Cabinet News & Views

In This Issue ...

I guess it’s time to add AI to the weekly regulatory hit parade that already includes crypto, ESG (especially the “E” for environmental), risk management and other popular topics.

First we had a much-publicized survey paint a doomsday picture of AI, with 42 percent of CEOs at the Yale CEO Summit warning that AI has the potential to destroy humanity five to ten years from now. Then, in a much less breathless pronouncement, Acting Comptroller of the Currency Michael Hsu still cautioned in an American Bankers Association speech that regulators need to arrive at a place “where responsible and purposeful innovation can be brought to market and a combination of controls, culture and common sense can prevent irresponsible innovations from emerging.” My colleague Mercedes Tunstall takes a closer look at these noteworthy observations from Acting Comptroller Hsu.

Lots more to read this week, including important guidance from the CFTC and, in the UK, the FCA, along with a look at comments from Assistant Attorney General Jonathan Kanter on the ongoing review of Bank Merger Guidelines.

What are your experiences in these areas? I'd love to discuss. You can reach me here.

Daniel Meade
Partner and Editor, Cabinet News and Views

Ask Permission, Not Forgiveness for Responsible Innovation: Acting Comptroller Hsu Discusses Tokenization and AI

By Mercedes Kelley Tunstall

Partner | Financial Regulation

In a speech given at the American Bankers Association’s Risk and Compliance Conference on June 16th, Acting Comptroller Michael J. Hsu discussed the importance of responsible innovation in financial services, with a special focus on tokenization and artificial intelligence.

By Peter Y. Malyshev

Partner | Financial Regulation

By Jason M. Halper

Partner | Global Litigation

On June 20, following a number of consultative papers, reports, committee hearings and public speeches by representatives of the Commodity Futures Trading Commission, the staff of CFTC’s Division of Enforcement has published its first alert on voluntary carbon markets. The alert: (i) describes the CFTC’s jurisdiction over VCMs; (ii) lists typical offenses involving VCMs; (iii) explains how to identify fraud and manipulation in VCMs; and (iv) lays out how to report alleged violations to the DOE.

By Daniel Meade

Partner | Financial Regulation

Earlier this week, Jonathan Kanter, Assistant Attorney General for the Antitrust Division of the Department of Justice, delivered remarks at the Brookings Institution titled “Merger Enforcement Sixty Years After Philadelphia National Bank.” In his remarks, Assistant AG Kanter noted that the Antitrust Division invited public comment on changes to the 1995 Bank Merger Guidelines, and that the Division is considering the comments received during the two rounds of public comment they requested. He also noted steps the Division is already undertaking.

By Peter Y. Malyshev

Partner | Financial Regulation

By Nikita B. Cotton

Associate | Financial Regulation

By Kathryn Garland

Associate | Financial Regulation

The Commodity Futures Trading Commission, on May 31, published an Advance Notice of Proposed Rulemaking seeking public comment in connection with potential amendments to the regulations under the Commodity Exchange Act relating to the risk management program requirements for swap dealers, major swap participants and futures commission merchants registered with the CFTC. Additionally, the CFTC is seeking comment on how to alter the current periodic risk reporting regime for such market participants. The changes the CFTC has proposed could result in either significant operational efficiencies or greater operational burdens for market participants if implemented; accordingly, market participants should consider submitting comments.

You can access our Clients & Friends Memo here.

The United Kingdom Introduces New Rules for Marketing Cryptoassets

By Alix Prentice

Partner | Financial Regulation

The UK’s Financial Conduct Authority has introduced robust new rules for those marketing cryptoassets to UK consumers. In Policy Statement PS23/6, new requirements covering financial promotions for all firms aimed at UK consumers, regardless of where the promoter is based or what technology they use, designate cryptoassets as “Restricted Mass Market Investments.” This means invitations or inducements to engage in investment activities in relation to “qualifying cryptoassets” will be subject to the restrictions outlined below. Broadly, a qualifying cryptoasset is any cryptographically secured digital representation of value or contractual rights that is transferable and fungible but does not include e-money (as defined), nor an existing controlled investment.

By Duncan Grieve

Special Counsel | White Collar Defense and Investigations

By Sharon Takhar

Associate

On May 4, the United Nations announced the formation of a 35-member bank-led working group to promote nature- and biodiversity-related target setting that is aligned with the Kunming-Montreal Global Biodiversity Framework adopted at COP15 last year, as well as to implement other climate-related market standards such as the recommendations of the Taskforce on Nature-related Financial Disclosures.