The New York State Department of Financial Services (“DFS”) has achieved a big win for state-based regulation of nonbank companies, in a lawsuit against the Office of the Comptroller of the Currency (“OCC”). The case involves the OCC’s two-year effort to grant special-purpose national bank charters to financial technology companies, and thereby preempt state law. In a decision last week, the Southern District of New York handed a win to the states in this national dispute over the proper boundaries of state and federal regulation of non-depository financial services companies. Continue reading
In a recent submission (PDF: 2.36 MB) to Congress, the U.S. Securities & Exchange Commission (SEC) reported that, for fiscal year 2018, the SEC paid the largest whistleblower awards since the institution of its program in 2012 following the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Specifically, in FY 2018, the SEC awarded 13 individuals over $168 million collectively for tips that led to actions by the SEC to protect investors.
Other statutes likewise provide financial incentives to whistleblowing. Under the False Claims Act (FCA), for example, persons who report fraud in government contracting can receive up to 30 percent of the government’s recovery in an action. Many states, including New York, have enacted state-level equivalents of the FCA. For many decades, the FCA has contributed to large recoveries to the U.S. Treasury, with an expansion of recoveries in part due to the reporting of violations by whistleblowers. Continue reading
Recently, the White House chief of staff announced that a major priority of the federal administration is de-regulation. According to the proponents of de-regulation, companies should be free to determine their own risks without governmental interference. This view is myopic and, if continued, will lead to increased risk to our financial system. Certainly, cybersecurity is not an area that should be part of any de-regulatory agenda.
The job of the regulator, particularly in the financial services industry, is to ensure the safety and soundness of an industry that serves the public. Promoting a compliance culture is a key part of the regulator’s job. For government actors to make political statements about the propriety of regulations as a binary proposition is a very bad idea. We have been there before and must resist the impulse to think it cannot happen again. Continue reading