address non-discrimination, transparency, notice and meaningful engagement, timely resolution, confidentiality protections, impartiality, access to information and opportunity to defend, representation by counsel, written decisions, and independent review. By joining the CAP, competition agencies affirmatively indicate their intention to adhere to the principles laid out in the Framework. The principles are further supported by implementation provisions that facilitate agency-to-agency cooperation on procedures and regular review of CAP operations. While sponsored by the ICN, the CAP is open to all competition agencies around the world, including both ICN members and agencies that are not members of the ICN.

The U.S. Department of Justice served as co-chair for the Agency Effectiveness Working Group, which developed the Recommended Practices for Investigative Process in conjunction with the FTC.  The Recommended Practices establish detailed, aspirational, procedural fairness norms for competition agency investigative tools, transparency, engagement during investigations, decision-making safeguards, and confidentiality protections. As Recommended Practices, they are the ICN highest level consensus statement on agency procedures and procedural fairness.

“The ICN has become a crucial instrument for dialogue, cooperation, and convergence within the global antitrust community,” said Assistant Attorney General Delrahim.  “The Annual Conference provides us all with an opportunity to reflect on the great progress that has been made in competition policy and enforcement around the world, as well as the challenges that lie ahead.”

On May 15, 2019, Assistant Attorney General Delrahim spoke on a panel celebrating the launch of the ICN CAP. The panel recognized the historic nature of the multilateral framework. The principles outlined by the Multilateral Framework on Procedures, as described by Assistant Attorney General Delrahim in a speech at the Council on Foreign Relations on June 1, 2018, served as a foundation for the CAP.  The CAP was adopted by the ICN on April 3, 2019, and it became open for all competition agencies to join as participants on May 1, 2019.

Chairman Simons helped lead the conference’s panel discussion of Merger Review in the 2020s. The Panel explored whether and how digitalization and globalization are likely to change merger review in the 2020s, given their continued influence on the evolution of competition policy. The FTC has for the past three years co-chaired the ICN’s Merger Working Group, which promotes convergence toward best practices in merger process and analysis and seeks to reduce the public and private costs of multijurisdictional merger reviews. This year, the Merger Working Group presented a report on vertical mergers and promoted the use of its Framework for Merger Review Cooperation, developing explanatory material on the types of documents typically exchanged in multijurisdictional merger review to support sound enforcement cooperation.

“Understanding how a market works is crucial to assessing a merger’s competitive impact, and more learning about digital markets can help refine our competition assessments. Yet digital markets do not require significant changes to our existing merger laws or analysis,” said Chairman Joseph Simons. “This is because our antitrust framework has consistently proven that it is sufficiently robust and flexible to fit new markets and new ways of doing business.”

Deputy Assistant Attorney General Roger Alford moderated a panel discussing agency effectiveness through organizational design.  The panel was part of the Agency Effectiveness Working Group project on competition agency choices in the design of their enforcement programs.

Randolph Tritell, Director of the FTC’s Office of International Affairs, led the concluding panel, showcasing how diverse competition agencies around the world benefit from implementing all types of ICN work product.

The Unilateral Conduct Working Group presented its project on vertical restraints. The project examined a series of hypothetical vertical restraints and their effect on competition and potential resulting efficiencies. 

The Cartel Working Group presented a new chapter on private enforcement for the working group’s Anti-Cartel Enforcement Manual and a report on leniency incentives.

The Advocacy Working Group compiled case studies as part of its Strategy Project, with specific examples of how agencies have developed strategies and assessed their advocacy initiatives. The working group also drafted a report on ICN member competition advocacy initiatives involving digital markets.

Created in October 2001 to increase understanding of competition policy and promote convergence toward sound antitrust enforcement around the world, the ICN, founded by 15 agencies including the Department of Justice’s Antitrust Division and the FTC, has grown to 139 member agencies from 126 jurisdictions, supported by a wide network of non-government advisors from around the world.

