Weekly RoundUp
September 28, 2023

SEC Approves Revised Privacy Act Rule

In this Issue. The Securities and Exchange Commission (SEC) approved revised regulations under the Privacy Act of 1974 (Privacy Act); the Financial Crimes Enforcement Network (FinCEN) issued a proposed rule extending the deadline for initial beneficial ownership information reports for entities formed or registered in 2024; and the Consumer Financial Protection Bureau (CFPB) announced a rulemaking process to amend Regulation V to remove medical bills from credit reports. These and other developments are discussed in more detail below.

Regulatory Developments

SEC Approves Revised Privacy Act Rule
On September 20, the SEC approved a revised rule under the Privacy Act, the federal law governing personal information handling. This final rule updates and simplifies the SEC's Privacy Act regulations, streamlining procedures, and eliminating unnecessary provisions. It also permits electronic identity verification and simplifies the process for submitting and receiving responses to inquiries, requests and administrative appeals.

The Privacy Act rules were last updated in 2011, and the new revisions will codify current processing practices, providing greater clarity. The final rule will replace the existing regulations entirely and takes effect 30 days after publication in the Federal Register.

“These amendments will provide more clarity on how the public can access their records maintained by the Commission and request amendments.”

- Gary Gensler, Chair, SEC

FinCEN Issues Proposed Rule Extending Deadline for Initial Beneficial Ownership Information Reports for Entities Formed or Registered in 2024
Under FinCEN’s final rule implementing the beneficial ownership reporting requirements under the Corporate Transparency Act (CTA), reporting companies formed or registered on or after January 1, 2024 have 30 calendar days to file their initial reports.

FinCEN has released a proposed rule that would extend the filing deadline for initial reports of reporting companies formed or registered in 2024 (January 1, 2024, through December 31, 2024) from 30 calendar days to 90 calendar days. Under the proposed rule, entities formed or registered on or after January 1, 2025 would have 30 calendar days to file their initial reports with FinCEN.

Comments to the proposed rule are due October 30, 2023.

CFPB Announces Rulemaking to Remove Medical Bills from Credit Reports
On September 21, accompanied by prepared remarks from CFPB Director Rohit Chopra, the CFPB announced it is beginning a rulemaking process to amend Regulation V, implementing the Fair Credit Practices Act, to remove medical bills from Americans’ credit reports, clean up inaccurate data, improve credit score predictiveness, end coercive debt collection tactics, and help families financially recover from medical crises. The CFPB’s outline of proposals and alternatives under consideration for the CFPB’s medical debt rulemaking, if finalized, would prohibit creditors from obtaining or using medical debt collection information to make determinations about consumers’ eligibility (or continued eligibility) for credit and would prohibit consumer reporting agencies from including medical debt collection tradelines on consumer reports furnished to creditors for purposes of making credit eligibility determinations. Creditors would still be able to obtain medical bill information for other purposes, such as verifying the need for medical forbearances or evaluating loan applications to pay for medical services. Written feedback on the proposals under consideration must be emailed to CFPB_consumerreporting_rulemaking@cfpb.gov no later than October 30, 2023. 

The FCA Consults: D&I Standards for Large Firms, Nonfinancial Misconduct Rules for All
On September 25, the Financial Conduct Authority (FCA) published its consultation paper CP23/20: Diversity and inclusion in the financial sector – working together to drive change alongside a similar consultation paper published by the Prudential Regulation Authority (PRA), CP18/23 – Diversity and inclusion in PRA-regulated firms. The 131-page CP sets out the FCA’s proposals for all firms to better integrate nonfinancial misconduct (NFM) considerations into their senior manager and certification regime (SMCR), including rules for staff fitness and propriety assessments, the FCA Conduct Rules, and threshold conditions for firms. 

Read more about these proposed diversity and inclusion (D&I) requirements in a recent client alert.

Litigation and Enforcement Developments

SEC Sends Second Message to Private-Fund Sponsors on Audit Obligations Under Custody Rule Through Enforcement Actions
On September 5, almost one year since its first flurry of similar Custody Rule actions, the SEC announced settlements with five SEC-registered investment advisers to private funds with respect to alleged violations of Rule 206(4)-2 under the Investment Advisers Act of 1940 (the Custody Rule) and related Form ADV violations. Specifically, these settlements primarily addressed the following types of violations: (i) the failure to have a private fund audited in accordance with the annual audit exemption under the Custody Rule and timely deliver the audited financials; (ii) the failure of a non-US firm to have the financials audited in accordance with US generally accepted auditing standards (GAAS); (iii) the failure to follow the alternative Custody Rule requirements where the firm did not implement the audit exemption correctly; (iv) the failure to amend Form ADV, Part 1A, Schedule D, Section 7.B.23.(h) to reflect the receipt of the audit opinion following the annual amendment of the Form ADV; and (v) the failure of one firm to properly describe the status of its financial statement audits for multiple years in its Form ADV.

The SEC Division of Examinations had previously indicated that compliance with the annual audit exemption would continue to be an examination priority in 2023, just as it was in 2022. A summary of the enforcement actions is included in a recent client alert.

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