On July 18, the staff of the SEC’s Division of Investment Management (the Division) issued frequently asked questions (FAQs) on investment company reporting modernization reforms, which were adopted in October 2016 (the Reforms). The FAQs, which the Division expects to update from time to time as needed, address the following broad topic areas: compliance dates and general filing obligations, Form N-PORT, Regulation S-X and Form N-CEN. The FAQs confirmed, among other things, the compliance dates for the new forms and amendments adopted by the Reforms, which are for reporting periods after such dates. For more information about the Reforms, view the client alert prepared by Goodwin’s Investment Management practice.
The NYSDFS issued answers to FAQs concerning its recently adopted cybersecurity regulations. As discussed in the March 1 edition of the Roundup, NYSDFS had previously promulgated a regulation establishing cybersecurity requirements for financial services companies. The FAQs cover a wide range of topics, including applicability to subsidiaries, affiliated and third-party service providers.
On July 18, the FDIC revised its guidelines for appeals of certain material supervisory determinations to expand the circumstances under which banks may appeal a material supervisory determination and enhance consistency with the appeals processes of other federal banking agencies. The FDIC sought comment on the proposed changes in July 2016. The revised guidelines, which are effective immediately, adopt the amendments as proposed in July 2016, and include additional amendments based on feedback received from commenters.
On July 14, the CFPB issued a proposal on reporting requirements for banks and credit unions that issue home-equity lines of credit. Under rules that are scheduled to take effect in January 2018, financial institutions are generally required under the Home Mortgage Disclosure Act (HMDA) to report home-equity lines of credit if they made 100 such loans in each of the last two years. The new proposal would increase that threshold to 500 loans through calendar years 2018 and 2019 so that the CFPB can consider whether to make a permanent adjustment. The public comment period is open until July 31, 2017. The CFPB will issue a separate proposal with a longer notice and comment process to consider adjustments to the permanent threshold at a later date.
As discussed in last week’s edition of the Roundup, on July 10, the CFPB announced the release of its anticipated Arbitration Rule, opening the door for more consumer class actions against financial institutions concerning financial products and services. Many consumer contracts, such as credit card and bank agreements, contain mandatory arbitration clauses. These clauses typically require consumer disputes to be arbitrated rather than litigated in court, and they work to prevent class action lawsuits from being filed. Consumer advocacy groups have long complained about such clauses, posturing that individuals are unlikely to endure the costs of arbitration to resolve what are typically low dollar value cases. Their position is that if consumers were able to band together and file class action lawsuits, consumers would be more apt to challenge allegedly unlawful conduct against financial institutions, and companies would be held accountable. View the LenderLaw Watch blog post.
With the near unanimous passing of a bill that will explicitly recognize the right to trade stocks using a blockchain, Delaware is making a strong case for it being the blockchain-friendliest state. The Delaware Senate Bill 69, which won a majority vote in the Senate with 20 to 0 in favor of the bill and 40 to 1 in the House of Representatives in favor of the bill, will be expected to be signed into law by end of July, with an effective date of August 1. The bill includes a series of amendments to the Delaware General Corporation Law, specifically to Sections 219, 224, and 232, that legally recognize any number of records being stored on networks of electronic databases – e.g., blockchain – for the creation and maintenance of corporate records, including the corporation’s stock ledger. View the Digital Currency + Blockchain Perspectives blog post.
Enforcement & Litigation
On July 13, the Massachusetts Attorney General’s Office (Massachusetts AG) announced that it obtained a preliminary injunction against a debt collection law firm and its principal attorney. The Massachusetts AG alleged that the law firm engaged in unlawful collection practices, in violation of the Massachusetts AG’s debt collection regulations. View the Enforcement Watch blog post.
On July 11, the United States Department of Housing and Urban Development (HUD) announced that its Mortgagee Review Board had suspended a national mortgage lender from originating and underwriting new mortgages insured by the Federal Housing Administration (FHA). HUD’s Departmental Enforcement Center also banned the lender’s owner from doing business with the federal government. View the Enforcement Watch blog post.
The consumer finance industry is heading toward uncertainty with the current administration promising to loosen regulation. ACI’s 29th Consumer Finance Class Actions & Litigation conference will address the uncertainties by providing new and emerging trends as well as topics affecting consumer finance litigation and class actions. Sabrina Rose-Smith, partner in Goodwin’s Financial Industry and Consumer Financial Services Litigation practices, will serve as co-chair of this conference and will be a speaker on the “Consumer Finance Class Action Litigation and Settlement Trends and New and Emerging Procedural Consideration Including Ascertainability of Class and Class Members, Offers in Judgment, and More” panel. For additional information, please visit the event website.
Jamie Fleckner, partner in Goodwin’s Financial Industry practice and Chair of its ERISA Litigation practice, will be speaking in an upcoming Strafford live webinar, “ERISA Breach of Fiduciary Duty Class Actions: Avoiding and Defending Claims Against Companies and Fiduciaries.” The panel will provide guidance to counsel for plan fiduciaries and companies on avoiding and defending ERISA class claims that allege breach of fiduciary duty related to the selection and administration of investment plans.
At a time of substantial regulatory action in the area of consumer financial protection, there has also been significant judicial activity. Hear from legal experts as they examine and discuss recent major decisions at the Supreme Court and appellate courts which will affect consumer protection generally and impact the mortgage finance arena specifically. Please join MBA Compliance Essentials for an important, informative program on the current state of consumer protection law, as well as what might be coming from the courts in the not too distant future. Goodwin partners Willy Jay, Matthew Sheldon and Laura Stoll will be speaking at this webinar.This week’s Roundup contributors: Geoffrey Anghelone and Courtney Hayden.