Washington Report 360 | March 15, 2019

SEC focuses exams on firms with senior investor accounts; Basel Committee considers crypto-assets; Proposed 2020 Federal budget

Key highlights

  • The SEC will focus exams on firms with high numbers of senior investor accounts and assets.
  • The Basel Committee considers crypto-assets to present multiple risks to banks and has set prudential expectations for associated exposures.
  • The Administration’s proposed 2020 budget (as drafted) would subject the CFPB, FSOC, and OFR to the appropriations process.

Financial services legislative and regulatory news

The SEC will:

  • Reassess Regulation NMS, and consider equity market structure initiatives on thinly-traded (i.e., less actively traded) securities, retail fraud, and market data and market access.
  • Focus advisor examinations on firms with high numbers of senior investor accounts and assets; recent SEC exams denoted "significant” policy weaknesses. (Financial Advisor online)
  • Seek industry input on Custody Rule issues, including the application of the rule to digital assets.

The CFPB released its Supervisory Highlights examination findings for automobile loan servicing, deposit operations, mortgage servicing, and remittances.

The Federal Reserve stated that changes to the assessment area definition and the performance test, along with improved metrics, may enhance the Community Reinvestment Act.

The Senate Banking Committee conducted a hearing on the CFPB focusing on the Military Lending Act, student lending, and payday lending, as well as a hearing on the FSOC’s nonbank designation process.

The House Financial Services Committee conducted hearings on “megabanks,” the National Flood Insurance Program, and financial crimes.

Financial services policy news

The Administration’s proposed 2020 budget (as drafted) would:

  • Subject the CFPB, FSOC, and OFR to the appropriations process.
  • Require certain post-secondary institutions to share in the financial risk for student loans.
  • Assess FHA lenders to fund modernization of the FHA’s technology systems.

The Basel Committee issued a newsletter outlining prudential expectations for banks' exposures to crypto-assets and related services; the Basel Committee believes crypto-asset trading platforms and crypto-asset financial products pose multiple risks to banks, including financial stability concerns.

The CFTC Chair indicated the CFTC will outline concerns for U.S. central counterparties (CCPs) and the U.S. financial markets in consultations for the EU’s EMIR 2.2, new legislation to enhance the supervision of CCPs.