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  • Former DOJ Fraud Compliance Counsel Resigns, Criticizes President

    Financial Crimes

    Hui Chen, formerly Compliance Counsel Expert in the DOJ Fraud Section, is speaking out about the reasons for her May 2017 resignation, which she has attributed to unacceptable conduct by the President and his Administration. Chen was hired by DOJ in November 2015 after serving as Global Head for Anti-Bribery and Corruption and Standard Chartered Bank. She was the first lawyer to hold this position at the DOJ.

    In a June 25 LinkedIn post, Chen unleashed several criticisms against the President, including regarding lawsuits, conflicts of interest, and ongoing investigations. She said that she would “not tolerate” those conducts in a company, but “worked under an administration that engaged in exactly those conduct.” Chen further elaborated on her criticisms in a July 4, 2017 interview with CNN, stating that the firing of FBI James Comey tipped the scales in favor of resignation. 

    The DOJ had previously posted an opening to hire a new Compliance Counsel, but that listing has now expired. It is not clear if anyone has been hired to replace Ms. Chen.

    Financial Crimes DOJ Trump Fraud

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  • President Issues Executive Order Directing Agencies to Focus on Cybersecurity

    Federal Issues

    On May 11, the Trump Administration issued an Executive Order, directing federal agencies to increase their efforts to mitigate cyber risks. The order, entitled “Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure,” mandates that agencies follow the National Institute of Standards and Technology’s Framework for Improving Critical Infrastructure Cybersecurity to manage cybersecurity risk. Among other things, the EO tasks agency heads with submitting a risk management report to the Department of Homeland Security and the OMB within 90 days. In addition, the order also directs defense agencies, the office of the Attorney General and the FBI, to provide the White House with recommendations on how to improve cybersecurity standards among critical infrastructure industries. Notably, the EO includes the financial services industry in its list of critical infrastructure industries. The report is due in 180 days.

    Federal Issues Privacy/Cyber Risk & Data Security Trump Executive Order

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  • DOL Extends Fiduciary Rule Applicability Date by 60 Days

    Securities

    On April 4, the U.S. Department of Labor (DOL) issued a 60-day extension of the applicability dates of its “Fiduciary Rule”—a 2016 final rule expanding the definition of who qualifies as a “fiduciary” under ERISA and the Internal Revenue Code. The rule treats persons who provide investment advice or recommendations for a fee or other compensation with respect to assets of a plan or IRA as fiduciaries in a wider array of “advice relationships.” The extension also delays (by 60 days) the applicability of certain prohibited transaction exemptions. Accordingly, exemptions such as the “Best Interest Contract Exemption” and the “Principal Transaction Exemption” will become applicable on June 9, 2017. In its press release announcing the issuance of the final rule, the DOL noted, among other things, that the extensions are necessary to enable the DOL to perform the examination of the fiduciary rule directed by the President in his February 3 Presidential Memorandum (see previously posted InfoBytes summary regarding February 3 memo) to consider possible changes with respect to the fiduciary rule and related Prohibited Transaction Exemptions based on new evidence or analysis developed pursuant to the examination.   

    The 60-day extension was published in the Federal Register on April 7. As previously covered on InfoBytes, the DOL has released two sets of “frequently asked questions” about the Fiduciary Rule.

    Securities Department of Labor DOL Fiduciary Rule Trump

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  • Congress Approves Joint Resolution to Repeal FCC’s Broadband Privacy Rules, Signed into Law by President Trump

    Privacy, Cyber Risk & Data Security

    On April 3, President Trump signed into law a measure (S.J.Res. 34) rescinding the new Federal Communications Commission (FCC) broadband privacy rules related to Internet service providers (ISPs). As previously covered on InfoBytes, the privacy rules—passed last year in a 3-2 party-line vote under former Democratic FCC Chairman Tom Wheeler—require, among other things, that ISPs receive express consent from users concerning the use of their personal data for marketing purposes. FCC Chairman Ajit Pai has taken the position that the new FCC regulations are inconsistent with the Federal Trade Commission’s (FTC) framework. The rules had been partially stayed by the FCC in response to multiple reconsideration petitions. Approved last week in the Senate by a 50-48 margin, and subsequently passed by a 215-205 House vote, S.J.Res. 34 was sent to President Trump on Friday for his signature. The President signed the joint resolution into law on Monday evening, thereby repealing the FCC regulations pursuant to the Congressional Review Act, 5 U.S.C. §§ 801-808. Notably, per the language of the resolution—which was originally introduced by Sen. Jeff Flake (R-AZ) in early March—the FCC is also prohibited from re-issuing new rules without the passage of a new law authorizing them.

