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Steven Lofchie @Stevenlofchie

#NortonRoseFulbright partner. Founder of #USRegulatoryIntelligence & newsletter, first ranked in Chambers, twice named best NY FinReg lawyer. #FinReg

Joined May 2014
  • Tweets 258
  • Following 129
  • Followers 521
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With a diatribe against Paul Atkins, the nominee-to- be SEC Chair, that runs 34 pages and contains 196 footnotes, Senator Warren demonstrates that within her still beats the heart of an academic. However, her arguments are badly stretched (apparently, she thinks he caused the 2008 financial crisis) or based on some nostalgic view of how the stock market used to work (she does not explain how the uptick rule for short sales she remembers from the olden days could possibly work in today’s markets). Taken point by point, her letter is more impressive for the number of her footnotes than for the strength of her arguments. bit.ly/4kWC7qK @SenWarren @PaulAtkinsETH @SECGov
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Commissioner Crenshaw trivializes the new SEC guidance on whether crypto mining is a securities activity by pointing out that its application to mining activities is subject to a "limitation: one actually would have to conduct a Howey [test] analysis to know if a specific mining arrangement constitutes an investment contract" and, thus, a security subject to the securities laws. In other words, she argues that the new guidance does not actually represent any change in the law. What this criticism misses is that no one ever disputed the continuing validity of Howey and its potential application to cryptocurrency activities. The criticism of the SEC under Chair Gensler was that no attempt was ever made to explain in what situations Howey might be relevant to cryptocurrency. bit.ly/4kVQY4T @SECGov, @crypto, @securities
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There is no area of financial regulation that is so in need of reduced regulation as that governing of the production of investment research. Investment research, which is a necessity for strong capital markets, has been treated by the SEC and FINRA as an inherently suspect activity. As a result, they have imposed onerous regulations that both made it more expensive to produce and to provide less of a benefit (profit motive) for it to be produced. bit.ly/4hHsiu3, #regulation, @SECGov, @FINRA
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That FINRA has revived work (which had been dormant for over six years) on simplifying its rules governing the outside employees of broker-dealers is reflective of the general policy of the Trump Administration to simplify regulation. That policy is impacting not only governmental agencies under the control of the President, but also self-regulatory organizations. bit.ly/3FziG7r, @FINRA, #Regulations
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Ordinarily, when a regulator states that it intends to "modernize" rules, that means it intends to adopt more (and more burdensome) rules. Under the new administration, the world is turned upside down. It is actually reasonable to expect that FINRA will consider where burdens might be reduced without depriving investors of reasonable protections. bit.ly/3Fx3ure @FINRA, #regulation
Laptop with a checklist on it.

ALT Laptop with a checklist on it.
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The establishment of the Crypto Reserve is among the most trivial of issues. The Executive Order does not authorize the U.S. Government to buy bitcoin. Essentially all it says is that, to the extent that the U.S. Government comes into possession of bitcoin, as a result of criminal enforcement activities, the holding of those assets should be centralized, and the sale should be conducted in a way to maximize the return to the Government. Since the U.S. Government will not be buying crypto, Senator Warren’s concerns about conflicts of interest in the establishment of the Reserve don’t seem to have a substantive basis. bit.ly/41FDnWr, #CryptoReserve, #Bitcoin, #ElizabethWarren
A few gold Bitcoins on a desk.

ALT A few gold Bitcoins on a desk.
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The ICI request that the SEC liberalize and simplify its rules regarding "co-investments" between registered investment companies and their affiliates will be a good test of the SEC's willingness to devote its resources to simplifying rules and reducing restrictions in response to market participants. bit.ly/3DwSNnN, @SECGov, @ICI, #regulation
Signing an agreement.

ALT Signing an agreement.
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The replacement of Mr. Barr as Vice Chair for Supervision at the Fed is as consequential as the replacement of Mr. Gensler as Chair of the SEC and Mr. Chopra as the director of the CFPB. bit.ly/3QIPSvx, @federalreserve
Federal Reserve Building, Washington DC, USA.

ALT Federal Reserve Building, Washington DC, USA.
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A broker-dealer has petitioned the Supreme Court to address the issue of whether FINRA exercises governmental power without the oversight and restraints that would apply to a governmental agency. Although such a petition is contrary to the long accepted conventional wisdom, it is not an outlandish claim, particularly as one takes a fresh look at the status of the independent agencies, such as the SEC, under the Constitution. This prompts the question: if the SEC is subject to the Executive Branch, how can FINRA (which is itself largely subject to the SEC) exercise powers that are outside of those allocated to it by the Executive Branch. bit.ly/4h8oRMs, #FINRA, #SEC, #Regulation
Illustration of documents in court with scales of justice and a gavel.

