Editor’s note — The California Department of Business Oversight (DBO) supervises, licenses and regulates a variety of financial institutions, including some real estate mortgage loan originators (MLOs) holding a Nationwide Multistate (or Mortgage) Licensing System & Registry (NMLS) license. Alongside the California Department of Real Estate (DRE), the DBO shares the responsibility for overseeing MLOs depending on their license use.

This month’s DBO Bulletin Digest features important training information for financial institution examiners, new fintech tools and an email security notice.

Broker-dealer examiner training

Real estate licensees engaged in real estate syndicates may be interested in an upcoming joint conference held by the DBO, Financial Industry Regulatory Authority (FINRA) and North American Securities Administrators Association (NASAA) on training for broker-dealer examiners. The event is scheduled for September 26, 2019 and will take place at the Omni Los Angeles Hotel at California Plaza.

Editor’s note — Real estate licensees soliciting investors as part of a real estate syndicates require an understanding of state and federal securities laws. Uninitiated solicitors may inadvertently offer investors value-adding activities to enhance a real estate investment which puts the group investment within the control of securities laws. See Forming Real Estate Syndicates Chapter 13: Securities Aspects of Syndication.

FINRA is an independent nongovernmental organization that regulates the trading of equities, corporate bonds for brokers and broker-dealer firms. NASAA is an organization of securities regulators responsible for enforcing state securities laws and licensing securities firms and investment professionals like broker-dealers and investment advisers. This conference is the ideal setting to brush up on the topics the DBO, FINRA, and NASAA deem most critical in 2019 and strengthen your network in the meantime.

The conference invites state securities regulators to discussion panels dedicated to training examiners on conducting broker-dealer examinations. This includes panels on fee structures, trading activity risks, exception reports, Written Supervisory Procedures and more.

Tickets are free and disbursed on a first-come, first-served basis. Download the agenda and register at FINRA’s conference page here.

Cybersecurity preparedness

On the topic of best practices, the Federal Financial Institutions Examination Council (FFIEC) urged financial institutions to standardize their cybersecurity measures in a press release on August 28, 2019. This includes non-banks like broker officers of corporations that regularly handle consumers’ sensitive financial information.

The FFIEC is an interagency body empowered by the Federal Reserve, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency and Consumer Financial Protection Bureau to make recommendations promoting uniformity in the supervision of financial institutions. It is responsible for developing standardized reporting systems for federally supervised financial institutions. The Council also conducts training programs for federal and state examiners.

While the FFIEC does not endorse any single approach, it encourages financial institutions to take advantage of the following standardized industry tools for cybersecurity preparedness self-assessments:

The Council mentions in its press release that adopting standardized approaches like these allow members to better track their progress over time and share best practices with other financial institutions and regulators.

Read the FFIEC’s full press release here.

New fintech banking tools

The Conference of State Bank Supervisors (CSBS) has launched three new online tools that will help real estate industry licensees understand their controlling regulatory schemes and protect against cybersecurity attacks. These include:

  • a State Regulatory Guidance Portal to help nonbank financial services companies like individual MLOs and real estate agents quickly locate their governing state agency or department’s webpages;
  • an interactive map listing agent-of-the-payee exemptions for money transmitters; and
  • Cybersecurity 101, a straightforward cybersecurity resource guide for financial sector executives of both banks and nonbanks, essential for any real estate professional handling sensitive information.

These tools are part of CSBS Vision 2020, an initiative to modernize state regulation of nonbank financial companies. They are designed to garner greater understanding between and regulators and financial institutions.

Suspicious DBO emails

Speaking of cybersecurity, several employees of licensees reported to the DBO suspicious emails with the return address of the Department Examiner on August 30, 2019. An internal investigation revealed the emails contained a link to a possible phishing website or malicious software.

The DBO concluded the emails were sent from someone outside the Department and were written to trick recipients into believing they were legitimate communications. For more information on phishing scams, review the Federal Trade Commission’s guide on recognizing and avoiding this type of fraud.

A consumer alert by the DBO on this topic warns consumers not to open suspicious emails from the DBO. When in doubt, contact ask.dbo@dbo.ca.gov to verify a DBO correspondence’s legitimacy.

Check back next month for October’s DBO bulletin digest. As always, you can read the full DBO bulletin on their website.