Effective April 14: FinCEN GTO Requires MSBs Along US Southwest Border to Report Transactions in Currency of More than $200
Go-To Guide:
The Financial Crimes Enforcement Network (FinCEN) issued a Geographic Targeting Order (GTO) requiring all money services businesses (MSBs) located in 30 ZIP codes across California and Texas to, among other things, report and maintain records of cash transactions exceeding $200 (up to $10,000), and to verify the identity of persons presenting such transactions.
The GTO does not alter existing obligations for MSBs, except as otherwise provided in the GTO.
The GTO takes effect April 14, 2025, and will remain in effect until Sept. 9, 2025, unless renewed.
Background
Effective April 14 through Sept. 9, 2025, unless renewed, FinCEN’s GTO aims to combat Mexico-based cartels and other illicit actors in certain California and Texas counties along the U.S.-Mexico border. The GTO requires all MSBs located in the specified targeted areas to (i) file Currency Transaction Reports (CTRs) with FinCEN for cash transactions of more than $200 but not more than $10,000; and (ii) verify the identity of persons making such transactions.
The GTO is intended to support the Trump administration’s goal of halting the flow of harmful drugs into the United States by drug cartels and other criminal actors. President Trump issued an executive order (EO) in January mandating the classification of drug cartels and other organizations as Foreign Terrorist Organizations (FTOs) or Specially Designated Global Terrorists (SDGTs). Following the EO, the U.S. Departments of the Treasury and State designated eight organizations as FTOs and SDGTs, including six drug cartels based in Mexico. According to U.S. Treasury Secretary Scott Bessent, the GTO “underscores [the] deep concern with the significant risk to the U.S. financial system of the cartels, drug traffickers, and other criminal actors along the Southwest border.”
Which MSBs Must Comply with the GTO?
MSBs1 located in the seven counties in California and Texas listed below, as denoted by their respective ZIP codes, are required to comply with the GTO (collectively, Covered MSBs):
Imperial County, California: 92231, 92249, 92281, and 92283;
San Diego County, California: 91910, 92101, 92113, 92117, 92126, 92154, and 92173;
Cameron County, Texas: 78520 and 78521;
El Paso County, Texas: 79901, 79902, 79903, 79905, 79907, and 79935;
Hidalgo County, Texas: 78503, 78557, 78572, 78577, and 78596;
Maverick County, Texas: 78852; and
Webb County, Texas: 78040, 78041, 78043, 78045, and 78046.
MSBs located in these specified targeted areas must transmit the GTO to each of their agents located in these areas.
What Transactions Must Be Reported and How?
Covered MSBs must report each deposit, withdrawal, exchange of currency, or other payment or transfer by, through, or to the Covered MSB that involves a transaction in currency of more than $200 but not more than $10,000. The CTR filing requirement, however, does not apply to transactions with a commercial bank.
The Covered MSB must report the transaction to FinCEN in a CTR through the BSA E-Filing System within 15 days of the date when the transaction occurred and include “MSB0325GTO” in Field 45 in Part IV of the CTR. FinCEN instructs Covered MSBs to continue with the submission notwithstanding the BSA E-Filing System-generated warnings indicating the transaction being reported is below the $10,000 reporting threshold.
The GTO reminds Covered MSBs to comply with the identification requirements set forth at 31 C.F.R. § 1010.312 before concluding a covered transaction, including the requirement that the specific identifying information used in verifying the identity of the customer be recorded on the CTR. The GTO prohibits the mere notation of “known customer” or “bank signature card on file” on the CTR. The GTO exempts Covered MSBs from verifying the identity of armored car service employees.
Although dollar thresholds for Suspicious Activity Report requirements remain the same (i.e., as low as $2,000),2 FinCEN encourages the voluntary filing of SARs where appropriate to report transactions conducted to evade the $200 reporting threshold imposed by the GTO.
Record Retention Requirements
Covered MSBs must retain all CTRs filed in compliance with the GTO and any related records for a period of five years from the last day the GTO is in effect (including any renewals thereof). MSBs must make these records available to FinCEN or any other law enforcement or regulatory agencies upon request.
Noncompliance
Noncompliance with the terms of the GTO may result in civil or criminal fines/penalties for the Covered MSB and any of its officers, directors, employees, and agents.3
Key Takeaways for Covered Businesses
The GTO will directly impact the operations of MSBs that engage in cash-based transactions in the 30 ZIP codes subject to the GTO. MSBs operating in these areas should become familiar with the GTO’s requirements and take steps to ensure the implementation of adequate controls to comply with the GTO’s terms by April 14, 2025. This may involve updating existing risk assessments, reviewing BSA-mandated compliance programs, and training customer-facing and compliance staff.
Covered MSBs should closely monitor regulatory updates from FinCEN, as GTOs historically have been renewed and at times, expanded to address emerging areas of concern.
1 FinCEN regulations define an “MSB” to include dealers in foreign exchange, check cashers, issuers or sellers of traveler’s checks or money orders, providers of prepaid access, money transmitters and sellers of prepaid access. 31 C.F.R. § 1010.100(ff).
2 31 C.F.R. § 1022.320.
3 31 U.S.C. §§ 5321-5322.
