FinTech and Blockchain Law Watch – Page 48 – At the Crossroads of Law, Innovation and Commerce

OCC Explores Special Purpose National Bank Charter for FinTech Companies

Dec 07 2016

By Judith E. Rinearson, Anthony R.G. Nolan, Rebecca Laird, and Jeremy M. McLaughlin

On December 2, 2016, the Office of the Comptroller of the Currency (“OCC”) announced its plans to move forward with a proposal to consider applications from financial technology (“FinTech”) companies to receive charters as special purpose national banks. The OCC simultaneously released a white paper detailing the program. The OCC is seeking comments on its proposal, including responses to 13 specific questions listed in the paper. The announcement is potentially significant for the FinTech sector, but questions remain as to whether a special bank charter would represent a fundamental change or merely an incremental enhancement. The comment period ends on January 15, 2017. See our Legal Insight on the proposal here.

UK Department for International Trade announces FinTech mission to Australia

Dec 07 2016

By Jonathan Lawrence

The UK’s Department for International Trade (DIT) has announced its first FinTech mission to Australia taking place in Sydney and Melbourne from 20-23 March 2017.

DIT will select 8-12 UK FinTech companies to participate in the mission to Australia where they will participate in a programme of events and activities. Delegates will spend two days in Sydney, two days in Melbourne and an optional fifth day in Australia or New Zealand. The delegates will meet with and pitch to Australian financial institutions and venture capital firms, visit FinTech hubs, meet the regulator and government ministers, network with the Australian FinTech community, hear from UK FinTech companies that have found success in Australia and schedule meetings with potential customers and partners.

British Consul General in Sydney and Director-General UK Trade & Investment for Australia and New Zealand, Nick McInnes said: “We are very pleased to have the opportunity to bring a group of UK FinTech companies to Australia for the first time and introduce them to the local market. While FinTech in Australia is still in relatively early stages, the industry is growing rapidly and there are many opportunities for UK companies to set up, collaborate and succeed. The FinTech market in Australia is forecast to grow to over AU $4 billion by 2020, of which AU $1 billion will be completely new added value to the Australian economy, so now is an ideal time for UK companies to enter the market”.

For more details, please click here.

The post-election fintech world: are happy days (for bankers) here again?

Dec 05 2016

By Judith Rinearson and Eric Love

In the days following the U.S. federal elections that resulted in the election of Donald Trump as President and Republican control of the 115th Congress, FinTech companies, banks, and other financial institutions are increasingly asking whether they still need to worry about compliance with the landmark Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), Consumer Financial Protection Bureau (“CFPB”) regulatory actions, and other financial services regulations.

It is true that there will likely be some significant regulatory changes, but it is a little too early for industry participants to pop the champagne corks.

To see are our thoughts about some of the top issues impacting FinTech companies, banks and other financial institutions, click here.

UK Supreme Court to stream live today on future of Brexit

Dec 05 2016

By Judith Rinearson

The Fintech world is strongly impacted by Brexit, with the ability to access financial markets easily an important factor for disruptors. No doubt they, like many of us, have a keen eye on the speed in which Brexit can occur.

On 3 November 2016, the High Court in the UK ruled that the Prime Minister cannot trigger Article 50 (the notification that triggers the process of the UK leaving the EU) without the leave of Parliament. The decision was appealed, and the Supreme Court (the highest appellate court in the UK) will hear the matter starting today, 5 December. The four days of hearings will be streamed live from the Supreme Court’s website (click here).

There will be eleven justices hearing the matter, which (according to the UK’s non-profit Full Fact organization) will be the largest panel of judges to have heard a single appeal—since the Supreme Court’s predecessor was established in 1876. There are some interesting potential outcomes of this process, including the possibility that the matter will need to be referred to the Court of Justice of the European Union to interpret Article 50.

Please note that even if the Supreme Court sides with the High Court, and decides that the Article 50 notification requires an Act of Parliament, it will still be for Parliament to decide whether or not they want to confirm and continue with the referendum’s Brexit result, or attempt to impose terms on the triggering of Article 50 (which some say is not possible), or reject it altogether. These are interesting times in the UK. We will be watching these developments closely.

Securitization developments for Alternative Finance

Dec 01 2016

K&L Gates partner Anthony Nolan will be speaking on “Securitization in Alternative Lending” at the Marketplace Lending & Alternative Financing Summit 2016 in Dana Point, California, on December 5th. This session will bring together participants with various perspectives, including investment bankers, platform representatives and service providers, in addition to Nolan’s viewpoint as a U.S. securitization and fintech lawyer. They will address recent commercial and regulatory developments that may affect the securitization of online and marketplace loans which include the impact of risk retention, which becomes effective on December 24, the implications of rating agency reform, emerging standards for asset-level representations and warranties, and the prospects for reform or rollback of Dodd-Frank consumer financial services regulation following President Trump’s inauguration in January.

The Marketplace Lending & Alternative Financing Summit is an educational forum for financial services professionals to delve into industry topics and trends to maximize returns and reduce risk in the growing field of marketplace lending. It brings together some of the thought leaders and market movers within the marketplace lending & alternative financing industry. Topics will include legal, tax and structural considerations, rating agency methodology, and information and tools for attendees to keep up with this dynamic industry. To see the agenda for the conference, please click here.

