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Financial Services Law Insights and Observations

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  • Hsu predicts CRA proposal in “not-too-distant” future

    On February 14, acting Comptroller of the Currency Michael J. Hsu announced that the OCC, Federal Reserve Board, and the FDIC plan to release a joint notice of proposed rulemaking for strengthening and modernizing the Community Reinvestment Act (CRA) in the “not-too-distant future.” Speaking before the National Community Reinvestment Coalition, Hsu stressed the importance of expanding financial access and inclusion for low- and moderate-income (LMI) communities, and explained that while banks have made substantial CRA investments in these communities, “significant disparities continue to exist in many LMI areas and are most prevalent for Black, Hispanic, and Native American communities and borrowers across our nation.” As previously covered by InfoBytes, the OCC’s 2020 final rule to modernize the CRA was formally rescinded in December to facilitate ongoing interagency work. Stating that the Fed’s September 2020 Advance Notice of Proposed Rulemaking on CRA modernization (covered by InfoBytes here) has served as the “basic framework” for current interagency discussions, Hsu outlined several overarching objectives including: (i) increasing levels of CRA activity to help persistent disparities, particularly in LMI communities, “to ensure that banks are engaging with and being responsive to local stakeholders and the local needs of LMI communities, not just applying one-size fits all solutions”; (ii) increasing “the clarity, consistency, and transparency” of CRA supervisory expectations and standards regarding eligible CRA activities and how these activities are evaluated and assessed; and (iii) updating “CRA standards to reflect changes in the business of banking, in particular the increased use of mobile and internet delivery channels”—a business model, Hsu noted, that did not exist when the regulators last updated the CRA regulations. Pointing out that trends and studies have shown that it is insufficient to evaluate a bank’s CRA performance solely on a branch-based model, as banks are increasingly closing branches and focusing on online and mobile banking, Hsu stressed the need to broaden regulators’ evaluation of banks’ CRA performance “to more appropriately reflect the communities the banks serve” in order to fulfill the CRA’s core mission.

    Bank Regulatory Federal Issues OCC CRA Federal Reserve FDIC Agency Rule-Making & Guidance

  • SEC amends whistleblower program rules

    Securities

    On February 10, the SEC announced two amendments to the rules regarding its whistleblower program. According to the SEC, the first proposed amendment concerns award claims for related actions that would be otherwise covered by an alternative whistleblower program. The amendment would allow the Commission to pay whistleblower awards for certain actions brought by other entities, including designated federal agencies, in cases where those awards might otherwise be paid under the other entity's whistleblower program. The second amendment would affirm the Commission's authority under Rule 21F-6 to consider the dollar amount of a potential award for the limited purpose of increasing the award amount, and would eliminate the Commission’s authority to consider the dollar amount of a potential award for the purpose of decreasing an award. Comments are due 60 days after publication of the proposing release on the SEC’s website or 30 days after publication in the Federal Register.

    Securities Whistleblower Agency Rule-Making & Guidance SEC

  • SEC to update beneficial ownership reporting requirements

    Securities

    On February 10, the SEC proposed amendments to its rules governing beneficial ownership reporting under Exchange Act Sections 13(d) and 13(g) in order to “improve transparency and provide more timely information for shareholders and the market.” (See also SEC fact sheet here.) Among other things, the proposed rule would (i) accelerate the filing deadlines for Schedules 13D and 13G beneficial ownership reports from 10 days to five days (amendments would be required to be filed within one business day); (ii) expand the application of Regulations 13D and 13G to certain derivative securities; (iii) clarify the circumstances in which two or more persons have formed a “group” that would be subject to beneficial ownership reporting obligations; (iv) allow for new exemptions “to permit certain persons to communicate and consult with one another, jointly engage issuers, and execute certain transactions without being subject to regulation as a ‘group’”; and (v) require Schedules 13D and 13G filings to be done through a “structured, machine-readable data language.” Comments are due 30 days after publication in the Federal Register, or April 11, whichever is later. SEC Chair Gary Gensler issued a statement supporting the proposed amendments, which “would reduce information asymmetries and promote transparency, thereby lowering risk and illiquidity,” citing the “rapidity of current markets and technologies” as justification for updating the decades-old rules. However, SEC Commissioner Hester M. Peirce dissented, arguing that the proposed amendments fail to fully contend “with the realities of today’s markets or the balance embodied in Section 13(d) of the Exchange Act.” She further challenged the justification of technological advancements as a reason to shorten the 10-day reporting window to five days.