Federal Court Rejects FCA’s “65%-100%” Language as Insufficient to Constitute the Necessary Quantity Term in a Requirements Contract—A Win for Suppliers
A recent federal court decision marks an important win for automotive suppliers in the ongoing debate over what constitutes a valid requirements contract under Michigan law following the Michigan Supreme Court’s decision in MSSN, Inc. v. Airboss Flexible Products Co. (2023). In FCA US LLC v. MacLean-Fogg Component Solutions LLC, Judge Judith Levy of the Eastern District of Michigan ruled FCA’s use of the phrase “approximately 65%-100% of FCA’s requirements” fails to satisfy the quantity term requirement under the Michigan UCC. As a result, the court dismissed FCA’s breach of contract claims because FCA failed to establish its form contract is an enforceable requirements contract.
At the heart of the case was whether the FCA’s purchase orders—providing for “approximately 65%-100%” of FCA’s requirements—created a binding obligation for MacLean-Fogg to continue supplying parts at the previously agreed price. FCA alleged that MacLean-Fogg breached by halting shipments and demanding a retroactive price increase. But the court found that FCA’s language lacks the “clear and precise” quantity term required to support a valid requirements contract under Michigan law.
Relying on the Sixth Circuit’s recent decision in Higuchi Int’l Corp. v. Autoliv ASP, Inc. (2024), the court emphasized that quantity terms must be unambiguous on their face and cannot be clarified through parol evidence. The court rejected attempts by FCA to rely on past practices and other extrinsic evidence to fill in the gaps.
This is a good development for suppliers, especially those facing aggressive pricing tactics or unilateral demands to extend programs from OEMs who have not committed to purchase 100% of their requirements (or some other set percentage) from a supplier. The ruling underscores that vague or qualified commitments—such as ranges or “approximate” percentages—do not obligate suppliers to continue deliveries absent a clearly enforceable agreement.
While this decision is favorable to suppliers, they should proceed carefully in relying upon it to guide their contract negotiations with OEMs. First, this decision, while favorable, is not binding on other courts and does not settle the issue statewide. Second, a key appellate ruling on this issue is still pending in FCA US LLC v. Kamax Inc., which is now fully briefed before the Michigan Court of Appeals. In Kamax, the Oakland County Circuit Court held the same “approximately 65%-100%” language did satisfy the quantity requirement. In fact, Judge Levy recognized that her ruling in the MacLean-Fogg matter may be in conflict with the Oakland County Circuit Court’s ruling in Kamax but indicated that the Court is not “at liberty to depart from Higuchi,” the most recent Sixth Circuit decision on requirements contracts. Judge Levy found the reference to “approximately” 65-100% in FCA’s purchase orders particularly troubling, as that phrase does not “clearly and precisely” establish a quantity term, as Higuchi required. The forthcoming ruling of the Michigan Court of Appeals in the Kamax matter is expected later this year, and its outcome will create further clarity on this issue.
But for now, suppliers —particularly those litigating in federal court— should take heart in the MacLean-Fogg decision. It affirms courts will continue to scrutinize quantity terms closely and, under the guidance provide in the Airboss and Higuchi decisions, will not stretch vague or hedged language that imposes no obligation on the buyer into binding obligations for the seller—especially where significant pricing disputes are at stake.
Australia: APRA Proposes Reforms to Strengthen Governance Standards
The Australian Prudential Regulation Authority (APRA) has proposed reforms to strengthen core prudential standards and guidance on governance, currently set out in SPS 510 Governance, SPS 520 Fit and Proper, and SPS 521 Conflicts of Interest.
The proposals come after APRA chairman, John Lonsdale, witnessed “entities treating compliance with some requirements, as a box-ticking exercise”. Lonsdale also stated that “international best practice on governance has progressed, and we want to ensure that our framework reflects that evolution”.
The proposed reforms include:
Introducing a 10-year tenure limit for non-executive directors at regulated entities;
Extending the current RSE licensee conflict management requirements to banks and insurers;
Strengthening board independence, particularly for entities which are part of a larger group structure;
Clarifying expectations around the roles of boards, the chair and senior management;
Lifting requirements for boards to ensure they have appropriate skills and capabilities to deliver an entity’s strategy;
Raising minimum standards for the fitness and propriety of responsible persons of regulated entities;
Requiring significant financial institutions to have separate audit and risk committees; and
Engaging a third-party performance assessment of the board, committees and individual directors at least every three years.
What’s Next?
APRA has confirmed the changes would be applied proportionately, with less complex institutions facing lower compliance expectations. APRA also aims to lift standards without adding undue cost burden, with Lonsdale stating that “most proposals will involve little change for entities with mature governance practices”.
Over the next three months, the industry will have the opportunity to comment on APRA’s proposals, with submissions required by 6 June 2025. The regulator intends to release updated prudential standards and guidance for formal consultation in early 2026, with the revised framework scheduled to come into force in 2028.
While noting that APRA’s Discussion Paper discloses APRA’s preliminary views, we suggest Australian banks, insurers, and superannuation trustees should review their current governance framework in anticipation of the direction of the regulator’s future expectations.
Privacy Tip #436 – Microsoft Warns of Crypto Wallet Scanning Malware StilachiRAT
A Microsoft blog post reported that incident response researchers uncovered a remote access trojan in November 2024 (dubbed StilachiRAT) that “demonstrates sophisticated techniques to evade detection, persist in the target environment, and exfiltrate sensitive data.”
