Financial institutions should understand that relying on a power of attorney may subject them to potential liability as the use of powers of attorney becomes more commonplace. The Alabama Supreme Court recently shed some light on this topic in Forbes v. Platinum Mortgage, Inc., No. 1180985, 2020 WL 746533 (Feb. 14, 2020).
In Forbes, Platinum Mortgage and PennyMac Loan Services LLC relied on a power of attorney when executing a $175,000 mortgage. The principal's conservator later claimed that the principal lacked the capacity to execute the power of attorney and initiated the ...
Firms permitting the creation and operation of custodial accounts related to Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) transactions must take special notice of Financial Industry Regulatory Authority's (FINRA) recent Regulatory Notice 11-02. This notice requires firms to take steps to establish the identity and age of the custodians and beneficiaries of custodial accounts. Such custodial accounts are tied to UTMA and UGMA transactions allowing individuals to transfer property to a minor without the need for a formal trust.
While some ...
In a July 30 speech in Singapore, SEC Commissioner Hester Peirce compared renegade red pandas’ penchant for life “outside the fence” to the Fin-Tech innovation currently frustrating regulators’ efforts to keep up.
Eschewing calls for international regulation, she also compared the efforts of multiple national regulators to the oft-cited role of U.S. states as “laboratories of democracy.” Cataloging some to date, she cited:
- Singapore’s regulatory “clarity”
- Thailand’s 2018 regulatory framework
- Japan digital asset offering legislation and 2017 ...
Last week, the SEC’s Corporate Finance division issued its second no-action letter supporting a digital token issue. On July 25, 2019, the Staff agreed it would not recommend enforcement action over the issuance of Quarters tokens for online gaming.
The issuer, Pocketful of Quarters, Inc. (“POQ”), states its use case as addressing “in-game currency fragmentation” by creating a “universal gaming taken” to solve “the inability to use gaming credits, coins or other units of value purchased in, or earned playing, one online video game in other online games.”
The ...
June 20, 2019 – Walmart (NYSE: WMT) and its subsidiary, WMT Brasilia, agreed to a combined criminal penalty and disgorgement of $282M, together with WMT’s criminal guilty plea and undertakings in an NPA, to reach a global resolution of the combined DOJ, SEC, and IRS-CI FCPA investigations on-going since at least 2012. Walmart reports spending over $900M on the investigations and defense. Walmart agreed to criminal penalties of $138M plus disgorgement of $144M to the SEC and admissions of fact in the criminal matter. Walmart entered a 3-year NPA and agreed to retain Louis Freeh as ...
The SEC recently issued an investor alert warning about crypto advisory and trading websites. The alert cautions investors to be especially wary of web-based crypto-currency sites with any of these red-flags:
- Outsized “guaranteed” investment returns.
- Complicated jargon or difficult-to-understand technologies.
- Unlicensed sellers.
- Sounds too good to be true.
- Unsolicited offers.
- Urgency to act.
…in short, the usual hallmarks of many scams.
The advisory comes on the heels of an indictment against two Nigerian citizens for wire fraud and conspiracy to commit ...
Last week, the D.C. Circuit held that the SEC can’t prosecute the same conduct as both willful and as negligent under the tandem sections found in most of the nation’s securities laws. The ruling prevents the SEC from piling on an additional negligence-based offense as some sort of “lesser included offense” in enforcement actions.
The SEC brought an administrative enforcement action against the Texas-based Robare Group and its officers for inadequate disclosure of a revenue-sharing agreement with Fidelity over certain funds on Fidelity’s platform. The firm’s ADV ...
Late last week, the SEC issued a no-action letter widely hailed as its first on a blockchain-based digital token for private jet services. In its TurnKey Jet letter, the Commission Staff indicated it would not recommend enforcement action over the operation of a private, permissioned, centralized blockchain network and smart-contract infrastructure for clearing and payment using a utility-token effectively functioning as a pre-paid jet card (or streetcar token).
See TurnKey Jet, Inc. (Apr. 3, 2019), here.
And the request, here.
CoinDesk reports that the no-action ...
This week, the Supreme Court held that knowing distributors of another’s false statements still could be primarily liable under parts of Rule 10b-5, even though they didn’t “make” the statements under prior precedent. The Lorenzo decision seems clear and common-sense on its face, but represents a battle in the weeds of an administrative case that’s likely to have significant ramifications over who private civil litigants can sue under the Securities Laws.
Rule 10b-5 prohibits any person from:
- "employ[ing] any device, scheme or artifice to defraud" [Scheme]
- "mak[ing ...
This week, the SEC's Division of Investment Management issued a letter seeking industry and public input on custody issues arising from digital assets.
The "Custody Rule," Rule 206(4)-2 under the Advisers Act of 1940, provides it is a fraudulent act or practice to have custody of client assets, unless an adviser complies with Custody-Rule requirements, including among others, by a qualified custodian subject to annual independent audits.
The Division's recent Guidance Update on custody issues focused on inadvertent custody (e.g. where boilerplate in the adviser’s agreement ...