Enforcement and Litigation

  • Securities and Exchange Commission. Fraud. On May 3, 2024, SEC sanctioned an audit firm for "deliberate and systemic failures" to comply with Public Company Accounting Oversight Board (PCAOB) standards in more than 1,500 SEC filings. The firm, BFA Borgers CPA PC, fabricated audit documents and misled clients into believing that the firm's audits complied with PCAOB accounting standards, according to SEC. The firm will pay $12 million to settle the charges.
  • Financial Industry Regulatory Authority. Fraud prevention failures. On May 6, 2024, SoFi Technologies Inc. agreed to a $1.1 million settlement with FINRA to resolve charges that it failed to implement effective fraud prevention measures. SoFi Money, the company's brokerage unit, lacked a system "reasonably designed to verify the customers' identity," FINRA said. The security failings resulted in the opening of about 800 fraudulent SoFi Money accounts and $2.5 million in related withdrawals between December 2018 and April 2019, the agency said.

Rulemaking Updates

  • Commodity Futures Trading Commission. Capital and financial reporting. On April 30, 2024, CFTC announced a final rule amending capital and financial reporting requirements for swap dealers and major swap participants. The revisions are designed to make complying with CFTC's financial reporting requirements and demonstrating compliance with minimum capital requirements more straightforward. The compliance date for firms subject to the rule is September 30, 2024. (Read our attorneys’ take on the updated regulations).
  • Commodity Futures Trading Commission. Financial reporting. On April 30, 2024, CFTC released final rules to revise reporting regulations for futures and options. The updated rules require futures commissions merchants, foreign brokers, and certain reporting firms to report to CFTC position information for the largest futures and options traders. The new rules are effective 60 days following their publication in the Federal Register.

Other News of Note

  • Commodity Futures Trading Commission. AI regulation. On May 2, 2024, one of CFTC's advisory committees asked the agency to further consider policies to manage the risks related to artificial intelligence and safeguard financial markets. CFTC's technology advisory committee recommended that the agency adopt the AI risk management framework created by the National Institute of Standards and Technology, perhaps via an official rule, to assess the efficiency of AI models and potential consumer harms as they apply to regulated entities, including governance. The committee also recommended that CFTC hire additional AI-knowledgeable staffers and work with other regulators on a list of best practices for regulating AI use in derivatives.
  • U.S. House of Representatives. Cryptocurrency accounting. On May 8, 2024, House legislators voted to repeal cryptocurrency accounting guidance issued by the Securities and Exchange Commission in 2022. Staff Accounting Bulletin No. 121 requires banks to account for all digital assets on their balance sheets. Lawmakers behind the House Bill hold that SEC failed to follow proper rulemaking procedures when crafting the guidelines.

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