According to Microsoft, the StilachiRAT threat actors use different methods to steal information from the victim, including credentials stored in the browser, scans for digital wallet information, system information, and data stored on the clipboard.
Once inside the victim’s system, StilachiRAT scans the configuration data of 20 cryptocurrency wallet extensions for the Google Chrome browser, extracting and decrypting saved credentials from Google Chrome. The 20 cryptocurrency wallet extensions targeted are listed in the blog article. The article also lists recommended mitigations.
One takeaway from the article is to not store critical credentials in Chrome, a common and simple security measure. If a threat actor gains access to these credentials, multiple applications could be at risk. You may wish to consider which passwords you are saving in Chrome and refrain from saving the credentials for any banking or cryptocurrency platforms, as well as for access to your employer’s system. These are credentials worth memorizing.
Reminder: New York Cybersecurity Reporting Deadline April 15, 2025; New Regulations Effective May 1, 2025
Covered entities regulated by the New York State Department of Financial Services (NYDFS) must submit cybersecurity compliance forms by April 15, 2025. New sets of requirements for system monitoring and access privileges, enacted as part of 2023 amendments to the NYDFS cybersecurity regulations, will take effect on May 1 and November 1, 2025.
Quick Hits
Covered entities in New York must submit their annual cybersecurity compliance forms to the NYDFS by April 15, 2025, either certifying material compliance or acknowledging material noncompliance.
Starting May 1, 2025, new requirements will be implemented, including enhanced access management protocols, vulnerability management through automated scans, and improved monitoring measures to protect against cybersecurity threats.
In November 2023, NYDFS amended its comprehensive cybersecurity regulations with the changes set to take effect on a rolling basis over the following two years. Several amendments went into effect on November 1, 2024, and several more are set to take effect on May 1 and November 1, 2025.
The regulations apply to NYDFS-regulated entities, which include financial institutions, insurance companies, insurance agents and brokers, banks, trusts, mortgage banks, mortgage brokers and lenders, money transmitters, and check cashers. Certain large companies regulated by NYDFS (Class A companies) have additional requirements, while certain small businesses are exempt from specific regulations.
April 15 Annual Compliance Reporting Deadline
The NYDFS cybersecurity regulations require financial services companies and other covered entities to file annual notices of compliance to the superintendent of NYDFS by April 15, 2025, covering the prior calendar year. Under the amended regulations, covered entities must submit either a certification of material compliance with the cybersecurity requirements or an acknowledgment of noncompliance. In the acknowledgment of noncompliance, covered entities must (1) acknowledge the entity did not materially comply, (2) identify all sections of the regulations with which the entity has not complied, and (3) provide a “remediation timeline or confirmation that remediation has been completed.”
Covered entities must submit the certification or acknowledgment electronically using the NYDFS portal and the form on the NYDFS website.
New Requirements Effective May 1, 2025
Several requirements of the amended NYDFS cybersecurity regulations take effect on May 1, 2025, for nonexempt covered entities. Class A companies are subject to additional requirements that are not addressed below.
Access Privileges and Management
The amended regulations will require covered entities to limit user access privileges based on job function, limit the number and use of privileged accounts, periodically (but at least annually) review user access privileges, disable or securely configure protocols that permit remote control of devices, and “promptly” terminate accounts after a user’s departure. The regulations further require covered entities to implement a written password policy that meets industry standards.
Vulnerability Management
In addition to penetration testing, the amended regulations will require covered entities to perform “automated scans of information systems” and manual review of systems not covered by such scans to determine potential vulnerabilities.
System Monitoring
The amended regulations will require covered entities to implement “risk-based controls designed to protect against malicious code.” This includes monitoring and filtering web traffic and email to block malicious code.
New Requirements Effective November 1, 2025
The final batch of requirements under the amended cybersecurity regulations take effect on November 1, 2025. Covered entities will be required to implement multifactor authentication for all individuals to access the entity’s information systems. If the entity has a chief information security officer (CISO), the CISO “may approve in writing the use of reasonably equivalent or more secure compensating controls,” which must be reviewed at least annually.
Additionally, covered entities will be required to “implement written policies and procedures designed to produce and maintain a complete, accurate and documented asset inventory of the covered entity’s information systems.” The policies will be required to include methods to track information for each asset and “the frequency required to update and validate” the entity’s asset inventory.
Next Steps
Covered entities may want to take steps to comply with the April 15 compliance reporting deadline and the next round of cybersecurity requirements, which will take effect on May 1, 2025. Additional requirements for certain written policies and procedures and the implementation of multifactor authentication are set to take effect on November 1, 2025.
Boosting Boston’s Housing: City & State Partner to Overcome Market Challenges
According to recent news coverage, about 30,000 housing units proposed for Boston are approved by the Boston Planning Department (BPD) yet unable to break ground due to market conditions. In response, the Wu administration, in partnership with the Commonwealth of Massachusetts, is advancing the following strategies to facilitate construction commencement: revising affordable housing agreements, providing direct public funding through a newly launched fund, and granting tax abatements, tax credits, and grants for office-to-residential conversions.