    Securities Agency Rule-Making & Guidance Beneficial Ownership SEC Securities Exchange Act

  • SEC proposes cybersecurity risk management rules and amendments

    Securities

    On February 9, a divided SEC voted to release proposed cybersecurity risk management rules and amendments to certain requirements for registered investment advisers and funds. (See SEC fact sheet here.) Commissioner Hester Peirce voted against the proposal, stressing that because “an adviser’s or fund’s system has been successfully breached should not lead us to the immediate conclusion that that adviser or fund was lax in its efforts to protect client data and funds.” She added that “[a]bsent circumstances that suggest deliberate or reckless disregard of known vulnerabilities by the firm, we should resist the temptation to pile on with an enforcement action after a breach.”

    Under the proposed rules, advisers and funds would be required to adopt and implement written policies and procedures reasonably designed to address cybersecurity risks that could harm advisory clients and fund investors. Advisers would also be required to file a confidential report for a significant cybersecurity incident to the SEC on a new form. Additionally, advisers and funds must also publicly disclose cybersecurity risks and significant cybersecurity incidents that occurred in the last two fiscal years “that have significantly disrupted or degraded the adviser’s ability to maintain critical operations, or that have led to the unauthorized access or use of adviser information, resulting in substantial harm to the adviser or its clients in their brochures and registration statements.” Advisers and funds would be required to comply with new cybersecurity-related recordkeeping requirements to assist SEC inspection and enforcement capabilities. Comments on the proposal are due 60 days following publication on the SEC’s website or 30 days after publication in the Federal Register, whichever period is longer.

    Securities Privacy/Cyber Risk & Data Security SEC Agency Rule-Making & Guidance Risk Management Disclosures

  • FinCEN releases statement on NPRM for beneficial ownership

    Financial Crimes

    On February 8, FinCEN disclosed that the comment period from a December 2021 notice of proposed rulemaking (NPRM) related to the reporting of beneficial ownership information (the “Reporting NPRM”) received more than 230 public comments and is now closed. As previously covered by InfoBytes, in December, FinCEN issued a NPRM implementing the beneficial ownership information reporting provisions of the Corporate Transparency Act (CTA), which addressed who must report beneficial ownership information, when to report it, and what information they must provide. FinCEN noted that “the next step in the CTA rulemaking series will be FinCEN’s publication of proposed rules on BOI access and disclosure requirements (the 'Access NPRM'), which FinCEN anticipates publishing later this year.” According to FinCEN, some public comments included requests for the opportunity to submit, supplement, or amend their comments on the Reporting NPRM after having the opportunity to review the Access NPRM.

    Financial Crimes FinCEN Agency Rule-Making & Guidance Beneficial Ownership Corporate Transparency Act

  • VA establishes threshold for reporting VA debts to CRAs

    Agency Rule-Making & Guidance

    On February 2, the Department of Veterans Affairs published a final rule in the Federal Register amending its regulations around the conditions by which VA benefits debts or medical debts are reported to consumer reporting agencies (CRAs), and creating a methodology for determining a minimum threshold for debts reported to the CRAs. According to the VA, approximately 5,000 delinquent accounts are reported monthly to credit bureaus, and, in many cases, veterans complained about the loss of security clearance or an inability to obtain credit or rental housing. In amending the rule, the VA acknowledged that certain debts, such as medical debts, “are fundamentally different than consumer debt.” Under the new rule, debts are to be reported to a credit bureau if (i) they are considered to be “currently not collectible,” meaning the VA has exhausted available debt collection efforts; (ii) the debt is not owed by someone who has been determined to be catastrophically disabled or has a gross household income below a certain amount; and (iii) the debt owed is over $25. The rule is effective March 4.

    On February 7, the CFPB published a blog highlighting the changes that the VA made in its final rule. Among other things, the blog discussed changes to VA’s debt collection practices, protections against surprise medical bills, and getting help with medical bills.

    Agency Rule-Making & Guidance Federal Register Department of Veterans Affairs Consumer Reporting Agency Debt Collection CFPB Consumer Finance

