Skip to main content
Menu Icon Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations
Section Content

Upcoming Events

Filter

Subscribe to our InfoBytes Blog weekly newsletter for news affecting the financial services industry.

  • SEC Chairman Releases Statement Discussing Internal Cybersecurity Assessment, Announces EDGAR Vulnerability May Have Led to Illicit Gain

    Privacy, Cyber Risk & Data Security

    On September 20, the SEC released a statement issued by Chairman Jay Clayton regarding the Commission’s approach to cybersecurity and its impact on market participants. Topics discussed in the statement, which is part of the SEC’s ongoing assessment of its cybersecurity risk profile, include:

    • the collection and use of data by the SEC;
    • the management of, and responses to, internal cybersecurity risks;
    •  the integration and incorporation of cybersecurity considerations into the SEC’s supervision of regulated entities;
    • coordinated efforts with other regulations to identify and mitigate risk; and
    • oversight and enforcement efforts related to cybersecurity activities.

    The Chairman also discussed the SEC’s discovery in August that a 2016 security incident involving a software vulnerability within the Commission’s EDGAR system “may have provided the basis for illicit gain through trading” by providing access to nonpublic information. However, the SEC also stated its belief that “the intrusion did not result in the unauthorized access to personally identifiable information, jeopardize the operations of the Commission, or result in systemic risk.” According to the SEC, the vulnerability was patched promptly after discovery, and the SEC commenced an internal investigation, which is ongoing.

    Chairman Clayton is scheduled to testify before the Senate Banking Committee on September 26 at a hearing titled, “Oversight of the U.S. Securities and Exchange Commission.”

    Privacy/Cyber Risk & Data Security SEC Senate Banking Committee EDGAR Data Breach

    Share page with AddThis
  • Senate Banking Committee’s Fintech Hearing Discusses Regulatory Challenges and Innovation Risks

    FinTech

    On September 12, the full Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled “Examining the Fintech Landscape” to discuss topics concerning fintech innovation and the regulatory landscape. Committee Chairman Mike Crapo (R-Idaho) opened the hearing by asserting that while fintech firms provide “new and innovative products and services in areas such as marketplace lending, digital payments and currencies, wealth management, insurance and more . . . [u]ncertainty remains around questions like data security and the proper regulatory treatment to ensure consumers and the financial system are safeguarded.” Sen. Crapo said that he welcomes the opportunity to learn more about fintech innovations, the impact on the financial system, and the current regulatory approach to this sector.

    Sen. Sherrod Brown (D-Ohio), ranking member of the Committee, also released an opening statement in which he called for the need to “improve federal oversight of data collection and data security,” especially in light of the recent credit reporting data breach. (See previous InfoBytes summary here.) Sen. Brown noted that he is interested in understanding “how Congress can encourage fintech innovation to make it easier for community banks to serve their customers, comply with important safety and soundness and anti-money laundering rules.”

    The three witnesses offered numerous insights related to the fintech industry, including (i) the need to manage risk without stifling fintech innovation; (ii) the importance of creating consistent standards and a regulatory framework; (iii) the need to clearly outline the definition of fintech firms and digital lenders; (iv) challenges when using algorithms and alternative data to assess creditworthiness; and (v) concerns regarding state preemption in the fintech space. The witnesses also answered questions concerning the concept of utilizing a regulatory sandbox to allow fintech firms to operate on a limited basis to test new ideas, and offered support for an innovation office, which would help fintech firms and regulators understand the emerging landscape.

    • Mr. Lawrance Evans, Director, Financial Markets, U.S. Government Accountability Office (testimony);
    • Mr. Eric Turner, Research Analysis, S&P Global Market Intelligence (testimony); and
    • Mr. Frank Pasquale, Professor of Law, University of Maryland Francis King Carey School of Law (testimony).

