Broker Dealer Regulatory Digest

Editor's Note
The following newsletter provides a roundup summarizing enforcement actions, guidance, rulemakings, and other public statements taken by a federal and/or state financial services regulatory agency, specifically focusing on: (1) the source of the development (regulator, legislative body, etc.), (2) the subject matter (consumer lending, money transmission, capital markets, etc.), and (3) the general issue covered.

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Regulatory Developments

• Commodity Futures Trading Commission. Decentralized Finance Report. On January 8, 2024, the Digital Assets and Blockchain Technology Subcommittee of the CFTC's Technology Advisory Committee (TAC) released its report on Decentralized Finance. Commissioner Christy Goldsmith Romero spoke about the report in her opening statement at the January 8 TAC meeting.
• Financial Crimes Enforcement Network. Beneficial Ownership Information Registry. FinCEN is now accepting beneficial ownership information reports. Reporting companies created or registered to do business in the United States before January 1, 2024, must file by January 1, 2025. Reporting companies created or registered to do business in the United States in 2024 have 90 calendar days to file after receiving actual or public notice that their company's creation or registration is effective.
• Financial Industry Regulatory Authority. 2024 Regulatory Oversight Report. On January 9, 2024, FINRA published its Annual Regulatory Oversight Report. Major topics in this year's report include: Crypto Asset Development; Advertised Volume; Cybersecurity; AML, Fraud and Sanctions; Reg BI and Form CRS; and Consolidated Audit Trail. Senior FINRA staff spoke about the report on Episode 144 of the "FINRA Unscripted" podcast.
• International Organization of Securities Commissions. Margin Calculations and Transparency. On January 16, 2024, BCBS and IOSCO published a consultative report titled "Transparency and responsiveness of initial margin in centrally cleared markets – review and policy proposals." The report makes ten policy proposals. Comment period is open until April 16, 2024.
• International Organization of Securities Commissions. Variation and Initial Margin Responsiveness. On January 17, 2024, BCBS, CPMI, and IOSCO published a report titled "Streamlining VM processes and IM responsiveness of margin models in non-centrally cleared markets." The report provides eight recommendations but does not propose any policy changes. Comment period is open until April 17, 2024.

Enforcement and Litigation

• Commodity Futures Trading Commission. CFTC vs. FOX Holdings, L.L.C.; Andrew Gizienski. On January 8, 2024, the Fifth Circuit held that "the Defendants lacked fair notice of the CFTC's unprecedented interpretation" of "17 C.F.R. § 155.4(b)(2)(i), a regulation that prevents commodities traders from ‘taking the other side of orders' without clients' consent." The judgment was reversed in part and the case remanded.
• Department of Justice. High-Yield Investment Fraud Scheme. On January 5, 2024, DOJ announced that Daniel Thomas Broyles Sr. aka Dan Thomas was sentenced to four years in prison for his role in high-yield investment fraud schemes.
• New York State Department of Financial Services. Anti-Money Laundering and Cybersecurity. On January 12, 2024, NYDFS announced an $8 million penalty against Genesis Global Trading, Inc. after a DFS investigation found significant failings in the firm's Anti-Money Laundering and Cybersecurity Programs.
• Securities and Exchange Commission. Real Estate Investment Fraud. On January 3, 2024, the SEC announced that it obtained an asset freeze and other emergency relief concerning an alleged $93 million real estate investment fraud perpetrated by Miami-based developer Rishi Kapoor.
• Securities and Exchange Commission. Foreign Corrupt Practices Act. On January 10, 2024, the SEC announced charges against global software company SAP for FCPA violations. The Department of Justice also announced that SAP will pay over $220 million to resolve SEC's investigations.
• Securities and Exchange Commission. Manipulative Trading. On January 11, 2024, SEC announced charges against Future FinTech's CEO with manipulative trading using an offshore account and with multiple disclosure failures.

Jonathan Cristol is a regulatory analyst with Davis Wright Tremaine LLP.