Are Zoom Calls the Next Front in the SEC's Probe of Off-Channel Communications?

WhatsApp clampdown highlights video call compliance threat for finance firms

With text messages and emails under tightened surveillance, financial firms may now have to screen staff video calls for possible rule-breaking, amid concern regulators are poised to scrutinise such calls for compliance breaches.

So far, a sector-wide crackdown led by the U.S. Securities and Exchange Commission (SEC) has focused on business-related text messages over unauthorised platforms, such as WhatsApp, which went untracked and unrecorded by regulated firms, largely during COVID-19 lockdowns when thousands of employees were working from home.

The SEC declined to comment for this story but two people with knowledge of the U.S. investor probes said they were concerned the SEC would expand recording requirements to Zoom calls, or similar forms of communication.

Finance firms are now engaging technology specialists, law firms and risk consultants to ensure video calls are monitored and retained as required, to meet record-keeping requirements and manage risks such calls could be used to share non-public information illegitimately, a dozen sources told Reuters.

Crypto giant Binance’s US affiliate halts direct dollar withdrawals

The U.S. unit of cryptocurrency exchange Binance has halted withdrawal of dollars by its clients from the platform, its updated terms showed on Monday.

In early June, Binance.US had halted dollar deposits, after the U.S. Securities and Exchange Commission (SEC) asked a court to freeze its assets.

“In the event that customers wish to withdraw U.S. dollar funds from their account, they may do so by converting U.S. dollar funds to stablecoin or other digital assets, which can subsequently be withdrawn,” the terms page said.

U.S. Derivatives Regulator Plans Tougher Enforcement Approach

Commodity Futures Trading Commission enforcers intend to push for heavier fines, particularly on repeat offenders, and will increasingly eschew settlements that allow firms to avoid admitting fault, the financial regulator’s enforcement unit said Tuesday.

The CFTC, which polices derivatives markets, will crack down in particular on repeat offenders, it said in a memo to enforcement staff. Recidivist firms can expect to see monitors put in place to oversee compliance as part of their settlements, it said.

The use of what are known as no-admit, no-deny settlements will also be dialed back, the CFTC said. The moves are intended to deter misconduct by making it more costly for firms that violate the law.

Lawmakers Press Biden on Preventing Use of Crypto in ‘Financing of Terrorism’

Eighty-six members of Congress representing both Democrats and Republicans pressed the Biden administration for details on how it plans to prevent militant organizations from using crypto in the “financing of terrorism.”

In an Oct. 17 letter, led by senators Elizabeth Warren and Roger Marshall, along with representative Sean Casten, to the US Treasury Department and the National Security Council, the lawmakers noted that militant Islamist groups Hamas and Palestinian Islamic Jihad (PIJ) raised millions of dollars in crypto in the months leading up to Hamas’ attack on Israel. Between August 2021 and this June, the groups raised over $130 million in crypto, with PIJ sending more than $12 million in crypto to Hezbollah since 2023, according to the letter, which cited a Wall Street Journal report.

2023 Fiscal Year in Review: SEC Enforcement Actions Against Investment Advisers to Private Funds, Registered Funds, and Retail Clients

In its 2023 fiscal year that ended on September 30, the U.S. Securities and Exchange Commission (SEC or Commission) brought over 150 enforcement actions against investment advisers and their representatives. A review of notable actions under the Investment Advisers Act of 1940 reveals a number of trends likely to continue into FY2024, including aggressive enforcement in areas of focus for Chairman Gary Gensler’s regulatory agenda.

Here, we provide an overview of key areas of focus and notable actions….

SEC Charges Illinois Resident with Insider Trading

The Securities and Exchange Commission today announced charges against Brian Marc Rubin of Deerfield, Illinois, for insider trading in stock options of Array BioPharma Inc. in advance of an announcement that Pfizer, Inc. was acquiring Array via a tender offer.

The SEC’s complaint, filed in federal court in Illinois, alleges that Rubin unlawfully traded Array stock options based on material, nonpublic information about the acquisition that he learned about and then misappropriated from his spouse, who worked at Array. The SEC’s complaint further alleges that Rubin traded the Array stock options prior to the announcement of the acquisition, and as a result made illegal profits of $90,458.

Why Binance, Coinbase, Ripple and Other Crypto Firms Cite the ‘Major Questions’ Doctrine During Legal Imbroglios

Coinbase, the largest U.S. crypto business, is arguing along the same lines. Like Binance, Coinbase argued that the SEC doesn’t have explicit permission to say whether it is an unlicensed securities exchange, and cited the “major questions” doctrine in a brief meant to quickly expel the SEC’s lawsuit.

Last week, the SEC fired back against Coinbase’s brief in what has been called both its “most expansive response to date to crypto industry arguments” the agency is exceeding its bounds and also something of a “novel” interpretation of the rules. In an Oct. 4 filing, the SEC argued “major questions” is nullified in that it has never been applied to a matter of “enforcement authority.”

Further, in a novel interpretation that has ruffled some feathers, the SEC said thus far the “major questions” doctrine has only applied to strike down “novel regulatory forays,” and most significantly, novel regulatory forays into areas of major “economic and political significance.” Coinbase, the SEC said, “does not have the vast economic or political significance.”

EU securities watchdog warns investors over crypto market protections

Investors will not be protected under European Union cryptoasset market rules until at least the end of 2024, and even then they should still be ready to lose all their money, the bloc’s securities watchdog said on Tuesday.

The EU was the first jurisdiction in the world to approve a comprehensive set of rules to regulate markets for cryptoassets like bitcoin, which entered into force in June but won’t be fully applied until December 2024.

The Sam Bankman-Fried Trial Is Revealing Crypto’s Amateur-Hour Ways

Paradigm, BlockFi, Genesis and other companies did not have access to audited financial statements prior to investing or loaning billions to FTX, FTX.US. and Alameda Research, according to testimonies given in the trial of Sam Bankman-Fried. Rather, these investors and lenders looked at unaudited financial statements and spoke with the executives at these companies to determine critical pieces of information like FTX’s cash flow, its liabilities, its current assets and net asset value.

Everyone, including regulators, is paying renewed attention to the FTX and Alameda Research collapse. The amateur-hour practices coming out in that courtroom are unlikely to impress anyone in traditional finance or in policy, underscoring the distance crypto still has to cover to be taken seriously by the TradFi world.