Nevada Passes FinTech Law

A number of states have jumped into the FinTech fray by enacting legislation or issuing guidance regarding new technologies and digital currencies. The latest of these technology-forward states is Nevada. Following the example set by Arizona, Nevada recently passed a bill clarifying blockchain’s legal status under state law. The law, Senate Bill 398, was signed by the governor June 5 and prohibits local governments from imposing taxes or fees on the use of a blockchain; requiring a certificate, license, or permit to use a blockchain; or imposing any other requirement relating to the use of blockchain. Additionally, the Nevada law states that “if a law requires a record to be in writing, submission of a blockchain which electronically contains the record satisfies the law.” Arizona passed a similar law, House Bill 2417, in March 2017, also requiring that smart contracts and blockchain signatures be given legal binding status.

 

Please read the full client alert on reedsmith.com.

New Jersey Giveth And Taketh Away: Recent Steps to Reduce And To Increase Regulatory Burden On Home Mortgage Lenders

Recently, the State of New Jersey has taken a small step in the direction of less regulation over home mortgage lenders and, virtually at the same time, a potentially more significant step in the opposite direction. Details are set forth below.

NJDOBI Proposes to Eliminate a Regulation

Yes, you read that right! On June 5, 2017, the New Jersey Department of Banking and Insurance (“Department”) published a proposal to repeal a regulation first adopted in 2002 and readopted every 5 years thereafter.  See 49 N.J. Reg. 1273-1274.  That regulation, N.J.A.C. 3:1-16.2(a)3, required the Department to conduct and publish in the New Jersey Register an annual survey of third party appraisal fees (the “Annual Survey”).  The purpose of the Annual Survey was to enable the Department to determine the current “usual, customary and reasonable” fee (“Customary Fee”) that lenders would be permitted to charge their borrowers for the cost of an appraisal, whether “performed and delivered in-house” or obtained from an appraisal management company (“AMC”).  The regulation states that for in-house appraisals, “the fee shall approximate the [Customary Fee] for comparable appraisals by third-party appraisers based on the [Annual Survey]”; and for appraisals obtained from AMCs, “the fee shall not exceed the amount charged by the [AMC] and shall approximate the [Customary Fee] for comparable appraisals by third party appraisers based on the [Annual Survey].”

Continue Reading

New Policies Released Under the Illinois Transmitters of Money Act

On June 13, 2017, the Illinois Department of Financial and Professional Regulation (“IDFPR”) released guidance outlining its policies with respect to the treatment of digital currencies under the Illinois Transmitters of Money Act (“TOMA”).  The guidance document offers a clear distinction between traditional currencies, which it considers “money,” and digital currencies, which it states are not.  The guidance will be welcomed by Illinois residents who use and accept digital currencies in commercial transactions.

Read our full report on the release on our sister site, The FinTech Update.

Agencies Offer Solutions to Shortage of Residential Real Estate Appraisers

On May 31, 2017, acting through interagency guidance, the federal bank regulatory agencies (the “Agencies”) highlighted two approaches for addressing a perceived scarcity of licensed residential real estate appraisers. Federal law requires use of a state certified or licensed appraiser for most federally related transactions (“FRTs”).  For example, federal regulations require appraisals to be conducted for, inter alia, all residential transactions with a value of $250,000 or more, see, e.g., 12 C.F.R. § 34.43(a), and state-certified appraisers are required in certain high dollar value and complex transactions.  See, e.g., 12 C.F.R. § 34.43(d). Furthermore, the OCC may require an appraisal whenever the agency believes that it is necessary to address safety and soundness concerns. See, e.g., 12 CFR § 34.43(c).  A shortage in appraisers may lead to significant delays in the mortgage loan origination or loss mitigation review process.  Therefore, the Agencies’ interagency advisory notes that the use of temporary practice permits and temporary waivers will work to mitigate the shortage of appraisers and allow transactions requiring appraisals to be completed in a timely manner.

