The Financial Choice Act Aims to Help Angel Investors

The proper treatment of angel investing groups under the Federal securities laws can be a vexing question. If it were appropriate to describe the angel investing group as a “company” as defined in Section 2(a)(8) of the Investment Company Act of 1940, and if the “company” were appropriately viewed as issuing interests or shares, then the angel investing group would have to seek to rely on Sections 3(c)(1) or 3(c)(7) of the Investment Company Act and comply with the requirements of Regulation D under the Securities Act of 1933. Yet these views seem to beg the questions of who is giving investment advice to the “company” and who is acting as a broker in offering and selling interests in the “company.” Continue reading The Financial Choice Act Aims to Help Angel Investors.

Takeaways From TRANSACT: Payments Industry Legal and Regulatory Trends

The Electronic Transactions Association (ETA) hosted its annual TRANSACT conference focused on connecting and educating the various branches of the payments industry. Industry leaders spoke on technology, security, regulatory and policy issues affecting the industry.

This update highlights the key legal and regulatory takeaways from TRANSACT, which include regulatory red flags, the important role of compliance, recent litigation in the field of chip card and signature debit, nationwide-licensing and the potential impact of Dodd-Frank amendments and other changes brought by the Trump administration.

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U.S. Government Accountability Office Report: Financial Technology – Information on Subsectors and Regulatory Oversight

The U.S. Government Accountability Office (“GAO” or the “Office”) recently published its study related to the financial technology (“fintech”) industry. Members of Congress (Hon. Sherrod Brown, Hon. Jeanne Shaheen, and Hon. Jeffrey A. Merkley) asked the GAO to review a number of issues related to the fintech industry including how fintech products and services are regulated. The GAO does not make any recommendations in this initial report, but the Office plans to issue a series of reports on fintech addressing four common subsectors of fintech (marketplace lenders, mobile payments, digital wealth management platforms, and distributed ledger technology) and each subsector’s regulatory oversight. This initial report attempts to define each subsector, explain how it works, who uses it, benefits and risks, industry trends, and regulation and oversight. The GAO provided a draft of the report for review and comment to the CFPB, CFTC, CSBS, FDIC, the Federal Reserve, FINRA, FTC, NCUA, OCC, SBA, SEC, and Treasury. The Office incorporated technical comments from these agencies as appropriate. The GAO conducted this study from July 2016 to April 2017 in accordance with generally accepted government auditing standards. The GAO reported, as an example, that depending on services provided a marketplace lender may be subject to:  federal regulation (e.g., Federal Reserve, FDIC, OCC), state licensing and regulation, securities offering registration (e.g., SEC), and/or enforcement actions (e.g., CFPB, FTC). The GAO noted that each subsector’s regulation depends on (1) the extent to which the firms provide a regulated service and (2) the format in which the services are provided.

GAO Report to Congress on Financial Technology

GAO Report Highlights

Fintech Week in Review – April 17, 2017

Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.

U.S. Developments

Announcements

The OCC’s Office of Innovation To Hold Upcoming Office Hours
As part of the OCC’s new Office of Innovation, the OCC has announced that it will hold office hours where it will conduct one-on-one meetings for fintech industry members for companies wishing to discuss the OCC’s perspective on responsible innovation. The OCC will provide feedback to companies and answer questions. Meetings will be held at the OCC’s San Francisco Office on May 16 and 17, 2017. Space for these meetings is limited. The OCC plans to meet with only about 15 companies over the two-day period. OCC 4/13/2017 Press Release

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Fintech Week in Review – March 10, 2017

Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.

U.S. Developments

Class Action to Proceed in Fair Debt Collection Practices Suit Against Midland
The U.S. District Court for the Southern District of New York is permitting a class action lawsuit to proceed involving allegations that Midland Funding, LLC (Midland) violated state usury laws in its debt collection practices. Midland had claimed that, since the original debt agreement contained Delaware choice-of-law provisions, and since the debtor had defaulted on the obligations, New York’s criminal usury interest rate cap of 25% should not apply to Midland’s collection of the debt – notwithstanding that the debtor lived in New York. In certifying two classes of plaintiffs which could cover as many as 50,000 residents of New York, the U.S. District Court disagreed with Midland and concluded that the court should apply New York law pursuant to New York’s common law choice of law rule and that the New York criminal usury cap of 25% applies to defaulted obligations. A scheduling conference regarding further proceedings took place on March 8, and the Opinion and Order can be found here. Continue Reading

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