On May 23, the Department of Labor (DOL) announced that it would not extend the applicability dates of the Fiduciary Rule beyond June 9, 2017, and released FAQs providing additional information on the transition period for certain provisions delayed until January 1, 2018. As discussed in a prior client alert, the DOL had previously announced that the applicability dates in its Fiduciary Rule and related prohibited transaction exemptions would be delayed from April 10, 2017, to June 9, 2017, with certain provisions in the exemptions further delayed to January 1, 2018. As a result of the DOL’s decision not to further extend the applicability dates, on June 9, 2017, investment advice providers to retirement savers will become fiduciaries, and the “impartial conduct standards” will become requirements of the exemptions. Other exemption conditions scheduled to become applicable on April 10, 2017, will be delayed to January 1, 2018, while the DOL conducts its ongoing examination of the Fiduciary Rule as directed by President Trump. The FAQs provide additional information on the transition period from June 9, 2017, to January 1, 2018, for these delayed provisions. According to the DOL, the guidance included in the FAQs, like the Fiduciary Rule and related exemptions, is generally limited to advice concerning investments in IRAs, ERISA-covered plans, and other plans covered by section 4975 of the Internal Revenue Code.
On May 17, the Securities and Exchange Commission, Office of Compliance Inspection and Examinations (OCIE) issued a Risk Alert in response to the recent ransomware attack known as WannaCry, WCry, or Wanna Decryptor. During the attack, hackers gained access to enterprise servers through flaws in Microsoft Remote Desktop Protocol, Windows Server Message Block, or through phishing emails and malicious websites. OCIE encouraged broker-dealers and investment management firms to review this alert issued by the Department of Homeland Security, Computer Emergency Readiness Team and verify that all applicable system patches and updates have been properly installed. The OCIE highlighted relevant preventative practices, which include conducting cyber-risk assessments, performing penetration tests, and completing regular system maintenance. It emphasized the importance of proper planning to mitigate the impact of cyber-attacks and reduce the potential effects on investors and clients.
In response to the global “WannaCry” ransomware attacks, the Massachusetts Commissioner of Banks (Commissioner) issued guidance on May 18 directing nondepository institutions to maintain good “computer hygiene” by keeping computers updated and patched. Emphasizing that “[p]revention is the most effective defense against ransomware,” the guidance advises institutions to adopt certain precautionary measures and recommends a series of other resources, including the Commissioner’s 2015 industry letter addressing cybersecurity self-assessments and the FFIEC’s cybersecurity assessment tool; the Massachusetts Division of Banks’ information security work-program for nondepository institutions; and related cybersecurity resources from the FBI. Finally, the guidance reminds institutions of their obligations to protect personal information of Massachusetts residents under applicable Massachusetts law and regulations.
On May 23, the Office of the Comptroller of the Currency (OCC) updated its policies and procedures regarding violations of laws and regulations, effective July 1, 2017. These updates are reflected in the “Bank Supervision Process,” “Community Bank Supervision,” “Federal Branches and Agencies,” and “Large Bank Supervision” booklets and other sections of the Comptroller’s Handbook and internal guidance. The OCC’s updated policies and procedures on violations of laws and regulations address recommendations in “An International Review of OCC’s Supervision of Large and Midsize Institutions” (International Peer Review report). The updated guidance applies to all national banks and federal savings associations. Among other things, the updated guidance emphasizes the need for examiners to communicate effectively and in a timely manner with the bank’s board of directors, the bank’s management team, and OCC supervisors, as well as the need to track and document corrective actions.
On May 18, the Federal Deposit Insurance Corporation (FDIC) announced that it will offer four identical live seminars on FDIC deposit insurance coverage for bank employees and officers between June 6, 2017, and December 4, 2017. The seminars will cover FDIC deposit insurance coverage rules, including information for prepaid cards, health savings accounts, 529 plan accounts and 529 Achieving a Better Life Experience plan accounts. The live seminars are free, but require advanced registration. More information regarding registration can be found at https://www.fdic.gov/deposit/seminars.html. Additionally, the FDIC has developed three deposit insurance coverage seminars for bank employees and officers that are available on the FDIC’s YouTube channel. These YouTube seminars cover fundamentals of deposit insurance coverage, deposit insurance coverage for revocable trust accounts and advanced topics in deposit insurance coverage. Links to the YouTube videos can be found at https://www.fdic.gov/deposit/seminars.html.
Enforcement & Litigation
On May 16, the U.S. Department of Justice (DOJ) announced that it had reached a settlement with a company engaged in reverse mortgage servicing, in connection with the company’s participation in the Department of Housing and Urban Development’s (HUD) Home Equity Conversion Mortgage (HECM) program, which offers senior citizens reverse mortgages insured by the Federal Housing Administration (FHA). View the Enforcement Watch blog post.
On May 15, the Minnesota Attorney General’s office (Minnesota AG) announced that it obtained a judgment in a lawsuit filed in Minnesota state court against a debt collection company. As a result of the final judgment, the company is permanently barred from collecting debts in Minnesota and must pay a civil money penalty and restitution to Minnesota consumers. View the Enforcement Watch blog post.
On May 11, the FDIC announced a settlement with a Wisconsin bank and two affiliated institutions, resolving allegations that the three lenders violated Section 5 of the Federal Trade Commission (FTC) Act, which prohibits unfair and deceptive practices. The lenders allegedly violated this provision by: (1) charging interest to consumers who paid off their loans within six months, despite the fact that the loans were advertised as interest-free for the first six months; (2) selling add-on products without accurately disclosing the terms of those products; and (3) failing to provide consumers the opportunity to pay monthly premiums to finance the purchase of optional debt cancellation coverage on loans originated by the lenders. View the Enforcement Watch blog post.
On May 9, the Attorney General for the Commonwealth of Virginia (Virginia AG) announced that it had entered into a proposed consent order to resolve an action filed in Spotsylvania County Circuit Court against a Virginia-based pawn broker that allegedly charged illegal interest rates on loans. The proposed consent order would require the pawnbroker to provide restitution to more than 1,400 consumers. View the Enforcement Watch blog post.
UJA – Federation of New York Bankruptcy and Reorganization Group’s annual luncheon is one of New York’s premier events, with more than 1,100 bankruptcy attorneys and restructuring professionals paying tribute to an industry leader and celebrating UJA’s work. Goodwin is a sponsor. For more information, please visit the event website.
At the Maryland Bankers Association's 121st Annual Convention, hundreds of bank CEOs, directors, and senior management decision-makers will gather for educational programs, networking events, and the annual election of association leadership. As always, activities include a golf tournament, Chairman’s Night of Celebration and the election of association leadership – plus many more activities and events. Regina Pisa and Matt Dyckman will be presenting, “Mission Critical: The Importance of Board Composition and Succession to the Future of the Enterprise.” Goodwin is a sponsor of this event. For additional information, please visit the event website.
Mike Whalen, a partner in the firm’s Technology Group and co-leader of the firm’s Fintech practice, will present Fintech business opportunities in Q&A format to the USAA senior management and legal teams.
Alison Douglass, partner in Goodwin’s Financial Industry and ERISA Litigation practices, will be participating in a T. Rowe Price webcast regarding “The Great Myth: Passive Investing Eliminates Fiduciary Risk.”