Revised Affordability
The Inclusionary Development Policy (IDP) originally created by a mayoral executive order in 2000, and now codified in Article 79 of the Boston Zoning Code, requires developers of market-rate housing projects to include a prescribed number of income-restricted housing units at prescribed affordability levels. The BPD prefers on-site IDP units, although compliance may be achieved by creating off-site units near the project or by paying into an IDP fund in an amount based on the project’s location in a high, medium, or low property value zone.
For stalled projects, the BPD and the Mayor’s Office of Housing (MOH) have been willing in certain circumstances to revise a project’s IDP commitments given the difficult financial environment and the urgency to build more housing. This strategy is not part of a formal program and does not follow rigid procedural rules.
Examples of recent proposals include:
A payment in lieu of half of the approved on-site IDP units based on the applicable property value zone and conditioned on building permit issuance within a specified timeframe, with the contributed amount being directed to an identified nearby affordable housing project; and
A commitment to deliver 4% instead of 18% on-site IDP units in an initial building, and to construct a separate project in close proximity with larger, more deeply affordable units, funded with proceeds from the sale or refinancing of the initial building.
In each case, affordable housing agreements with MOH were amended with a limited administrative process.
Momentum and Accelerator Funds
MassHousing is administering a newly created Momentum Fund, supplemented for Boston projects by the City of Boston’s Accelerator Fund, providing additional equity alongside private equity to improve the economics of stalled projects. The resulting noncontrolling investment would:
Comprise a quarter to half of the total ownership interests;
Be committed before construction financing closes;
Be funded when permanent financing closes; and
Be coterminous with the project’s senior loan up to 15 years.
The Momentum Fund is capitalized with $50 million as part of the Affordable Homes Act signed by Governor Healey in August 2024, and the Accelerator Fund is capitalized with $110 million proposed by Mayor Wu and approved by the Boston City Council in January 2025. MassHousing will review applications and handle underwriting, and will consult with the BPD on applications for projects in Boston.
To receive funds, projects must create at least 50 net new housing units, at least 20% of them income restricted at 80% AMI, and must demonstrate that they are energy code compliant and can commence construction within 6 months of the commitment of funds.
Resources for Office to Residential Conversions
Boston’s Downtown Residential Conversion Incentive Program supports downtown office-to-residential conversions in light of the post-pandemic decline in office utilization paired with businesses vacating Class B and C properties in favor of Class A properties. Eligible proposed conversions must be IDP and energy code compliant, and must commit to commence construction by December 31, 2026.
Developers under this program can obtain tax abatements of up to 75% at the standard residential tax rate for up to 29 years as memorialized in a Payment in Lieu of Taxes (PILOT) agreement, along with fast-tracked project impact review and reduced mitigation and public benefit commitments.
By the end of last year, 14 submitted applications to the Conversion Program representing 690 housing units resulted in 4 project approvals, with submissions and approvals continuing this year based on an extension of the program through December 2025.
Separately, the Commonwealth’s Affordable Housing Trust Fund has allocated a total of $15 million for grants to conversion projects of at least 70,000 square feet. This fund can provide up to $215,000 per affordable unit and up to a total of $4 million per project. The City of Boston will apply to the state for such funding on behalf of qualifying project applicants. As of early March 2025, about $7.5 million of the original pool is still available. In addition, the Affordable Homes Act establishes a tax credit program for qualified conversion projects covering up to 10% of total development cost to be administered by the Executive Office of Housing and Livable Communities (“EOHLC”). EOHLC is currently developing guidelines for implementation and is seeking input from developers and other interested parties.
Litigation Risk for Mortgage Lenders with a Less Active CFPB
With the recent developments at the Consumer Financial Protection Bureau (CFPB), many mortgage lenders have been left wondering about the extent to which the CFPB will enforce federal laws governing the mortgage lending industry. Many industry participants expect a significant reduction in CFPB enforcement activity for the foreseeable future. While the states could ramp up their enforcement efforts to account for a less active CFPB, mortgage lenders should also recognize that borrowers – and by extension the plaintiff’s bar – could step in to any gap left by the CFPB and exercise their private rights of action under various federal and state laws governing mortgage lending.
While the torts adage of “anyone can sue anyone over anything” still rings true, we have identified several prominent mortgage lending laws below that provide borrowers a private right of action and pose litigation risk for mortgage lenders. Mortgage lenders should continue to ensure compliance with these laws for both short-term and long-term mitigation of potential liability. Failure to mitigate these risks today could lead to deficiencies in compliance that are compounded across multiple loans over time and create greater lender exposure to potential borrower litigation.
Federal Law Private Rights of Action
Truth in Lending Act (TILA)
TILA imposes various requirements on mortgage lenders, including disclosure-related requirements for both open-end and closed-end loans. Under 15 U.S.C.A. § 1640(a), a borrower is provided a private right of action for a creditor’s violation of TILA that generally must be brought within one year of the violation. A creditor is liable for actual damages sustained as a result of its TILA violation, attorneys’ fees, and statutory damages depending on the circumstances of the transaction, such as damages between $400 and $4,000 for closed-end mortgage transactions. Some jurisdictions allow for the application of vicarious liability on creditors for the acts of its servicers under TILA(see e.g., Montano v. Wells Fargo Bank N.A., 2012 WL 5233653 (S.D. Fla. Oct. 23, 2012)). TILA also provides for borrower class actions and limits a lender’s liability in those cases to the lesser of $1 million or 1% of the lender’s net worth.