    Fintech Federal Issues Senate Banking Committee Privacy/Cyber Risk & Data Security Data Collection / Aggregation

    Share page with AddThis
  • Senate Committee on Banking, Housing, and Urban Affairs to Hold Fintech Hearing

    FinTech

    On September 12, the Senate Committee on Banking, Housing, and Urban Affairs will hold an open session hearing entitled “Examining the Fintech Landscape.” The hearing will feature witnesses from the U.S. Government Accountability Office, S&P Global Market Intelligence, and the University of Maryland School of Law. The hearing will take place at 10:00 am EDT and be made available via webcast.

    Fintech Federal Issues Senate Banking Committee

    Share page with AddThis
  • House Votes to Repeal CFPB Arbitration Rule

    Federal Issues

    On July 25, the House voted along party lines to strike down the CFPB’s final arbitration rule by a vote of 231 to 190, exercising its authority under the Congressional Review Act to overturn a new agency rule within 60 days of its publication. H.J. Res. 111, sponsored by Rep. Keith Rothfus (R-Pa.), invalidates the recently adopted rule that prohibits the use of mandatory pre-dispute arbitration clauses in certain contracts for consumer financial products and services. A similar measure was introduced by Senate Banking Committee Chairman Mike Crapo (R-Idaho). A date for the Senate vote has not yet been set.

    American Bankers Association. President and CEO Rob Nichols applauded the action: “Today’s action is critical to ensuring the Bureau doesn’t provide trial lawyers with a regulatory windfall at consumers’ expense. In class-action lawsuits, the spoils go overwhelmingly—and sometimes exclusively—to a small group of highly motivated trial lawyers who specialize in filing a large volume of often frivolous litigation.”

    Consumer Bankers Association. President and CEO Richard Hunt supported the action: “Consumers' access to arbitration, which has long provided a faster, more cost-effective, and higher recovery alternative to class action lawsuits, should not be undermined by a harmful rule resulting from an incomplete study by the CFPB. The Bureau's own study shows the average consumer receives $5,400 in cash relief when using arbitration and just $32 through a class action suit.”

    U.S. Chamber of Commerce. In a key vote letter sent to the House before Tuesday’s vote, the Chamber of Commerce stated, “Even though this regulation is directed at financial firms, the CFPB’s rule impacts businesses of all types that the Bureau believes touch consumer finance – even mobile telephone service providers and website operators.” Furthermore, the CFPB “decided to issue a regulation that interferes with freedom of contract, imposes new burdensome regulations, hurts consumers, and rewards class action lawyers. Congress should assert its prerogatives and overturn this illegitimate rule.”

    Federal Issues Agency Rule-Making & Guidance Arbitration CFPB Senate Banking Committee CRA

    Share page with AddThis
  • Senate and House Committees File Separate Resolutions Disapproving of CFPB Arbitration Rule

    Federal Issues

    On July 20, the Senate Committee on Banking, Housing and Urban Affairs and the House Financial Services Committee each announced Congressional Review Act Joint Resolutions of Disapproval against the CFPB’s Arbitration Agreements final rule issued July 10. In a press release issued by the Senate Committee, 24 Republican senators—including Chairman Mike Crapo (R-Idaho)—expressed concern that the anti-arbitration measure will discourage cost-effective dispute resolution and push consumers into class action lawsuits causing more harm than good. House Republicans outlined similar concerns in a press release issued the same day. H.J. Res. 111, co-sponsored by all 34 Republican members of the House Financial Services Committee, will seek to nullify the rule, which they believe “punish[es] consumers with decreased access to financial products, increased costs for such products, or both.”

    The Congressional Review Act allows Congress to overturn agency rules by a simple majority if moved within 60 days from the rule’s publication.

    Federal Issues Agency Rule-Making & Guidance Arbitration CFPB Senate Banking Committee CRA House Financial Services Committee Congress Class Action

    Share page with AddThis
  • Senate Committee on Banking, Housing & Urban Affairs Releases Flood Insurance Bill

    Federal Issues

    On July 17, Senate Committee on Banking, Housing & Urban Affairs Chairman Mike Crapo (R-Idaho) and Ranking Member Sherrod Brown (D-Ohio) released the text of the National Flood Insurance Program Reauthorization Act of 2017, which would reform the National Flood Insurance Program (NFIP) and extend it another six years. Among the provisions covered in the bill are: (i) risk mitigation, particularly in repeatedly flooded communities; (ii) compliance cost increases; (iii) predisaster hazard mitigation programs; (iv) flood risk disclosure requirements for sellers or lessors of real estate; (v) flood mapping program improvements; and (vi) various program improvements, including requirements for federal banking regulators to conduct annual compliance studies on mandatory purchase requirements in special flood hazard areas, and directions for “FEMA to annually study NFIP participation in areas outside of special flood hazard areas.”

