Tag:SEC
Coinbase Global Inc. Settlement Raises More Questions for Financial Regulators
On January 4th, 2023, the New York State Department of Financial Services made public that a $100 million settlement with the cryptocurrency exchange Coinbase Global Inc. (Coinbase) has been agreed to. The settlement follows an enforcement action imposed this past August aiming to regulate cryptocurrencies. With a lot of discussion happening given the recent collapse of FTX and anti-money laundering violations by Robinhood Markets, this action begs the question: should the digital currency industry be regulated nationwide and, if so, what should these regulatory agendas look like?
The SEC’s Proposal for Regulation Best Execution and Its Effect on Broker-Dealers
Megan Aldworth Associate Editor Loyola University Chicago School of Law, JD 2023 On December 14, 2022, the U.S. Securities and Exchange Commission (SEC) announced a proposal for Regulation Best Execution (Reg BE). The regulation would broadly affect those buying and selling securities in a wide array of markets. Reg BE would generally require broker-dealers …
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Regulatory Ecosystem Post-FTX (SBF) Disaster
From “How are institutions and companies investing in crypto” and “Sequoia Capital launches $500 million fund to invest in crypto” to “FTX files for bankruptcy” and “Sequoia Capital marks down its $210 million crypto investments to $0” – the crypto market capitalization skydived from $3 trillion in November 2021 to $881 billion, experiencing a 71% freefall in just one year.
Major household names such as FTX, BlockFi, Celsius, Genesis, TerraLuna, Three Arrows Capital, and Voyager all evaporated within days after public recognition of corporate issues including capitalization and intra-firm lending. Last summer’s TerraLuna and Voyager bankruptcies foreshadowed the debacle to come. However, enthusiasts remained naively optimistic until the shockwave of FTX’s evaporation led to the collapse of an entire market. Investors rushed to withdraw their investments only to see their accounts already frozen or funds already missing. Before it is too late, either the Commodities Futures Trading Commission (CFTC) or the U.S. Securities and Exchange Commission (SEC), or the agencies jointly together, should take action on this volatile decentralized market.
The SEC’s Second Attempt to Fix a 10-Year-Old Problem
The 2008 financial collapse occurred when banks began substantially increasing access to debt. They offered adjustable-rate mortgages to borrowers who could afford the initial mortgage payments, but would end up defaulting on the loans when their adjustable interest rates kicked in. The banks then subsequently packaged these high-risk loans together and sold them as securities to mutual funds, investment banks, and pension funds. When most of these high-risk loans defaulted, the market crashed. The recession that followed cost the public thousands of jobs, homes, and retirement accounts.
The Collapse Of FTX and The Future Of Crypto
New investment vehicles and opportunities have flooded the financial services industry over the past few decades, but arguably none have grown in popularity at a rate comparable to cryptocurrency. A cryptocurrency is a digital or virtual currency typically based on a decentralized network that utilizes blockchain technology. In other words, this decentralized feature allows a network of users to verify and record transactions without relying on any central authority, which permits the cryptocurrency to exist without government interference.
The Clock Continues to Tick for SEC Climate Proposal
Juhi Desai Associate Editor Loyola University Chicago School of Law, JD 2024 In March 2022, the U.S. Securities and Exchange Commission (SEC) released a 490-page proposal encouraging organizations to adopt climate-focused regulations. The policies could include climate disclosure requirements and an expense report detailing the effect climate change has on businesses. However, shortly after the …
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The SEC and Its New Marketing Rule: Testimonials and Endorsements
The Securities and Exchange Commission’s (SEC) new marketing rule will take effect on November 4, 2022. Advertising and solicitation regulations have undergone a major overhaul after decades of continuity. Further, testimonials and endorsements are no longer prohibited, but their use will be conditioned on compliance with certain provisions. The new rule only applies to financial adviser’s communications that are advertisements, as defined in the new rule.
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.
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.