September 9, 2016 – FinTech and Blockchain Law Watch

Movement in marketplace lending regulation for small business loans

Sep 09 2016

Marketplace lenders who cater to small businesses are about to face increased regulation in relation to the credit they provide. From 12 November 2016, some businesses will receive the same protection currently available to consumers as unfair contract terms in small business contracts will become prohibited.

Small business contracts include loans which are entered into with businesses which have fewer than 20 employees for an amount less than $300,000 or less than $1 million if the term of the loan is more than 12 months.

Under the new law, a contract term will be unfair if:

it would cause a significant imbalance in the parties’ rights and obligations;
it is not reasonably necessary to protect the interests of the party who would be advantaged by the term; and
it would cause detriment to a party if the term is relied on.

HKMA’s support to fintech development in Hong Kong

Sep 09 2016

By Michael P. W. Wong

The Hong Kong Monetary Authority (HKMA), announced on 6 September 2016, the launch of Fintech Innovation Hub (FIH) and the Fintech Supervisory Sandbox (FSS).

The FIH will be jointly established by the HKMA and the Hong Kong Applied Science and Technology Research Institute for the purposes of supporting and promoting the research and development of fintech by the local financial services industry. The FIH will be equipped with all the requisite IT systems and supported by technical teams, enabling industry players to pioneer or build upon new fintech solutions, such as enhanced biometric authentication and integrated mobile payment services. In addition, operation of the FIH is expected to facilitate dialogue between the HKMA and the relevant industry players on emerging technologies by serving as a common training venue. For instance, the HKMA may wish to explore “regtech” solutions to improve its regulatory efficiency in the FIH.

Goldman Accelerates FinTech Disintermediation

Sep 09 2016

By Susan Altman

Goldman Sachs, in a dramatic sign of the times, has recently started giving its clients for free the very software tools that made Goldman a global trading powerhouse, per the Wall Street Journal. A decade ago, Goldman considered licensing the software to rival Deutsche Bank and threw around licensing values in the billions of dollars. Now it’s free, at least for customers. The software, known as Securities DataBase, or SecDB, remains Goldman’s prime tool for measuring securities risk and analyzing their prices and is used to analyze potential trades. Why the change? Some experts point the finger at new regulations limiting the banks’ trading risks and making it costly to hold large inventories of stocks and bonds on their books. In addition, electronic trading and research has squeezed margins across the financial industry. In an effort to build its customer base, Goldman plans to make the web-based application available to customers who can then customize and operate the tools on their own. Goldman joins many others in offering its own risk-management system to customers, including startups and big players like BlackRock. It seems like every Fin is now a Tech as well.

Who bears the risk? Federal Court holds that a purchaser of unsecured consumer loans is the “true lender”

Sep 09 2016

By Irene C. Freidel and David D. Christensen

A California federal court has held that the purchaser of consumer loans is the “true lender” and thus subject to state usury laws, even though a separate entity funded and closed the loans in its own name. The recent decision, however, is another reminder that US state and federal regulators, as well as plaintiffs’ attorneys, may be able to pierce these partnerships where the financial institution funding and closing the loan does not bear substantial risk on those loans.

Archive:September 9, 2016