    Privacy/Cyber Risk & Data Security FTC FCC Trump

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  • President Trump Releases Budget Plan Proposal; HUD and Treasury Among Many Who Would Face Significant Cuts

    Federal Issues

    On March 16, the White House released its budget blueprint America First: A Budget Blueprint to Make America Great Again, which sets forth the President’s discretionary funding proposals in advance of the “full Budget”—scheduled for release later this spring. Among the many agencies and programs that would experience substantial cuts under the President’s budget are both the Department of Housing and Urban Development and the Department of the Treasury.

    Department of Housing and Urban Development (“HUD”). For HUD, the President’s 2018 budget requests $40.7 billion in gross discretionary funding for HUD, which is a $6.2 billion or 13.2 percent decrease from the 2017 annualized continuing resolution level. The White House budget also proposes that: (i) funding be eliminated or redirected to the State and Local level for the Community Development Block Grant program, which the White House estimates would save $3 billion from 2017 levels; (ii) funding be eliminated for “lower priority programs,” which the White House says include “the HOME Investment Partnerships Program, Choice Neighborhoods, and the Self-help Homeownership Opportunity Program”; (iii) funding be eliminated or redirected to the State and Local level for Section 4 Capacity Building for Community Development and Affordable Housing (at an estimated savings of $35 million from 2017 levels); (iv) support be provided for “homeownership through provision of Federal Housing Administration mortgage insurance programs.”

    Dept. of the Treasury. And, as for Treasury, the White House is proposing that the Department be granted $12.1 billion in discretionary resources. This proposal represents a $519 million or 4.1 percent decrease from the 2017 levels. Specifically, the White House’s budget proposes to, among other things: (i) preserve key operations of the Internal Revenue Service (“IRS”) to ensure that “the IRS can continue to combat identity theft, prevent fraud, and reduce the deficit through the effective enforcement and administration of tax laws,” while diverting resources away from “antiquated operations” that still rely on paper-based reviews;  (ii) “strengthen cybersecurity in a Department-wide plan to strategically enhance existing security systems and preempt fragmentation of information technology management across the bureaus”; (iii) “prioritize funding for Treasury’s array of economic enforcement tools”; (iv) “eliminate funding for Community Development Financial Institutions Fund grants”; (v) “empower the Treasury Secretary, as Chairperson of the Financial Stability Oversight Council, to ‘end taxpayer bailouts and foster economic growth by advancing financial regulatory reforms that promote market discipline and ensure the accountability of financial regulators;’” and (vi) “shrink the Federal workforce” while increasing its efficiency by redirecting resources away from "duplicative" policy offices.

    In response to the proposed budget, Treasury Secretary Steven T. Mnuchin released the following statement:

    "President Trump’s discretionary budget plan released today focuses Treasury on our core missions of collecting revenue, managing the nation’s debt, protecting the financial system from threats, and combating financial crime and terrorism financing. It will ensure that we have the resources we need to enforce the nation’s tax laws, while investing in cybersecurity and prioritizing resources on initiatives that promote technology, efficiency and modernization across the agency."

    Federal Issues Trump Budget HUD Treasury Department

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  • Executive Order Calls for Agency Reorganization Plan

    Agency Rule-Making & Guidance

    On March 13, the Trump Administration issued an Executive Order calling for a reorganization of the executive branch to improve its efficiency, effectiveness, and accountability.  Specifically, the order, entitled “Comprehensive Plan for Reorganizing the Executive Branch,” mandates that Office of Management and Budget (“OMB”) Director Mick Mulvaney “propose a plan to reorganize governmental functions and eliminate unnecessary agencies (as defined in section 551(1) of title 5, United States Code), components of agencies, and agency programs.” In order to assist Director Mulvaney in this task, the head of each agency is required to—within 180 days—submit to the OMB director a proposed plan “to reorganize the agency, if appropriate, in order to improve the efficiency, effectiveness, and accountability of that agency.” 

