Weekly RoundUp
July 21, 2023

Financial Institution Diversity Voluntary Self-Assessments: Due September 30

In this Weekly Roundup Issue. The Federal Deposit Insurance Corporation (FDIC) announced a due date for financial institution diversity voluntary self-assessments; the Securities and Exchange Commission (SEC) proposed amendments to the Customer Protection Rule (Rule 15c3-3); and the Consumer Financial Protection Bureau (CFPB) issued a joint statement with the European Commission announcing the start of an informal dialogue between the two agencies on a range of critical consumer financial protection issues. These and other developments are discussed in more detail below.

Regulatory Developments

Financial Institution Diversity Voluntary Self-Assessments: Due September 30
On July 13, the FDIC issued a financial institution letter announcing that FDIC-supervised financial institutions are encouraged to voluntarily conduct and submit self-assessments regarding their diversity policies and practices by September 30, 2023. The self-assessment is accessible through the secure FDICconnect portal. The FDIC holds the information collected from the self-assessments confidentially, and results of the assessment are not shared with examiners. The purpose of the assessment, according to the FDIC, is to gather and analyze information pertaining to organizational commitments to diversity and inclusion, workforce profiles and employment practices, procurement and business practices/supplier diversity, practices to promote transparency of organizational diversity and inclusion and entities’ self-assessment. The FDIC encourages FDIC-supervised financial institutions to contact their institution’s FDICconnect Coordinator if they need help accessing the portal.

SEC Proposes Rule Amendments to the Broker-Dealer Customer Protection Rule
On July 12, the SEC proposed amendments to Rule 15c3-3 (the Customer Protection Rule) that would require certain broker-dealers to perform daily, rather than weekly, computations of the net cash that they owe their customers. The proposed amendments would require broker-dealers with an average total equal to or greater than $250 million, of cash they owe customers and PAB account holders, to make daily computations to determine the amounts required to be deposited in the customer and PAB reserve bank accounts, as of close the of the previous business day. The net cash owed to customers would then be required to be deposited into special reserve bank accounts no later than one hour after the opening of business the following business day. The current weekly computation requirement can permit instances, occurring between computations, in which the amount a customer is owed is more than the amount that is in their reserve bank account at one time. Comments to the proposed amendments are due on or before September 11, 2023.

CFPB Announces Informal Dialogue with the European Commission Aimed at Policy and Regulatory Cooperation
On July 17, the CFPB issued a joint statement with the European Commission announcing the start of an informal dialogue between the two agencies on a range of critical consumer financial protection issues, focusing on digital developments. With an aim toward improving policy and regulatory cooperation, the CFPB and European Commission plan to share insights, experience, and technical expertise on issues including automated decision making, processing of data, use of artificial intelligence, new forms of credit like ‘Buy Now, Pay Later’, strategies to prevent and assist with consumer over-indebtedness, fair choice and access to financial services, and implications for competition, privacy, security, and financial stability of Big Tech companies.

“I am pleased to support this proposal because, if adopted, it would help protect customers in the event that a broker-dealer fails.”
- Gary Gensler, Chairman, SEC

SEC Adopts Reforms for Money Market Funds
On July 12, the SEC voted to adopt money market fund reforms that will significantly impact the regulatory framework governing money market funds (money funds or funds). According to the SEC, the reforms are designed to improve the resiliency of money funds by reducing the risk of shareholder “runs” on money funds during periods of market stress. The adopting release highlighted heavy outflows from institutional prime money funds in March 2020 at the onset of the COVID-19 pandemic. The reforms consist of amendments to Rule 2a-7 under the Investment Company Act of 1940 (1940 Act), the primary rule governing the operation of money funds, and related recordkeeping, reporting, and disclosure form amendments.

Read more in this client alert that summarizes key aspects of the final rules.

Trading Venues in the UK: Regulatory Clarity for Fintech Providers; Implications for Crypto-Trading and DeFi?
The UK Financial Conduct Authority (FCA) has published its policy statement PS23/11 (PS), containing final guidance (the guidance) on trading venues. A firm requires trading venue authorization from the FCA if it operates what is defined as a “multilateral system” (see “Unpacking the Multilateral-System Definition” for the definition and our analysis). The multilateral-system definition is the primary focus of the guidance.

Read more about this final guidance in a recent client alert.

What Companies Need to Know About the New EU-US Data Privacy Framework for Cross-Border Data Transfers
On July 10, the European Commission adopted an adequacy decision for the new EU-US Data Privacy Framework (“DPF”), the revamped transatlantic framework designed to support transfers of personal data from the EU to companies in the US that self-certify compliance with the DPF’s privacy requirements.

Read more on the new EU-US data privacy framework in this client alert.

Litigation and Enforcement

CFPB, U.S. Department of Health and Human Services, and U.S. Department of Treasury Initiate Public Inquiry into Financial Products Targeted at Healthcare Costs
On July 7, the CFPB, U.S. Department of Health and Human Services (DOH), and U.S. Department of Treasury (DOT) initiated a public inquiry into certain financial products, such as medical credit cards and installment loans that the CFPB characterized as “high-cost specialty products.” The CFPB, DOH, and DOT claim that these products are often “pushed” upon consumers and effectively drive up the cost of routine medical care, which leads to increased medical debt. The inquiry is part of the continued effort by the CFPB to investigate medical financing products and medical debt and builds upon research conducted by the Bureau regarding these products. Read more about this public inquiry on Goodwin’s CFI Blog.

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