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Top Story Compliance Related


Former race car team owner/Investment advisor charged by SEC

The SEC has announced it has filed a complaint charging Andrew T. Franzone, former owner of a race car team, and investment adviser FF Fund Management, LLC (FFM) with fraudulently raising and misappropriating tens of millions of dollars from the sale of limited partnership interests in a private fund, FF Fund I LP.

The complaint alleges that Franzone, the sole owner and principal of FFM, defrauded investors by making misrepresentations regarding the fund's strategy and investments, failing to eliminate or disclose conflicts of interest, misappropriating fund assets, and falsely representing the fund would be audited annually. According to the complaint, from August 2014 through Sept. 24, 2019, Franzone told potential and existing investors that his investment strategy for the fund was to maintain a highly liquid portfolio primarily focused on options and preferred stock trading. Franzone allegedly raised more than $38 million for the fund from approximately 90 investors through these representations.


SEC awards whistleblowers over $3 million

The SEC has announced awards totaling more than $3 million to two whistleblowers in separate enforcement proceedings. In the first order, the SEC awarded approximately $3.2 million to a whistleblower who alerted SEC staff to violations, identified key issues for staff to focus on, and provided subject matter expertise to the staff that conserved SEC resources. In the second order, the SEC awarded a whistleblower more than $100,000 for significant information and ongoing assistance. The whistleblower’s information and cooperation helped the SEC detect and stop an ongoing fraud preying on investors.


OCC conditionally approves national trust bank

The OCC has announced preliminary conditional approval of the application to charter Paxos National Trust, New York. The national trust bank charter was conditionally awarded to Paxos after a thorough review of the company and its current operations.


Cash advance firm settles with FTC

The Federal Trade Commission has announced that Yellowstone Capital, a provider of merchant cash advances, will pay more than $9.8 million to settle Commission charges that it took money from businesses’ bank accounts without permission and deceived those businesses about the amount of financing business owners would receive and other features of its financing products. Under the terms of the settlement, Yellowstone, Fundry Inc., Yitzhak (a/k/a Isaac) Stern, and Jeffrey Reece will be required to surrender $9,837,000 to the FTC to be used in providing refunds to affected businesses. In addition, the settlement permanently prohibits the defendants from misleading consumers about the terms of their financing, including the amount and timing of any fees and whether business owners are required to be personally liable for the financing. The defendants will also be prohibited from making withdrawals from consumers’ bank accounts without their express informed consent.


FDIC proposes rule on false deposit insurance ads

The FDIC has issued a proposed rule implementing its statutory authority to prohibit any person or organization from making misrepresentations about FDIC deposit insurance or misusing the FDIC’s name or logo. This statutory authority allows the FDIC to bring formal enforcement actions, such as cease and desist orders or civil money penalties, against individuals or entities for violations.

The proposed rule describes the process by which the FDIC would identify and investigate potential violations, and the procedures it would follow, when formally and informally enforcing the statutory prohibitions. The proposed rule would also create a central point-of-contact where the public could report or make inquiries about potential violations.

Comments on the proposed rule will be accepted for 60 days after publication in the Federal Register.

  • FDIC press release
  • UPDATE on publication and comment period: Scheduled for publication on 5/10/2021, with comments due by 7/9/2021


Agencies propose rule on income tax allocation agreements

The Federal Reserve Board, FDIC, and OCC have released a proposed rule that would update and codify existing guidance on income tax allocation agreements involving depository institutions and their affiliates. Under the proposed rule, banks that file tax returns as part of a consolidated tax filing group would be required to enter into tax allocation agreements with their holding companies and other members of their consolidated group.

The proposed rule also describes the provisions required to be included in those agreements and specifies regulatory reporting treatment. Comments will be accepted for 60 days following Federal Register publication.


Federal Reserve enforcement orders

The Board of Governors of the Federal Reserve System has announced the execution of two enforcement orders against state-chartered member banks.

  • The Yellowstone Bank, Laurel, Montana, was ordered to pay a $9,500 civil money penalty for a pattern or practice of unspecified violations of Federal Reserve Board Regulation H section 208.25, which implements the National Flood Insurance Act.
  • Iowa Prairie Bank, Brunsville, Iowa, entered into a written agreement with the Federal Reserve Bank of Chicago and the Iowa Division of Banking addressing matters of board oversight, credit risk management, asset improvement, the allowance for loan and lease losses, capital planning, a business plan and budget, regulatory reporting, dividends, and compliance with laws and regulations.


Proposed weakening of Equal Access Rule withdrawn

HUD has announced it is withdrawing the previous administration’s proposed rule that would have weakened the Equal Access Rule. The Rule ensures that all individuals—regardless of sexual orientation or gender identity—have equal access to the Department’s Office of Community Planning and Development programs, shelters, other buildings and facilities, benefits, services, and accommodations. HUD also announced it is releasing technical assistance resources to HUD grantees. These resources will support HUD’s Office of Community Planning and Development grantees in implementing the Equal Access Rule.


Employer tax credits for paid leave for vaccinations

The IRS has announced further details of tax credits available under the American Rescue Plan to help small businesses, including providing paid leave for employees receiving or recovering from COVID-19 vaccinations. A fact sheet released yesterday spells out some basic facts about the employers eligible for the tax credits. It also provides information on how these employers may claim the credit for leave paid to employees related to COVID-19 vaccinations.


OFAC sanctions key Burmese timber and pearl enterprises

On Wednesday, OFAC designated two Burmese state-owned enterprises, Myanma Timber Enterprise and Myanmar Pearl Enterprise, which are responsible for timber and pearl exports from Burma. The timber and pearl industries are key economic resources for the Burmese military regime that is violently repressing pro-democracy protests in the country and that is responsible for the ongoing violent and lethal attacks against the people of Burma, including the killing of children. These sanctions are not directed at the people of Burma.

Identification information on these two enterprises can be found in a BankersOnline's OFAC Update.


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