CFPB Invokes Dormant Authority to Examine Nonbank Companies Posing Risks to Consumers

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) announced that it is invoking a largely unused legal provision to examine nonbank financial companies that pose risks to consumers. The CFPB believes that utilizing this dormant authority will help protect consumers and level the playing field between banks and nonbanks. The CFPB is also seeking public comments on a procedural rule to make this process more transparent.

“Given the rapid growth of consumer offerings by nonbanks, the CFPB is now utilizing a dormant authority to hold nonbanks to the same standards that banks are held to,” said CFPB Director Rohit Chopra. “This authority gives us critical agility to move as quickly as the market, allowing us to conduct examinations of financial companies posing risks to consumers and stop harm before it spreads.”

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the CFPB has authority to use traditional law enforcement to stop companies from engaging in conduct that pose risk to consumers; this can involve adversarial litigation. However, the law also gives the CFPB authority to conduct supervisory examinations to review the books and records of regulated entities. CFPB examiners typically provide a report to entities with problems that need to be addressed, and responsible institutions typically take prompt corrective action.

Nonbank Supervision

For decades before the Dodd-Frank Act, only banks and credit unions were subject to federal supervision. But after the 2008 financial crisis in which nonbank companies played a pivotal role, Congress tasked the CFPB with supervising certain nonbanks, in addition to large depository institutions with more than $10 billion in assets, and their service providers. Nonbanks do not have a bank, thrift, or credit union charter; many today operate nationally and brand themselves as “fintechs.”

Congress authorized several categories of entities subject to CFPB’s nonbank supervision program. First and foremost, all nonbank entities in the mortgage, private student loan, and payday loan industries, regardless of size. Another category of supervised entities includes what the law calls “larger participants” in other nonbank markets for consumer financial products and services. The CFPB conducted rulemakings to define thresholds for entities subject to supervision in the markets of consumer reporting, debt collection, student loan servicing, international remittances, and auto loan servicing.

The third category of entities subject to the CFPB nonbank supervision are nonbanks whose activities the CFPB has reasonable cause to determine pose risks to consumers. This authority is not specific to any particular consumer financial product or service. While the CFPB did implement the provision through a procedural rule in 2013,  the agency has now begun to invoke this authority. This will allow the CFPB to be agile and supervise entities that may be fast-growing or are in markets outside the existing nonbank supervision program.

Such risky conduct may involve, for example, potentially unfair, deceptive, or abusive acts or practices, or other acts or practices that potentially violate federal consumer financial law. The CFPB may base such reasonable cause determinations on complaints collected by the CFPB, or on information from other sources, such as judicial opinions and administrative decisions. The CFPB may also learn of such risks through whistleblower complaints, state partners, federal partners, or news reports.

Transparency

The CFPB is also issuing a procedural rule today to increase the transparency of the risk-determination process. Unlike other provisions of law regarding nonbank supervision, entities subject to supervision based on risk are given notice and an opportunity to respond. In order to provide greater guidance to the marketplace on how the CFPB will make determinations, the CFPB is updating an aspect of its procedures for risk determinations to authorize the release of certain information about any final determinations made.  The company involved will have an opportunity to provide input to the CFPB on what information is released to the public.

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Sources

https://www.consumerfinance.gov/about-us/blog/introducing-our-new-bureau-seal/

https://www.consumerfinance.gov/

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Retirees May Soon Have More Options as House Passes “Securing a Strong Retirement Act”

Raising the required minimum distribution age to 75 (from 72) on retirement accounts will have more impact than many may realize. The House advanced legislation on Tuesday (March 29) raising the age where retirees must take RMDs or face severe IRS penalties. The measure seems to take into account much that is facing retirees, but there are some pitfalls older Americans must be watch as well.

Background

The House of Representatives passed the Securing a Strong Retirement Act, often referred to as the Secure Act 2.0, by a vote of 414-5. The most consequential provisions are below:

• Raise the age savers must take minimum distributions, or RMDs, from their retirement savings accounts to 73 from 72, effective next Jan. 1, to 74 starting in 2030 and to 75 starting in 2033. *The RMD age was raised to 72 from 70½ by the Secure Act of 2019.
• Increase the limits on “catch-up contributions for employees ages 62 to 64. In 2021, this age worker was permitted to contribute up to $6,500 to their retirement savings plans beyond the standard limits. The bill would increase the limit to $10,000, beginning in 2024, and indexes it to inflation.
• Expanded automatic enrollment of workers in employer-sponsored retirement saving plans. Beginning in 2024, employees would be automatically enrolled in plans such as 401(k)s and 403(b)s unless they opt out. Workers’ initial automatic contributions would be between 3% and 10% of pretax earnings, and that amount would be increased by 1% each year until reaching 10%.

  All current 401(k) and 403(b) plans are “grandfathered,” the employer-based plan doesn’t have to comply with this provision. There’s also an exception for businesses with 10 or fewer employees, businesses that have existed for less than three years, church plans, and governmental plans.

