US – Page 10 – FinTech and Blockchain Law Watch

SEC FinTech Forum Part 2: Don’t Call Me a Robo Adviser

Dec 21 2016

As we reported in Part 1 of this series of posts, the U.S. Securities and Exchange Commission held its first forum exclusively focused on the impact of the FinTech movement on November 14, 2016. The first panel of the forum addressed recent innovations in investment advisory services. The panel was comprised of Ben Alden, General Counsel of Betterment, Bo Lu, Co-Founder and CEO of Future Advisor at Blackrock, Mark Goines, Vice Chairman of Personal Capital, and Jim Allen, Head of Capital Markets Policy Group, CFA Institute. While several of the panelists lamented the use of the title “Robo Adviser,” the panel’s discussion was vibrant and delved deeply into the role robo advisers (advisers which rely to varying degrees on computer-based technology, primarily algorithms, to deliver investment advice) are and should be playing in the United States.

First, the panel discussed the growth in automated advice, attributing the growth to the ability of lower net worth investors, especially those comfortable with technology, to obtain affordable and sophisticated investment advice. Given the savings shortfall in the United States, this growth was viewed to be a positive trend. Further, the panel also noted that the DOL Fiduciary Rule is also driving growth. Ultimately, the panelists thought that the industry would consolidate as assets under management grew.

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.

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.

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.

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.

Fraud-Prevention Resources for Online Lenders

Nov 14 2016

By Joseph A. Valenti

Several resources exist—and are receiving renewed attention—to help companies combat fraud committed during the online-lending process. With cybercrime on the rise, the non-profit Pittsburgh-headquartered National Cyber-Forensics & Training Alliance (“NCFTA”) announced earlier this year that it was opening offices in financial centers New York and Los Angeles. The NCFTA conducts real-time information sharing and analysis with experts in the public, private, and academic sectors, with its Cyber Financial Program specifically dedicated to identifying and neutralizing cyber threats to the financial-services industry from malware, phishing, social engineering, and other computer-aided or fraudulent methods. In October 2016, TransUnion launched the Fraud Prevention Exchange, an industry collaborative where reports of prior fraud and ongoing high-velocity applications are shared to help show what identities and devices may be compromised and—knowingly or unknowingly—participating in fraud. Several other industry players got involved in the Online Lending Network later that month to share data on loan applications and funded loans to assist in combatting loan stacking and excessive credit risk.

The Financial Crimes Enforcement Network (“FinCEN”) works under the parameters of Section 314(b) of the USA PATRIOT Act to assist financial institutions in sharing information with one another to identify and report activities that may involve money laundering or terrorist activity. FinCEN has “strongly encouraged” voluntary information sharing under 314(b)’s safe harbor to boost customer-due-diligence programs, bring more transparency to convoluted financial trails, and alert financial institutions to known bad actors they may not have encountered yet.

These same reasons support increased and real-time sharing of fraud-prevention data between financial institutions, particularly in the online-lending industry that is growing and speedy. As the industry matures, it seems destined for collaboration on fraud-prevention issues.

Comprehensive Analysis of the CFPB’s Final Prepaid Account Rule

Nov 10 2016

By Eric A. Love, Linda C. Odom and Judie Rinearson

As noted in our previous blog post, the Consumer Financial Protection Bureau (“CFPB”) finalized on October 5 its long-awaited Final Rule for prepaid accounts under the implementing regulations for the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z). Effective October 1, 2017, the Final Rule clocks in at nearly 1,700 pages and represents the most significant change to the legal and regulatory landscape of the prepaid account industry since the Financial Crimes Enforcement Network’s issuance in 2011 of a final rule regarding prepaid access. Although the CFPB’s Final Rule retains many key aspects of the agency’s Notice of Proposed Rulemaking (“NPRM”) on prepaid accounts, the Final Rule differs from the NPRM in a number of important respects and will create a new set of compliance hurdles for the prepaid account industry.

In our alert entitled “CFPB Finalizes Expansive Prepaid Account Rule Creating New Compliance Hurdles,” we provide a comprehensive analysis of the Final Rule and highlight several notable differences between the Final Rule and the NPRM. You can read the full alert here.

The U.S. Wants a Sandbox Too

Nov 03 2016

By C. Todd Gibson and Tyler Kirk

On September 22, 2016, Republican Congressman Patrick McHenry from North Carolina announced the introduction of H.R. 6118, the Financial Services Innovation Act of 2016 (the “Bill”). McHenry is the chief deputy whip and vice chairman of the House Financial Services Committee. According to the press release, the bill was introduced as part of the “Innovation Initiative” that McHenry co-launched earlier this year with House Majority Leader Kevin McCarthy, a fellow Republican from California. On October 19, 2016, the Bill was referred to the Subcommittee on Commodity Exchanges, Energy, and Credit. Before the Bill becomes law in the United States, it must be past by both chambers of Congress and signed by the President. With this Bill, America joins, among others, the United Kingdom, Hong Kong, and Malaysia in establishing FinTech regulatory sandboxes.

In its current form, the Bill takes a two-prong approach to constructing a regulatory sandbox. First, it creates a government-wide FinTech oversight regime, and second, it codifies an exclusive no-action relief mechanism for financial innovators. Under the first prong, the Bill requires federal regulators to adopt a mandate to encourage innovation in the financial industry through the creation of Financial Services Innovation Offices (“FSIOs”). Further, the Bill provides for the establishment of the FSIO Liaison Committee (“Committee”) comprised of the directors of each agency’s FSIO. The purpose of the Committee is to coordinate the regulation of companies seeking to bring new and innovative financial technologies to market (“Covered Persons”). Under the second prong, Covered Persons may petition regulators for an alternative compliance plan under an “enforceable compliance agreement,” that will provide the conditions under which the Covered Person may implement their financial innovation (including any regulatory waivers).

The future of Fintech event, San Francisco, 1 November

Oct 28 2016

K&L Gates will be co-hosting an event with the Silicon Vikings in San Francisco on Tuesday November 1st. This will be a panel session with presenting companies including: Checkbook, bitwage, StratiFi and Qwil. An event not to be missed.

The panel will include:

Sanjiv Das, Professor of Finance, Santa Clara University
Jacob Sisk, VP Payments & Data Science, CapitalOne
Tyler He, Business Development, Tencent
Moderator & Event Chair: Shikhar Das, Assistera

Details of the event:

Date/time: Tuesday, November 1st, 6.00 pm – 8.30 pm
Location: K&L Gates, 4 Embarcadero Center, Suite 1200, San Francisco, CA 94103 (google maps)
Register: Click here for more details or to register to attend

For any queries, please contact K&L Gates partner, Lars Johansson.

A guide to doing FinTech business in the U.S. and Germany

Oct 28 2016

“Getting the Deal Through” is a publication that provides international expert analysis in key areas of law, practice and regulation for corporate counsel, cross-border legal practitioners, and company directors and officers.

The inaugural edition of Fintech serves as a resource to help fintech entrepreneurs and their advisers and investors around the world navigate the often complex key legal and regulatory issues on which we are most often asked to advise. Two of the chapters were authored by K&L Gates lawyers.

The Germany chapter is authored by Dr. Hilger von Livonius, Dr. Friederike Gräfin von Brühl and Dr. Thomas Nietsch.

The United States chapter is authored by Judith Rinearson, Robert Zinn, Anthony Nolan, C. Todd Gibson and Andrew Reibman.

To read this publication, click here.

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