Home Ownership and Equity Protection Act (HOEPA)
HOEPA governs abusive lending practices related to high-cost mortgages. Although HOEPA is technically part of TILA, federal law imposes additional lender liability for HOEPA violations. In addition to the lender liability for TILA outlined above, a lender that violates HOEPA is required to refund all finance charges and fees that were assessed in connection with the particular loan pursuant to 15 U.S.C.A. § 1640(a)(4). Moreover, violating HOEPA’s disclosure requirements (creditor’s must “clearly and conspicuously disclose” the borrower’s rights of rescission) may trigger an extended right of rescission, which expires three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first (15 U.S.C. § 1635(f)).
HOEPA is also important to consider as industry changes related to interest rates may impact the prevalence of loans that fall under HOEPA. For some mortgage lenders, this new interest rate environment may lead to the lender making an increased number of high-cost mortgage loans.
Homeowners Protection Act (HPA) – PMI Cancellation Act
While seen more prominently in the servicing context, HPA outlines requirements regarding borrower paid private mortgage insurance. More importantly in the originations context, HPA requires the lender provide certain disclosures to borrowers at consummation regarding rights to cancel PMI and the necessary procedures for doing so (12 U.S.C. § 4903(a), (b)). HPA creates a private right of action for violations, and the borrower may recover actual and statutory damages, attorneys’ fees, and costs (with class action defendants liable for costs and attorneys’ fees) (12 U.S.C. § 4907(a)). The borrower must bring an HPA claim within two years of the discovery of the violation.
Equal Credit Opportunity Act (ECOA)
ECOA creates various requirements for lenders related to the extension of credit, including obligations in evaluating a borrower’s credit application and an obligation to provide specific borrower notifications. Under 15 U.S.C.A. § 1691e, a lender is liable for any actual damages, attorneys’ fees, or punitive damages resulting from a violation of ECOA. The punitive damages are capped at $10,000 for an individual borrower, or in the case of class action, punitive damages are capped at the lesser of $500,000 or 1% of the lender’s net worth. Pursuant to 12 CFR § 1002.16(b)(1), a borrower’s claim for an ECOA violation must be brought within five years of the violation or within one year of an administrative enforcement action that is brought within five years of the violation.
Real Estate Settlement Procedures Act (RESPA)
Pursuant to 12 U.S.C. § 2607(d), RESPA provides a private right of action and treble damages for a number of violations, including Section 8 prohibitions on kickbacks and unearned fees. Similarly, borrowers may bring a private action for violations of RESPA Section 9’s prohibition on required usage of title insurance providers under 12 U.S.C. § 2614. Such claims must be brought within one year of the alleged violation. Moreover, 12 U.S.C. § 2605(f) establishes a private right of action for borrowers where the lender fails to provide a notice disclosing whether the loan may be assigned, sold, or transferred. Costs, attorneys’ fees, actual damages and statutory damages are all recoverable (the latter when a pattern or practice of noncompliance is established). Claims under this provision must be brought within three years.
State Law Private Rights of Action
While federal law tends to be at the forefront for most mortgage lenders, all states also have laws that can impact mortgage lenders, including laws that provide borrowers a private right of action against lenders. And at times, these state laws can present an easier route for borrower recovery compared to federal law. For example, federal law prohibits unfair, deceptive, or abusive acts or practices (UDAAP) in the mortgage lending context. This prohibition is indeterminate to the point that it could be applied in a wide variety of factual scenarios. Many states have a comparable prohibition, although the state version of UDAAP typically only prohibits unfair or deceptive acts or practices (UDAP). And while there is some variation in whether state UDAP laws apply to mortgage lenders, almost all state UDAP laws provide borrowers, individually or as a class, a private right of action, unlike the federal UDAAP law.
Many states also regulate a lender’s ability to make high-cost mortgage loans. As indicated above, there are various legal requirements, such as conducting an ability to repay analysis, a mortgage lender must typically satisfy before or in connection with making a high-cost mortgage loan. Many states provide borrowers a private right of action for a lender’s violation of these laws, which can result in anything from lenders refunding excess interest to lenders having to pay actual and statutory damages.
The federal and state laws discussed above are only a portion of the laws governing mortgage lending that grant borrowers a private right of action. Mortgage lenders should keep this in mind even if the CFPB takes a backseat in enforcement, because at the end of the day, those laws are still valid and enforceable in a court of law.
Listen to this post
Private Market Talks: Driving Growth with Corbin Capital Partners’ Tracy Stuart [Podcast]
Over the past 20 years, as Managing Partner and CEO, Tracy Stuart has transformed Corbin Capital Partners from a few hundred million to over $9 billion in AUM. In this episode, we explore what has driven Corbin’s success and how its disciplined, research-focused strategy and client-centric philosophy will sustain it into the future. Tracy also shares what she has learned about leadership and offers advice to young professionals looking to make their mark in the industry.
With an Eye Toward Modernization, FINRA Requests Comment on Its Regulatory Requirements for Members and Associated Persons
On March 12, 2025, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 25-04, seeking public comment on its initiative to modernize regulatory requirements for Members and Associated Persons. The initiative aims to broadly review FINRA’s rules in light of evolving markets, technologies, and business practices.