• Reduces the penalty for failure to take RMDs to 25% from 50%. In addition, if this failure is corrected in a timely manner, as defined by the bill, the penalty would be further reduced to 10%.
• Allows employers to match a worker’s student loan payment by making the same size contribution to that worker’s retirement savings plan. This provision, which will take effect Jan. 1, is to help workers who find it difficult to save for retirement because of student-loan payments. Npt contributing causes them to miss out on their employers’ matching contributions to company-sponsored retirement savings plans.
• Enhances the Saver’s Credit, which intends to incentivize low- and middle-income Americans to save for retirement with a tax credit of up to $1,000 each year. Today these workers can qualify for a tax credit of 50%, 20%, or 10% of their contributions to a qualified retirement plan, up to $2,000, based on  income level.
• Creates an online, searchable “retirement savings lost-and-found database” at the Labor Department to help workers and retirees find their lost retirement accounts, including those from previous employers.

People are living longer than ever before, and everyone’s situation is different. Raising the minimum age for a person to take distributions allows more freedom to design around one’s own retirement and tax circumstances.

The purpose of the requiring distributions is that the IRS did not collect taxes on the qualified retirement money when it was earned. RMDs are their way to finally collect. Should savers opt to wait longer, it is likely the IRS will benefit as the savings is likely to grow and the expected time remaining until death is likely to shrink. Therefore, the RMDs will be much larger and taxes would be higher. This could benefit the tax rolls but still benefits the retiree.

Paul Hoffman

Managing Editor, Channelchek

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Sources

https://www.congress.gov/bill/117th-congress/house-bill/2954

https://www.barrons.com/advisor/articles/senators-retirement-security-bill-secure-act-cardin-portman-51638537894

https://www.reportdoor.com/how-the-secure-act-could-trigger-higher-taxes-for-some-retirees/

https://www.barrons.com/articles/secure-act-2-0-retirement-rmd-requirements-51648594141

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Image Credit: Nat’l Institute of Health

New Data-Sharing Requirements from the NIH are a Big Step Toward More Open Science – and Potentially Higher-Quality Research

Starting on Jan. 25, 2023, many of the 2,500 institutions and 300,000 researchers that the U.S. National Institutes of Health supports will need to provide a formal, detailed plan for
publicly sharing the data generated by their research. For many in the scientific community, this new NIH Data Management and Sharing Policy sounds like a no-brainer.

The incredibly quick development of rapid tests and vaccines for COVID-19 demonstrate the success that can follow the open sharing of data within the research community. The importance and impact of that data even drove a White House Executive Order mandating that “the heads of all executive departments and agencies” share “COVID-19-related data” publicly last year.

I am the Director of the Rochester Institute of Technology’s Open Programs Office. At Open@RIT, my colleagues and I work with faculty and researchers to help them openly share their research and data in a manner that provides others the rights to access, reuse and redistribute that work with as few barriers or restrictions as possible. In the sciences, these practices are often referred to as open data and open science.

The journal Nature has called the impact of the NIH’s new data management policy “seismic,” saying that it could potentially create a “global standard” for data sharing. This type of data sharing is likely to produce many benefits to science, but there also are some concerns over how researchers will meet the new requirements.

The National Institutes of Health has had data-sharing guidelines in place for years, but the new rules are by far the most comprehensive. NIH

What to Share and How to Share It

The NIH’s new policy around data sharing replaces a mandate from 2003. Even so, for some scientists, the new policy will be a big change. Dr. Francis S. Collins, then Director of the NIH, said in the 2020 statement announcing the coming policy changes that the goal is to “shift the culture of research” so that data sharing is the norm, rather than the exception.

Specifically, the policy requires two things. First, that researchers share all the scientific data that other teams would need in order to “validate and replicate” the original research findings. And second, that researchers include a two-page data management plan as part of their application for any NIH funding.

So what exactly is a data management plan? Take an imaginary study on heat waves and heatstroke, for example. All good researchers would collect measurements of temperature, humidity, time of year, weather maps, the health attributes of the participants and a lot of other data.

Starting next year, research teams will need to have determined what reliable data they will use, how the data will be stored, when others would be able to get access to it, whether or not special software would be needed to read the data, where to find that software and many other details – all before the research even begins so that these things can be included in the proposal’s data management plan.

Additionally, researchers applying for NIH funding will need to ensure that their data is available and stored in a way that persists long after the initial project is over.

The NIH has stated that it will support – with additional funding – the costs related to the collection, sharing and storing of data.

Sharing Data Promotes Open Science

The NIH’s case for the new policy is that it will be “good for science” because it maximizes availability of data for other researchers, addresses problems of reproducibility, will lead to better protection and use of data and increase transparency to ensure public trust and accountability.

The first big change in the new policy – to specifically share the data needed to validate and replicate – seems aimed at the proliferation of research that can’t be reproduced. Arguably, by ensuring that all of the relevant data from a given experiment is available, the scientific world would be better able to evaluate and validate through replication the quality of research much more easily.

I strongly believe that requiring data-sharing and management plans addresses a big challenge of open science: being able to quickly find the right data, as well as access, and apply it. The NIH says, and I agree, that the requirement for data management plans will help make the use of open data faster and more efficient. From the Human Genome Project in the 1990s to the recent, rapid development of tests and vaccines for COVID-19, the benefits of greater openness in science have been borne out.

