Monthly Bulletin – May 2023
Volume 10, Number 10
DFPI Review of Silicon Valley Bank Oversight and Regulation
On May 8, the DFPI released its Review of DFPI’s Oversight and Regulation of Silicon Valley Bank (SVB). The report summarizes DFPI’s supervision of SVB and reviews the circumstances that led to the failure of the bank. Findings include:
- SVB was slow to remediate regulator-identified deficiencies; and regulators did not take adequate steps to ensure the bank resolved problems as fast as possible.
- Recent rising interest rates led to SVB’s startup deposits decreasing and its investments losing value, contributing to liquidity challenges.
- SVB’s unusually rapid growth was not sufficiently accounted for in risk assessments.
- SVB’s high level of uninsured deposits contributed to the bank run; and
- Digital banking technology and social media accelerated the volume and speed of the run on SVB and contributed to its ultimate collapse.
Contents
The report also outlines next steps for DFPI to improve its supervision of state-chartered banks for the future.
Through the report, the DFPI seeks to provide information for policymakers and stakeholders that may help to prevent future bank failures. In the interest of transparency, this report includes confidential supervisory information (CSI) about SVB, including summaries of examination reports, supervisory letters, and ratings downgrades, so that policymakers and the public are fully informed about the circumstances leading to the demise of SVB.
DFPI Takes Possession of First Republic Bank
On May 1, the DFPI announced that regulators had taken possession of First Republic Bank. The DFPI took action pursuant to California Financial Code section 592, subdivisions (b) and (c), specifically “conducting its business in an unsafe or unsound manner” and being in a “condition that … is unsafe or unsound” to transact banking business.
The DFPI appointed the Federal Deposit Insurance Corporation (FDIC) as receiver of First Republic Bank. The FDIC has accepted a bid from JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all deposits, including all uninsured deposits, and substantially all assets of First Republic Bank.
As of April 13, 2023, First Republic Bank, based in San Francisco, had total assets of approximately $229.1 billion and total deposits of approximately $103.9 billion. Its deposits are federally insured by the FDIC subject to applicable limits.
DFPI Takes Action Against AI Investment Scams
On Apr. 19, the DFPI announced desist and refrain orders against five entities to stop fraudulent investment schemes tied to artificial intelligence (AI).
The orders find that the named entities and individuals violated California securities laws by offering and selling unqualified securities and making material misrepresentations and omissions to investors. The entities solicited funds from investors by claiming to offer high yield investment programs (HYIP) that generate incredible returns by using AI to trade crypto assets. As part of their solicitations, they used multi-level marketing schemes that reward investors for recruiting new investors.
These orders continue the DFPI’s crackdown on HYIPs, programs that use social media and influencers to quickly raise hype about the promised returns and low risk of the investment, then the operators quickly disappear leaving investors with no recourse to retrieve their money. The DFPI website has more information about HYIPs:
DFPI Settlement With Robinhood Financial
On Apr. 6, the DFPI announced that it joined a multi-state settlement with Robinhood Financial LLC, which will pay up to $10.2 million in penalties for operational and technical failures that harmed main street investors.
The settlement stems from a North American Securities Administrators Association (NASAA) investigation spearheaded by state securities regulators from Alabama, Colorado, California, Delaware, New Jersey, South Dakota, and Texas regarding Robinhood’s operational failures with respect to the retail market.
BDIA Online Examination due May 19
The Broker-Dealer / Investment Adviser (BDIA) Division is continuing an annual online examination for certain registered Investment Advisers, in accordance with DFPI’s authority under California Corporations Code Section 25241, subdivision (c). This mandatory examination consists of an online examination for Investment Advisers registered with the DFPI, who have their principal place of business in another state.
The online examination for this year began on April 3. Selected advisory firms were notified on April 3 that they are required to complete and submit the online examination by May 19, 2023. The Division is structuring the exam to be conducted on this population on a four-year cycle. However, an Investment Adviser may be selected for a future examination sooner or later than the estimated four-year cycle.
To communicate regarding the online examination, as well as any follow-up communication, the Division is using the Investment Adviser email address as disclosed on the current Form ADV. If you have any questions or inquiries, please contact the Division at CADFPIexams@dfpi.ca.gov.
Debt Collection Advisory Committee – New Members
The Debt Collection Advisory Committee advises Commissioner Clothilde V. Hewlett on matters related to the debt collection business, including proposed fee schedules and other requirements. As the first 2-year term (2021-2023) comes to a close a new committee has been appointed for the 2023-2025 term.
The committee members were appointed by Commissioner Hewlett for a two-year term according to Financial Code Section 100025 as of 5/1/2023. This diverse group includes representatives from the debt collection, debt-buying, third-party collection, and collection law industries:
- Angela Reed-Becker – Equabli Inc.
