On July 7, the Board of Governors of the Federal Reserve System announced that it has further extended the conformance period under the Volcker rule until July 21, 2017, to allow banking entities to conform their investments in and relationships with covered funds made prior to December 31, 2013 (legacy covered fund activities). Without this extension, the conformance period for legacy covered fund activities was set to expire on July 21, 2016. For more information, view the client alert issued by Goodwin’s Financial Industry group.
On July 11, U.S. Senator Mike Rounds (R-S.D.), a member of the Senate Committee on Banking, Housing and Urban Affairs, introduced the Taking Account of Institutions with Low Operation Risk (TAILOR) Act, a bill to require federal regulatory agencies to take risk profiles and business models of institutions into account when crafting regulations. The TAILOR Act would require regulatory agencies, such as the Office of the Comptroller of the Currency, the FRB, the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Consumer Financial Protection Bureau, to (1) take into consideration the risk profile and business models of individual financial institutions and tailor those regulations accordingly, (2) provide an annual report to Congress outlining the steps they have taken to tailor their regulations; and (3) conduct a review of all the regulations issued by the agencies since the 2010 passage of the Dodd-Frank Act and to revise such regulations if the review finds that the regulations issued since 2010 do not conform to the TAILOR Act. The TAILOR Act closely resembles a version of the bill passed by the House Financial Services Committee earlier this year.
The Securities and Exchange Commission (SEC) Office of the Investor Advocate (OIA) published its objectives for fiscal year 2017, highlighting as priorities (1) shareholder proposals and (2) disclosure surrounding fund fees and expenses, among other objectives:
1. Shareholder proposals. Exchange Act Rule 14a-8 allows a shareholder who holds voting shares worth at least $2,000 (or one percent of voting shares, whichever is less) to submit a proposal for a vote of the other shareholders using the company’s proxy statement. The company is required to include the proposal in its proxy materials unless it is entitled to exclude the proposal for one of the procedural or substantive reasons set forth in the rule. The OIA’s report noted that each year the SEC receives hundreds of requests for assurances that the SEC will not take enforcement action if the company excludes a shareholder proposal. The OIA report set forth a FY 2017 objective of continuing to monitor developments in shareholder proposals and making recommendations designed to protect shareholders' rights, as appropriate.
2. Fund fees and expenses. Given the substantial impact that even seemingly minor differences in fees paid have on an investment’s ultimate return, the Investor Advocate is testing various approaches to fee disclosure to maximize efficacy for investors. In particular, (1) accurate characterization of so-called “12b-1 fees” (as derived from Rule 12b-1 under the Investment Company Act of 1940), (2) disclosure emphasizing the long-term impact that costs have on the return on investment and (3) disclosures that enable investors to understand how they bear the costs of running the funds in which they invest are focus areas.
Enforcement & Litigation
On June 24, the staff of the SEC issued letters to Deutsche Strategic Income Trust and Deutsche Multi-Market Income Trust, certain closed-end funds managed by Deutsche Investment Management Americas Inc. (Applicants), denying requests for no-action relief that would have permitted them to exclude from the proxy materials for their 2016 annual shareholder meeting, a shareholder proposal and supporting statement to declassify each fund’s board of directors so that all directors are elected on an annual basis. The staff was unable to concur with the Applicants’ view that the proposal could be omitted pursuant to Rule 14a-8(i)(3) under the Securities Exchange Act of 1934 (Exchange Act) because the Applicants could not demonstrate objectively that the supporting statement contained materially false and misleading statements in violation of Rule 14a-9 under the Exchange Act. The Applicants’ request for no-action relief prompted an intervening response letter from a dissident shareholder activist, contesting any grant of no-action relief to the Applicants.
Bill Weintraub, partner in Goodwin's Financial Institutions Group and co-chair of its Financial Restructuring Practice, will be speaking at the 23rd Annual ABI Northeast Bankruptcy Conference, July 14-16 in Bretton Woods, NH, on a panel to discuss “Cutting Edge Chapter 11 Plan Issues.”
On July 26, ACI will host its 20th National Forum on Directors & Officers and Management Liability, a premier event for leading brokers, underwriters, claims professionals and attorneys to benchmark coverage, underwriting and claims strategies. The event will offer practical and detailed analysis of the entire D&O and Management Liability landscape, including the impact of litigation, regulatory action, and market conditions in today’s tumultuous environment. Business Litigation partner Carl Metzger, head of the firm's Insurance & Risk Management Practice, will be moderating a panel titled, “Identifying, Acquiring and Evaluating D&O Policies.” For more information, click here.
On July 28, ACI will host the 13th installment of its Cyber & Data Risk Insurance conference. Hear from high-level faculty about advancements in technology, products, pricing, coverage options, prevention strategies and more. Learn from and network with industry leaders about the right coverage options for your company and how you can protect data from financial and reputational loss. Business Litigation partner Carl Metzger, head of the firm’s Insurance & Risk Management Practice, will be a featured speaker on a panel titled, “Identifying, Acquiring and Evaluating Cyberliability Insurance.” For more information, click here.