Friday, January 30, 2015

FDIC tightens the noose around Operation Choke Point

By Lisa M. Goolik, J.D.

The Federal Deposit Insurance Corporation is serious about addressing Operation Choke Point, the program created by the Justice Department to “choke out” companies the administration considers “high risk” by denying them access to the banking system. In addition to releasing a statement to its supervised institutions intended to counteract the broad-based risk assessments previously made under the program, the FDIC tasked its Office of Inspector General with conducting a formal investigation of the program and any staff who may have played a part.

The FDIC has also establised a new, dedicated toll-free number and an email address that allows institutions to confidentially report FDIC personnel that are not following FDIC policies on providing banking services.

According to Rep. Blaine Luetkemeyer (R-Mo), one of the program's most vocal critics, FDIC Chairman Martin Gruenberg and Vice Chairman Tom Hoenig acknowledged the "wrongdoing" within the FDIC during a meeting with Luetkemeyer on Wednesday.

For more details about FIL-5-2015, subscribe to the Banking and Finance Law Daily.

Thursday, January 29, 2015

FOMC reports the economy is improving

By Lisa M. Goolik, J.D.

The Federal Open Market Committee had some positive news yesterday. According to the FOMC’s statement, economic activity is "expanding at a solid pace." In addition, although inflation is anticipated to decline further in the near term, the FOMC expects inflation to rise gradually toward 2 percent over the medium term "as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate."

Overall, the news from the FOMC was positive: labor market conditions are improving and household spending "is rising moderately," and business fixed investment "is advancing."

However, despite the progress, the FOMC stated that it will continue to maintain the current, low-target range for the federal funds rate at 0 to .25 percent. In addition, the FOMC indicated that, even if the economy reaches the FOMC’s objectives of maximum employment and 2 percent inflation, “economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."


For the full story on the FOMC’s report, subscribe to the Banking and Finance Law Daily.

Wednesday, January 28, 2015

Penny stock violations add up to $20 million fine for Oppenheimer

By Lisa M. Goolik, J.D.

Penny stocks can add up—especially if you’re Oppenheimer & Co., Inc., a securities broker-dealer based in New York. Oppenheimer is paying $20 million to the Securities Exchange Commission and Treasury Department to settle charges that it willfully violated securities laws and the Bank Secrecy Act while dealing in penny stocks.

BSA violations. According to the Financial Crimes Enforcement Network's assessment, from 2008 through May 2014, Oppenheimer failed to detect and report suspicious activity related to penny stocks, which typically are low-priced, thinly traded, and “highly speculative securities” that can be vulnerable to manipulation. Oppenheimer failed to report patterns of activity in which the customers deposited large blocks of unregistered or illiquid penny stocks, moved large volumes of penny stocks among accounts with no apparent purpose, or immediately liquidated those securities and wired the proceeds out of the account.

SEC violations. Of the $20 million penalty, $10 million will be paid to the SEC to settle charges that Oppenheimer violated the books and records and registration provisions of the securities laws. The SEC found that between July 2008 and May 2009, Oppenheimer executed sales of billions of shares of penny stocks for an account in the name of a customer that was acting as a broker in the U.S., despite not being registered with the Commission. In addition, Oppenheimer, through a registered representative, engaged in the unregistered distribution of the securities of six entities on behalf of a customer.

This is also not the first time Oppenheimer has been in trouble. In 2005, FinCEN and the New York Stock Exchange assessed a civil money penalty of $2.8 million against Oppenheimer for similar violations. In 2013, the Financial Industry Regulatory Authority fined the firm $1.4 million for violations of securities laws and anti-money laundering failures.

For more details about the action against Oppenheimer, subscribe to the Banking and Finance Law Daily.

Tuesday, January 27, 2015

The Fed's plan to improve the payment system includes you

By Lisa M. Goolik, J.D.

The Federal Reserve Board has released a plan to enhance the speed, safety, and efficiency of the U.S. payment system, which is nearing  a “critical juncture in its evolution.” The Fed report, “Strategies for Improving the U.S. Payment System,” envisions a world where businesses, emerging payments firms, card networks, payment processors, consumers, and financial institutions all work together to create a payment system utopia.

According to the Fed, responses to a 2013 paper on payment system improvements indicate broad agreement with the gaps, opportunities, and desired outcomes that the Fed identified. Given the recent stakeholder dialogue, the Fed believes that now is the time to join together and achieve the following outcomes: (1) speed; (2) security; (3) efficiency; (4) International; and (5) collaboration.
If you would like to help the Fed achieve these goals, the Fed is looking to establish various stakeholder taskforces in 2015 that will advise the Fed and identify effective approaches for achieving the outcomes. Membership needs and instructions for expressing an interest in participating will be detailed on
If you'd rather watch from the sidelines, you can join Kansas City Fed President Esther George and Fed Governor Jay Powell on January 29 for a live webcast, via, at which they will share their vision for the future U.S. payment system.

For more details about the Fed's strategy and desired outcomes, subscribe to the Banking and Finance Law Daily.


Monday, January 26, 2015

Your chance to comment (or complain) about the FSOC's designation process

By Lisa M. Goolik, J.D.
The Financial Stability Oversight Council is seeking comments on an existing collection of information related to its authority to determine that certain nonbank financial companies are subject to supervision by the Federal Reserve Board and enhanced prudential standards. Among other uses, the information collection affords a nonbank financial company an opportunity to submit materials to contest a proposed determination.

The comments may help the FSOC address three primary concerns reported at the most recent FSOC meeting:  (1) companies want to know sooner if they are being considered for designation as systemically important; (2) companies want more information about FSOC’s designation process; and (3) companies want more details about the annual reviews and to be given the opportunity to meet and discuss developments during the reviews.
Comments are due by March 30, 2015.

For additional details about the information collection and comment process, subscribe to the Banking and Finance Law Daily.