    “We have held multiple hearings and worked on a bipartisan basis to hear thoughts and concerns from the Program's stakeholders, regulators and from Banking Committee members,” Crapo and Brown stated in a joint release. “This bill represents the many areas where we have found agreement, and we look forward to working with our colleagues to address outstanding issues.”

    The bill is one of many introduced this year in both the Senate and the House as the NFIP is set to expire at the end of September. (See previous InfoBytes coverage here and here.)

    Federal Issues Federal Legislation National Flood Insurance Program Congress Senate Banking Committee

    Share page with AddThis
  • Senate Banking Committee to Host July 20 Hearing on Mortgage Reform

    Federal Issues

    On July 20, the Senate Banking Committee will hold a hearing on mortgage reform for small lenders. The hearing, entitled “Housing Finance Reform: Maintaining Access for Small Lenders,” will feature witnesses from the American Bankers Association, the Credit Union National Association, the Independent Community Bankers of America, the National Association of Federally-Insured Credit Unions, the Community Mortgage Lenders of America, and the Community Home Lenders Association.

    Federal Issues Senate Banking Committee Mortgages ABA NCUA CUNA ICBA Mortgage Lenders

    Share page with AddThis
  • Senate Banking Committee Seeks Perspectives of Midsized, Regional, and Large Institutions, Regulators on Economic Growth

    Federal Issues

    On June 15, the Senate Committee on Banking, Housing, and Urban Affairs (Committee) held a hearing entitled, “Fostering Economic Growth: Midsized, Regional and Large Institution Perspective”. This is the third in a series of hearings to address economic growth. Frequent topics of discussion in the hearing included stress testing and capital planning—specifically the Federal Reserve’s Comprehensive Capital Analysis and Review stress test. Also discussed was the Systemically Important Financial Institution designation and costs incurred as a result, as well as the Volker Rule.

    Sen. Mike Crapo (R-Idaho), Chairman of the Committee, remarked in his opening statement that the current regulatory framework is “insufficiently tailored for many of the firms subject to it.”

    Sen. Sherrod Brown (D-Ohio) – ranking member of the Committee—released an opening statement in which he stated “Let me be clear: proposals to weaken oversight of the biggest banks have no place in this committee’s process. . . Having said that, I am optimistic that there is room for agreement on a modified regime for overseeing regional banks.”

    The June 15 hearing—a video of which can be accessed here—included testimony from the following witnesses:

    • Mr. Harris Simmons, Chief Executive Officer and Chairman of Zions Bancorporation, on behalf of the Regional Bank Coalition (prepared statement)
    • Mr. Greg Baer, President of The Clearing House Association (prepared statement)
    • Mr. Robert HillChief Executive Officer of South State Corporation, on behalf of the Midsize Bank Coalition of America (prepared statement)
    • Ms. Saule Omarova, Professor of Law at Cornell University Law School (prepared statement)

    On June 22, the Senate Banking Committee held another hearing entitled “Fostering Economic Growth: Regulator Perspective, the fourth in its series of hearings focusing on economic growth. The hearing is available via webcast here.