May 18, 2019 in Financial Regulation | Permalink | Comments (0)

Saturday, May 4, 2019

FTC and CFPB Report on 2018 Activities to Combat Illegal Debt Collection Practices

Agencies provide annual summary of work to combat illegal debt collection practices

The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (Bureau or CFPB) reported on their 2018 activities to combat illegal debt collection practices. The annual report to Congress on the administration of the Fair Debt Collection Practices Act (FDCPA) highlights both agencies’ efforts to stop unlawful debt collection practices, including robust law enforcement, education and public outreach, and policy initiatives. Federal Trade Commission Enforcement of the Fair Debt Collection Practices Act In Calendar 2018: Report To the Bureau of Consumer Financial Protection (also known as Consumer Financial Protection Bureau)

In the report, the FTC states that it filed or resolved a total of seven cases against 52 defendants, and obtained more than $58.9 million in judgments. The FTC also banned 32 companies and individuals that engaged in serious and repeated law violations from ever working in debt collection again. The FTC continued its aggressive efforts to curb egregious debt collection practices, including initiating or resolving four actions involving phantom debt collections. The FTC returned $853,715 to consumers who lost money to two phantom debt collection operations previously stopped by the FTC. In 2018, the FTC also:

  • Initiated or resolved three other actions, in addition to the phantom debt cases, to protect consumers from unlawful debt collections practices;
  • Deployed educational materials through multiple channels and formats to inform consumers about their rights and educate debt collectors about their responsibilities under the FDCPA and FTC Act;
  • Collaborated with an informal network of about 16,000 community-based organizations and national groups as part of its outreach efforts;
  • Distributed 13.4 million print publications to various organizations, businesses, and government agencies;
  • Logged more than 60 million views of its business and consumer education websites, with more than 592,000 views of the consumer videos on the FTC’s channel at, and over 280,000 email subscribers to its consumer blogs;
  • Supplied more than 24,000 copies of a fotonovela (graphic novel) on debt collection, developed for Spanish speakers, to raise awareness about scams targeting the Latino community;
  • Logged more than 4.7 million page views on its Business Center that houses business education resources; and
  • Issued a new Staff Perspective discussing the various financial issues that military servicemembers face, including the unique challenges that can arise in the debt collection context.

In the report, the Bureau states its intent to issue a Notice of Proposed Rulemaking on debt collection that will address issues ranging from communication practices to consumer disclosures. The Bureau highlights in the report that it handled approximately 81,500 debt collection complaints related to first-party (creditors collecting on their own debts) and third-party collections. Debt collection is among the most prevalent topics of consumer complaints about financial products or services received by the Bureau. In 2018, the Bureau engaged in six public enforcement actions arising from alleged FDCPA violations. The Bureau brought an action that resulted in an $800,000 civil penalty. It also accepted a judgment in favor of the defendant in a second case. Four other FDCPA cases remain in active litigation. In 2018, the Bureau also:

  • Filed briefs as amicus curiae in two cases arising under the FDCPA – one in the Supreme Court and one in federal court of appeals;
  • Identified one or more violations of the FDCPA through its supervisory examinations;
  • Conducted a number of non-public investigations of companies to determine whether they engaged in collection practices that violated the FDCPA or the Dodd-Frank Act (DFA);
  • Provided consumer debt collection educational materials, which have consistently remained among the most-viewed categories in “Ask CFPB,” an interactive online consumer education tool;
  • Trained, as of the end of 2018, over 26,535 staff and volunteers in social service organizations on Your Money Your Goals – a financial empowerment toolkit;
  • Continuously operated the 21-day email course called “Get a Handle on Debt Boot Camp,” a program to get periodic messages about steps to manage debt effectively, which attracted 19,294 sign-ups since launching in November 2017;
  • Offered five sample letters that consumers may use when they interact with debt collectors, which have now been downloaded more than 607,000 times as of December 2018;
  • Offered print publications on financial topics including debt collections, such as the bilingual brochure “Know Your Rights When a Debt Collector Calls”; and
  • Continued research projects and market monitoring and outreach activities to improve its understanding of the debt collection market, and to better understand the benefits, costs and impacts of potential rules, including a report on collecting telecommunication debt, which have aided in the ongoing development of a potential debt collection rule.

The FTC and the Bureau share enforcement responsibilities under the FDCPA. Last month, the agencies reauthorized their memorandum of understanding that continues coordination between the agencies in enforcement, sharing of supervisory information and consumer complaints, and collaboration on consumer education.

The FTC and the Bureau remain vigilant in their efforts to monitor the debt collection industry and stop unlawful conduct that harms both consumers and legitimate businesses. The CFPB’s annual report to Congress on the FDCPA, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, includes information provided by the FTC in its letter to the CFPB.

May 4, 2019 in Financial Regulation | Permalink | Comments (0)

Sunday, April 28, 2019

determinations of whether a company has the ability to exercise a controlling influence over another company for purposes of the Bank Holding Company Act or the Home Owners’ Loan Act.

