Regulatory Developments
SEC Publishes Small Entity Compliance Guide for Crowdfunding
On May 13, the Securities and Exchange Commission (SEC) published a small entity compliance guide for companies wishing to issue securities utilizing the crowdfunding exemptions from registration set forth in Section 4(a)(6) of the Securities Act of 1933, which were added by Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012. The guide, entitled “Regulation Crowdfunding: A Small Entity Compliance Guide for Issuers,” summarizes and explains the Regulation Crowdfunding rules adopted by the SEC in 2015, under which eligible companies will be allowed to raise capital using Regulation Crowdfunding starting on May 16, 2016.
SEC Issues Compliance and Disclosure Interpretations on Non-GAAP Financial Measures
On May 17, the SEC issued a series of new Compliance and Disclosure Interpretations (C&DIs), and significantly revised some existing C&DIs, on the use of non-GAAP financial measures.
FINRA Conducts Sweep Exam of Mutual Fund Waivers
In connection with its mutual fund waiver sweep exam, FINRA has published its request list. The sweep exam focuses on whether member firms have a process and supervisory controls in place to ensure mutual fund sales charge waivers are provided to eligible accounts, including retirement plans and charitable accounts. The review period is from January 1, 2011 through December 31, 2015, and responses are due by June 10, 2016.
The Office of the Comptroller of the Currency (OCC) opened registration for its complimentary forum on “Supporting Responsible Innovation in the Federal Banking System.” The OCC will host the forum on June 23, and the event will take place at its Headquarters in Constitution Center, 400 7th St SW, Washington DC 20219. Attendees will hear from bankers, financial technology companies, community and consumer groups, academics, and OCC officials. Panelists will discuss trends in financial innovation today, managing risks associated with innovation, incorporating innovation into strategic plans, and innovation’s potential to promote financial inclusion and consumer protection. OCC panelists will cover the agency’s perspective on financial innovation as well as comments it has received regarding its white paper, “Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective,” published in March.
Enforcement & Litigation
U.S. Supreme Court Rules that Plaintiffs Must Show Real Harm to Bring Suit
On May 16, the United States Supreme Court issued its decision in Spokeo, Inc. v. Robins, vacating and remanding the Ninth Circuit’s ruling that a plaintiff had standing to bring a class action suit for a procedural violation of the Fair Credit Reporting Act (FCRA) where the defendant allegedly falsely reported plaintiff as affluent, married, and having a graduate degree. In a 6-2 decision written by Justice Alito, the Court held that the Ninth Circuit failed to consider both the concreteness and particularized requirements necessary to establish injury-in-fact under Article III. The Court explained that a plaintiff does not automatically satisfy the “concreteness” requirement merely because a statute purports to grant a statutory right and authorizes suit to vindicate that right. Rather, to satisfy injury-in-fact, a plaintiff must show that the procedural violation at least creates a risk of real harm to the plaintiff. Thus, a plaintiff cannot satisfy Article III by alleging a bare procedural violation of the FCRA that results in no harm. Without taking a position on whether the Ninth Circuit’s ultimate conclusion was proper, the Court remanded the case to the lower court to address whether the allegations “entail a degree of risk sufficient to meet the concreteness requirement.” For more information, view the LenderLaw Watch post from Goodwin’s Consumer Financial Services Litigation group.
On May 11, the Consumer Financial Protection Bureau (CFPB) commenced a lawsuit under the Dodd-Frank Act against All American Check Cashing, Inc., which offers check cashing and payday loans, and its owner, for allegedly tricking and trapping consumers. The lawsuit alleges that All American engaged in deceptive tactics to prevent consumers from backing out of transactions, issued deceptive statements regarding the benefits of its high-cost payday loans, failed to provide refunds to consumers and tried to keep consumers from learning how much they would be charged to cash a check. The lawsuit seeks to end these unlawful practices, obtain redress for consumers and impose penalties on All American. To view the CFPB’s complaint, click here.
On May 13, M&T Bank Corp. (M&T) agreed to pay the United States government $64 million to settle allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the Federal Housing Administration (FHA). M&T has stated that it agreed to settle the matter without admitting liability in order to avoid the expense of potential litigation. The Department of Justice alleged that M&T failed to comply with certain FHA origination, underwriting and quality control requirements and failed to review an adequate sample of FHA loans. The Department of Justice has reached similar False Claims Act settlements against 15 other FHA lenders over the past few years.
Goodwin News
Maryland Bankers Association Annual Convention
The Maryland Bankers Association's 120th Annual Convention brings together hundreds of bank CEOs, directors, and senior management decision-makers for educational programs, networking events, and the annual election of association leadership. Financial Institutions group partner Bill Stern will present on "Friend or Foe: Partnering with Marketplace Lenders." Goodwin Procter is a sponsor for the event, which will be held on June 5 – 8 in Amelia Island, Florida.