Category:

Finance & Banking

Financial Institutions Join Forces for Vendor Management Compliance

Financial institutions often rely on outside vendors to provide information technology services.  While doing so often provides economic efficiency and quicker technological innovation, the risks associated with outsourcing information technology services are significant.  Institutions must develop strong vendor management programs to ensure the safety of their customer’s personal information. Several large financial institutions have come together to create a new consortium to perform vendor and partner due diligence.

Death and Taxes

As the president and the Republican Party inch closer to finalizing their proposed tax overhaul, one major proposed change is the repeal of the estate tax. The estate tax is a tax on an individual’s right to transfer property upon his or her death, usually to the individual’s surviving relatives or heirs. Currently, estates are taxed at a rate of 40% after the first 5.5 million. While the tax itself only impacts the wealthiest 0.2% of Americans, the inclusion or repeal of the tax in the Republican tax bill will affect Americans of all income brackets.

Evolving Regulatory Conditions Spur the Creation of Novel Insurance Protections for Corporate Officers

Consistent with modern financial regulation, United States regulators are increasingly focusing upon individual accountability of corporate officers and directors. Once a regulatory agency contacts a corporation regarding an inquiry into the actions of its agents, it is the duty of the corporation to front the costs of legal defense and representation. Historically, corporate directors and officers liability insurance (“D&O”) covered the costs of legal defense and costs associated with the regulatory investigation. In light of the increasing government emphasis on individual liability within corporations, traditional D&O liability insurance is no longer guaranteed to protect corporate exposure to regulatory inquiry. As a result of these changes to corporate exposure, insurance agencies have begun to create novel insurance solutions to solve the problems created by the new regulatory policy.

SEC Begins to Regulate Bitcoin and other Cryptocurrencies

The Securities and Exchange Commission, which has been notably quiet on the subject, is beginning to show an interest in the cryptocurrency craze. It published a report last July concluding that initial coin offerings (ICOs) are subject to securities laws and that one ICO which raised nearly $150 million worth of cryptocurrency violated securities law.

Congressional Repeal of Consumer Protection Rule Creates Bar to Class-Action Suits Against Banks

In July of 2017, the Consumer Financial Protection Bureau (“CFPB”) Director, Richard Cordray, implemented a rule regulating the ability of banks to prohibit class-action lawsuits from being placed within the fine print of their consumer contracts. By the end of July, the House of Representatives voted to repeal the rule under the Congressional Review Act, which allows lawmakers to overturn any recently issued regulation by an executive agency. The Senate subsequently voted to repeal the rule after a 50-51 vote, where Mike Pence cast his vote to break the 50-50 tie. On November 1st, 2017, President Trump signed the bill repealing the regulation.

Challenges and Opportunities in Regulating Cryptocurrency

Many nations are increasingly attempting to regulate Bitcoin and other forms of cryptocurrency. Increased regulation could help legitimize the currency, but uncertainties about what regulation lies ahead threatens the value of the currencies. A main driver of the increased value of cryptocurrencies is the potential for increased usage in markets globally and greater integration of them into our economy. Regulation may be essential to successfully enabling such integration, because with instability in trade and valuation of the currency it is hard for consumers to know whether they should be spending the currency, or if it will dramatically change in value over the course of a short time period.

IRS Suspends Automated Substitute for Return (ASFR) Program

The IRS suspended its Automatic Substitute for Return (ASFR) Program for lack of resources, Tax Analysts  and others report.  The ASFR program has long provided an avenue for the IRS to assess taxes on delinquent filers after requests to file returns were ignored by having its computer system automatically calculate the tax due based on Forms 1099 and other information reports that had been filed with the IRS.  The IRS could then assess the taxes and attempt to collect based on these substitute returns.  However, since deductions were ignored, the tax amounts tended to be inflated, sometimes incredibly so, and significant IRS time was required to respond to contested assessments and collection efforts that were sometimes highly unrealistic.

Appreciating Taxes

After failing to arrive at a consensus on healthcare reform, the Republican party recently passed a blueprint which marked their shift in focus to something less contentious: the American tax code. If the Republicans are successful, compliance with tax regulation in the United States may soon change. An aspect of the code likely to be reformed is how asset appreciation is taxed.  

Is Federal Securities (De)Regulation Obscuring State Blue Skies?

Under Rule 506 of Regulation D (“Reg D”), the U.S. Securities and Exchange Commission (“SEC”) exempts companies making private placements to accredited investors from all federal and state securities registration requirements. As a federal safe harbor, Rule 506 of Regulation D preempts all conflicting state securities regulations, but reserves the states’ rights to require issuers to make notice filings, and to investigate and prosecute securities fraud under state securities laws, commonly known as “Blue Sky Laws.” On its face, Rule 506 of Reg D creates a more efficient securities marketplace. However, the historical lack of consequences for non-compliance at the federal level, combined with inconsistent state notice requirements for using exemptions, further complicates an already over-regulated securities marketplace.

Fight over the CFPB’s Arbitration Rule Exposes Rift Between Federal Regulators

Since its inception in 2010, The Consumer Financial Protection Bureau (CFPB) has garnered its fair share of criticism and controversy.  The regulator was created by the Dodd-Frank legislation to curb the practices and risks, which brought about the financial crisis of 2007-2008.  The CFPB is often criticized by the banks and firms it regulates, but now a fellow federal regulator is casting doubt on the CFPB’s new rule concerning mandatory arbitration clauses found in contracts for commonly used banking products, such as checking accounts and credit cards.  The rule is also opposed by Congress, which is working on measures to repeal the rule, and several financial industry and lobbying groups who are suing the CFPB.