The Board is seeking comment on proposed revisions to its rules regarding the definition of control in the Bank Holding Company Act (“BHC Act”), and the Home Owners’ Loan Act
(“HOLA”). Download Control-proposal-fr-notice-20190423

Under the BHC Act, control is defined by a three-pronged test: a company has control over another company if the first company (i) directly or indirectly or acting through one or more other persons owns, controls, or has the power to vote 25 percent or more of any class of voting securities of the other company; (ii) controls in any manner the election of a majority of the directors of the other company; or (iii) directly or indirectly exercises a controlling influence over the management or policies of the other company. 

HOLA includes a substantially similar definition of control. The proposed revisions are intended to provide bank holding companies, savings, and loan holding companies, depository institutions, investors, and the public with a better understanding of the facts and circumstances that the Board generally considers most relevant when assessing controlling influence. The increase in transparency due to the proposed rule should provide greater clarity and ensure consistency of decision-making, thereby reducing regulatory burden for banking organizations and investors.

April 28, 2019 in Financial Regulation | Permalink | Comments (0)

Friday, April 26, 2019

FINRA Statistics 2018

Key Statistics for 2018

Registered Representatives 629,847
Securities Firms 3,607
Cycle Exams 1,171
Branch Exams 446
Reviews for Cause in the Examination Program 4,728
Market Events Processed 66.7 billion every day
Fines $61.0 million
Restitution $25.5 million
Individuals Barred 386
Individuals Suspended 472
Firms Expelled 16
Firms Suspended 23
Fraud and Insider Trading Cases Referred for Prosecution 919

Regulatory Actions and Corporate Financing Review 2014 – 2018

Regulatory Actions 2018 2017 2016 2015 2014

Investor Complaints Received1






New Disciplinary Actions Filed2






Fines3 (in millions)






Restitution (in millions)






Firms Expelled4






Firms Suspended






Individuals Barred






Individuals Suspended






Advertisements and Sales Communications Reviewed






Corporate Financing 2018 2017 2016 2015 2014
Total Public Offering Filings 1,014 979 755 972 1,139
> Corporate Filings5 973 914 693 901 958
> Other Filings6 41 65 62 71 181
Private Placement Filings 2,471 2,579 4,018 3,249 3,159

Current Registration Statistics for February 2019

Registered Reps Member Firms Branch Offices




Registered Representatives Statistical Review 2004 - 2018

Year Total Registered Reps
at End of Year
Individuals Leaving % of Total Individuals Entering % of Total



























































































Certain data presented here reflect minor adjustments from previously reported data due to technical database corrections.

Member Firm Statistical Review 2004 - 2018

Year Total Firms at End of Year Firms Leaving % of Total Firms Added % of Total



























































































Certain data presented here reflect minor adjustments from previously reported data due to technical database corrections.

Member Firm Branch Offices Statistical Review 2005 - 20187

Year Total Branches at End of Year Branches Closed % of Total Branches Opened % of Total




















































































Certain data presented here reflect minor adjustments from previously reported data due to technical database corrections.

1. Includes complaints directly reported by investors to FINRA.
2. Beginning in 2017, FINRA changed its methodology in compiling aggregate data for Actions Filed.
3. Fines billed by FINRA, excluding amounts billed by FINRA on behalf of another self-regulatory organizations, including the Municipal Securities Rulemaking Board.
4. Beginning in 2017, FINRA changed its methodology in compiling aggregate data for Firms Expelled.
5. Includes equity and debt filings.
6. Includes unlisted REIT and direct participation program filings.
7. The revised definition of “branch office” took effect on July 3, 2006 (NASD) and September 9, 2005 (NYSE). The Branch Office Registration System launched on October 29, 2005.

April 26, 2019 in Financial Regulation | Permalink | Comments (0)

Thursday, April 25, 2019


The amendments to the Securities Investment Business Law (2019 Revision) stem from the review conducted by the Cayman Islands Monetary Authority of the entities that are allowed to be excluded from the Law’s licensing requirements. Those entities are known as “excluded persons”. The review identified a number of weaknesses and challenges that may pose regulatory and reputational risk to the Authority and the Islands. The Bill seeks to provide for the adjustment of the excluded persons regime and for incidental and connected purposes.

Download Cayman new exempt co law

Clause 5 of the Bill seeks to amend section 5 of the principal Law to make provision for a person to apply for a licence or registration. The clause also provides that a person who carries on a securities investment business for which a licence or registration is required must also maintain, among other things, staff and premises. The clause also sets out the procedure for registration as a “registered person”. A person listed in Schedule 4 of the principal Law is required to apply for registration as opposed to a licence.