Will the New Requirements be a Burden?

At its core, the goal of the new policy is to make science more open and to fight bad science. But as beneficial as the new policy is likely to be, it’s not without costs and shortfalls.

First, replicating a study – even one where the data is already available – still consumes expensive human, computing and material resources. The system of science doesn’t reward the researchers who reproduce an experiment’s results as highly as the ones who originate it. I believe the new policy will improve some aspects of replication, but will only address a few links in the overall chain.

Second are concerns about the increased workload and financial challenges involved in meeting the requirements. Many scientists aren’t used to preparing a detailed plan of what they will collect and how they will share it as a part of asking for funding. This means they may need training for themselves or the support of trained staff to do so.

Part of a Global Trend Toward Open Science

The NIH isn’t the only federal agency pursuing more open data and science. In 2013, the Obama administration mandated that all agencies with a budget of $100 million or more must provide open access to their publications and data. The National Science Foundation published their first open data policy two years earlier. Many European Union members are crafting national policies on open science – most notably France, which has already published its second.

The cultural shift in science that NIH Director Collins mentioned in 2020 has been happening – but for many, like me, who support these efforts, the progress has been painfully slow. I hope that the new NIH open data policy will help this movement gain momentum.

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House Approval Expected for Marijuana Opportunity Reinvestment and Expungement Act (MORE Act)

The first week of Spring may be exciting for marijuana businesses, both publicly traded and private. On Thursday (March 24), The House branch of Congress scheduled a vote to legalize cannabis federally, (MORE Act).

As soon as Monday, The U.S. House of Representatives will vote on the Marijuana Opportunity, Reinvestment, and Disposal Act. This bill would remove marijuana from the list of federally controlled substances. The MORE Act is expected to pass, at that point, it would make its way to the Senate for a vote and is expected to eventually wind up on the desk of the President to be signed into law.

Investors viewed this move to put it on the calendar the last week in March as a huge positive which then pushed cannabis-related stocks higher. Medicine Man Technologies – Schwazze (SHWZ) saw its shares leap 10.48% on Thursday.  SHWZ is involved in production, consulting, and retailing. Stem Holdings (STMH), is involved in properties used in cannabis agriculture, it saw its shares jump 9.37%. Both SHWZ and STMH are small, growth companies with equity research coverage provided on Channelchek, by Noble Capital Markets. Other cannabis companies involved in various ends of the business, both large and small saw similar movement.

The federal legalization of marijuana has bipartisan support in Congress. While it is widely expected to pass in the House and Senate, it is not certain whether President Biden will sign. Senate Majority Leader Schumer has been lobbying President Biden on the positive implications of legal marijuana and has expressed hope Biden will support the law.

Cannabis is legal for recreational use in 18 states and for medical use in 38. Federal recreational drug legalization would dramatically increase the market for cannabis growers, refiners, and distributors while eliminating concerns over banking and securities laws related to involvement in federally illegal businesses.

Sources

https://www.congress.gov/bill/117th-congress/house-bill/3617/

https://norml.org/blog/2022/03/24/us-house-of-representatives-to-vote-on-more-act-next-week/

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Are ESG Social and Governance Policies Why Companies Stopped Russian Operations?

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Sources

https://www.conference-board.org/topics/geopolitics/cutting-ties-with-russia

https://stories.starbucks.com/press/2022/letter-to-partners-from-kevin-johnson-on-ukraine/

https://www.cnn.com/2022/03/08/business/mcdonalds-pepsi-coke-russia/index.html

https://som.yale.edu/story/2022/over-300-companies-have-withdrawn-russia-some-remain

https://www.cnet.com/news/apple-microsoft-and-other-tech-companies-stop-sales-in-russia/

https://www.mashed.com/789748/heres-why-boycott-mcdonalds-is-trending-on-twitter/

https://theconversation.com/why-apple-disney-ikea-and-hundreds-of-other-western-companies-are-abandoning-russia-with-barely-a-shrug-178516

https://www.wsj.com/articles/big-auditors-to-leave-russia-amid-invasion-of-ukraine-11646666419?mod=djemCFO

https://www.mlb.com/news/2021-all-star-game-draft-relocated

https://www.cbsnews.com/news/russia-ukraine-corporations-pull-out-invasion/

https://en.wikipedia.org/wiki/Firestone_and_Ford_tire_controversy

https://www.caranddriver.com/news/a15339250/everything-you-need-to-know-about-the-vw-diesel-emissions-scandal/

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  Image: BJClayborn (Flickr)

Pelosi’s Recent Investment Portfolio Tweaks

House Speaker Nancy Pelosi’s husband, financier Paul Pelosi, has had remarkable stock-picking success. This hasn’t gone unnoticed by coattail investors and others that peruse the couple’s investment transactions for ideas. Nancy Pelosi’s wealth, in part because of her spouse’s investment track record, is now listed as 13^th among the wealthiest members of Congress. This is why others look to see where they are committing assets.

Background

So-called coat tail or copycat investors that follow hedge fund managers and other professional investors often have to wait 45 days for a quarterly filing to be made public. This makes some of the listed transactions as ancient as 135 days old by the time they become public information. Perhaps too old to act on, the positions may no longer even be held in the portfolio.