    Notably, the order requires that the OMB Director seek public comment as to potential improvements in “the organization and functioning of the executive branch,” and requires that the OMB Director consider the comments received when formulating a proposed plan that must be submitted to the President 180 days after the deadline for agency submissions. The order also asks agencies to (as consistent with applicable law) consult with persons or entities outside of government with relevant expertise in organizational structure and management.

    Agency Rule-Making & Guidance Federal Issues Trump OMB

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  • White House Releases Proclamation Announcing National Consumer Protection Week

    Consumer Finance

    On March 9, President Trump issued Proclamation 9577 announcing March 5 through March 11 as National Consumer Protection Week 2017. The President “call[ed] upon government officials, industry leaders, and advocates to educate our citizens about the protection of personal information and identity theft through consumer education activities in communities across the country.” As previously covered in InfoBytes, several events have been planned nationally to educate and empower consumers.

    Consumer Finance Trump Consumer Education

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  • President Trump Hosts “National Economic Council” Listening Session with CEOs of Small and Community Banks

    Federal Issues

    On March 9, President Trump met with 11 community bank CEOs at the White House seeking the bankers’ input on which regulations may be crimping their ability to lend to consumers and small businesses. The meeting included representatives from the Independent Community Bankers of America (ICBA), and the American Bankers Association (ABA), as well as nine bank executives from across the country. Treasury Secretary Steven Mnuchin, National Economic Council Chairman Gary Cohn, and White House Chief of Staff Reince Priebus also were present.

    The President started the meeting by noting that “[n]early half of all private-sector workers are employed by small businesses” and that “[c]ommunity banks are the backbone of small business in America” before announcing his commitment to “preserving our community banks.” Following the President’s brief opening remarks, the attendees had the opportunity to introduce themselves and share specific examples of how excessive regulatory burdens affect their ability to serve their customers, make loans and create jobs at the local level. Proposals, such as the ICBA’s Plan for Prosperity, also were discussed.

    Following the meeting, ABA President and CEO Rob Nichols released a statement “commend[ing] President Trump for meeting with community bankers to hear the challenges they face serving their clients.” He described the meeting as “an important step” toward re-examining the “highly prescriptive rules” that have created a “regulatory environment” in which “mortgages don’t get made, small businesses don’t get created and banks find it more difficult to make the loans that drive job creation.” The ICBA also issued a post-meeting Press Release, in which their Chairman, Rebeca Romero Rainey, explained that among the items discussed at the meeting was the ICBA’s “Plan for Prosperity”—a “pro-growth platform to eliminate onerous regulatory burdens on community banks” that “includes provisions to cut regulatory red tape, improve access to capital, strengthen accountability in bank exams, incentivize credit in rural America and more.” The ICBA Chairman also confirmed that the Association “looks forward to continuing to work with President Trump, his administration and Congress to advance common-sense regulatory relief that will support communities nationwide.”

    Also weighing in was House Financial Services Committee Chairman Jeb Hensarling (R-TX), who issued a press release praising the President for “listening to the concerns of community bankers who have been buried under an avalanche of burdensome regulations as a result of Dodd-Frank.” Chairman Hensarling also took the opportunity to tout the Financial CHOICE Act, his bill that would make sweeping amendments to the Dodd-Frank Act. According to Chairman Hensarling, GOP members on the Financial Services Committee are “eager to work with the President and his administration this year to fulfill the pledge to dismantle Dodd-Frank and unclog the arteries of our financial system so the lifeblood of capital can flow more freely and create jobs.”

    Federal Issues Bank Regulatory Lending Congress Insurance House Financial Services Committee Trump ABA Dodd-Frank

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  • New DOJ Appointee Expresses Commitment to Enforcing the FCPA

    Financial Crimes

    In late January of 2017, President Donald Trump appointed Trevor N. McFadden as Deputy Assistant Attorney General in the U.S. Department of Justice Criminal Division, a position that includes oversight over the Fraud and Criminal Appellate Sections.  The Fraud Section is in charge of enforcing the FCPA, placing the former law firm Litigation and Government Enforcement partner, who also served as an Assistant U.S. Attorney and Counsel to the Deputy Attorney General, in a key role to determine the future of FCPA enforcement under the new administration.  On February 16, 2017, McFadden gave a speech at the Global Investigations Review Conference in which he proclaimed his dedication to the continued enforcement of the statute.  While McFadden’s comments reflect Attorney General Jeff Sessions’ recent promise to enforce the FCPA, they contrast with President Trump’s 2012 comments that the FCPA is a “horrible law” that “should be changed.”