- Cindy Yaklin – States Recovery Systems Inc.
- Desiree Nguyen Orth – East Bay Community Law Center
- Kali Miller – OPTNSVC Mexico (Oportun, Inc.)
- Robert Tavelli – Tavelli Co., Inc.
- Scott Hyman – Severson & Werson
- Sean Welch – P & B Capital Group, LLC
The first meeting with the newly appointed committee took place virtually on May 1, 2023. This meeting was open to the public and led by Commissioner Clothilde Hewlett and Deputy Commissioner Melinda Lee.
To learn more about the Debt Collection Advisory Committee, and for prior meeting recordings, please visit: https://dfpi.ca.gov/dfpi-debt-collection-advisory-committee.
Fourth Round of CalMoneySmart Grants to Support Financial Education
On April 24, the DFPI announced it has begun accepting applications for CalMoneySmart grants to support financial education and empowerment programs for unbanked and underbanked consumers in the state of California. This is the fourth year of grant funding. Last year, the program awarded nearly $2 million to twelve nonprofit organizations serving 27 counties across the state.
Organizations that support at-risk individuals to achieve economic self-sufficiency and build wealth are encouraged to apply. All CalMoneySmart applications must be submitted by May 26, 2023. The DFPI expects to announce the 2023-24 grantees in August.
Information for prospective CalMoneySmart applicants and a link to application can be found at https://dfpi.ca.gov/calmoneysmart. For questions, comments, or help, please contact grants@dfpi.ca.gov.
Learn more about the accomplishments of grantees for the 2021-22 cycle in the recently published CalMoneySmart Annual Report.
DFPI to Host Free Military and Veterans Financial Education and Resources Webinar
In honor of National Military Appreciation Month, the DFPI is hosting a Military and Veterans Financial Education and Resources webinar on May 24, at 12 pm.
In partnership with the U.S. Department of Veteran Affairs (VA), CalVet, and the Sacramento County Veteran’s Service Office, this webinar will provide financial education, information, and other resources available to California military service members, veterans, and their families.
To learn more and register for this free webinar, please visit https://tinyurl.com/webinar5242023.
DFPI Californians with Student Loans Webinar on June 6
On June 6, the DFPI will host a webinar with updates about available student loan initiatives, including Public Service Loan Forgiveness (PSLF), the Income-Driven Repayment (IDR) Adjustment, and the Fresh Start program. DFPI’s Student Loan Ombudsperson Celina Damian will provide the latest updates, valuable resources, and answers questions.
For more information, including how to register, to Student Loans: What to Expect in 2023 – PSLF Forgiveness, Income Driven Repayment, and Fresh Start Program.
For videos of past student loan workshops, visit the DFPI “Californians with Student Loans” playlist set up on our YouTube Channel: https://www.youtube.com/playlist?list=PL9JLpvE-qjAYszf6F2mQdF1LSz-YP3RPi.
LICENSEE ACTIVITY
Bank Activity
Acquisition of Control
West Coast Community Bancorp, to acquire control of Santa Cruz County Bank
Filed: 3/23/23
Approved: 4/5/23
Change of Name
Fresno First Bank, to change its name to FFB Bank
Effected: 3/10/23
Premium Finance Company Activity
New Premium Finance Company
Ethos Premium Financing, Inc.
660 Newport Center Drive, Newport Beach
Filed: 4/18/23
Southern Transportation Finance, Inc.
253 Whigham Dairy Road, Bainbridge, Georgia
Approved: 4/14/23
Acquisition of Control
Roberson Family Trust to acquire 100% control of Snowcrest Funding, Inc.
Filed: 12/20/22
Approved: 4/18/23
Credit Union Activity
Merger
North County Credit Union, San Diego to merge with and into BluPeak Credit Union, San Diego
Filed: 3/20/23
Pacific Transportation Federal Credit Union, Gardena, to merge with and into Credit Union of Southern California, Anaheim
Approved: 4/01/23
Effected: 4/01/23
Printing Industries Credit Union, Riverside, to merge with and into Credit Union of Southern California, Anaheim
Approved: 4/01/23
Effected: 4/01/23
Money Transmitter Activity
Acquisition of Control
AFX HoldCo Corp. to acquire control of AscendantFX Capital USA, Inc.
Approved: 4/24/23
CLOTHILDE V. HEWLETT Commissioner, Department of Financial Protection and Innovation
The May 2023 Monthly Bulletin covers the month ended April 30, 2023.
It is issued pursuant to Financial Code section 376.
The Monthly Bulletin is available at no charge via e-mail.
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