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Financial Services Law Insights and Observations


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  • SEC charges crypto company with fraud and anti-registration violations


    On November 1, the SEC charged a crypto company and its executive team with fraud through the unregistered sale of crypto asset securities. According to the complaint, the defendants represented in marketing materials, website, social media posts, and other communications with the public that a certain percentage of funds for each transaction would be retained and inaccessible by any party for a period of four years as a safety mechanism against asset misappropriation. Instead, the complaint alleges, the defendants accessed the funds and misappropriated tens of millions of dollars for various purposes, including manipulation of the market for the crypto asset, business expenses, investments in unrelated companies, and personal use. The complaint charges defendants with violating the registration and anti-fraud provisions of the Securities Act of 1933 and the anti-fraud provisions of the Securities Exchange Act of 1934.

    Securities Federal Issues Venture Capital Risk Management Digital Assets

  • OCC releases commercial lending bulletin on venture loans

    On November 1, the OCC issued a bulletin on “commercial loans to early-, expansion-, and late-stage companies,” which it referred to as “venture loans.” The OCC explained that although “venture lending supports new business formation and can improve access to capital for growth companies… new business ventures have a high probability of failure.” Accordingly, the bulletin, which “applies to all OCC-regulated banks, including community banks, that engage in or are considering engaging in venture lending,” provides guidance on the agency’s expectations for risk management and risk-rating of venture loans. 

    The bulletin expressly exempts “[f]ully monitored and controlled asset-based loans (ABL) to early-, expansion-, and late-stage companies,” from the guidance.  In addition, the OCC does not categorize the following types of credit as venture loans:

    • Loans to businesses that primarily rely on internal cash flow, rather than equity investments, for their growth;
    • Loans made under government-backed lending support programs where federal, state, or local guarantees sufficiently reduce credit risk (e.g., SBA guarantees); and
    • Loans made under special purpose credit programs (SPCP).

    Bank Regulatory OCC Commercial Lending Venture Capital Risk Management

  • OCC reminds banks of venture capital prohibitions

    Agency Rule-Making & Guidance

    On November 23, the OCC sent banks a reminder that they are generally prohibited from making most equity investments in venture capital funds. The bulletin warned that simply because an investment in a fund qualifies for the venture capital fund exclusion under the Volcker Rule, it does not mean the fund is a permissible investment for a national bank, federal savings association, or federal branch and agency of a foreign bank. Prior to investing in a venture capital fund, banks must make a determination as to whether the investment is permissible and appropriate for the bank. The OCC reminded banks that engaging in impermissible and inappropriate investments may expose a bank and its institution-affiliated parties to enforcement actions and civil money penalties. Additionally, national bank directors may be held personally liable for losses attributed to impermissible investments. The OCC noted, however, that equity investments in venture capital funds may be allowed provided they are public welfare investments or investments in small business investment companies.

    Agency Rule-Making & Guidance OCC Federal Issues Venture Capital Volcker Rule Bank Regulatory Of Interest to Non-US Persons

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