Banks, Marijuana, and Federalism

Although marijuana is illegal under federal law twentythree states have legalized some marijuana use The statelegal marijuana industry is flourishing but marijuanarelated businesses report difficulty accessing banking services Because financial institutions will not allow marijuanarelated businesses to open accounts the marijuana industry largely operates on a cashonly basis ” a situation that attracts thieves and tax cheats This Article explores the root of the marijuana banking problem as well as possible solutions It explains that although the United States\u27 dual banking system comprises of both federal and statechartered institutions when it comes to marijuana banking federal regulation is pervasive and controlling Marijuana banking access cannot be solved by the states acting alone for two reasons First marijuana is illegal under federal law Second federal law enforcement and federal financial regulators have significant power to punish institutions that do not comply with federal law Unless Congress acts to remove one or both of these barriers most financial institutions will not provide services to the marijuana industry But marijuana banking requires more than just congressional action It requires that federal financial regulators set clear and achievable due diligence requirements for institutions with marijuanabusiness customers As long as financial institutions risk federal punishment for any marijuana business customer\u27s misstep institutions will not provide marijuana bankin

Divide and Conquer: SEC Discipline of Litigation Attorneys

The Securities and Exchange Commission SEC can investigate and discipline attorneys for unethical or improper professional conduct Although the SEC\u27s disciplinary authority extends to all attorneys for more than 70 years it only investigated transactional attorneys Recently however the SEC announced that it is now investigating litigation attorneys for professional misconductThis Article examines the problems that arise because the SEC staff that is investigating and prosecuting a client is also allowed to investigate the professional conduct of the litigator representing that client The Article explains that the SEC\u27s rules governing litigator conduct are unclear and therefore susceptible to agency abuse The SEC can use ethics investigations or even threats of investigations to remove attorneys from cases or to intimidate attorneys into less zealous advocacy During ethics investigations the SEC can further erode the attorneyclient relationship by pressing litigators for confidential information ordinarily protected by the attorneyclient privilege By dividing the client from the attorney the SEC can gain the upper hand in its investigation of the client Because of these problems the SEC should not investigate litigators for professional misconduct Instead litigators\u27 ethical lapses should be investigated by state attorney disciplinary agencies or if the allegations are very serious by criminal authorities The SEC can then impose reciprocal disciplin

When Bank Examiners Get It Wrong: Financial Institution Appeals of Material Supervisory Determinations

Banks and credit unions sometimes complain that the examination process regulators use to police banking practices is oppressive. These financial institutions complain that regulators reach unduly negative examination conclusions known as “material supervisory determinations.” Institutions are wary because negative determinations can subject an institution to further regulatory scrutiny or enforcement actions. To guard against erroneous determinations, Congress, in 1994, enacted a statute requiring federal financial institution regulators to provide an appeals process. Each of the four regulators (the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corporation, and the National Credit Union Administration) adopted a unique material supervisory determination appeals process. Using data (some collected through Freedom of Information Act requests) about material supervisory decision appeals since 1994 and interviews with top regulators, this Article provides the first in-depth analysis of the appeals processes. It shows that the appeals processes are sometimes dysfunctional and seldom used. To improve the appeals processes, the Article recommends three changes. First, once a regulator issues a material supervisory determination, financial institutions should have direct access to a dedicated appellate authority outside of the examination function. Second, the appellate authority should engage in a robust review; it should consider a broad scope of appealable matters and employ a clear and rigorous standard of review. Third, regulators should release detailed information about each decision reached by the appellate authority

Divide and Conquer: SEC Discipline of Litigation Attorneys

The Securities and Exchange Commission SEC can investigate and discipline attorneys for unethical or improper professional conduct Although the SEC\u27s disciplinary authority extends to all attorneys for more than 70 years it only investigated transactional attorneys Recently however the SEC announced that it is now investigating litigation attorneys for professional misconductThis Article examines the problems that arise because the SEC staff that is investigating and prosecuting a client is also allowed to investigate the professional conduct of the litigator representing that client The Article explains that the SEC\u27s rules governing litigator conduct are unclear and therefore susceptible to agency abuse The SEC can use ethics investigations or even threats of investigations to remove attorneys from cases or to intimidate attorneys into less zealous advocacy During ethics investigations the SEC can further erode the attorneyclient relationship by pressing litigators for confidential information ordinarily protected by the attorneyclient privilege By dividing the client from the attorney the SEC can gain the upper hand in its investigation of the client Because of these problems the SEC should not investigate litigators for professional misconduct Instead litigators\u27 ethical lapses should be investigated by state attorney disciplinary agencies or if the allegations are very serious by criminal authorities The SEC can then impose reciprocal disciplin

Transaction Account Fees: Do the Poor Really Pay More than the Rich

During the Great Recession and its aftermath customers have become increasingly concerned about the fees banks charge for checking transaction accounts Some believe that banks\u27 fee structures are unfair In particular commentators often argue that high overdraft and other fees paid by poor consumers crosssubsidize free accounts for rich consumers or businesses If true this regressive crosssubsidization could be forcing some consumers to do without banking services or to use more costly fringe financial service providers Moreover if regressive crosssubsidization exists it would provide a powerful argument for increased regulation of account feesIn spite of frequent claims that poor accountholders crosssubsidize rich accountholders there is little scholarship examining or establishing such claims This Article examines both theoretical and empirical evidence of crosssubsidization among transaction accountholders Contrary to the assumptions made in much of the account fee literature this Article concludes there is little evidence that the poor crosssubsidize the richWhat the Article however does find is contradictory account fee regulation Some regulations encourages fee structures with high overdrafts while other regulations simultaneously discourage overdraft fees This Article recommends that instead of focusing on crosssubsidization policymakers should work to establish a coherent theory of transaction account fee regulation A coherent theory of fee regulation could correct this inconsistency and provide clear direction for bank

Banks, Marijuana, and Federalism Symposium: Marijuana, Federal Power, and the States

Although marijuana is illegal under federal law, twenty-three states have legalized some marijuana use. The state-legal marijuana industry is flourishing, but marijuana-related businesses report diffi- culty accessing banking services. Because financial institutions will not allow marijuana-related businesses to open accounts, the mari- juana industry largely operates on a cash-only basis-a situation that attracts thieves and tax cheats. This Article explores the root of the marijuana banking problem as well as possible solutions. It explains that although the United States\u27 dual banking system comprises both federal- and state- chartered institutions, when it comes to marijuana banking, federal regulation is pervasive and controlling. Marijuana banking access cannot be solved by the states acting alone for two reasons. First, marijuana is illegal under federal law. Second, federal law enforcement and federal financial regulators have significant power to punish institutions that do not comply with federal law. Unless Congress acts to remove one or both of these barriers, most financial institutions will not provide services to the marijuana industry. But marijuana banking requires more than just congressional action. It requires that federal financial regulators set clear and achievable due diligence requirements for institutions with marijuana-business customers. As long as financial institutions risk federal punishment for any mari- juana business customer\u27s misstep, institutions will not provide marijuana banking