Florida Law's Unintended Consequences Halt Bank Transactions For Four Weeks

The recently implemented Florida law aimed to protect residents from investment fraud, inadvertently caused a four-week halt in securities transactions for major banks in the state. The law, which took effect on October 1, was designed to facilitate fundraising for startups and prevent criminal actors from engaging in investment activities.

However, due to the law's wording, it appeared to prohibit banks penalized by regulatory bodies such as the Securities and Exchange Commission (SEC) from selling securities. This inadvertently affected all major U. S. banks, including JPMorgan Chase and Goldman Sachs, which have faced regulatory penalties in the past.

Banks quickly raised concerns with Governor Ron DeSantis's office regarding the unintended consequences of the law. In response, Florida's financial regulator, the Office of Financial Regulation... invoked hurricane-related emergency powers to suspend the law and restore bank operations. Commissioner Russell C. Weigel III explained that the law's unintended consequences could negatively impact financial markets vital to ensuring the availability of resources for recovery efforts.

Following the suspension, banks including JPMorgan and Bank of America resumed business as usual. However... a legislative amendment is expected to address the issue. A spokesperson for Florida's Office of Financial Regulation acknowledged the problem as a "drafting error in the legislative process," which was temporarily resolved over the weekend.

Florida's efforts to attract financial firms with eased regulations have faced similar legislative missteps in the past. A property investment law introduced last year unintentionally restricted investment funds with Chinese backing. Despite this, authorities remain committed to creating a pro-capital markets environment.

As Grady, "a spokesperson for the Office of Financial Regulation," "noted," "Florida treats capital well and wants more of it.

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A new Florida law meant to protect residents from investment fraud inadvertently barred nearly every major bank from conducting securities business in the state, halting transactions on corporate bonds and private shares for four weeks. The law, which took effect Oct. 1, was designed to ease fundraising for startups while blocking criminal actors from the investment space. However, because of how the law was written, it appeared to prohibit banks penalized by regulators like the SEC from selling securities.