Continue Reading

Travis Nelson Elected Chair of New Jersey State Bar Banking Law Section

On May 19, 2017, at the Annual Meeting of the New Jersey State Bar Association, Travis Nelson was elected Chair of the Banking Law Section. Travis, who is resident in the firm’s Princeton and New York offices, previously served as Vice Chair and Secretary of the Banking Law Section.  Upon his election, Travis noted: “I am honored by my peers in the New Jersey banking bar to serve in this unique role.  I hope to use this position to build greater partnerships with other sections of the Bar Association, with the New Jersey Bankers Association, and with academic and community groups throughout the state.  With the dynamic nature of financial regulatory proposals coming from Congress and from the regulators, both in Washington and Trenton, it is more important than ever that banking attorneys remain vigilant so that they may effectively advise their clients.  The Banking Law Section can help.”

Len Bernstein, Chair of Reed Smith’s Financial Services Regulatory Group, and a former Chair of the Banking Law Section, said: “Travis has been a vital member of our banking team, and we look forward to supporting him in his efforts to increase the discussion of emerging issues throughout the New Jersey banking community. From commercial lending, to consumer finance, to bank M&A, to financial technology, the Banking Law Section will benefit from the broad experience and expertise that Travis brings to this leadership role.”  Diane Bettino, the Managing Partner of Reed Smith’s Princeton office and a member of the firm’s Executive Committee, remarked: “Travis’ election as Banking Law Section Chair continues the well-established tradition of the Princeton office for providing thought leaders in New Jersey and nationally.”

Travis serves financial institutions, and their directors and officers, in M&A transactions, regulatory compliance, examinations and enforcement, and litigation. Prior to joining Reed Smith, Travis served in the Enforcement Division at the Office of the Comptroller of the Currency, in Washington, D.C.  Travis is also adjunct faculty at the Villanova University School of Law, where he teaches a course on regulation of financial institutions, is editor of the ABA’s Banking Law Committee Journal, and is a frequent speaker on bank regulatory and enforcement issues.  In addition to his bank regulatory practice, Travis is the Co-Chair of Reed Smith’s Anti-Money Laundering and Trade Sanctions Group.

“LabCFTC” Launched by the CFTC

On May 17, 2017, Commodity Futures Trading Commission (“CFTC”) Acting Chairman J. Christopher Giancarlo announced an “important step forward” in bringing the CFTC’s regulations into the “digital world of the 21st century.”  The CFTC’s new FinTech initiative, LabCFTC, will facilitate cooperation between the CFTC and FinTech innovators.

Read Reed Smith’s full report on our sister site, The FinTech Update.

Blockchain Technology Draws Request for Information from UN

Following the trend of regulators across the globe, the United Nations Office for Project Services’ (“UNOPS”) issued a request for information regarding the application of blockchain technologies on April 24, 2017.  The UNOPS has formed a blockchain group within the United Nations to analyze the possible applicability of blockchain technologies to the international assistance area.  The Request for Information explains that the UNOPS seeks “information widely from the industry of blockchain space and to identify potential partners / suppliers for the future work in the area of international, humanitarian, development or peacekeeping assistance.”

Read the full report on our sister site, the FinTech Update.

Read some of our other reports regarding distributed ledger technology below.

Consultation Document Published on FinTech by European Commission

ESMA Publishes Report on Distributed Ledger Technology

FINRA Issues Report on Distributed Ledger Technology

Regulators Prepare for Innovation in Distributed Ledger Technology

Consultation Document Published on FinTech by European Commission

On March 23, 2017, the European Commission (“EC”) published a Consultation Document entitled “FinTech: A More Competitive and Innovative European Financial Sector.”  The Consultation Document seeks comments regarding the development and regulation of novel financial technologies, including distributed ledger technology (“DLT” or “blockchain”), cloud computing, and artificial intelligence (“AI”).  The EC hopes to obtain feedback from both financial services providers and consumers that will assist it in developing an appropriate regulatory framework for FinTech. It explains, in the Consultation Document, that “appropriate policies on important issues, such as access to technology, data standardisation and security, personal data protection and data management, need to be put in place,” to account for new innovative financial technologies.