The request for comment is not limited to any particular topic or Rule; however, FINRA itself has started the conversation by identifying the following two topics – Capital Formation, and the Modern Workplace. The notice outlines six key questions for stakeholders to consider:
“1.
What specific FINRA rules should be a focus for modernization based on their economic costs and benefits; changes in markets, products, services, or technology; or otherwise? What groups of FINRA requirements should be a focus? Please include FINRA rules that may be mandated or derived from a statutory or other non-FINRA regulatory requirement applicable to FINRA or its members.
2.
What areas of FINRA interpretations or guidance regarding existing rules should be a focus for modernization?
3.
What changes to FINRA’s rules or other requirements applicable to FINRA members would facilitate innovation and the development and deployment of new technologies and services that enable them to better serve markets and investors?
4.
Are there gaps, risks or other challenges created by changes in markets, products, services or technology where additional guidance or standards would better enable member firms to serve investors, consistent with investor protection and market integrity?
5.
Where does FINRA’s oversight of its member firms interact with other non-FINRA regulatory requirements in a manner that should be a focus for modernization, based on unnecessary or duplicative burdens, insufficiently tailored requirements, member firm or investor confusion, or otherwise? For example, what differences between FINRA’s requirements for broker-dealers and the requirements that apply for investment advisers engaging in similar activities should be a focus for modernization?
6.
What areas of reporting or data production related to existing rules should be a focus for modernization?”
This initiative presents an opportunity for Members and their Associated Persons to evaluate how existing FINRA rules and regulatory requirements align with their current and future business models. It also invites firms to highlight areas where guidance is unclear or insufficient, creating compliance challenges.
Comments must be received by May 12, 2025, and will be made available to the public.
KSA Introduces New Ultimate Beneficial Ownership Rules
Go-To Guide:
The Kingdom of Saudi Arabia’s new UBO Rules, effective 3 April 2025, require most companies to disclose their UBOs to the Ministry of Commerce.
Companies must register UBOs during incorporation, maintain updated UBO records, and notify authorities of changes within 15 days, with penalties up to SAR 500,000 for non-compliance.
The rules exclude publicly listed companies, state-owned entities, and those under liquidation.
The Kingdom of Saudi Arabia minister of commerce recently issued the Rules for the Ultimate Beneficial Owner (UBO Rules), which aim to enhance corporate transparency and align with international standards by requiring companies to disclose their ultimate beneficial owners (UBOs) to the Ministry of Commerce (the Ministry). The UBO Rules apply to all companies registered in the Kingdom, except publicly listed joint-stock companies, and will take effect 3 April 2025.
These rules are part of Saudi Arabia’s commitment to international best practices, including compliance with Financial Action Task Force (FATF) recommendations, and are designed to combat financial crimes, enhance anti-money laundering (AML) enforcement, and improve corporate accountability.
Previous Regulatory Framework
Previously, Saudi Arabia’s regulatory framework required companies to maintain ownership records, but there was no centralized obligation for private companies to disclose UBOs. UBO identification was primarily enforced in financial and regulated sectors under AML and Know Your Customer requirements. However, non-financial businesses lacked a structured UBO disclosure process, making it difficult to trace ownership in complex corporate structures or offshore entities.
Despite this, it was previously possible to obtain some information about the direct owners of companies through the Aamaly portal, where companies’ constitutional documents were published as required under the Saudi Companies Law. Since the constitutional documents typically contained details about shareholders and ownership percentages, anyone could access these documents to determine the direct legal owners of a company. However, this method had limitations, as it only reflected registered direct shareholders rather than the actual UBOs who might control the company through indirect ownership, nominee structures, or layered corporate entities. If ownership was structured through trusts, offshore holdings, or other intermediaries, the true UBOs could remain undisclosed, making it difficult to trace ultimate ownership and control.
Key Changes the UBO Rules Introduce
With the introduction of the new UBO Rules, all companies (except publicly listed joint-stock companies) must now formally register and maintain a record of their UBOs with the Ministry. This expands regulatory oversight beyond financial institutions to all corporate entities, ensuring greater transparency, accountability, and alignment with international standards such as Financial Action Task Force recommendations. Companies will now be required to submit UBO details during incorporation, update them annually, and notify authorities of any changes within 15 days.
UBO Criteria
A UBO is defined as any natural person who meets at least one of the following criteria:
Owns at least 25% of the company’s share capital, directly or indirectly.
Controls at least 25% of the company’s voting rights, directly or indirectly.
Has the power to appoint or remove the majority of the board, manager, or chairman.
Has the ability to influence the company’s operations or decisions.
Represents a legal entity that meets any of the above conditions.
If no individual qualifies under these criteria, the company’s manager, board member, or chairman will be deemed as the UBO.
Key Obligations
Disclosure at Incorporation: Newly formed companies must disclose UBO information as part of the registration process.
Annual Filings: Existing companies must confirm UBO details annually within 30 days before their registration anniversary.
UBO Register & Updates: Companies must maintain a UBO register containing details such as the UBO’s name, national ID or passport details, residential address, contract information, and the criteria used to determine their UBO status. The register must be maintained in the Kingdom.
Updates to UBO Information: Companies are required to notify the Ministry of any changes to the UBO details within 15 days of such change.
Regulatory Requests: The Ministry has the discretion to request UBO related information and supporting documents.