April 25, 2019 in Financial Regulation | Permalink | Comments (0)

Friday, April 12, 2019

General Electric Agrees to Pay $1.5 Billion Penalty for Alleged Misrepresentations Concerning Subprime Loans Included in Residential Mortgage-Backed Securities

By late third quarter 2006, managers responsible for quality control and risk management at WMC and GECC had expressed concerns that WMC’s quality and fraud controls were so lax that WMC received more mortgage applications containing fraud or other defects than its competitors. As a member of GE’s Corporate Audit Staff (CAS) involved in audits of WMC observed in April 2007, WMC “jacked up volume without controls.”

The Department of Justice today announced that General Electric (GE) will pay a civil penalty of $1.5 billion under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) to resolve claims involving subprime residential mortgage loans originated by WMC Mortgage (WMC), a GE subsidiary. WMC, GE, and their affiliates allegedly misrepresented the quality of WMC’s loans and the extent of WMC’s internal quality and fraud controls in connection with the marketing and sale of residential mortgage-backed securities (RMBS). FIRREA authorizes the federal government to seek civil penalties for violations of various predicate criminal offenses, including wire and mail fraud where the violation affects a federally insured financial institution.

“The financial system counts on originators, which are in the best position to know the true condition of their mortgage loans, to make accurate and complete representations about their products. The failure to disclose material deficiencies in those loans contributed to the financial crisis,” said Assistant Attorney General Jody Hunt. “As today’s resolution demonstrates, the Department of Justice will continue to employ FIRREA as a powerful tool for protecting our financial markets against fraud.”

General Electric Capital Corporation (GECC), then the financial services unit of GE, acquired WMC, a subprime residential mortgage loan originator, in 2004. WMC originated more than $65 billion dollars in mortgage loans between 2005 and 2007. WMC sold the vast majority of its loans to investment banks, which, in turn, issued and sold RMBS backed by WMC loans to investors. The United States alleged that a majority of the mortgage loans WMC originated and sold for inclusion in RMBS in 2005-2007 did not comply with WMC’s representations about the loans, and that certain of WMC’s representations were reviewed by, approved by, or made with the knowledge of personnel from GE or GECC. Investors, including federally insured financial institutions, suffered billions of dollars in losses as a result of WMC’s fraudulent origination and sale of loans for inclusion in RMBS. 

In particular, the United States alleged that in 2005-2007, WMC attempted to increase its profits and meet profit goals by increasing originations. WMC loan analysts responsible for underwriting mortgage loans were encouraged to approve loans in order to meet volume targets, even where the loan applications did not meet the criteria outlined in WMC’s published underwriting guidelines, and received additional compensation based on the number of mortgages they approved. At the same time, there were significant deficiencies with respect to WMC’s quality control, which was viewed by some as an impediment to volume.

In 2005, a WMC quality control manager described his department as a “toothless tiger” with inadequate resources and no authority to prevent the approval or sale of loans his department had determined were fraudulent or otherwise defective.

By late third quarter 2006, managers responsible for quality control and risk management at WMC and GECC had expressed concerns that WMC’s quality and fraud controls were so lax that WMC received more mortgage applications containing fraud or other defects than its competitors. As a member of GE’s Corporate Audit Staff (CAS) involved in audits of WMC observed in April 2007, WMC “jacked up volume without controls.”

The United States alleged that the investment banks that purchased WMC’s loans declined to buy certain mortgage loans that WMC attempted to sell due to defects in the loan file or suspected fraud. When it declined, or “kicked out” a loan, the potential purchaser typically notified WMC of its reasons for rejecting the file, including the defects identified. WMC’s general practice was to re-offer certain kicked loans to a second potential purchaser for inclusion in RMBS without disclosing that the mortgage had previously been rejected or the reasons why the first potential purchaser concluded the mortgage had defects. 

The United States alleged that by late 2005 and early 2006, investment banks were kicking out more of WMC’s loans than ever, and investors in RMBS backed by WMC loans raised concerns about the quality of loans originated by WMC because WMC borrowers were failing to repay their loans at unexpectedly high rates. WMC also began receiving increased numbers of requests from investment banks to buy back, or repurchase, loans. In March 2006, WMC reviewed a representative sample of the 1,276 loans it had repurchased in 2005, and concluded that 78 percent of the loan files reviewed contained at least one piece of false information. The results of this review were shared with WMC’s senior executive team and discussed on multiple occasions with personnel from GECC.

