On August 9, as part of a lawsuit in the U.S. District Court for the District of Minnesota, the U.S. Department of Labor (DOL) filed a Notice of Administrative Action indicating that it is seeking to extend the transition period and delay the applicability date of its Conflict of Interest Rule (the Fiduciary Rule) for 18 months from January 1, 2018, to July 1, 2019.The proposal has been submitted to the Office of Management and Budget, which must review and approve it before it can be enacted.
On August 14, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve Board) and the Federal Deposit Insurance Corporation (FDIC) (together, the federal banking agencies) issued joint guidance on the regulatory capital treatment of certain centrally cleared derivative contracts in light of recent changes to the rulebooks of certain central counterparties. The guidance specifically addresses the regulatory capital treatment of variation margin requirements for such centrally cleared derivative contracts and will result in more beneficial regulatory capital treatment for centrally cleared derivative contracts.
On August 9, the Federal Reserve Board issued final guidelines (Guidelines) addressing requests for joint accounts at Reserve Banks. Reserve Banks routinely open individual accounts for eligible institutions. In the past, Reserve Banks have also in limited cases opened joint accounts (where accountholder rights and liabilities are shared among multiple eligible institutions), but they have not been available as a standard option. In light of a 2016 request for a new joint account and the Board’s expectation of broader future interest in such arrangements, the Guidelines present six principles intended to provide consistency and transparency in case-by-case evaluations of future requests:
- Each joint account holder must meet all applicable legal requirements to have a Federal Reserve account, and the Reserve Bank will not have any obligation to any non-account holder with respect to the balance in and operation of the account;
- The private-sector arrangement should demonstrate that it has a well-founded, clear, transparent and enforceable legal basis in all aspects of its proposed arrangement;
- The design and rules of the private-sector arrangement should be consistent with the Federal Reserve’s policy objectives to promote a safe, efficient and accessible payment system for U.S. dollar transactions;
- The provision of the joint account should not create undue credit, settlement, or other risks to the Reserve Banks; and
- The provision of a joint account should not adversely affect monetary policy operations.
The Guidelines provide additional descriptions and discussions of each of these principles. The Board has indicated that the Guidelines are not intended to assure regulatory approval of any particular joint account arrangement.
Enforcement & Litigation
On August 9, the federal district court in Delaware approved the parties’ stipulation dismissing with prejudice an excessive fee complaint brought under Section 36(b) of the Investment Company Act of 1940 against an investment adviser that managed a number of mutual funds. The complaint, which was filed in 2014, alleged that the investment adviser charged excessive fees to certain of its proprietary funds because it provided similar investment management services as a subadviser to unaffiliated funds at a much lower fee rate and, therefore, violated Section 36(b) of the Investment Company Act of 1940. The stipulation of dismissal filed by the parties expressly states that the “dismissal is not the result of a settlement or a compromise or the payment of any consideration to Plaintiffs.”
The FTC is using consumer complaints in its effort to quell alleged illegal robocalls. On September 1, 2009, the FTC issued rules prohibiting robocalls made without a consumer’s prior written authorization. Yet, the FTC’s research shows that robocalls persist. According to the FTC’s Do Not Call Reported Calls Data website—which contains data about the telephone number, date, time and subject matter of the call, the state where the consumer receiving the call was located, and whether the call was reportedly a robocall—over 1.9 million complaints regarding robocalls were made between January and May 2017 alone. In fact, the FTC receives tens of thousands of complaints about robocalls daily, making robocalls the most complained-about issue the FTC oversees. View the LenderLaw Watch blog post.
On August 8, the Department of Justice (DOJ) announced that a national lender agreed to settle allegations that it violated the False Claims Act. The settlement resolves allegations that the lender originated and underwrote mortgage loans insured by the United States Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) or guaranteed by the United States Department of Veterans Affairs (VA), and purchased by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) that did not meet applicable origination, underwriting and quality-control requirements. View the Enforcement Watch blog post.
On August 4, the United States District Court for the Middle District of Pennsylvania denied a student loan servicer’s motion to dismiss claims brought against it by the Consumer Financial Protection Bureau (CFPB), rejecting the servicer’s argument that the claims fail because the CFPB is unconstitutional. In January 2017, the CFPB filed an 11-count complaint against the servicer, alleging that the servicer violated federal statutes, including the Consumer Financial Protection Act, Fair Debt Collection Practices Act and Fair Credit Reporting Act, by steering borrowers into more expensive repayment plans. View the Enforcement Watch blog post.
On August 10, the Massachusetts Division of Banks and four other state regulators announced a joint settlement with two affiliated collection agencies for their failure to comply with state and federal consumer protection laws related to debt collection practices. The agreement requires corrective actions by the two companies and a settlement payment of $500,000 to be distributed equally among the five states. The settlement alleges that the collection agencies violated federal and state consumer protection requirements, including the Fair Debt Collection Practices Act, and their own compliance policies that limit contact with third parties or with consumers at their places of employment in an effort to meet revenue goals. Specifically, collection agents were directed to call phone numbers that had previously been marked as “Do Not Call” and to document the accounts “REHAB PUSH” to avoid potential disciplinary action. The collection agencies are also alleged to have engaged in unfair and deceptive practices by failing to promptly credit debtor accounts upon receipt of payment by check. In addition to the $500,000 settlement payment, the two companies have agreed to reform their debt collection, compliance and financial practices.
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.
The Knowledge Group: Navigating SEC’s Latest Custody Rule Guidance and Its Impact on Advisers Webcast – September 15
Earlier this year, the SEC Division of Investment Management released and provided a new custody rule guidance under the Investment Advisers Act of 1940. The new guidance addresses the three areas under the Custody Rule, which are the standing letters of authorization, client's grant of authority to an adviser, and the provisions in a separate custodial agreement. In this live webcast, a seasoned panel of thought leaders, professionals and advisers assembled by The Knowledge Group will provide and present to the audience the recent trends and developments related to the latest SEC Custody Rule Guidance. Speakers will also identify how the new guidance impacts investment advisers. Jason Monfort is speaking at this webinar. For additional information, please visit the event website.