On March 1, 2023, the U.S. Department of Justice (DOJ) unsealed an indictment against the CEO of a publicly traded healthcare company (the Executive) relating to charges of an insider trading scheme. The indictment represents the first time the DOJ has brought criminal insider trading charges stemming from an executive’s use of a Rule 10b5-1 trading plan. The investigation is part of a data-driven initiative led by the DOJ’s Fraud Section to identify executive abuses of 10b5-1 trading plans.Continue Reading DOJ Brings First Criminal Charges Stemming From Use of Rule 10b5-1 Trading Plan
Thomas Ahmadifar primarily advises clients on regulatory issues under federal and state securities, commodity, and banking laws. He counsels broker-dealers on matters before the SEC, FINRA and other SROs, including business expansions, changes of control, membership applications and the trading practice rules. In his funds practice, Thomas advises clients in both the registered and private funds spaces.
The staff (“Staff”) of the Division of Trading and Markets of the U.S. Securities and Exchange Commission (SEC) issued a no-action letter (NAL) at the request of the Financial Industry Regulatory Authority (FINRA) on September 25, 2020, which built upon a joint statement (“Joint Statement”) issued by the staffs of the SEC and FINRA in 2019 (please see our prior client update for additional discussion of this 2019 guidance). As part of its guidance, the Joint Statement provided an example of a noncustodial business model for broker-dealers that involved the operation of an alternative trading system (ATS). Upon a request by FINRA on behalf of its broker-dealer members, the NAL provides modified relief for ATSs that meet certain conditions, enabling them to settle digital asset security trades under a slightly modified structure designed to reduce operational and settlement risks.
Continue Reading SEC Staff Provides Relief on the Role of ATSs in the Settlement of Digital Asset Security Trades
- S. Department of Homeland Security Issues Challenge for Development of Trusted User Interface for Digital Wallets
- Kraken Announces Approval From Wyoming Division of Banking for a Special Purpose Depository Institution Charter
- CFTC Provides Temporary No-Action Relief to Tassat From SEF Reinstatement Requirements
- FinCEN Seeks Public Comments on AML Program Requirements
- CSBS Announces “One Company, One Exam” for Licensed Payment Firms
- CFTC Files Complaint in Alleged Fraudulent Digital Asset Scheme
- SEC Brings Charges against T.I. for Violations of Securities Laws
- SEC Brings a Complaint Against Individuals and Two Companies Relating to Token Offerings
- FAFT Issues Report on Virtual Assets Red Flag Indicators of Money Laundering and Terrorist Financing
- Gibraltar Issues Updated Guidance Notes for DLT
- Report: New Zealand Updates Tax Guidance for Crypto Assets
- Report: Bahamas Planning to Formally Launch Its CBDC as Soon as October 2020
- Report: India Considering a New Law Banning Cryptocurrency Trading
- Nigeria Issues Statement on Digital Assets and Their Classification and Treatment
- EU Committee Legislative Proposal on the Regulation of Crypto-Assets
- OCC Announces a New Acting Comptroller of the Currency
- House Bill Would Require a Study on the Regulation and Use of Blockchain Technology in the United States
- IRS Reportedly Seeking Private Contractors in Connection with Virtual Currency-Related Tax Returns
- US Senate Subcommittee Raises Blockchain as Option for Senate Voting During Times of Crisis
- Private Party Brings Suit against Crypto-Products Trading Platform for Alleged Violations of RICO and the CEA
- Bank of France Provides Update on Central Bank Digital Currency Experimentation
- FATF Issues Report on COVID-19-Related Money Laundering and Terrorist Financing Risks and Policy Responses
- Brazilian Agency Re-opens Investigation into Banks’ Treatment of Virtual Currency Firms
- Reports: Iran Takes Several Actions Related to the Regulation of Virtual Currencies
On April 28, 2020, the U.S. Securities and Exchange Commission (“SEC”) filed a complaint against a company and its chief executive officer (“CEO”) for alleged fraud in connection with the company’s stated response to the COVID-19 pandemic. In its complaint, the SEC alleged that the company issued two press releases containing false or misleading statements in which the company purported to be negotiating the sale of N95 masks and then made claims that it was in possession of N95 masks. After regulators inquired about these claims, the SEC alleged that the company issued a third press release a month later that it did not have any N95 masks on hand. The complaint asserts that the company’s stock trading volume and stock price increased significantly as a result of the initial press releases.