Congress and close family members are required to release information concerning their transactions within 45 days of the trade execution. This provides much more current information on a member of Congress’ account than a quarterly 13F filing by Ark Invest or Scion Capital does. The most recent Periodic Transactions Report of the Pelosi’s is comprised of investments all made in late January.

Holdings Changes

From January 21- January 27 there was $2.9m of large tech and financial firms added to Pelosi’s assets. They were Alliance Bernstein (AB), American Express (AXP), Apple (AAPL), Paypal (PYPL), and Walt Disney (DIS). There was nothing reported to suggest that they lowered their holding in previous high flyers, Slack (WORK), Tesla (TSLA), Alphabet (GOOGL), Facebook (FB), or Netflix (NFLX)

Image: Paul Pelosi’s Stock Act filing (January 2022)

Related News

The latest transaction report comes at a time when actions are being discussed by lawmakers that could require members of Congress and their spouses to be barred from trading individual stocks. A House panel is meeting on March 16th to debate the merits of a Congressional ban on trading and what any trading rules should include. Similar restrictions have been placed on officials at the Federal Reserve.

Representative Lofgren chairs the House Administration Committee; he has been compiling recommendations on how best to enact a ban. The House leadership, steered by Speaker Pelosi, will then have the final decision on how to proceed. Other laws covering members and staff, such as the Ethics in Government Act, are expected to be reviewed as well.

Take-Away

Copycat investing is easiest if you’re mimicking a lawmaker as their reporting is more frequent than SEC-regulated money managers. One of the most successful accounts in Congress is that of the Pelosis. The opportunity to follow lawmakers’ trades may one day come to an end as lawmakers are looking to ban themselves from trading in stocks. Should this ever come to be, this method for self-directed traders to discover ideas will come to an end.

Paul Hoffman

Managing Editor, Channelchek

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Sources

Pelosi’s Transaction
Report

https://www.investopedia.com/terms/c/coattailinvesting.asp

https://email.punchbowl.news/t/ViewEmail/t/FA92DBE67DB478132540EF23F30FEDED/BCD22D0840B16355A0F01D70678E0DEE

https://www.businessinsider.com/nancy-pelosi-discloses-stock-trades-amid-calls-trading-ban-congress-2022-3

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Seizing Assets of Wealthy and Powerful Russians to Help Weaken Resolve

What’s an oligarch, what’s a Russian oligarch, and can nations around the globe choose to seize their assets?

In a US Justice Department press release on March 2^nd, Attorney General Merrick Garland Announced the launch of Task Force KleptoCapture. According to the release, the “task force will surge federal law enforcement resources to hold accountable corrupt Russian oligarchs.”

The Task Force is dedicated to enforcing the strict sanctions, export restrictions, and economic countermeasures that the US, EU, and other partners have imposed on the aggressor, says the release.

It explains that Task Force KleptoCapture exists to ensure enough power is provided, so the full effect of the punitive actions and Russian isolation from global markets is fully implemented. The intent is to impose serious costs for an “unjustified act of war, by targeting the crimes of Russian officials, government-aligned elites, and those who aid or conceal their unlawful conduct” according to the DOJ release.

Deputy Attorney General Lisa Monaco is quoted in the release as saying, “To those bolstering the Russian regime through corruption and sanctions evasion: we will deprive you of safe haven and hold you accountable”. “Oligarchs be warned: we will use every tool to freeze and seize your criminal proceeds.” The press release goes on to define the task forces full mission which not only has implications for powerful Russians, it may also impact cryptocurrency transactions and others that under “normal” circumstances may not have been considered as crimes that are worthy of the penalties imposed. The DOJ summarized the mission of the Task Force to include:

• Investigating and prosecuting violations of new and future sanctions imposed in response to the Ukraine invasion, as well as sanctions imposed for prior instances of Russian aggression and corruption;
• Combating unlawful efforts to undermine restrictions taken against Russian financial institutions, including the prosecution of those who try to evade know-your-customer and anti-money laundering measures;
• Targeting efforts to use
  cryptocurrency to evade US sanctions, launder proceeds of foreign corruption, or evade US responses to Russian military aggression; and
• Using civil and criminal asset forfeiture authorities to seize assets belonging to sanctioned individuals or assets identified as the proceeds of unlawful conduct.

Using the combined force of powerful nations to determine guilt and then punish people with close ties to President Putin and their families may turn out to be effective, but, not unlike the conundrum experienced by crypto
exchanges,  it does create questions related to who owns what and who may seize that which others own. For example, a 500-foot megayacht seized this week in Germany owned by a member of the Russian elite.

A group of mostly obscure officials and businessmen from Russia are now being closely tracked financially. Some of the listed targets have indicated publicly they are against the war. And according to the Wall Street Journal, many of Russia’s better-known oligarchs aren’t on any governments’ sanctions lists. This is the case with Roman Abramovich, who made his money in the energy business and is the owner of British soccer club Chelsea FC. In recent days, he has offered to mediate peace efforts and said he’s looking to sell Chelsea.

