Money service businesses received a reprieve last week that will make cryptocurrency firms very happy since they will be able to more easily expand across the United States. The Conference of State Bank Supervisors (“CSBS”) – 48 state regulators – agreed on a regulatory system for money services’ businesses, including a single set of supervisory rules and exam program conducted by state regulators. The new regime applies to nearly 80 large payment and cryptocurrency firms,…

The United States Securities and Exchange Commission (“SEC”) adopted amendments to the definitions of both accredited investor under Securities Act of 1933 (“Securities Act”) Regulation D Rule 501 and qualified institutional buyer (“QIB”) under Securities Act Rule 144A. Under the new accredited investor definition, the following parties would now be considered accredited investors: (1) designated professionals, such as those persons currently holding, in good standing, the FINRA Series 7, Series 65 and Series 82 licenses,…

FINRA’s National Adjudicatory Counsel (“NAC”), recently, affirmed a disciplinary panel decision significantly sanctioning a broker-dealer for paying unregistered persons and entities.  See https://www.finra.org/sites/default/files/2020-07/NAC_2014042606902_Silver-Leaf_062920.pdf. FINRA alleged, among other things, that a broker-dealer paid transaction-based compensation to “unregistered finders,” and non-registered entities owned by its registered persons.   Ultimately, the NAC agreed that, over a 3 year period, the broker-dealer paid and/or shared certain transaction-based compensation with unregistered finders and entities affiliated with registered persons, rather than…

The SEC’s Office of Compliance Inspections and Examinations (“OCIE”) conducted a series of examinations into private fund advisers. See the SEC risk alert here. To say the least, OCIE was not pleased with the results, indicating a significant percentage of these advisers had compliance issues.  In particular, OCIE found problems with: (1) conflicts of interest; (2) fees and expenses; and (3) material non-public information policies and procedures. OCIE found that these private advisers had…

The SEC’s Office of Compliance and Inspections (“OCIE”), recently, issued an alert—more like a shot across the bow—to BDs and RIAs regarding its concerns over activities in the industry concerning the challenges encountered by COVID-19.  See https://www.sec.gov/files/Risk%20Alert%20-%20COVID-19%20Compliance.pdf.  As part of its efforts, OCIE made certain recommendations concerning: (1) investor asset protection; (2) personnel supervision; (3) fees, expenses, and financial transactions policies; (4) investment fraud; (5) business continuity plans; and (6) sensitive information protection. OCIE complained…

Recently, the United States District Court of the District of Columbia refused to dismiss money laundering charges against a defendant who was allegedly engaged in a darknet cryptocurrency scheme.   See U.S. v. Harmon, Case Number 1:19-cr-00395-BAH (D.D.C. July 24, 2020) . Essentially, the defendant tried to claim that, when he transferred more than 350,000 bitcoins, he was not transferring “money,” and, therefore, not subject to operating an unlicensed money transmitting business, in violation of 18 U.S.C. §…