It is interesting that the SEC thought to bring this action as a "swaps" case. It would have been more straightforward, and ordinary, to charge the firm with acting as an unregistered broker-dealer and making illegal margin loans. Calling this a swaps case suggests that the conduct in question would have been legal but for the expansion of the SEC's authority under Dodd-Frank; that is not the case. This is not the first time the SEC Enforcement Staff turned an ordinary securities enforcement…

The policy behind the Rule 15c3-3 requirement that collateral be delivered away from the broker-dealer, rather than be put into the customer's account at the broker-dealer, is long-standing (as the dissenting Commissioners say, it dates from 1982), but the need for the specific requirement has always been somewhat unclear. On the one hand, a securities lender who holds collateral is obviously protected in the event of the bankruptcy of the broker-dealer. That said, if the collateral were to…

The CFTC letter may be reasonably summarized a, "yes, FCMs can hold virtual currency as margin, subject to strict conditions, but we would really rather you didn't, and if you do, keep it to a low level."

Perhaps the most notable aspect of the letter the staff's statement that CFTC Rule 1.55 requires an FCM intending to hold virtual currency for any customer to provide advance notice to all other customers notifying them of the risk created by the FCM's custody. Query whether this…

While enforcement actions against compliance officers are fairly unusual, they are still very daunting to those in the role who feel themselves potentially exposed to a personal charge for any misconduct by the firm. While no one doubts that a compliance office should be subject to personal liability under the first two of Mr. Ceresney's three-pronged analysis, when the SEC brings a charge under the third prong, if it seems doubtful, it sends a strong message of fear through the industry, as…