Western governments hope that heightened scrutiny of Russia’s oligarchs will pressure President Vladimir Putin.

What is an Oligarch?

An “oligarchy” describes a power system led by a small group of people. It could be compared to a ruling monarchy, although the small number of leaders aren’t necessarily related. In recent years, the word “oligarch” has taken on a more specific meaning when it relates to states from the former USSR. Here it translates to businesspeople and officials who gained wealth and power in the years following the collapse of the Soviet Union.

How Russia’s Oligarchs Gained Wealth and Power?

The country’s current crop of billionaires and officials accumulated wealth and power in different ways. Some of those on the sanction list are part of Mr. Putin’s inner circle; others are longtime associates; while others benefited from a wave of privatizations that followed the collapse of the Soviet Union.

Their Public Stance on the War

Oleg Deripaska, a raw-materials magnate who had been sanctioned before (2014/Crimea) by the US, wrote on social media Sunday that peace “is very important.” Mr. Deripaska sued the US Treasury Department in 2019, challenging his inclusion in the Treasury’s report on Russian oligarchs as well as the sanctions against him. He alleges the US made false accusations based on rumor and innuendo to support the sanctions. A court ruled against Oleg last June.

Mikhail Fridman is the founder of Alfa Bank, Russia’s largest private bank. Mikhail was sanctioned by the EU late Monday. Fridman says he will contest the designation and that he isn’t politically or financially connected to Mr. Putin. “It seems to me that we have done a lot of good things, invested in companies, created a lot of jobs,” Mr. Fridman said at a press conference from his private-equity firm’s office in London. “We will litigate to protect our reputation.”

Take-Away

All matters related to war, politics, and justice are delicate.

Paul Hoffman

Managing Editor, Channelchek

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Sources

https://www.justice.gov/opa/pr/attorney-general-merrick-b-garland-announces-launch-task-force-kleptocapture

https://www.aljazeera.com/news/2022/3/2/us-launches-kleptocapture-task-force-against-russian-oligarchs

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  Image: BJClayborn (Flickr)

Pelosi’s Recent Investment Portfolio Tweaks

House Speaker Nancy Pelosi’s husband, financier Paul Pelosi, has had remarkable stock-picking success. This hasn’t gone unnoticed by coattail investors and others that peruse the couple’s investment transactions for ideas. Nancy Pelosi’s wealth, in part because of her spouse’s investment track record, is now listed as 13^th among the wealthiest members of Congress. This is why others look to see where they are committing assets.

Background

So-called coat tail or copycat investors that follow hedge fund managers and other professional investors often have to wait 45 days for a quarterly filing to be made public. This makes some of the listed transactions as ancient as 135 days old by the time they become public information. Perhaps too old to act on, the positions may no longer even be held in the portfolio.

Congress and close family members are required to release information concerning their transactions within 45 days of the trade execution. This provides much more current information on a member of Congress’ account than a quarterly 13F filing by Ark Invest or Scion Capital does. The most recent Periodic Transactions Report of the Pelosi’s is comprised of investments all made in late January.

Holdings Changes

From January 21- January 27 there was $2.9m of large tech and financial firms added to Pelosi’s assets. They were Alliance Bernstein (AB), American Express (AXP), Apple (AAPL), Paypal (PYPL), and Walt Disney (DIS). There was nothing reported to suggest that they lowered their holding in previous high flyers, Slack (WORK), Tesla (TSLA), Alphabet (GOOGL), Facebook (FB), or Netflix (NFLX)

Image: Paul Pelosi’s Stock Act filing (January 2022)

Related News

The latest transaction report comes at a time when actions are being discussed by lawmakers that could require members of Congress and their spouses to be barred from trading individual stocks. A House panel is meeting on March 16th to debate the merits of a Congressional ban on trading and what any trading rules should include. Similar restrictions have been placed on officials at the Federal Reserve.

Representative Lofgren chairs the House Administration Committee; he has been compiling recommendations on how best to enact a ban. The House leadership, steered by Speaker Pelosi, will then have the final decision on how to proceed. Other laws covering members and staff, such as the Ethics in Government Act, are expected to be reviewed as well.

Take-Away

Copycat investing is easiest if you’re mimicking a lawmaker as their reporting is more frequent than SEC-regulated money managers. One of the most successful accounts in Congress is that of the Pelosis. The opportunity to follow lawmakers’ trades may one day come to an end as lawmakers are looking to ban themselves from trading in stocks. Should this ever come to be, this method for self-directed traders to discover ideas will come to an end.

Paul Hoffman

Managing Editor, Channelchek

Suggested Reading

Lawmakers and Insider Trading Laws

About Cathie Wood’s SEC Filing for a Private Equity Fund

Michael Burry’s Stock Market Holdings (Filed Feb 14, 2022)

The SPAC Advantage in a Volatile or Bear Market

Sources

Pelosi’s Transaction
Report

https://www.investopedia.com/terms/c/coattailinvesting.asp

https://email.punchbowl.news/t/ViewEmail/t/FA92DBE67DB478132540EF23F30FEDED/BCD22D0840B16355A0F01D70678E0DEE

https://www.businessinsider.com/nancy-pelosi-discloses-stock-trades-amid-calls-trading-ban-congress-2022-3

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  Image Credit: Dmitry Shustov (Flickr)

The Conundrum Crypto-Exchanges Face – What is Their Wartime Responsibility?

