Weekly RoundUp
February 3, 2016

Financial Services Weekly News

Digging Out. Washington, D.C., which President Kennedy famously called “a city of Southern efficiency and Northern charm,” remained paralyzed by the aftermath of Winter Storm Jonas for much of last week. With the federal government being closed for two days and operating under a delayed opening for two others, agency activity was fairly light. But new FDIC guidance on cybersecurity, further easing of Cuba sanctions by the Treasury and Commerce departments, and SEC approval of a new FINRA rule regarding crowdfunding portals were noteworthy. Additional details follow.

Regulatory Developments

FDIC Provides Framework for Cybersecurity in Recent Supervisory Insights

The FDIC featured an article titled “A Framework for Cybersecurity” in the Winter 2015 issue of Supervisory Insights released Feb. 1, 2016. The article discusses the cyber threat landscape and outlines how financial institutions can enhance information security programs to respond to evolving cybersecurity risks. The article advised that financial institutions should seek to improve corporate governance, security awareness training, and patch management programs to respond to common methods of cyberattack, including malware deployment, distributed denial-of-service attacks and compound attacks.

Treasury and Commerce Amendments Continue Easing of Cuba Sanctions

On Jan. 26, the Treasury’s Office of Foreign Assets Control and the Department of Commerce’s Bureau of Industry and Security announced further amendments to the Cuban Assets Control Regulations and Export Administration Regulations that took effect on Jan. 27. The amendments are extensive and include the removal of certain restrictions on payment and financing terms for authorized exports and reexports, except for agricultural commodities and agricultural items; authorizing additional exports; and the further facilitation of authorized travel to Cuba. For additional information, please see the press release, updated FAQs, Treasury and Commerce regulations. Questions regarding changes to the Cuba sanctions regime can be directed to partner Richard Matheny, head of our National Security and Foreign Trade Regulation practice.

SEC Approves FINRA Funding Portal Rules and Forms

As reported in the Nov. 4, 2015 Roundup, the SEC voted last fall to approve final crowdfunding rules requiring that crowdfunding be conducted exclusively through an intermediary platform operated by either a registered broker or a registered funding portal. The SEC recently approved new FINRA Rule 4518 as part of FINRA’s proposal to establish the new Funding Portal Rules and related forms, effective Jan. 29, 2016. FINRA Notice 16-07 provides further guidance on new Rule 4518, which applies to registered broker-dealer members of FINRA that contemplate acting as intermediaries in transactions involving the offer or sale of securities pursuant to the crowdfunding provisions of Title III of the JOBS Act and the SEC’s Regulation Crowdfunding. Under the new rule, registered broker-dealer members must provide notification to FINRA, as specified in the rule and as discussed further in this Notice, prior to engaging in such activities. The text of the Funding Portal Rules is available on FINRA’s website.

Federal Reserve Board Extends Comment Period for Proposed Policy Statement Regarding Framework for Countercyclical Capital Buffer

On Jan. 29, the Federal Reserve Board extended through Mar. 21, 2016 the comment period for the proposed policy statement detailing the framework the Federal Reserve Board would follow in setting the Countercyclical Capital Buffer (CCyB). The CCyB is a macroprudential tool that can be used to increase the resilience of the financial system by raising capital requirements on internationally active banking organizations when there is an elevated risk of above-normal losses in the future. The CCyB would then be available to help banking organizations absorb shocks associated with declining credit conditions. The proposed policy statement provides background on the range of financial system vulnerabilities and other factors the Federal Reserve Board could take into account as it evaluates settings for the buffer.

Federal Reserve Board Extends Comment Period for Proposed Rule to Strengthen the Ability of Large Banks to be Resolved Without Taxpayer Assistance

On Jan. 29, the Federal Reserve Board extended through Feb. 21, 2016 the comment period for its proposed rule, which requires U.S. global systemically important banks (GSIBs) and the U.S. operations of foreign GSIBs to meet a long-term debt requirement, a “total loss-absorbing capacity” requirement, and a requirement that the parent holding company of a domestic GSIB avoid entering into certain financial arrangements that would create obstacles to an orderly resolution. These requirements are intended to strengthen the ability of those banks to withstand financial stress and failure without imposing losses on taxpayers. The proposed rule also includes regulatory capital deductions for Federal Reserve Board-regulated banking firms that hold unsecured debt of the parent holding companies of domestic GSIBs.

OCC and Federal Reserve Board Release Supervisory Scenarios and Instructions for 2016 CCAR and Dodd-Frank Act Stress Tests

On Jan. 28, the Federal Reserve Board released the supervisory scenarios for the 2016 Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act stress test exercises and also issued instructions to firms participating in CCAR. Also on Jan. 28, the Office of the Comptroller of the Currency (OCC) released economic and financial market scenarios that will be used in stress tests for national banks and federal savings associations with total consolidated assets of more than $10 billion, as required by Section 165(i)(2) of the Dodd-Frank Act. The results of the company-run stress tests are intended to provide the agencies with forward-looking information used in market supervision and will assist the agencies in assessing the companies’ risk profiles and capital adequacy.

Enforcement & Litigation

CFPB and DOJ Mail $80 Million to Consumers from Ally Auto Loan Discrimination Settlement

On Jan. 29, the CFPB announced that it and the Department of Justice (DOJ) distributed Ally Financial’s $80 million settlement payment to approximately 301,000 minority borrowers allegedly harmed by Ally’s discriminatory auto loan practices. This comes after Congressional Republicans had requested immediate suspension of the settlement proceeds’ distribution, and issued a report asserting that the CFPB’s statistical method for identifying minority borrowers is over-inclusive and lacks a verification requirement. Although the checks have been mailed, this issue is likely to remain on Congress’ radar moving forward.

Webinar – Antitrust Enforcement Landscape in 2016: Looking Back and Looking Ahead

On Feb. 4 from noon to 1 p.m. EST, Goodwin Procter partner Kirby Lewis will host a complimentary webinar discussion on key enforcement actions at the Federal Trade Commission and the Antitrust Division of the Department of Justice, as well as the international competition law bodies. Goodwin Procter's Antitrust & Competition practice will evaluate what these actions mean for transactions going forward and discuss deal trends and best practices. To register for the webinar please click here.

Goodwin Procter News

Goodwin Ranks Among Most Active Law Firms in Fintech

Goodwin Procter ranked as one of the top 5 most active law firms advising on publicly disclosed Fintech industry deals in 2015, according to PitchBook and SNL rankings. The firm advised on and completed approximately 40 M&A and financing transactions last year with a combined deal value of approximately $3.4 billion. The Fintech practice is led by partners Amber DolmanRobert Bishop and Brian McPeake.