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On May 6, 2019, the Financial Industry Regulatory Authority (“FINRA”) issued Regulatory Notice 19-18, addressing members’[1] anti-money laundering (“AML”) compliance programs.  This notice focused extensively on members’ monitoring for suspicious activities and subsequent suspicious activity report (“SAR”) filing obligations, providing 97 examples of “money laundering red flags” to securities industry market participants.  Where applicable to a members’ business operations, FINRA encouraged broker-dealers to take a “risk-based approach” to AML compliance and incorporate these…
On April 16, 2019, the U.S. Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert addressing all registered broker-dealers and investment advisers’ (together, “Firms”)[1] privacy-related obligations under Regulation S-P (“Reg S-P”).  The Risk Alert set out the most frequent Reg S-P deficiencies OCIE identified during examinations over the past two years, and encouraged registrants to review their written privacy policies and procedures as well as the consistency…
On April 16, 2019, the U.S. Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert addressing all registered broker-dealers and investment advisers’ (together, “Firms”)[1] privacy-related obligations under Regulation S-P (“Reg S-P”).  The Risk Alert set out the most frequent Reg S-P deficiencies OCIE identified during examinations over the past two years, and encouraged registrants to review their written privacy policies and procedures as well as the consistency…
On April 3, 2019, staff of the Securities and Exchange Commission released (1) a framework providing principles for analyzing whether a digital asset constitutes an investment contract, and thus a security, as defined in SEC v. W.J. Howey Co. and (2) a no-action letter permitting TurnKey Jet, Inc., without satisfying registration requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934, to offer and sell “tokenized” cards that are recorded on a permissioned…
On April 3, 2019, staff of the Securities and Exchange Commission released (1) a framework providing principles for analyzing whether a digital asset constitutes an investment contract, and thus a security, as defined in SEC v. W.J. Howey Co. and (2) a no-action letter permitting TurnKey Jet, Inc., without satisfying registration requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934, to offer and sell “tokenized” cards that are recorded on a permissioned…
On March 4, 2019, the Commodity Futures Trading Commission (“CFTC”) announced a whistleblower award of over $2 million to an individual—unaffiliated with the company the CFTC charged—for providing expert analysis in conjunction with a related action instituted by another federal regulator.  While the Securities and Exchange Commission, which possesses a similar whistleblower award regime,[1] has previously issued awards to multiple claimants for both related actions[2] and to company outsiders,[3] this is the…
On February 20, the Securities and Exchange Commission (the “SEC” or “Commission”) issued a cease-and-desist order against Gladius Network LLC (“Gladius”) concerning its 2017 initial coin offering (“ICO”).  The SEC found that the Gladius ICO violated the Securities Act of 1933’s (“Securities Act”) prohibition against the public offer or sale of any securities not made pursuant to either an effective registration statement on file with the SEC or under an exemption from registration.[1] …
On February 20, the Securities and Exchange Commission (the “SEC” or “Commission”) issued a cease-and-desist order against Gladius Network LLC (“Gladius”) concerning its 2017 initial coin offering (“ICO”).  The SEC found that the Gladius ICO violated the Securities Act of 1933’s (“Securities Act”) prohibition against the public offer or sale of any securities not made pursuant to either an effective registration statement on file with the SEC or under an exemption from registration.[1] …
On January 22, the Financial Industry Regulatory Authority (“FINRA”)[1] released its 2019 Risk Monitoring and Examination Priorities Letter (the “Letter”).  The Letter highlights material new priorities for FINRA examinations in the coming year, as well as priorities in areas of ongoing concern.  The topics highlighted in this year’s Letter reflect FINRA’s increasing focus on its members’ interaction with, and adoption of, innovative financial technologies, as well as its implicit acknowledgement of the ability for…
Continuing its efforts to engage with FinTech innovators and market participants in the adoption of new technologies, the Commodity Futures Trading Commission (“CFTC”) and its LabCFTC[1] released a Primer on Smart Contracts (the “Primer”) on November 27. The Commission focused its Primer on (1) detailing the technical aspects of smart contract technology; (2) examining potential benefits and risks connected to their widespread adoption; and (3) the CFTC’s role in regulating the adoption of the…