Exemptions
The following entities are exempt from the UBO disclosure requirements:
Companies the state wholly owns or any state-owned authorities, whether directly or indirectly.
Companies undergoing liquidation under the bankruptcy law.
Companies specifically exempted by decision of the minister.
If a company is exempt, it is required to submit proof of its exemption to the Ministry.
Penalties
Failure to comply with the UBO Rules may result in penalties, including fines of up to SAR 500,000 (approx. USD 133,000). Companies operating in the Kingdom should consider taking proactive measures to comply with the UBO Rules.
SEC No Action Letter Guidance Streamlines Rule 506(c) Accredited Investor Verification
On March 12, the US Securities and Exchange Commission (SEC), via a No Action Letter, issued interpretive guidance clarifying what constitutes “reasonable steps” issuers can take to verify purchasers’ accredited investor status, as required under Rule 506(c) of Regulation D under the Securities Act of 1933, as amended (Securities Act) (Rule 506(c)).
The Letter provides an alternative path for compliance with Rule 506(c). This new guidance streamlines the verification process by allowing a high minimum investment amount to serve as a relevant factor in confirming accredited investor status.
In the No Action Letter, the SEC staff affirmed that an issuer may utilize the size of certain purchasers minimum investment amounts (including uncalled capital commitments), along with certain written representations by the purchaser, to verify a purchaser’s accredited investor status in an offering conducted under Rule 506(c) of Regulation D. Issuers may require at least a $200,000 investment for natural persons and at least $1 million for legal entities.
The written representations from the purchaser would include (1) accreditation status and (2) that the investment funds are not borrowed or financed by a third party specifically for making the investment.
Implications for Market Participants and Capital Raising
The new guidance alleviates uncertainty for issuers seeking to comply with Rule 506(c) when an accredited investor invests an amount equal to or in excess of the minimum investment amounts specified in the No Action Letter. Issuers may now verify accredited investor status based on minimum investment amounts, without imposing the invasive or tedious verification requirements on investors.
The No Action Letter provides a clearer path to completing an exempt offering using general solicitations. For example, investment funds may now have the opportunity to publicly launch at the outset to raise a new private fund and broadly advertise it through social media, online, in published interviews, etc. The new guidance may also encourage an influx of accredited investors that are willing to meet the minimum investment requirements and who found the previous verification requirements taxing or invasive.
An Overview of Rule 506(c) Accredited Investor Requirements
Rule 506(c) permits the use of general solicitation and general advertising in connection with unregistered offers and sales of securities where (1) the purchasers are accredited investors, (2) the issuer has taken “reasonable steps” to verify the accredited investor status of the purchasers and (3) the terms of Securities Act Rules 501, 502(a), and 502(d) are observed.
Rule 506(c)(2)(ii) also lays out a non-exhaustive list of steps an issuer can take to verify the accredited investor status of a purchaser. Some of these methods include:
Reviewing documentation, such as tax returns, bank statements, or brokerage statements, to verify the investor’s income or net worth.
Obtaining written confirmation from a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney, or a certified public accountant (CPA) that the investor meets the accredited investor standards.
Using a third-party verification service to verify the investor’s accredited investor status.
Asking the investor to provide a signed statement or certification confirming that they are an accredited investor, so long as the offeror has used another method of verification to determine the purchaser’s accredited investor status within the last five years.
The verification processes above can be tedious, costly, and invasive for investors who do not wish to disclose certain sensitive information. However, in a previous Securities Act Release, the SEC indicated that rather than relying solely on the non-mandatory, non-exclusive examples provided, “if the offering’s terms necessitate a high minimum investment amount and a purchaser can fulfill those terms, the probability of that purchaser meeting the accredited investor criteria may be sufficiently high. Consequently, unless there are any indications that the purchaser is not an accredited investor, it might be reasonable for the issuer to reduce the steps required for verification or, in some instances, forego additional verification steps altogether, aside from confirming that the purchaser’s cash investment is not financed by a third party.”
The SEC also acknowledged that whether an issuer has taken reasonable steps to verify that a purchaser is an accredited investor is an objective determination by the issuer (or those acting on its behalf) and dependent on the particular facts and circumstances of each purchaser and transaction. In the No Action Letter, the SEC confirmed that an issuer could reasonably conclude that it has taken reasonable steps to verify that a purchaser of securities sold in an offering under Rule 506(c) of Regulation D is an accredited investor if the investment involves minimum investment amounts of at least $200,000 for natural persons and at least $1 million for legal entities, and the accredited investor makes written representations representations (1) of accreditation status and (2) that the investment funds are not borrowed or financed by a third party specifically for making the investment. In addition, the issuer must have no actual knowledge of any facts that indicate that any purchaser is not an accredited investor; or that the minimum investment amount of any purchaser is financed in whole or in part by any third-party for the specific purpose of making the particular investment in the issuer.
The No Action Letter reflects the views of SEC staff and does not have legal force or effect or alter or amend applicable law, and as a consequence, issuers and investors must remain aware of and compliant with other requirements under Rule 506(c).
Navigating Divorce: Key Evidence Strategies for Family Law Cases
Getting Your Story to a Judge
Divorce and family law proceedings can be emotionally charged and legally complex, particularly when disputes arise over issues such as property division, child custody, spousal support, or allegations of misconduct. Litigants have been living their story for years, but a judge knows nothing about the situation and will be hearing two sides for the first time.
