Financial Services Alert - June 10,2014 June 10, 2014
In This Issue

Federal Banking Agencies Seek Comments on Their Regulations in Effort to Reduce Regulatory Burden

The FRB, FDIC and OCC (the “Agencies”) published the first of a series of four requests seeking public comments to identify regulations of the respective Agencies that are seen as outdated, unnecessary or unduly burdensome.  The Agencies noted that any changes to their regulations that are designed to reduce regulatory burden must be compatible with the safety and soundness of depository institutions and must be consistent with the Agencies’ statutory mandates.  The Agencies’ first notice of regulatory review and request for comments (the “First Notice”) was issued on June 4, 2014 pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (“EGRPRA”).  Under EGRPRA, the Agencies are required to conduct a review every ten years to identify outdated, unnecessary or unduly burdensome regulations.

The Agencies divided those of their regulations that will be reviewed into 12 categories (the “Categories”):

  • Applications and Reporting
  • Banking Operations
  • Capital
  • Community Reinvestment Act
  • Consumer Protection
  • Directors, Officers and Employees
  • International Operations
  • Money Laundering
  • Powers and Activities
  • Rules of Procedure
  • Safety and Soundness
  • Securities

The Agencies said that over the next two years they expect to issue four regulatory notices and that each notice will seek comments on regulations covering one or more of the Categories.  The First Notice seeks comments on the Agencies’ regulations concerning:  (1) Applications and Reporting; (2) Powers and Activities; and (3) International Operations.

In the First Notice, the Agencies included charts for each of the twelve Categories that identify specifically the regulations for which the Agencies are seeking comment and identify the type of institution (national bank, state member bank, state non-member bank, federal savings association, state savings association, bank holding company, financial holding company or savings and loan holding company) to which the regulation applies.  The Agencies noted that they seek comments identifying regulations that pose a particularly harsh burden on community banks.

The Agencies said that they would schedule roundtable discussions with bankers and interested parties regarding these potential regulatory changes.  Comments on the First Notice are due by September 2, 2014.

OCC Updates Booklet in its Handbook Concerning Collective Investment Funds

The OCC issued a revised and updated booklet (the “Revised Booklet") concerning collective investment funds (“CIFs”).  The Revised Booklet is part of the OCC’s “Comptroller’s Handbook.”  The Revised Booklet (which updates the OCC’s prior 2005 guidance) describes and discusses various aspects of CIFs and provides guidance regarding risk management of CIFs.

The Revised Booklet contains updated discussions of, among other topics, investment risk management and valuation of CIFs, securities lending, audit and financial reports of CIFs and Board of Directors and senior management responsibilities for oversight of risk management of CIFs.  In the Revised Booklet, the OCC cautions that, in reviewing risk management of CIFs, the OCC will closely scrutinize a bank’s arrangements with third-party vendors.

In conjunction with the OCC’s issuance of the Revised Booklet, the OCC rescinded its 1990 Banking Circular 247 “Application of Securities Laws to Common Trust Funds.”

SEC Staff Provides Guidance on Affiliated Person Determinations for Series Investment Companies

The staff of the SEC’s Division of Investment Management issued IM Guidance Update No. 2014-6  in which it advises registered funds organized as series of a “series company” that compliance with the affiliated transactions prohibitions of Section 17(a) of the Investment Company Act of 1940 requires identification of any relevant affiliated persons on a series by series basis.  In particular, the Guidance Update notes that affiliated person status with respect to a series can result from the ownership of 5% or more of the outstanding voting securities of that series.  The Guidance Update further advises that affiliated person status based on ownership of voting securities should also be monitored at the series company level based on the total outstanding voting securities of the series company.

NFA Makes Changes to CPO Form PQR and CTA Form PR

The National Futures Association issued Notice I-14-13 advising of changes to CPO Form PQR and CTA Form PR that will be effective for the quarter ended June 30, 2014.  The Notice explains the changes “will simplify and make less burdensome the Forms’ questions relating to NFA’s request for information relating to any funds under management allocated to futures and swaps.”   The Notice provides brief descriptions of the changes.  The updated Forms will be available in the Easy File System the first week of July 2014 along with the updated PQR and PR templates with expanded help text.