Weekly RoundUp
July 22, 2015

Financial Services Weekly News

Treasury Department Request for Information on Online Marketplace Lending. The U.S. Treasury Department has issued a request for information (RFI) in which it seeks public comment concerning online marketplace lending. For purposes of the RFI, marketplace lending refers to the segment of the financial services industry that uses investment capital and data-driven models to lend to consumers and small businesses. The Treasury Department is not seeking comment on aspects of marketplace lending that are the subject of rule proposals that the Consumer Financial Protection Bureau has announced that it is considering releasing. In the RFI, the Treasury Department has stated that it is particularly interested in comments relating to certain “key questions,” including those concerning the role of electronic data sources in marketplace lending, whether marketplace lending may expand access to credit to underserved market segments, the manner in which marketplace lenders underwrite borrowers, how marketplace lenders address loan servicing, fraud detection, credit reporting and collections, whether marketplace lenders should be subject to credit risk retention requirements, and the relationship between marketplace lenders and banks. Comments should be submitted on or before August 31, 2015.

Short Takes. New rulemaking developments were light this week, but the progress of rulemaking continues, above and below the ground. As reported below, the SEC has approved a new FINRA debt research rule and amendments to the equity research rule, both of which have been a long time in the making. Comment letters have been pouring into the Department of Labor concerning its proposed new fiduciary standard and related rules, including a suite of letters from SIFMA, the association for the securities industry. And the Volcker rule conformance period ended yesterday, July 21, 2015. However, in December 2014, the Federal Reserve Board announced that it was extending the Volcker rule conformance period for one year, until July 21, 2016, solely with respect to legacy relationships with covered funds. The Federal Reserve Board also announced at that time that it intends to act later this year to provide an additional one year extension, until July 21, 2017, for legacy relationships with covered funds. The extended conformance period only applies to investments in and relationships with covered funds that were in place prior to December 31, 2013. So, all proprietary trading and any non-legacy relationships with or investments in covered funds must conform to the requirements of the Volcker rule.

Regulatory Developments

SEC Approves New Debt Research Rule and Amended Equity Research Rule

On July 16, the SEC approved FINRA Rule 2241, which modifies and clarifies existing rules related to research analysts, and FINRA Rule 2242, a new rule which addresses conflicts of interest relating to the publication and distribution of debt research reports. Rule 2241 retains the core provisions of current rules, broadens the obligations on members to manage research-related conflicts of interest, provides flexibility in compliance and extends protections where gaps have been identified. Rule 2242 creates a tiered approach that is intended to provide retail debt research recipients with extensive protections similar to those provided to recipients of equity research under current FINRA rules, with modifications to reflect differences in the trading of debt securities. Members would be permitted under the tiered approach in Rule 2242 to provide debt research meeting less stringent standards to institutional investors who opt out of the standards for debt research to retail investors.

Client Alert: Federal Regulators Issue Volcker Rule FAQ Addressing Investment Fund Seeding Periods

Goodwin’s Financial Institutions Group issued a client alert, written by partner Bill Stern, on last week’s Volcker Rule FAQ that was issued to address investment fund seeding periods. The guidance issued by the staffs of the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission and the Commodity Futures Trading Commission will allow banking entities to provide seed capital to mutual funds, business development companies and foreign public funds for a seeding period, generally of up to three years.

Enforcement & Litigation

CFBP Takes Action Against Bank for Private Student Loan Servicing Practices

Today the Consumer Financial Protection Bureau (CFPB) announced that it had taken action against Discover Bank and its affiliates for illegal private student loan servicing practices. The CFPB found that Discover overstated the minimum amounts due on billing statements and denied consumers information they needed to obtain federal income tax benefits. The CFPB also found the company had engaged in what the CFPB stated were illegal debt collection tactics, including calling consumers early in the morning and late at night. The CFPB’s order requires Discover to refund $16 million to consumers, pay a $2.5 million penalty, and improve its billing, student loan interest reporting, and collection practices.

Webinar - Tibble v. Edison: Implications of the Supreme Court's First ERISA Fee Decision

On July 23 from noon to 1 p.m. EDT, Goodwin Procter partners Jamie Fleckner and Scott Webster will host a complimentary webinar discussion on the Ninth Circuit's Tibble v. Edison, Int'l decision, highlighted in our quarterly newsletter, ERISA Litigation Update. They will analyze the implications of that ruling for ERISA litigation and fiduciary decision-making. To register for the webinar please click here.