The ethical question crypto exchanges are faced with as it relates to an aggressive nation versus maintaining a stateless bitcoin or other cryptocurrency creates a predicament with no satisfying answers. Exchanges are faced with allowing as regular transactions those that potentially help fund military aggression while undermining financial sanctions, or halting these transactions, which may in part undermine their own existence. The exchanges have unapologetically pushed back on requests from both U.S. officials and Ukraine leaders. While adhering to the requests may appear the most moral avenue, these same actions would undermine trust, which is the strength of any currency – so restricting transactions could undermine cryptocurrencies’ usefulness for everyone.  One-by-one the crypto exchanges have been solidifying or creating their policies as it relates to their overall obligation.

Position of the Exchanges

In an interview this week, Bloomberg spoke with Jean-Marie Mognetti, the CEO of CoinShares. Mr. Mognetti quoted Winston Churchill saying, “Where there is great power, there is great responsibility.” Mognetti thinks the marketplace and exchanges have good leaders and can develop responsible protocols. When the Bloomberg interviewer asked how an exchange can square the idea that at its philosophical core, cryptocurrency is designed to be stateless and without favoritism, the Coinshares CEO offered, “It’s a conundrum because there is, what crypto is supposed to be, at its core, and how it’s supposed to work. I think sometimes there are events that require different things.” Mognetti then added, “if government asks for freezing assets or doing something like this, most crypto platforms would abide by it, and stand by it.” It seems that, although Mognetti doesn’t feel as though the company should take a position, a regulated environment, perhaps even a self-regulated exchange environment, is not something exchanges would be completely against.

After Ukraine’s Vice Prime Minister Mykhailo Fedorov publicly pleaded for all major crypto exchanges to freeze related accounts to further challenge Russia’s resources and undermine the war, the CEO of widely used Kraken, Jesse Powell, responded to the call. The Kraken co-founder used Twitter to make clear, that while he has “deep respect” for the people of Ukraine, he believes crypto should enforce individualism, rather than a nationalistic alliance to a country.

Among the key points Binance founder and CEO Changpeng Zhao, told the BBC related to freezing Russian accounts is, “Many normal Russians do not agree with war…We [Binance] differentiate between the Russian politicians who start wars and the normal people…We don’t control the industry.” To demonstrate his company’s official neutrality, Zhao said, “I can publish my sanction list, you can publish yours… Guess what? No-one else is going to follow. It just moves Russian users to other smaller platforms.”

Coinbase, another large crypto U.S.-based exchange, responded to the plea from Ukraine by saying it, “will not institute a blanket ban on all Coinbase transactions involving Russian addresses.” A company spokesman explained their position. “A unilateral and total ban would punish ordinary Russian citizens who are enduring historic currency destabilization as a result of their government’s aggression against a democratic neighbor,” a spokesman for Coinbase said.

Position of the U.S. Treasury

The U.S. is forbidding U.S. citizens from employing cryptocurrencies as a work-around to undermine global financial sanctions placed on Russia. The primary goal of the sanctions is to cause the country to come to a financial standstill and tear at the support of some of the wealthiest Russians that may have used bitcoin and other cryptocurrencies as a safe haven asset leading up to the Russian invasion.  

Washington’s newest severe financial measures, include prohibiting transactions with Russia’s central bank and restricting access to the SWIFT global payments system.

The U.S. has also urged global cryptocurrency exchanges to block sanctioned individuals from accessing their digital assets regardless of location. The “ask” stops short of requiring this action.

Take-Away

Should crypto exchanges have within their power to do what many would consider “good”, or should they remain stateless and retain their neutrality promise to customers? Neutrality shows they can always be counted on to act one way, anything else may undermine their value and the value of the assets that are traded on their platforms.

While bitcoin and other cryptos are at their core stateless, and the crypto exchanges are honoring this, if required by a regulatory entity, it appears that they would view it as out of their hands and would abide by a legitimate authority.

Paul Hoffman

Managing Editor, Channelchek

Suggested Reading

Russia/Ukraine War and Reliance on Crypto and Blockchain

The International Energy Agency Takes Steps to Put a Ceiling on Oil Prices

Decentralized Finance, Is It The Future?

Is the Index Bubble Michael Burry Warned About Still Looming?

Sources

Bloomberg
Plus

https://news.bitcoin.com/coinbase-will-not-institute-a-blanket-ban-on-all-transactions-tied-to-russian-crypto-addresses/

https://www.bbc.com/news/technology-60576373

https://www.investopedia.com/treasury-department-cracks-down-on-crypto-used-to-bypass-russian-sanctions-5220729

https://www.bbc.com/news/technology-60576373

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  Image Credit: Dmitry Shustov (Flickr)

The Conundrum Crypto-Exchanges Face – What is Their Wartime Responsibility?

