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.
The law effectively impacted all major U.S. banks, such as JPMorgan Chase and Goldman Sachs, which have faced some form of regulatory penalty.
Upon realizing the mistake, banks raised concerns with Governor Ron DeSantis's office, leading to an emergency suspension by Florida's financial regulator, the Wall Street Journal reported.
Commissioner Russell C. Weigel III invoked hurricane-related emergency powers to restore bank operations, noting the law's unintended consequences "could negatively affect financial markets that are vital to ensuring the availability of financial resources for recovery efforts."
Though banks, including JPMorgan and Bank of America, resumed business after the suspension, a legislative amendment is anticipated. A spokesperson for Florida's Office of Financial Regulation acknowledged the issue as a "drafting error in the legislative process," which they worked "over the weekend" to resolve temporarily, according to WSJ.
Florida, actively seeking to attract financial firms with eased regulations, has faced similar legislative missteps before, including a property investment law last year that unintentionally restricted investment funds with Chinese backing.
The law is not only notable for its unforeseen bank ban. Florida's former financial regulator, Tom Grady, said the bill's provision allowing advertisements for certain unregistered securities is unprecedented.
"The bill is meant to be pro-capital markets," Grady told WSJ. "Florida treats capital well and wants more of it."
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