    Above all, McFadden’s message was one of enforcement, enforcement, enforcement.  He commented that the law “has been vigorously enforced” over its 40-year history, efforts which have “steadily increased over time.”  McFadden specifically highlighted two important trends of this history of enforcement: transparency to businesses, and cooperation with foreign nations in the fight against corruption.  McFadden’s emphasis on the “utmost importance” of working with other countries also signaled a continued commitment to what he called “important anti-corruption conventions,” including “the OECD Anti-Bribery Convention, the United Nations Convention Against Corruption (NCAC), the Convention on Transnational Organized Crime (UNTOC), and several others.” 

    In looking to the future of FCPA enforcement, McFadden called the law’s continued “fight against official corruption [] a solemn duty of the Justice Department…regardless of party affiliation.”  He also emphasized that the Justice Department will continue to prioritize “individual accountability,” although he did comment that some people “may be unwittingly involved in facilitating an illegal payment under circumstances that do not merit criminal prosecution of the individual.”  Finally, McFadden expressed that a company’s “voluntary self-disclosures, cooperation, and remedial efforts” will “continue to guide our prosecutorial discretion determinations,” along with the “penalty reductions for companies that self-disclose, cooperate, and accept responsibility for their misconduct” provided for in the U.S. Sentencing Guidelines.  Interestingly, the only whiff of questioning past Justice Department approaches was McFadden’s mention of an upcoming review of the FCPA pilot program encouraging such company cooperation.  However, plans to re-evaluate the pilot program were already in place under the Obama administration, according to an article McFadden co-wrote with colleagues at his proir law firm in April of 2016.  Notably, McFadden’s article called the pilot program “a step forward in providing companies and their counsel with more transparent and predictable benefits for self-reporting, cooperating, and remediating FCPA misconduct.”

    Financial Crimes Trump FCPA

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  • Trump Administration Given March 17 Filing Date for Amicus Brief in PHH v CFPB; Requests to Intervene by Outside Organizations Denied by D.C. Circuit

    Consumer Finance

    On March 7, the U.S. Court of Appeals for the D.C. Circuit granted the United States’ unopposed motion, filed through the Office of the Solicitor General (“SG”), which requested an extension to file its amicus brief in PHH Corp. v. CFPB. Notably, amicus briefs supporting PHH must be filed by March 10 and those supporting the CFPB must be filed by March 31. The fact that the United States’ motion requested an extension until March 17—before the deadline for briefs supporting the CFPB—signals that the SG may present arguments supporting PHH that differ both from the CFPB and from the positions previously presented by the Obama Administration in briefing submitted on behalf of the United States back in December.

    As previously covered in InfoBytes, late last year the D.C. Circuit invited briefing by the SG’s office on behalf of the United States (note that the SG does not represent the CFPB; the Bureau is legally permitted to litigate on its own behalf.) The then Obama-led SG’s office took the position that the case should be reheard by the en banc court because, among other reasons, (i) the majority’s reasoning misapplied Supreme Court precedent on separation of powers issues and/or (ii) the panel majority should not have reached the constitutional issue. Now under the Trump Administration, the DOJ hinted that it may revise its positions with respect to both the constitutionality of the CFPB’s single-director-removable-only-for-cause structure, and, if it chooses, the merits of PHH’s argument that the Bureau’s RESPA interpretation was incorrect. Indeed, the short motion asserted, among other things, that “the views of the United States on matters involving the President’s removal power are not always entirely congruent with the views of independent agencies.”

    Also on March 7, the D.C. Circuit issued a separate order denying three pending “motions and alternative requests” seeking to intervene, or in the alternative, hold in abeyance requests to intervene submitted by the Democratic Ranking Members of the Senate and House Committees with jurisdiction over the CFPB, 16 State Attorneys General, a coalition of consumer interest groups, and two conservative advocacy groups working with State National Bank of Big Spring.

    Consumer Finance PHH v CFPB Courts CFPB U.S. Solicitor General Trump DOJ RESPA Mortgages Litigation

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