  • OCC looks at compliance with state laws in CRA evaluations

    On February 2, the OCC issued Bulletin 2022-2 addressing the agency’s processes for considering state banking commissioner input related to the performance of national banks under state community reinvestment laws, as well as state consumer complaint referrals. Among other things, the Bulletin outlines OCC policy and procedures for considering state input on the community reinvestment performance of OCC-supervised banks, including the implementation of Riegle–Neal Interstate Banking and Branching Efficiency Act community reinvestment-related provisions. Noting that several states and the District of Columbia have adopted community reinvestment laws that are similar to the federal Community Reinvestment Act (CRA), the OCC states that it will consider input from state banking commissioners regarding a national bank’s performance under applicable state community reinvestment laws when evaluating the bank’s CRA performance. The Bulletin also provides general guidance related to the OCC’s expectations concerning the handling of consumer complaints that state officials refer to national banks and federal savings associations, as well as state referrals of complaints to the OCC. The Bulletin “reminds banks that the OCC’s exclusive visitorial authority is not a basis for declining to address consumer complaints referred by state or local officials,” and “encourages banks to explain to state officials how complaints were resolved but without compromising consumers’ privacy interests or other confidential information.” Additionally, state officials are encouraged to refer to the OCC complaints alleging violations of federal fair lending laws or illegal, predatory, unfair, or deceptive acts or practices.

    Bulletin 2022-2 rescinds OCC Advisory Letters 99-1 and 2004-2.

    Bank Regulatory Federal Issues Agency Rule-Making & Guidance OCC State Issues CRA Riegle-Neal Act

  • FCC proposes to classify ringless voicemails as “calls” under the TCPA

    Agency Rule-Making & Guidance

    On February 2, FCC Chairwoman Jessica Rosenworcel announced a proposal that would classify technology that leaves ringless voicemails on consumers’ cell phones as “calls” under the TCPA and therefore subject to the FCC’s robocalling restrictions. If adopted by the full Commission, callers using this form of technology would be required to obtain a consumer’s consent before delivering a ringless voicemail. The announcement explained that the TCPA “prohibits making any non-emergency call using an automatic telephone dialing system or an artificial or prerecorded voice to a wireless telephone number without the prior express consent of the called party.” According to Chairwoman Rosenworcel, ringless voicemails should face the same consumer protection rules as other robocalls. The proposal is in response to a petition that asked the FCC to find that ringless voicemails are not calls protected by the TCPA.

    Agency Rule-Making & Guidance FCC Robocalls TCPA

  • CFTC issues no-action letter on compliance date for swap data

    Agency Rule-Making & Guidance

    On January 31, the CFTC issued a no-action letter on the compliance dates for the November 25, 2020 amendments to the swap data reporting rules. According to the letter, the CFTC’s Division of Data does not recommend that the Commission take enforcement action against market participants “for failure to comply with the Amendments before December 5, 2022, and for failure to comply with the Block and Cap Amendments before December 4, 2023, provided that the entity comply with the Parts 43, 45, 46, and 49 regulations that were in effect on January 1, 2021.” A statement released by CFTC Commissioner Dawn D. Stump noted that she “expect[s] market participants to work diligently toward resolving the operational and technological issues they have encountered in complying with the Amendments,” and that she hoped the efforts will “better align swap data reporting rules internationally [and] will at last permit much needed international deference among the various regulatory bodies who long ago committed to improving swap data for the benefit of these global markets.”

    Agency Rule-Making & Guidance Federal Issues CFTC Swaps Compliance

  • CFPB releases regulatory agenda

    Federal Issues

    On January 31, the CFPB released its semiannual regulatory agenda in the Federal Register, as part of the Fall 2021 Unified Agenda of Federal Regulatory and Deregulatory Actions. According to the CFPB, it “reasonably anticipates having the regulatory matters identified below under consideration during the period from November 1, 2021 to October 31, 2022.” The next agenda will be published in Spring 2022, which will update the recently released agenda through Spring 2023. Among other things, the agenda noted that the Bureau made “significant progress” on the implementation of Section 1071 of the Dodd-Frank Act, which covers banks’ collection, reporting, and disclosure of information on credit applications made by women-owned, minority-owned, and small businesses. Other highlights of the agenda include the Bureau’s: (i) continued collaboration with other federal agencies on regulations for automated valuation models under the FIRREA amendments to Dodd-Frank; (ii) expectation to issue a final rule on the transition away from the LIBOR index, which aims to ensure that loans tied to LIBOR are transitioned “in an orderly, transparent, and fair manner”; (iii) assessment of a rule implementing HMDA; (iv) work on regulations for PACE financing and its “continu[ed] engagement with stakeholders and collect information” from a Advance Notice of Proposed Rulemaking, issued in March 2019 (covered by InfoBytes here); and (v) continued monitoring of consumer financial product markets and creation of working groups to focus on specific markets for potential future rulemakings.

    Federal Issues Agency Rule-Making & Guidance CFPB Dodd-Frank FIRREA HMDA AVMs Section 1071 Federal Register LIBOR

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