A&B Abstract:
In an effort to position itself as the “Regulator of the Future,” the New York State Department of Financial Services (“NYDFS”) recently launched the Research and Innovation Division, which will be responsible for ensuring that the NYDFS keeps pace with the rapid changes in all sectors of the financial services industry.
Earlier this year, the NYDFS announced the creation of two other divisions, Consumer Protection & Financial Enforcement Division and the Cybersecurity Division of the NYDFS. We addressed those developments in a previous post.
Creation of the Division
On July 23, 2019, Linda A. Lacewell, the Superintendent of the New York State Department of Financial Services (“NYDFS”), announced the establishment of a new Research and Innovation Division (“Division”). Superintendent Lacewell remarked; “The financial services regulatory landscape needs to evolve and adapt as innovation in banking, insurance and regulatory technology continues to grow. This new division … position[s] the DFS as the regulator of the future, allowing the [NYDFS] to better protect consumers, develop best practices, and analyze market data to strengthen New York’s standing as the center of financial innovation.”
Division Responsibilities
Superintendent Lacewell established the Division so that New York “remains the jurisdiction of choice for innovators.” The Division is tasked with supporting internal transformation and market innovation. Importantly, the Division will be responsible for:
- Licensing and supervising virtual currencies;
- Assessing new efforts to use technology to address financial exclusion;
- Identifying and protecting consumer data rights; and
- Encouraging innovations in the financial services marketplace to preserve New York’s competitiveness as a financial innovation hub.
Division Leadership
Along with the creation of the Division, Superintendent Lacewell announced several leadership appointments within the Division. Matthew Homer will lead the Division as Executive Deputy Superintendent. Prior to this appointment, Mr. Homer was the Head of Policy and Research at Quovo, a New York fintech company providing open banking functionality for the financial services ecosystem, leading up to the company’s acquisition by fintech company Plaid, where he has worked since. Matthew Siegel and Olivia Bumgardner will be Deputy Superintendents of the Division. Mr. Siegel most recently served as a Trial Attorney in the Antitrust Division of the U.S. Department of Justice. Ms. Bumgardner is currently Director of Research for the NYDFS. She has served as an economist responsible for the analysis of the NYDFS’ most complicated financial transactions and a leader of the NYDFS’s key initiatives relative to virtual currency, cybersecurity and financial inclusion. Andrew Lucas will serve as Counsel to the division. Previously, Mr. Lucas served as the Director of the NYDFS’s Department of Financial Innovation.
Takeaway
The creation of the Division marks a substantial change in the NYDFS’s relationship with rapidly evolving financial services technology companies. We believe that this will impact such companies that do business in New York, particularly those seeking BitLicenses with the NYDFS. We are actively monitoring the development of the Division, and are hopeful that this results in more favorable treatment of fintech companies by the NYDFS.