European Commission launches Task Force on Financial Technology

Nov 22 2016

By Jonathan Lawrence

On 14 November 2016, the European Commission launched an internal Task Force on Financial Technology (TFFT) that aims to assess and make the most of innovation in the FinTech area, while also developing strategies to address the potential challenges that FinTech poses. The work of this Task Force builds on the European Commission’s goal to develop a comprehensive strategy on FinTech. It appears to take a cautious approach. The launch statement warns that “technological development provides great opportunities for existing financial institutions, alternative service providers and new business models, provided that any risks are carefully managed”. This internal Task Force will bring together the expertise of European Commission staff across several areas, such as financial and digital services, digital innovation and security, and competition and consumer protection. It will also engage with stakeholders and present policy suggestions and recommendations in the first half of 2017.

Commission Vice-President Valdis Dombrovskis, responsible for Financial Stability, Financial Services and Capital Markets Union said:

“we see technological innovation in finance as a development that we need to encourage and enable. It brings huge opportunities for consumers and for industry, both by established players and new Fintech firms. Our Task Force will help us make sure that our policy supports the pursuit of these opportunities, while addressing any risks that may emerge. Efficient financial markets need to make the best possible use of the opportunities that technology presents, while also preserving competition and making sure that new operating systems are safe.”

Commissioner for Digital Economy and Society Günther H. Oettinger said:

“Digital innovation is transforming the entire economy and in particular the financial services sector. It disrupts business models and value chains, leads to the emergence of new players and services. The Digital Single Market strategy aims at laying down an appropriate framework and enabling solutions concerning for instance electronic authentication or cyber-security. Our ambition is to foster financial innovation while preserving financial stability and protecting consumers and investors.”

SEC FinTech Forum Part 1

Nov 22 2016

By Brian Vargo and Tyler Kirk

On November 14, 2016, the U.S. Securities and Exchange Commission held its first forum exclusively focused on the impact of the FinTech movement on the capital markets. Specifically, the forum was organized into four panels addressing automated investment advice, blockchain and distributed ledger technology, crowd funding and marketplace lending, and investor protection. Over the coming weeks we will be posting the key takeaways and implications of each panel.

In her opening remarks, Chair White called for federal agencies to encourage innovation while balancing such encouragement with appropriate investor protections. She noted that the speed and impact of FinTech innovation increases the need for reviewing the sufficiency of regulation. In that spirit, Chair White asked the SEC staff to form a FinTech Working Group to help foster responsible innovation in the capital markets, while exploring the adequacy of the current regulatory framework to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Commissioner Piwowar said in his remarks that the SEC is uniquely positioned to take the lead regulatory role in the FinTech movement, because many FinTech companies are already registrants and, significantly, the SEC is the only federal agency whose mission includes capital formation. The remarks at the forum indicate that the SEC and industry expect FinTech to play an increasingly important role in the securities industry and that the SEC should continue to engage with industry members in developing regulations that are thorough and forward-looking.

Electronic money: the French Government strengthens financial intermediaries’ obligations

Nov 16 2016

By Claude-Etienne Armingaud

On November 10, 2016, the French Government issued a decree against the financing of terrorism which contains various measures addressing anonymous electronic money [source in French]. This new regulatory measure applies to electronic money issuers as well as their distributors, credit institutions, finance companies, consumers, and to any person who physically transfers money from a certain amount.

In addition to reinforcing the powers of the Ministry of Economic and Financial Affairs agency against money-laundering (TRACFIN) -which will now have access to the wanted person files for the needs of criminal investigations-, the decree removed the duty of care of the financial intermediaries in the absence of any particular suspicion of money laundering and under strict conditions pertaining to electronic money:

Money must only be issued for the acquisition of goods and services.
The maximum monetary value stored must not exceed EUR 250.
These funds must only be used for payments on the national territory.
The electronic money device may neither be reloaded through cash nor through electronic money when the initial owner of such money cannot be identified.

Australian and Kenyan financial regulators sign co-operation agreement

Nov 16 2016

By Jim Bulling and Michelle Chasser

The Australian Securities and Investments Commission (ASIC) and the Capital Markets Authority of Kenya (CMA) have signed a co-operation agreement to share information about innovation in their markets including:

emerging market trends and developments; and
regulatory issues relating to innovation in financial services.

Kenya was an early adopter of FinTech with the launch of mobile phone based payments system M-Pesa back in 2007. It has since become one of the leading FinTech countries in Africa particularly in payments and credit innovations.

FinTech in Canada – Towards Leading the Global Financial Technology Transition

Nov 15 2016

By Robert Zinn and Jim Bulling

The Digital Finance Institute is a prestigious Canadian-based think tank for FinTech established in 2013 with a mandate to address the balance of innovation and regulation; support initiatives for financial inclusion; and advocate for diversity in FinTech. The Digital Finance Institute also promotes FinTech in Canada through conferences and international alliances; the creation of Canada’s national FinTech Awards; the FinTech Cup, the new university FinTech startup challenge and by preparing research papers on FinTech.

Robert Zinn and Jim Bulling contributed insight and content to the U.S. and Australian FinTech ecyosystems.

To read this publication, click here.