Hedge Fund Bits and Pieces for June 16, 2017

We are a day late but hope you had a happy Friday.  As has been the trend, we are seeing a large focus on cryptocurrency assets and this update reflects that focus.

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Speaking on Cryptocurrency Hedge Funds – I will be in New York next week to speak Thursday at the Blockchain, Accounting, Audit & Tax Conference.  The conference will have panels speaking throughout the day on various blockchain related issues.  I will be part of a panel entitled “Digital Asset Management and New Financial Products” where we will discuss current and future investment vehicles as well as how investors are (and should be) viewing these products.  More information on the event can be found here.

California BitLicense – continuing the trend toward increased regulation of digital assets, California has proposed (for a second time) a regulatory regime for certain exchanges dealing with bitcoin and other “virtual currency”.  This legislation comes on the heels of New York’s BitLicense requirement, along with other regulators beginning to look at blockchain based digital assets.  As described below, we believe the SEC will be addressing the industry soon with questions and comments regarding certain aspects of the FinTech industry.  For more on the California BitLicense requirement, please see here.

Industry asks SEC to Publish Concept Release on Regulation of Digital Assets – a FINRA registered broker-dealer recently petitioned the SEC to provide guidance with respect to the regulation of digital assets (to be called Regulation DA).  The broker-dealer asked that the SEC also consider adopting a regulatory sandbox for certain FinTech companies, similar to what is being employed in the UK and Singapore (the latter of which has seen a large influx of oversight/regulation of ICOs).  The broker-dealer also mentioned that the regulation of digital assets should be consistent with crowdfunding regulations given that digital assets (ICOs specifically) share many characteristics in common with the crowdfunding industry.  You can access the full petition here.

Financial CHOICE Act of 2017 – on June 8, the House of Representatives passed the Financial CHOICE Act which is aimed at rolling back many of the changes implemented by the Dodd-Frank Act.  There are a number of interesting things that this bill introduces, including: structural changes to the SEC, repeal of the Department of Labor’s (DOL’s) fiduciary rule, restructure the CFPB, and repeal the Volker Rule.  All of the above would affect the investment management industry in profound ways but it is unlikely we will see any movement on this bill in the Senate any time soon.  When and if we do, we will provide more analysis on the content of any legislation that is likely to pass and be implemented.  An executive summary of the bill can be found here. The full text can be found here.

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Bart Mallon is a founding partner of Cole-Frieman & Mallon LLP and focuses his legal practice on the investment management industry. He can be reached directly at 415-868-5345.

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