News & Events –

A key to understanding new BSA guidance on the “legal status of commercial growth and production of hemp” can be found in provisions of the Farm Bill signed into law in December of last year. That legislation distinguished and removed hemp (though not marijuana) as a controlled substance under law, and interim rules, issued by the USDA in late October 2019, established a federal licensing approval plan that allows state departments of agriculture and tribal governments to submit plans for monitoring and regulating hemp production. Given this context, the Federal Reserve Board, the FDIC, FinCEN, the OCC and the Conference of State Bank Supervisors issued a statement clarifying BSA obligations under these new USDA interim rules. Bates Research takes a closer look.

Despite “significant headwinds,” including “adverse” holdings in Supreme Court cases and a significant disruption in Congressional funding in the beginning of the year, Co-Directors of the SEC Enforcement Division Stephanie Avakian and Steven Peikin announced that their efforts in FY 2019 have been successful. In a recently published Annual Report, the Directors described enforcement actions that held wrongdoers accountable, removed bad actors, stopped frauds and prevented losses. Bates Research looks at some key takeaways from their report.

On October 18th, 2019, more than a year after the launch of the SEC Share Class Disclosure Initiative and targeted enforcement activity, the SEC Division of Investment Management issued information clarifying conflicts of interest raised by different types of investment adviser compensation. In a new set of FAQs, SEC staff reviewed general conflicts of interest disclosure requirements and offered insight on the “material facts” that need to be disclosed concerning mutual fund share classes and an adviser’s receipt of revenue-sharing payments. Bates Research takes a closer look.

FINRA issued its annual Report on Examination Findings and Observations on October 16, 2019. Like last year’s Report, the 2019 version highlights selected firm compliance violations and provides “observations” on how firms can improve their programs and address “perceived weaknesses that elevate risk.” Bates Research takes a closer look at FINRA's 2019 priorities and additional compliance concerns raised in the Report.

On September 26, a bipartisan group of Senators introduced a bill to strengthen the authority of the Financial Crimes Enforcement Network (FinCEN) to fight money laundering. Called the ILLICIT CASH Act, the legislation would establish federal reporting requirements for beneficial ownership information. A similar bill, sponsored by Congresswoman Carolyn Maloney, titled the Corporate Transparency Act, passed a vote in the House of Representatives this week. The House also passed its version of the SAFE Banking Act to remove legal uncertainty for regulated banks and credit unions that provide banking services to cannabis businesses. These bills have the potential to significantly impact AML/BSA compliance programs. In this article, Bates Research takes a closer look at their potential impact.

In two speeches delivered in September 2019, leaders of the Financial Crimes Enforcement Network (FinCEN) laid out their thinking behind the agency’s current regulatory approach to combatting money laundering and terrorist financing. FinCEN Deputy Director Jamal El-Hindi focused on the future of the BSA and emphasized compliance for NBFIs, while FinCEN Director Kenneth Blanco described the use of financial data to fight money laundering and the abuse of personally identifiable information by bad actors. In this article, Bates Research takes a closer look at FinCEN’s message.

In its 2019 annual enforcement report, the North American Securities Administrators Association ("NASAA") highlighted statistics from its 2018 state enforcement activities. The data show that the state securities regulators secured more than $1 billion in restitution and fines as well as significant criminal penalties. The report also notes that state regulators nearly doubled enforcement actions against investment adviser firms. Here, Bates Research takes a closer look.

In a new Regulatory Notice, FINRA is asking its members a series of questions about the utility of rules and processes to curb financial exploitation of senior investors. According to FINRA, the rules under review provide a way for member firms to deal with situations where there is “a reasonable basis to believe that financial exploitation has occurred, is occurring, has been attempted or will be attempted.”

Bates Research closely follows regulatory and enforcement developments on senior financial fraud. In this article, we recap those rules and consider the questions posed by FINRA in its latest Notice.

The SEC’s adoption of the Regulation Best Interest (“Reg BI”) package in June was a defining moment in the long-running debate over the standard of care for broker-dealers and investment advisers. It triggered compliance schedules and required registered broker-dealers and advisory firms to develop internal policies and procedures in order to satisfy the new standards. The passage of Reg BI, however, did not quell the ongoing controversies over the appropriateness and adequacy of standards and investor protections. This week, Reg BI suffered another state challenge, this time in the form of a lawsuit filed against the SEC by seven State Attorneys General. Bates Research takes a closer look.

The past few months have been a particularly busy time for state financial regulators and enforcement officials. At almost every turn, the complicated and overlapping relationship between federal and state officials is being tested. A review of recent activities by the North American Securities Administrators Association (NASAA) provides several examples. In this article, Bates recaps recent NASAA developments on cryptocurrency, fraud enforcement, Regulation Best Interest (Reg BI), and supervision of complex financial products (i.e. non-traditional Exchange Traded Funds).

Last week, the New York Supreme Court upheld the “Suitability and Best Interest in Life Insurance and Annuity Transactions” regulation (a/k/a Regulation 187) in the face of legal challenges brought by several associations and insurance agent groups. In this article we take a look at what the decision means, recent developments in both the SEC and NAIC efforts to rewrite standards, and we update you on the latest in the legal battle over commission trails for brokers selling variable annuities.

The growing global cannabis market is estimated to reach $66.3 billion by 2025, up from $13.8 billion in 2018. That kind of growth is spurring congressional and state legislators to seek to normalize the market for marijuana-related businesses and speed up the resolution of federal-state legal conflicts. In this article Bates looks at some of the recent federal legislative and state developments on what appears to be real momentum toward a fully functioning and legitimate market.

After analyzing data collected in Suspicious Activity Reports, FinCEN issued an update to a 2016 Advisory alerting financial institutions on how best to combat criminal schemes that compromise business email accounts. The problem of criminals targeting business fund transfers is not small. So-called “Business Email Compromise” scammers possibly stole billions of dollars from companies and individuals in 2018, more than in prior years, according to a new FinCEN Financial Trend Analysis of the SARs data. In this article, Bates considers the informed guidance in FinCEN’s new 2019 Advisory to financial institutions, as well as some of the salient conclusions drawn from the trend analysis report.

Bates Group is alerting counsel that we are seeing an uptick in option-related cases where firms offered their clients strategies to increase the yield in their investment portfolio, often involving options trading in order to earn premium income to enhance a portfolio’s regular returns. Bates staff and experts have provided both consulting and testimony services in matters involving options trading within a client account.

On June 25th, the U.S. House of Representatives weighed in and voted for an amendment to a bill with the intent of prohibiting the SEC from “implementing, administering, enforcing, or publicizing” the final rules and interpretations of Reg BI. The amendment is not likely to pass the Senate, and as this week’s formal publication of Reg BI in the Federal Register makes clear, the dates for implementation and compliance are set, even as the debate over the new rule package continues. In this article, we review SEC Chair Clayton’s endorsement of the regulation, and his point-by-point rebuttal of the criticism that it has received since agency adoption.

This month, a bipartisan group of Senate Banking Committee members introduced legislation to address current gaps inhibiting the fight against illicit financing of criminal activity (CFT). This follows the House Financial Services Committee's adoption of an aggressive legislative agenda aimed at modernizing and closing loopholes in the AML/CFT framework. Of key interest to both the Senate and the House is the expansion of the use of “beneficial ownership information” of the type now collected under the Customer Due Diligence rules that went into effect last year. In this article, Bates reviews the developing congressional legislative efforts to detect and deter financial crime.