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.
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
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.
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.