Broker Dealer Regulatory Digest

Enforcement and Litigation

• Securities and Exchange Commission. Cryptocurrency regulation. On April 23, 2024, two groups representing the cryptocurrency industry sued SEC over its expanded dealer definition announced earlier this year. The Blockchain Association and Crypto Freedom Alliance of Texas allege that the agency failed to adequately explain how the rule would affect the digital assets industry. The rule, approved by the SEC in February, broadens the definition of a dealer to include firms with trading activities that provide liquidity.
• Commodity Futures Trading Commission. Precious metals fraud. On April 25, 2024, CFTC announced a consent order against former employees of a precious metals company for defrauding customers and providing unlawful investment advice in connection with the purchase and sale of commodities. A federal judge in California ordered Sean L. Kelly and Anthony Spencer to pay more than $56 million in restitution and fines for violations of the Commodity Exchange Act and CFTC regulations.
• Securities and Exchange Commission. Cryptocurrency regulation. On April 25, 2024, cryptocurrency firm Consensys sued SEC over the agency's categorization of its ether token as a security. The lawsuit comes after Consensys received notification that SEC was considering enforcement action related to the company's products. Consensys is asking a Texas federal court to confirm that SEC doesn't have legal authority to regulate ether or related software platforms. The suit also asks the court to find that any enforcement action related to ether trading would exceed SEC's regulatory authority.

Rulemaking Updates

• Commodity Futures Trading Commission. Swap execution facilities. On April 23, 2024, CFTC published its final rule related to uncleared swap confirmations. The new rule allows swap execution facilities to apply terms of previous negotiated agreements to expedite swap confirmations. It also allows for the confirmation of swap transactions to take place "as soon as technologically possible" instead of "at the same time as execution."
• Labor Department. Retirement Security Rule. On April 23, 2024, DOL's Employee Benefits Security Administration released an updated rule that will broaden the definition of an investment advice fiduciary. The finalized rule adds several key situations to the list of those covered by the Employee Retirement Security Act, including one-time advice related to rollover transactions. The updated rule carries a final compliance date of September 2025 and will cover a broader group of financial industry workers, including insurance agents and more employees at securities firms. SIFMA, a leading securities industry trade group, said in a statement that the rule would likely "limit investors' access to advice and education."

Research and Analysis

• Securities and Exchange Commission. Registered funds. On April 24, 2024, SEC published its first report on the more than 12,000 funds registered with the agency. The report covers more than $26 trillion in net assets under management across assets classes including mutual funds, ETFs and closed-end funds. The report will be published quarterly moving forward.

Other News of Note

• Department of Justice. Common ownership by investment companies. On April 25, 2024, DOJ and FTC released a joint comment asking the Federal Energy Regulatory Commission to consider whether certain acquisitions involving common ownership across electricity markets could weaken competition. FERC is accepting comments as part of a policy review regarding the ownership of electric utilities by financial investment companies.

Orla McCaffrey is a regulatory analyst with Davis Wright Tremaine LLP.