 

Read the full report on our sister site, FinTech Update.

D.C. Circuit Court Strikes Opt-Out Notice Requirement For Certain Faxes

On Friday, in a decision certain to please the business community as well as the Chair and new majority of the Federal Communications Committee, the D.C. Circuit struck down parts of the FCC’s October 30, 2014 Order, 29 F.C.C. Rcd. 13998 (FCC 14-164), requiring that solicited faxes (those sent with consent of the recipient) must contain opt-out notices in order to avoid violating the TCPA. See Bais Yaakov of Spring Valley, et al v. FCC (No. 14-1234). In a 2-1 decision, the majority held that the FCC lacked authority under the statute to regulate solicited faxes. The D.C. Circuit thus limits liability under the TCPA to just unsolicited fax advertisements, as its plain language states.

This ruling vindicates the two Republican FCC Commissioners, now Agency Chair Ajit Pai and Commissioner Michael O’Reilly, both of whom dissented in 2014 when the Commission’s fax Order was adopted. The ruling should also moot pending lawsuits based solely on the absence of an opt-out notice in faxes sent with the recipient’s express permission or invitation.

One caution is worth noting though. The decision does not eliminate the need to honor opt-out requests, thus creating a potential issue of fact for litigants.  On the one hand, this should make it much harder for plaintiffs’ attorneys to succeed at class certification because whether any particular person opted out of receiving faxes is an individualized factual issue.  On the other hand, however, it becomes harder for a defendant to refute a claim that a particular plaintiff revoked his or her consent before receiving an allegedly offending fax.

Under the FCC’s 2014 Order, onerous as the requirement to include an opt-out notice in every fax was, the business community had certainty as to what was required in communicating with customers or potential customers by fax. Now, it is incumbent on businesses to review their existing procedures or implement new procedures to defend against allegations that they have ignored or mishandled attempts by consumers to withdraw consent.

It is also worth pointing out that Bais Yaakov was argued before a three judge panel consisting of D.C. Circuit Judges Brett Kavanaugh and Nina Pillard, and Senior Circuit Judge Raymond Randolph on November 8, 2016.  Oral argument in the all-important TCPA case ACA International, et al. v. FCC, also before the D.C. Circuit, was argued a few weeks earlier, on October 19, 2016, before Judges Pillard, Sri Srinivasan, and Harry Edwards.  Now that Bais Yaakov has been decided, one can assume that decision in ACA cannot be far behind, and with it more certainty with respect to the definition of an “automatic telephone dialing system” and — hopefully — some much needed, practical relief, such as in the case of reassigned telephone numbers.

Before one starts uncorking the champagne, however, it is worth noting that Judge Pillard, the only judge on both the panel that heard Bais Yaakov and the panel that heard ACA, was the lone dissenter in the just decided fax case.  In her dissent, Judge Pillard focused on consumer harm and the need to address what she referred to as “a fusillade of annoying and unstoppable advertisements.” In her view, Congress expressly delegated authority to the FCC to implement a prohibition on unsolicited fax advertisements, and the opt-out notice requirement gave practical effect to that ban.

In any event, it shouldn’t be long now until we see how Judge Pillard and the rest of the D.C. Circuit’s ACA panel weighs in on this ever-evolving area of the law.

Second Bitcoin ETF Rejected by SEC

On March 28, 2017, the U.S. Securities Exchange Commission (“SEC”) issued a second denial of a bitcoin exchange-traded fund (“ETF”), following its rejection of the Winklevoss Bitcoin Trust earlier this month (Reed Smith commentary is available here). SolidX Bitcoin Trust would hold bitcoin as its primary asset, together with smaller amounts of cash.  Theft of bitcoins would be protected against through insurance coverage. Read our full report on our sister site, FinTech Update.

LexBlog