As Fintech Platforms Grow Up, Investment Management Firms Face the ‘Problems of Tomorrow’

Fund groups face disruptive developments, as advances in financial technology, often called fintech, continue at an ever more rapid pace. Even as new efficiencies and opportunities blossom, regulators have pushed financial firms to recognize the dangers of technological failures. To help prepare investment management firms for changes ushered in by fintech, we offer our primer on the latest key developments and potential risks.  Read our new article in The Investment Lawyer to learn more about the legal and regulatory implications of emerging technologies, including blockchain and digital ledger technology, investing in fintech companies, robo-advisers and algorithms, and cybersecurity.

Retail Commodity Transactions Involving Virtual Currencies: An Overview of the CFTC’s Proposed Interpretation (Part 1)

On December 15, 2017, the U.S. Commodity Futures Trading Commission (the “CFTC”) issued a proposed interpretation of the term “actual delivery” as used in the provision of the Commodity Exchange Act (the “CEA”) that grants the CFTC explicit authority to oversee the marketplace for “retail commodity transactions”. This is the first blog posting in a multi-part series that will explore the regulation of retail commodity transactions and the CFTC’s recent proposed interpretation (the “Proposed Interpretation”), the issuance of which we believe has represents a potentially significant milestone in the regulation of virtual currency transactions. We begin our series with a brief look at the history and background of the regulation of retail commodity transactions. Read the full “Retail Commodity Transactions Involving Virtual Currencies: An Overview of the CFTC’s Proposed Interpretation (Part 1)” post on our Derivatives & Repo Report.

SEC Files Emergency Action to Halt Alleged ICO Scam

On Friday, December 1, 2017, the SEC filed an emergency action in federal district court in Brooklyn alleging that Dominic Lacroix and Sabrina Paradis-Roger, both from Quebec, Canada, raised approximately $15 million in a purported fraudulent unregistered Initial Coin Offering (ICO) involving PlexCoin.  In its complaint, the SEC alleged that a recidivist Quebec securities law violator, Dominic Lacroix, and his company, PlexCorps, had raised millions from investors since August 2017 by promising a 13-fold profit in less than a month.  In addition to filing the action, the SEC sought and obtained an asset freeze. Read the SEC press release here.

This action comes on the heels of a similar type of action filed by the SEC involving ICOs purportedly backed by investments in real estate and diamonds.  In that case, the SEC alleged that Maksim Zaslavskly touted REcoin as the first ever cryptocurrency backed by real estate.  Zaslavskly allegedly told investors that he had a team of lawyers, professionals, brokers and accountants that would invest REcoin’s ICO proceeds into real estate.  In reality, according to the SEC, no such operations existed and Zaslavskly never hired or even consulted any professionals.  Similar to PlexCoin case, the SEC sought and obtained an emergency court order freezing the assets of Zaslavskly and his companies. Read the SEC press release here.

Both of these actions reflect aggressive filings by the SEC for those involved in unregistered fraudulent ICOs.  Stay tuned as the Enforcement Division may be gearing up for further action.     

CFTC Commissioner Quintenz Addresses ISDA’s Unlocking Value in Derivatives Markets Conference in London

Earlier today, CFTC Commissioner Brian Quintenz spoke at a conference hosted by ISDA in London. His remarks focused on the central theme of that conference – the power of technology to transform financial markets. Read the highlights from Commissioner Quintenz’s speech on our Derivatives & Repo Report.

CBOE and CME Self-Certify Bitcoin Futures, Cantor Self-Certifies Bitcoin Binary Options and NFA Issues Investor Alert

It was a busy morning at the intersection of derivatives and virtual currencies. The world of virtual currencies is about to simultaneously become a lot more institutional and a lot more retail. Read an overview of what happened and some thoughts about what it means for the world of virtual currencies on our Derivatives & Repo Report.

Summary: ISDA Webinar on the Use of DLT and Smart Contracts in Market Infrastructure for Derivatives Processing

Earlier today, the International Swaps and Derivatives Association (ISDA) sponsored a webinar, “The Foundations of an Efficient Market Infrastructure,” that focused on an initiative by ISDA’s Market Infrastructure and Technology Committee to facilitate the adoption of emerging technologies (DLT, smart contracts)into the trading, documentation and processing of derivatives.

The focus of the conference was on derivatives processing and reporting; however, the issues that plague derivatives are relevant to many other financial market processes and activities.  Specifically, the primary challenge with respect to derivatives – a strained infrastructure that is too costly and inefficient to be sustainable – is common throughout the financial markets.  Or, put  differently, the development of technological solutions within the derivatives sector has the potential to become a template for the resolution of similar issues in other sectors of the financial marketplace.  For this reason, today’s webinar may have an appeal that is broader than market participants with an interest in the process of derivatives.

Click here to view a full summary of the information discussed at this informative webinar on our sister blog Derivatives and Repo Report.