ALT Illustration of documents in court with scales of justice and a gavel.
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SEC Commissioner Crenshaw criticized the staff's conclusion that meme coins are not securities. However, her argument that "meme coins" are "securities" because (i) they are issued as part of an effort to make money and (ii) both the sellers of the asset and the buyers have a common interest in the value of the asset rising is way overbroad. If the Commissioner’s definition of a “security” was correct, art galleries that sell paintings by artists that they promote and real estate magnates that sell co-ops in buildings that they are developing would be subject to the Securities Laws. bit.ly/4in9jWf, @SECGov, @CarolynCrenshaw
Picture of different meme coins images.

ALT Picture of different meme coins images.
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No great surprise that the SEC decided to delay the effective date of the clearing mandate. As was the case with pretty much all rulemaking adopted under Chair Gensler, the rule's details were not fully considered. Market participants should press for rule improvements. For example, the SEC should reconsider applying the mandate to transactions between parties acting outside of the United States, just because one of the parties is a member of a US clearing corporation. A lot more attention should be given as to the question of how the clearing mandate interacts with Rule 15c3-3, the custodial rule applicable to broker-dealers. Likewise, the SEC and the CFTC should resolve how the final rules will apply to investment companies and FCMs. tinyurl.com/ycykjtpx, @SECGov
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While there is no one better suited to the task of proposing a regulatory scheme for crypto assets than Commissioner Peirce, she is subject to one fundamental limitation that she cannot control. Every substantive question that she asks must be preceded by first addressing the metaphysical question of whether the asset at issue is a "security." This is a waste of time and effort and is no different than arguing as to whether a tomato is a fruit or a vegetable. See bit.ly/3CCDNEB. Isn't it better to just eliminate the jurisdictional question by starting with a new crypto-specific statute—as suggested in the Quick and Dirty Fix memo? tinyurl.com/yzja8vjb @SECGov, @HesterPeirce
Pile of crypto currency.

ALT Pile of crypto currency.
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It is an inherent premise of an election that the voters share some common goal, to advance the interest of the entity of which they are members. As a practical matter, when investors holding very few shares seek to force an election on a matter that is immaterial to the activity of the company, it is often the case that their interests are either indifferent to – or antagonistic to – the company. The hope is to use social pressure to force the company to advance a position that supports their interests, not those of the group. In the business world, it does not help a company to be forced to take a public stand on an issue that is both controversial and largely immaterial to the company’s activities. Regulatory interpretations that require it to do so result in the company offending those of its customers or business partners on the other side of the controversial issue, for no benefit to the company. @SECGov @SECCommissioner
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See full story: bit.ly/3CTHMwL
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It is hard to assess the practical significance of this EO. During Mr. Gensler's tenure at @SECGov and the @CFTC, party-line votes were the ordinary course. If there is now a shift in the SEC's priorities (to be consistent with the views of the Republican rather than the Democratic party), that shift is consistent, from a political standpoint, with how the "independent" agencies have acted for the past four years.
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There is one power that the minority party will continue to have—the power to issue dissents. SEC Commissioners Peirce and Uyeda, and CFTC Commissioner (later Chair) Giancarlo wrote dissents that were meaningful. To that end, independent agencies might consider expanding the staffs that are delegated to each of the non-Chair Commissioners, so that the minority Commissioners have more resources to voice dissent.
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An enhanced ability to issue public dissents might do more to strengthen the independence of the agency than maintaining the pretense that the majority Commissioners operate "independently" of the President. bit.ly/4b8He2G
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I’m honored to be ranked by @Chambers and Partners as a leader in Derivatives for a 18th consecutive year. What an honor to be recognized by my clients and peers. #ChambersGlobal
Steven Lofchie Chambers 2025 Top Ranked for USA Derivatives.

ALT Steven Lofchie Chambers 2025 Top Ranked for USA Derivatives.

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This is less a story about securities markets than it is a story about the movement of financial and commercial centers away from New York, Illinois and California to Texas and Florida. (See bit.ly/4aXrMGB, (the story also mentions the geographic shifts).) Expect this trend to continue. bit.ly/4hP1eJQ, @NYSE
American and Texas state flags flying on the dome of the Texas State Capitol building in Austin.

ALT American and Texas state flags flying on the dome of the Texas State Capitol building in Austin.

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Steven Lofchie retweeted
Gage Raju-Salicki
@gagerajusalicki
7 Feb 2025
Wrote about the two new stablecoin bills. Didn't get to include this in the article, but the offshore provisions are pretty interesting. Probably prudent to familiarize yourself with these bills—they could be passed in this pro-crypto environment. findknowdo.com/news/02/06/20…
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