Evidence plays a crucial role in influencing the court’s decisions, and understanding the potential challenges surrounding evidence is key to effectively navigating these cases. Below are some of the primary evidence-related issues that arise in divorce cases, along with strategies to address them so that your judge can hear the important facts of your story.
Admissibility of Evidence
Courts typically have strict rules about what evidence is admissible. For instance, hearsay—statements made outside of court by people who are not parties to the divorce—is generally inadmissible unless it falls under an exception. In other words, you cannot say, “my best friend saw my spouse gambling large sums of money at the casino.” The friend who actually observed the spouse must testify as to what was seen. Documents must be authenticated so that a judge is satisfied that the information it contains is genuine.
Similarly, evidence must be relevant to the issues at hand. For example, information about a spouse’s personal habits may not be admissible unless it directly impacts child custody or marital finances. So, if the spouse has been engaged in an extramarital affair, this may not be relevant to the issue of whether the parent is capable of caring for a child.
Tips for Avoiding Admissibility Issues:
Ensure all evidence is directly related to the claims or defenses in your case. For every statement, position, and information you want to provide to support your position, make sure that your evidence is accurate and can be verified. Provide your attorney with the information as soon as possible so that there is time to get what may be needed.
For instance, if a spouse has taken large sums of money from an account, the attorney will need time to get certified copies of bank statements by way of subpoena. This can take time, particularly if the bank is out of state.
Work with your attorney to verify that the evidence complies with local rules of Evidence.
Digital Evidence
In today’s digital age, emails, text messages, social media posts, and even GPS data are commonly presented as evidence. However, authenticity and privacy concerns can complicate their use. Courts may require proof that digital evidence has not been tampered with or taken out of context.
There is something called “The Completeness Doctrine” which means that a single text may not suffice, and the entire thread is necessary. Moreover, a screen shot may not be enough, and an attorney can evaluate if there are other steps that should be taken to get the evidence to the judge. This often includes video evidence such as videos taken with a smart phone, or police body camera footage.
Tips for Avoiding Digital Evidence Issues that can Prevent Your Proofs from Being Admitted
Preserve original digital files with metadata intact.
Avoid accessing or presenting information obtained through illegal means, such as hacking into a spouse’s email account.
Be cautious about your own online activity during divorce proceedings.
Spoliation of Evidence
Spoliation refers to the destruction or alteration of evidence that is relevant to a legal case. In divorce cases, this might involve deleting incriminating text messages or destroying financial records. Courts take spoliation seriously and may impose sanctions, including drawing adverse inferences or awarding legal fees to the other party.
Tips for Avoiding Spoilation of Evidence Issues:
Avoid deleting, altering, or destroying any potential evidence, even if you believe it may harm your case. Give the evidence to your attorney and let them help you determine the best way to address the issue. The other side likely has the same information, and if relevant, will ask that it be considered.
If you suspect your spouse is engaging in spoliation, notify your attorney immediately and consider seeking a court order to preserve evidence.
Financial Evidence
Financial disputes are a central issue in many divorces, and accurate financial evidence is critical. Hidden assets, underreported income, or discrepancies in financial disclosures can lead to significant legal challenges. Common forms of financial evidence include tax returns, bank statements, credit card records, and property appraisals.
Tips for Avoiding Issues with Financial Evidence
Be thorough and honest in disclosing your financial situation.
When possible, obtain statements and records directly from financial institutions. They will most likely be accompanied by a certification of the accuracy and authenticity of the records, which is often admissible.
If you do not have tax returns, the IRS can provide a transcript of the entries on the returns, which can be helpful.
Use forensic accountants or financial experts to uncover hidden assets or evaluate complex financial arrangements when necessary.
Expert Testimony
In cases involving contested child custody, property valuation, or allegations of abuse, expert testimony can be crucial. Psychologists, appraisers, and other professionals can provide opinions that carry significant weight in court. However, opposing parties may challenge the qualifications or conclusions of your experts.
Tips for Avoiding Issues with Expert Testimony
Choose experts with strong credentials and experience in family law cases.
Ensure your expert’s testimony is backed by solid evidence and methodology.
Privileged Communications
Certain communications are protected by legal privilege and cannot be used as evidence. Examples include conversations with your attorney or therapist. However, privilege can be waived if confidentiality is breached, such as by discussing the communication in public or sharing it with a third party.
Tips for Avoiding Issues with Privileged Communications
Keep privileged communications confidential. It is tempting to speak to your closest confidants about your case, but this is dangerous if it is something that you do not want disclosed.
Avoid discussing legal strategies or sensitive topics in public or online forums. This is an excellent way to anger a judge.
Bias and Credibility Issues
The credibility of witnesses and evidence can significantly impact a case. A history of dishonesty or bias may lead the court to question the reliability of a person’s testimony or evidence.
Tips for Avoiding Bias and Credibility Issues
Present your case with honesty and transparency – the good, the bad, and the ugly. It will likely come out anyway, so make sure it is with your narrative.
Avoid exaggerating claims or presenting questionable evidence, as this can undermine your credibility.
Make sure that no witness who is testifying on your behalf has skeletons in their closet that could have a negative impact on your case.
Open and honest communication with your lawyer is key to being able to give the judge your story in the way you want it told.