The ethical question crypto exchanges are faced with as it relates to an aggressive nation versus maintaining a stateless bitcoin or other cryptocurrency creates a predicament with no satisfying answers. Exchanges are faced with allowing as regular transactions those that potentially help fund military aggression while undermining financial sanctions, or halting these transactions, which may in part undermine their own existence. The exchanges have unapologetically pushed back on requests from both U.S. officials and Ukraine leaders. While adhering to the requests may appear the most moral avenue, these same actions would undermine trust, which is the strength of any currency – so restricting transactions could undermine cryptocurrencies’ usefulness for everyone.  One-by-one the crypto exchanges have been solidifying or creating their policies as it relates to their overall obligation.

Position of the Exchanges

In an interview this week, Bloomberg spoke with Jean-Marie Mognetti, the CEO of CoinShares. Mr. Mognetti quoted Winston Churchill saying, “Where there is great power, there is great responsibility.” Mognetti thinks the marketplace and exchanges have good leaders and can develop responsible protocols. When the Bloomberg interviewer asked how an exchange can square the idea that at its philosophical core, cryptocurrency is designed to be stateless and without favoritism, the Coinshares CEO offered, “It’s a conundrum because there is, what crypto is supposed to be, at its core, and how it’s supposed to work. I think sometimes there are events that require different things.” Mognetti then added, “if government asks for freezing assets or doing something like this, most crypto platforms would abide by it, and stand by it.” It seems that, although Mognetti doesn’t feel as though the company should take a position, a regulated environment, perhaps even a self-regulated exchange environment, is not something exchanges would be completely against.

After Ukraine’s Vice Prime Minister Mykhailo Fedorov publicly pleaded for all major crypto exchanges to freeze related accounts to further challenge Russia’s resources and undermine the war, the CEO of widely used Kraken, Jesse Powell, responded to the call. The Kraken co-founder used Twitter to make clear, that while he has “deep respect” for the people of Ukraine, he believes crypto should enforce individualism, rather than a nationalistic alliance to a country.

Among the key points Binance founder and CEO Changpeng Zhao, told the BBC related to freezing Russian accounts is, “Many normal Russians do not agree with war…We [Binance] differentiate between the Russian politicians who start wars and the normal people…We don’t control the industry.” To demonstrate his company’s official neutrality, Zhao said, “I can publish my sanction list, you can publish yours… Guess what? No-one else is going to follow. It just moves Russian users to other smaller platforms.”

Coinbase, another large crypto U.S.-based exchange, responded to the plea from Ukraine by saying it, “will not institute a blanket ban on all Coinbase transactions involving Russian addresses.” A company spokesman explained their position. “A unilateral and total ban would punish ordinary Russian citizens who are enduring historic currency destabilization as a result of their government’s aggression against a democratic neighbor,” a spokesman for Coinbase said.

Position of the U.S. Treasury

The U.S. is forbidding U.S. citizens from employing cryptocurrencies as a work-around to undermine global financial sanctions placed on Russia. The primary goal of the sanctions is to cause the country to come to a financial standstill and tear at the support of some of the wealthiest Russians that may have used bitcoin and other cryptocurrencies as a safe haven asset leading up to the Russian invasion.  

Washington’s newest severe financial measures, include prohibiting transactions with Russia’s central bank and restricting access to the SWIFT global payments system.

The U.S. has also urged global cryptocurrency exchanges to block sanctioned individuals from accessing their digital assets regardless of location. The “ask” stops short of requiring this action.

Take-Away

Should crypto exchanges have within their power to do what many would consider “good”, or should they remain stateless and retain their neutrality promise to customers? Neutrality shows they can always be counted on to act one way, anything else may undermine their value and the value of the assets that are traded on their platforms.

While bitcoin and other cryptos are at their core stateless, and the crypto exchanges are honoring this, if required by a regulatory entity, it appears that they would view it as out of their hands and would abide by a legitimate authority.

Paul Hoffman

Managing Editor, Channelchek

Suggested Reading

Russia/Ukraine War and Reliance on Crypto and Blockchain

The International Energy Agency Takes Steps to Put a Ceiling on Oil Prices

Decentralized Finance, Is It The Future?

Is the Index Bubble Michael Burry Warned About Still Looming?

Sources

Bloomberg
Plus

https://news.bitcoin.com/coinbase-will-not-institute-a-blanket-ban-on-all-transactions-tied-to-russian-crypto-addresses/

https://www.bbc.com/news/technology-60576373

https://www.investopedia.com/treasury-department-cracks-down-on-crypto-used-to-bypass-russian-sanctions-5220729

https://www.bbc.com/news/technology-60576373

Stay up to date. Follow us:

  Image: PxHere (1413412)

The Various Ways to Allocate into “War Investments”

The developments between Russia and Ukraine, coupled with international reactions will impact all investment markets over the coming weeks/months. While prices will settle as markets push and pull to determine the appropriate range, the current reaction has created some investments to gain substantially along with those that have been hurt by weakness in their own sectors.

A Different Angle on Gold

Gold spiked to its highest level since late 2020. Gold is up by $180 per ounce, or almost 10% since the end of January when it was well below $1800. Gold mining stocks, specifically junior gold miners, have performed even better. As measured by the VanEck Junior Miners ETF (GTXJ), the sector is up 16.89%.

