Alert April 21, 2009

SEC Reopens Comment Period on Model Privacy Notice

The SEC reopened the period for public comment on a model privacy notice (the “Model Notice”) that financial institutions would be able to use to provide disclosures in accordance with the privacy notice provisions of the Gramm-Leach-Bliley Act (the “GLBA”).  As reported in the March 27, 2007 Alertin accordance with the Financial Services Regulatory Relief Act of 2006 (the “Relief Act”),  eight federal regulators, including the SEC, proposed the Model Notice to provide for the simplified privacy notice called for by the Relief Act.  The comment period was reopened to allow public comment on the results of consumer testing of different types of privacy notices, including a slightly revised version of the Model Notice, conducted by an outside consultant, which had occurred subsequent to the initial comment period.  The results of the consumer testing have been posted in the comment file for the Model Notice at http://www.sec.gov/comments/s7-09-07/s70907-21.htm

Privacy Notices.  Under rules adopted pursuant to the GLBA, a financial institution must provide notice to certain of its customers of its policies regarding the disclosure of those customers’ nonpublic personal information to affiliated and non-affiliated third parties.  These privacy notice provisions also require that the consumer be provided with, where applicable, a reasonable opportunity to “opt out” of certain sharing of nonpublic information.  The privacy notice must be provided by the financial institution to the customer at the start of the relationship and annually during the existence of the relationship.  Regulation S-P (“Reg. S-P”) implements the privacy provisions of the GLBA for entities subject to SEC oversight.  If the SEC adopts the Model Notice, a financial institution would not be required to use the Model Notice to meet Regulation S-P’s privacy notice requirements.  During the first year after adoption, both the Model Notice and the sample clauses for privacy notices currently provided in Reg. S-P would serve as safe harbors under the GLBA; however, after the one‑year transition period, the sample clauses would no longer have that status, leaving the Model Notice as the sole safe harbor.

The reopened comment period ends May 20, 2009.