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Carl F. Emigholz advises major financial institutions and securities market participants on securities and derivatives regulatory and enforcement matters.

On January 31, 2018, the U.S. Court of Appeals for the D.C. Circuit upheld a federal statute curbing the President’s power to fire the director of the Consumer Financial Protection Bureau (“CFPB”), a financial regulator with the mandate to enforce federal consumer protection laws.[1]  In a 7-3 en banc decision, the Court held that it is constitutional for the CFPB director to be appointed to a five-year term, removable by the President only for “inefficiency, neglect of duty, or malfeasance in office.”[2]  At the same time, however, the Court affirmed the vacature of a $109 million sanction levied by former CFPB director Richard Cordray against PHH Corporation (“PHH”), a large mortgage lender.[3]

As a result of the Court’s decision, the enforcement action will be remanded back to the CFPB, now under the leadership of Trump Administration-appointee Mick Mulvaney.  The remand comes at a time of substantial uncertainty as to the CFPB’s enforcement prerogatives.  In a leaked email to the entire CFPB staff on January 23, 2018, Mulvaney indicated that the CFPB would no longer “push the envelope” when it comes to enforcing consumer protection laws, and would instead be reviewing “everything that [it] do[es], from investigations to lawsuits and everything in between.”[4]  Indeed, the CFPB has since issued several Requests for Information to encourage public comment as it reviews its policies and processes related to enforcement and civil investigative demands.[5] 
Continue Reading D.C. Circuit Rules CFPB’s Structure Constitutional but Vacates $109 Million Enforcement Award

FINRA released its 2018 Regulatory and Examination Priorities Letter (“2018 Letter”) on January 8, 2018.  The 2018 Letter highlights areas of emphasis for FINRA in the coming year.  While many of the areas of focus are similar to those included in the 2017 Regulatory and Examination Priorities Letter—including continued focus on high-risk brokers, fraud, firms’ surveillance systems, cybersecurity protocols, and protecting vulnerable investors—there are additional topics included in the 2018 Letter based on market developments throughout 2017 and the results of FINRA’s 2017 exam program, summarized in the 2017 Report on FINRA Examination Findings.

Continue Reading FINRA Declares Regulatory and Examination Priorities for 2018

On October 26, the SEC staff provided, in three related no-action letters, a 30-month grace period during which it will not pursue enforcement actions against U.S. broker-dealers and their client money managers subject to European Union regulations, including investment advisers, for accepting or making direct and separate (i.e., hard dollar) payments for research.  This grace period temporarily relieves a regulatory conflict concerning how market participants provide and pay for research between current U.S. securities laws and the European Union’s new Markets in Finance Instruments Directive (MiFID II) rules, which will take effect on January 3, 2018.
Continue Reading The SEC’s Temporary Enforcement Grace Period to Mitigate Legal Status and Operational Implementation Issues Over the EU’s New Research Regulation