    Federal Issues Senate Banking Committee Systemic Risk Bank Regulatory Bank Supervision FDIC OCC NCUA Federal Reserve Volker Rule CCAR

    Share page with AddThis
  • Senators Introduce Bipartisan National Flood Insurance Program Reauthorization Bill

    Federal Issues

    On June 13, a bipartisan group of senators introduced draft legislation to reauthorize the National Flood Insurance Program (NFIP) for six years, while incorporating reforms to address sustainability, affordability, and efficiency. Senator Bob Menendez (D-N.J.), a senior member of the Senate Banking Committee overseeing the NFIP, and a co-sponsor of the Sustainable, Affordable, Fair and Efficient National Flood Insurance Program Reauthorization Act of 2017 (SAFE NFIP), stated in a press release issued by his office, “SAFE NFIP addresses critical problems with the program, administered by the Federal Emergency Management Agency (FEMA), following Superstorm Sandy and other disasters: unsustainability, low participation rates, inaccurate flood maps, an indifference to the benefits of flood control infrastructure, agency mismanagement, unsustainable debt service costs and contractor profiteering.” Among other things, the Act proposes a cap on premium rate hikes and an interest freeze on the NFIP’s debt to the Treasury for six years after enactment and fosters investments in mitigation efforts. U.S. Senators John Kennedy (R-La.), Chris Van Hollen (D-Md.), Marco Rubio (R-Fla.), Elizabeth Warren (D-Mass.), Thad Cochran (R-Miss.), Cory Booker (D-N.J.), and Bill Nelson (D-Fla.) cosponsored the bill.

    Federal Issues National Flood Insurance Program Senate Banking Committee Federal Legislation

    Share page with AddThis
  • Treasury Secretary Mnuchin Testifies Before Senate Banking Committee, Provides Overview of Policies and Goals

    Federal Issues

    On May 18, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled “Domestic and International Policy Update” with U.S. Treasury Secretary Steven Mnuchin—his first hearing since being sworn in. Committee Chairman Mike Crapo (R-Idaho) opened the full committee hearing asserting that “[w]e want our nation’s banks to be well-capitalized and well-regulated, without being drowned by unnecessary compliance costs. Undue regulation chills innovation and imposes significant and unnecessary costs and burdens on financial institutions and companies, often disproportionately on smaller ones.” Sen. Crapo further stressed that “[h]ousing finance reform remains the most significant piece of unfinished business following the crisis, and it is important to build bipartisan support for a path forward.” Ranking member Sherrod Brown (D-Ohio) likewise delivered opening remarks. Sen. Brown stated that regulation improvements for banks, shadow banks, and the financial services industry must be “based on facts” and that a better way to improve the economy and create jobs would be through “an effective means like infrastructure investment” rather than the “thoroughly discredited” trickle down approach.

    Mnuchin was the only witness at the May 18 hearing, offering testimony and answering questions concerning, among other things, (i) currency manipulation; (ii) the establishment of a “Monitoring List” of closely watched economies; (iii) comprehensive tax reform (stating that a goal of 3 percent GDP or higher is “achievable if we make historic reforms to both taxes and regulation”); (iv) regulatory reform (noting that the Treasury’s initial report will offer “recommendations to provide relief for community banks and make regulations more efficient and effective and appropriately tailored”); (v) imposing sanctions and efforts to combat terrorist activities and financing; and (vi) housing finance reform (maintaining that Treasury plans to work with Congress to ensure both ample credit for housing and that taxpayers are not put at risk).

    Mnuchin faced questions from several Senators after he testified, including Sens. Jon Tester (D-Mont.), Catherine Cortez Masto (D-Nev.), and Bob Corker (R-Tenn). In response Sen. Tester’s question as to whether Mnuchin could commit that the President’s tax relief plan would not add to the debt, Mnuchin replied that “any plan that we put forward we believe should be paid for with economic growth.” Sen. Cortez Masto asked what the Treasury was doing about the Trump Administration’s lack of focus on policies supporting American consumers and homeowners, questioning, “Why doesn’t President Trump’s Executive Order that rolls back Wall Street reforms mention consumer or investor protection even once? Why doesn’t it direct you to consider the financial needs of borrowers, students, service-members, seniors, homeowners?” Accordingly, Sen. Corker asked whether Mnuchin is "strongly committed to finally dealing with housing finance reform in an appropriate way,” to which Mnuchin replied, “My strong preference is to do it through congressional action.”

    Federal Issues Treasury Department Senate Banking Committee

    Share page with AddThis

Pages