Continue Reading SEC Alleges COVID-19 Related Fraud by a Company after Suspending Trading
In the midst of the COVID-19 pandemic, the financial markets have experienced significant volatility. During the course of this volatility, exchanges have halted trading multiple times after declines in trading trigged circuit breakers. In addition, trading floors are transitioning to electronic trading in efforts to prevent the transmission of COVID-19 on physical trading floors. With the recent turmoil, this post provides a high-level summary of the various types of circuit breakers and what can be expected.
Continue Reading Understanding Circuit Breakers, Our New Reality, in the Time of COVID-19
On March 9, 2020, FINRA released Regulatory Notice 20-08 (the “Regulatory Notice”) providing guidance and limited relief to its member broker-dealers during the COVID-19 pandemic. In particular, the Regulatory Notice requests that broker-dealers evaluate their compliance with FINRA Rule 4370, which requires broker-dealers to create, maintain, and update upon any material change, BCPs (Business Continuity Plans) identifying procedures relating to emergency or significant business disruption.
Continue Reading FINRA Issues Notice Regarding Business Continuity Planning During COVID-19 Outbreak
Federal and State Regulatory Developments
Bill in Hawaii State Senate Addresses Digital Assets Including Authorization for Banks to Serve as Qualified Custodians
SB 2594 before the Hawaii State Senate addresses a number of matters relating to digital assets. In particular, it would classify digital assets under the Hawaii Uniform Commercial Code, specify the manner of perfecting a security interest in digital assets, authorize banks to hold digital assets in their custody, and authorize courts to hear claims relating to digital assets. As for the banking portions, SB 2594 seeks to establish that banks can serve as “qualified custodians” as that term is defined under the rules of the Investment Advisers Act of 1940. It also discusses situations in which a bank may undertake transactions with digital assets placed in its custody. SB 2594 was introduced on January 17, 2020, and was referred on January 23, 2020 to the Hawaiian Senate’s Judiciary Committee and the Committee on Commerce, Consumer Protection, and Health.
Continue Reading Blockchain Week in Review: Week of January 24, 2020
U.S. Federal Regulatory Developments
SEC Staff Holds FinTech Forum to Discuss Blockchain Technology and Digital Assets
On May 31, 2019, the staff of the U.S. Securities and Exchange Commission (“SEC”) held a FinTech Forum to discuss distributed ledger technology and digital assets. It was hosted by the SEC’s Strategic Hub for Innovation and Financial Technology. The FinTech Forum’s agenda and its speakers can be found here.
Members of Congress Write a Letter to the National Economic Council in Favor of Blockchain Technology
On May 24, 2019, seven bipartisan members of the U.S. House of Representatives sent a letter to Lawrence Kudlow, the Director of the National Economic Council (“NEC”), urging the Administration, through the NEC, to hold a forum on blockchain technology. Citing the President’s most recent State of the Union Address, the letter asks that blockchain technology be included in the Administration’s initiatives to promote emerging technology. It also argues that while government agencies are already using blockchain technology in operations, more can be done to support the adoption and development of technology in the United States. The letter suggests that the NEC host a forum including policymakers, the private sector, and academia to help promote technology innovations and identify how to appropriately update laws and regulations.
Continue Reading Blockchain Week in Review: Week of May 31, 2019
On Wednesday, December 12, 2018, the D.C. Bar hosted a panel to discuss current developments in the world of crypto. Among the panelists were two senior SEC officers: Jonathan Ingram, Deputy Chief Counsel, Division of Corporation Finance, and Jennifer Leete, Assistant Director, Division of Enforcement. Also participating on the panel was Era Anagnosti, a former senior manager in the Division of Corporation Finance of the SEC who in part oversaw the process relating to, among other things, various crypto-related registration filings. The following is a summary of certain topics discussed at the panel regarding both corporate finance and enforcement as well as some key takeaways.
Continue Reading Takeaways on the Regulation of Crypto Assets from Late 2018 Comments of Several SEC Officials