On January 16, the effective date of the rule, the CFPB announced that it intends to engage in a rulemaking process so that it may reconsider its Payday Rule. Although most provisions of the Payday Rule, including new stringent underwriting standards, do not require compliance until August 19, 2019, the effective date codifies the Payday Rule in the Code of Federal Regulations and establishes April 16, 2018, as the deadline to submit an application for preliminary approval to register under the Payday Rule. In light of its decision to revisit the Payday Rule, the CFPB indicated that it will entertain waiver requests from any potential applicant struggling to meet the April 16 registration deadline.
On January 10, the staff of the SEC’s Division of Investment Management released responses to frequently asked questions (FAQs) related to the open-end investment company (fund) liquidity risk management program rule and related requirements adopted by the SEC in October 2016 (for a summary of these requirements, view the client alert prepared by Goodwin’s Investment Management practice). The responses to the FAQs relate primarily to sub-advised funds and exchange-traded funds (ETFs), which are fund types with unique interpretive and implementation issues under the new rule. Among other things, the sub-advised fund FAQs address delegations of responsibilities, including responsibilities of advisers and sub-advisers; diversity of liquidity risk management practices among funds, advisers and sub-advisers; and how funds should address differences in judgment of advisers and sub-advisers about liquidity classifications. The ETF FAQs relate primarily to the rule’s definition of an “in-kind ETF,” particularly its requirement that cash used in redemptions be de minimis. The ETF FAQs address, among other things, cash that may be excluded from an ETF’s definition and testing of its de minimis amount; cash in redemptions that the staff views as reasonable de minimis amounts; and acceptable approaches to testing whether cash usage is de minimis. The FAQs’ preamble states that the staff “expects to update this document from time to time to include responses to additional questions.”
On December 22, 2017, the Office of the Chief Accountant (the OCA) and the staff of the Division of Corporation Finance (the Staff) of the SEC published guidance relating to financial accounting and disclosure issues that result from the tax reform act generally referred to as the Tax Cut and Jobs Act(the Tax Act) that the president signed on the same date. Staff Accounting Bulletin No. 118 (SAB 118), published by the OCA and the Staff, provides a framework for companies to gather and analyze the information necessary to account for certain income tax effects of the Tax Act for the reporting period in which the Tax Act became law. Compliance and Disclosure Interpretation 110.02(C&DI 110.02), published by the Staff, confirms that re-measurement of a deferred tax asset as a result of changes in tax rates or other provisions of the Tax Act will not trigger an impairment subject to mandatory reporting under Item 2.06 of Form 8-K. This alert also summarizes some of the other disclosure matters that companies should consider as they evaluate the impact of the Tax Act on their financial accounting and business disclosures. For more information, read the client alert issued by Goodwin’s Public Companies practice.
The FASB has issued a staff Q&A signaling that it would not object to private companies and not-for-profit organizations applying a recent SEC staff accounting bulletin that addresses several key financial reporting issues that resulted from the Tax Act. SAB 118 generally provides a one-year period for making refinements to estimates, but notes that if actual or reasonable estimations of tax reform effects are available, they should be reported in the year of enactment, which is 2017. FASB noted that private companies and not-for-profits applying SAB 118 should apply all relevant aspects of the bulletin in its entirety.
NYSE Regulation recently published its 2018 compliance guidance memorandum for companies listed on the NYSE American exchange. The memo summarizes important rules and policies applicable to listed companies and highlights rules and other developments that changed during 2017 or are new for 2018.
There is general consensus that 2017 was a banner year for cryptocurrencies. According to CNBC, initial coin offerings (ICOs) in 2017 raised approximately $3.7 billion for issuing companies. And despite some recent weakness in high-profile cryptocurrencies like bitcoin, we expect an increasing number of ICOs from an ever-expanding scope of industries. With opportunity invariably comes risk, however, and we are spending significant time counseling clients on how best to mitigate risk associated with cryptocurrencies, including lawsuits, regulatory scrutiny and cyberattacks. In fact, there already have been significant enforcement actions and public investigations initiated by federal and state regulators regarding ICOs, as well as private class action litigation filed. Not surprisingly, insurance coverage for these types of exposures is high on the list for discussion. For more information, read the Fintech Flash issued by Goodwin’s Fintech practice.
Enforcement & Litigation
On January 12, the U.S. Supreme Court granted a petition for certiorari in Lucia v. Securities and Exchange Commission to consider whether administrative law judges (ALJs) of the SEC are officers of the United States within the meaning of the Appointments Clause of the U.S. Constitution. As we discussed in the December 6 edition of the Roundup, the matter is the subject of a split-circuit decision calling into question whether ALJs must be appointed by the president or SEC Commissioners.
On December 15, Massachusetts Secretary of State William Galvin announced that his office’s Securities Division (MSD) would begin “aggressive policing” of cryptocurrency sales in Massachusetts. The MSD regulates the offering and sale of securities in Massachusetts. The MSD can seek a range of civil remedies for violation of the state securities laws, including disgorgement, fines and injunctive relief. Galvin, in his December statement, expressed the view that all ICOs are sales of securities subject to regulation, as opposed to the federal SEC’s approach of considering each ICO on a case-by-case basis. View the Digital Currency + Blockchain Perspectives blog post.
Brown Brothers Harriman’s CMO Beth Maury speaks with Goodwin’s Chairman Emeritus, Regina Pisa, about the importance of impact philanthropy and contributing to the advancement of women leaders. Pisa also shared her top 10 leadership lessons.
Bank Director’s 24th annual Acquire or Be Acquired Conference focuses on banks seeking to explore strategic short- and long-term growth options. Regina Pisa will be speaking on the panel, “Effectively Communicating an M&A Transaction” on January 28. Samantha Kirby and Matt Dyckman will also be in attendance. For more information, please visit the event website.
This week’s Roundup contributor: Andrew Zutz.