Department of the Treasury

Department of Treasury Releases Second Report on Administration’s Core Principles of Financial Regulation

On October 6, 2017, the Department of the Treasury released its Second Report on the Administration’s Core Principles of Financial Regulation which details how to streamline and reform the U.S. regulatory system for the capital markets. The Report is titled A Financial System that Creates Economic Opportunities and is in response to Executive Order 13772 issued by President Trump on February 3rd, which calls on the Treasury to identify laws and regulations that are inconsistent with a set of Core Principles of financial regulation.

The Treasury found that the federal financial regulatory framework and processes could be improved, among other things, by:

  • Evaluating the regulatory overlaps and opportunities for harmonization of SEC and CFTC regulation;
  • Incorporating more robust economic analysis and public input into the rulemaking process in order to make the rulemaking process more transparent; and
  • Opening up private markets to more investors through proposals to facilitate pooled investments in private or less liquid offerings, and revisit the “accredited investor” definition;
  • Limiting imposing new regulations through informal guidance, no-action letters or interpretation, instead of through notice and comment rulemaking; and
  • Reviewing the roles, responsibilities and capabilities of self-regulatory organizations (SROs) and making recommendations for improvements; and
  • Creating an appropriate regulatory structure for finders.

Click here to view the full text Report. Click here to view the fact sheet for the Report.

FinCEN Proposes Funding Portals Regulations under Bank Secrecy Act

On April 4, 2016, the Financial Crimes Enforcement Network, a bureau of the Department of the Treasury (“FinCEN”), proposed amendments to the definitions of ‘‘broker or dealer in securities’’ and ‘‘broker-dealer’’ under the regulations implementing the Bank Secrecy Act (“BSA”). This rulemaking would amend those definitions explicitly to include “funding portals” that are involved in the offering or selling of “crowdfunded securities” pursuant to Section 4(a)(6) of the Securities Act of 1933. The consequence of those amendments would be that funding portals would be required to implement policies and procedures reasonably designed to achieve compliance with the BSA Act requirements currently applicable to brokers or dealers in securities. FinCEN stated that:  “The proposal to specifically require funding portals to comply with the Bank Secrecy Act regulations is intended to help prevent money laundering, terrorist financing, and other financial crimes.”  Written comments of this proposal must be submitted on or before June 3, 2016.

The Jumpstart Our Business Startups Act, enacted into law on April 5, 2012, established the foundation for a regulatory structure for startups and small businesses to raise funds by offering and selling securities through “crowdfunding” without having to register the securities with the Securities and Exchange Commission (“SEC”) or state securities regulators.  In order to take advantage of this exemption for offerings of crowdfunded securities, an issuer must use the services of an intermediary that is either a broker registered with the SEC or a “funding portal” registered with the SEC.

Treasury Request for Public Input on Expanding Access to Credit through Online Marketplace Lending

“Online marketplace lending refers to the segment of the financial services industry that uses investment capital and data-driven online platforms to lend to small businesses and consumers.”[1]

On July 20, the Department of the Treasury published a Notice and Request for Information (“RFI”) seeking comment on various aspects of online marketplace lending, including –

  • the business models and products offered to small businesses and consumers
  • the potential to expand access to credit to underserved market segments
  • how the financial regulatory framework should evolve to support the growth of the industry
  • Treasury asks for comment on 14 categories of questions, some of which include multiple specific questions, which we summarize and, with respect to some, offer initial thoughts on below.

To view the full article, please click here.


[1] 80 Fed. Reg. 42866 (July 20, 2015)