Current news and company information on junior miners is plentiful on Channelchek. There you can review the research on Great Panther Mining (GPL) which is exceeding, by a wide margin, the performance of gold and the junior mining ETF. Among the many other junior miners worth the attention of investors interested in this sector are: Allegiant Gold Ltd. (AUXXF), Great Bear Resources (GTBAF), and Aurania Resources (AUIAF, ARU:CA).

Crude is Up, Who
Benefits?

Oil’s surge to the $100 per barrel mark has brought energy sector stocks up along with it, with a bit of a lag. While crude oil has risen 8.69% since January, the overall energy sector measured by the XLE, which is heavily weighted with giants like Chevron and Exxon, is up over 2% in less than a month while the overall stock market has been sliding rapidly.

Smaller energy stocks, represented in the graph below by the ETF Investco Small-Cap Energy (PSCE) are up twice the larger companies and appear to now be gaining at a more rapid pace than crude.

Small and microcap energy sector stocks are demonstrating they have more upside potential than larger companies in this sector. Current news and company
information on smaller energy stocks is plentiful on Channelchek. There you can review the research on Indonesia Energy (INDO) whose price has more than doubled over this period. InPlay Oil Inc. (IPOOF, IPO:CA) has also seen a positive impact.

Overlooked Natural Resources

Palladium and platinum mining stocks, although less talked about, have also surged. A good example is Palladium One Mining Inc. (NKORF, PDM:CA). Since the end of January, the stock has risen 9.68%. The percent performance of Palladium One has spiked double digits over the past two days.

Take-Way

Changes and events bring opportunities for investors to reallocate and open themselves to other areas to enrich their portfolios. While at times the more profitable changes are from events that we would prefer not to happen, these events are beyond our control. Whereas one’s portfolio positions are well within their control. For example: Reallocating into construction materials after a devastating hurricane should be done without guilt. The same is true for those investing to take advantage of the current Ukraine/Russia situation.

Channelchek provides data and research on companies that often move by higher percentages when their industry moves. Sign-up to receive our emails to supplement your knowledge in ways missing on other equity research and market information platforms.

Paul Hoffman

Managing Editor, Channelchek

Suggested Reading

Small-Cap Companies and IRA Investments

How Cryptocurrencies, Gold, and Oil Trade When Political Tensions Rise

Index Funds Still May Fall Apart over Time

Trading Accounts for Children

Sources

Channelchek.com

www.koyfin.com

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Investors Watch Media SPAC Stay in the Green as Markets Falter

The SPAC, Digital World Acquisition Corp. (DWAC), which is likely to soon to become Trump Media & Technology Group (TMTG), is up 750% since the end of the third quarter 2021. This compares quite favorably to the S&P 500, which is up just 1.54% for the same period. Once merged, the media company founded by former President Trump will be a rare publicly owned entity with the former President’s name attached. 

The new social media app offered as a product of the company, Truth Social, became available on Monday in Apple’s App Store. During his White House term, the former President had credited himself with driving traffic and users to social media sites like Twitter. It is unclear how high of a profile Trump will take on this upstart, but it has been a very successful SPAC for investors. The IPO price was $10 and has had a 52-week range of $9.84 to $175. The pre-merger SPAC is currently trading in the upper $80 range. 

While there have been beta users of the app for months, Apple and TMTG made it available for all to download at midnight on Presidents Day. Users that had pre-ordered the app saw it automatically download to their devices. The first day was not without its glitches for Truth Social though. It was reported that many who sought to register their account were unable to and instead received the message, “Due to massive demand, we have placed you on our waitlist.”

Former U.S. Representative Devin Nunes left his Congressional seat to run Trump Media.  Nunes said in an interview with Maria Bartiromo this past Sunday that by mid-March he expects the app to be fully operational within the U.S.

De-SPAC Details

In December, TMTG raised $1 billion committed financing from private investors; the funds won’t be made available until the merger with DWAC has been completed. Also, upon merging, the company will have access to capital now being held in trust from the original investors, this is approximately $293 million. The merger is expected to occur during the first quarter of 2022.

Take-Away

One of the most successful SPACs initially offered in 2021 is Digital World Acquisition Corp. (DWAC). At one point the shares were up 1,650%. Today holders of the, as yet unmerged, SPAC are watching the product Truth Social made launched and are responding more positively than the overall market.

Paul Hoffman

Managing Editor, Channelchek

Suggested Reading

Update on DWAC, the Trump Media SPAC

Trump Media SPAC Merger Details

FOMC Approves Tighter Rules on Trading Activity for Officials

Have You Positioned Your Account to Not Fall Victim to a Crypto-Exchange Hack?

Sources

https://www.maxpixel.net/Trump-Truth-Social-Social-Media-App-6739660

https://www.sec.gov/Archives/edgar/data/1849635/000119312521348598/d242442d425.htm

https://apps.apple.com/us/app/truth-social/id1586018825

https://www.marketwatch.com/story/the-trump-spac-might-have-just-given-gensler-and-warren-an-accidental-invitation-to-start-probing-it-11637267697

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