The United States alleged that in fall 2006, GECC took control over the strategic direction of WMC. Even in the face of increasing repurchase demands, kick-outs, and concerns about WMC’s underwriting quality, WMC continued selling its loans and making false representations about their qualities and attributes. GECC became closely involved in WMC’s whole loan sales and provided WMC with input and direction on how to sell off WMC’s remaining loans. Beginning in 2007, GECC also assumed control over WMC’s ability to grant repurchase requests. 

The investigation of WMC, GE, and GECC and this settlement were handled by the Civil Division’s Commercial Litigation Branch, with assistance from the San Francisco Field Office of the Federal Bureau of Investigation. 

April 12, 2019 in Financial Regulation, Financial Services | Permalink | Comments (0)

SEC Grants Relief to Collective Trust Funds Accepting Assets of Certain Puerto Rico Retirement Plans

Cadwalder has posted an article about the SEC Division of Investment Management granting no-action relief, allowing certain Puerto Rico retirement plans to participate in "bank-maintained" collective trust funds without requiring the trust to register under the Investment Company Act, the Securities Act or the Exchange Act.

Read Cadwalder's article here

April 12, 2019 in Financial Regulation | Permalink | Comments (0)

Sunday, March 31, 2019

Office Depot and Tech Support Firm Will Pay $35 Million to Settle FTC Allegations That They Tricked Consumers into Buying Costly Computer Repair Services

Office Depot, Inc. and a California-based tech support software provider have agreed to pay a total of $35 million to settle Federal Trade Commission allegations that the companies tricked customers into buying millions of dollars’ worth of computer repair and technical services by deceptively claiming their software had found malware symptoms on the customers’ computers.

Office Depot has agreed to pay $25 million while its software supplier,, Inc., has agreed to pay $10 million as part of their settlements with the FTC. The FTC intends to use these funds to provide refunds to consumers.

“Consumers have a hard enough time protecting their computers from malware, viruses, and other threats,” said FTC Chairman Joe Simons. “This case should send a strong message to companies that they will face stiff consequences if they use deception to trick consumers into buying costly services they may not need.”

PC Health Check software screenshot.  Checking any of the four boxes triggered a deceptive report of malware on the consumer's computer.In its complaint, the FTC alleges that worked with Office Depot for nearly a decade to sell technical support services at its stores. Office Depot and used PC Health Check, a software program, as a sales tool to convince consumers to purchase tech repair services from Office Depot and OfficeMax, Inc., which merged in 2013.

The Office Depot companies marketed the program as a free “PC check-up” or tune-up service to help improve a computer’s performance and scan for viruses and other security threats., which received tens of millions of dollars in revenue from Office Depot, remotely performed the tech repair services once consumers made the purchase.

The FTC alleges that while Office Depot claimed the program detected malware symptoms on consumers’ computers, the actual results presented to consumers were based entirely on whether consumers answered “yes” to four questions they were asked at the beginning of the PC Health Check program. These included questions about whether the computer ran slow, received virus warnings, crashed often, or displayed pop-up ads or other problems that prevented the user from browsing the Internet.

The complaint alleges that Office Depot and configured the PC Health Check Program to report that the scan found malware symptoms or infections whenever consumers answered yes to at least one of these four questions, despite the fact that the scan had no connection to the “malware symptoms” results. After displaying the results of the scan, the program also displayed a “view recommendation” button with a detailed description of the tech services consumers were encouraged to purchase—services that could cost hundreds of dollars—to fix the problems.

The FTC alleges that both Office Depot and have been aware of concerns and complaints about the PC Health Check program since at least 2012. For example, one OfficeMax employee complained to corporate management in 2012, saying “I cannot justify lying to a customer or being TRICKED into lying to them for our store to make a few extra dollars.” Despite this and other internal warnings, Office Depot continued until late 2016 to advertise and use the PC Health Check program and pushed its store managers and employees to generate sales from the program, according to the complaint.

The Commission alleges that both companies violated the FTC Act’s prohibition against deceptive practices.

In addition to the monetary payment, the proposed settlement also prohibits Office Depot from making misrepresentations about the security or performance of a consumer’s electronic device and requires the company to ensure its existing and future software providers do not engage in such conduct. As part of its proposed settlement, cannot make, or provide others with the means to make, misrepresentations about the performance or detection of security issues on consumer electronic devices.

March 31, 2019 in Financial Regulation | Permalink | Comments (0)