Regulatory Developments
CFPB Finalizes Changes to Prepaid Rule
On January 25, the CFPB finalized amendments to its final rule on prepaid products, including an overall delay of the rule’s effective date until April 1, 2019. The amendments revised the error resolution and limited liability provisions to ensure that “financial institutions are not required to resolve errors or limit consumers’ liability on unverified prepaid accounts.” The CFPB also made other adjustments and clarifications that will reduce regulatory burden, including ones related to compulsory use for certain cards such as jury cards, foreign language disclosures and submission of prepaid account agreements to the CFPB. In connection with the amendments, the CFPB also released an executive summary of the amendments and an unofficial redline to assist industry and other stakeholders in reviewing the amendments.
CFPB Solicits Comments Regarding Civil Investigative Demands and Processes
On January 24, the CFPB released a request for information regarding the CFPB’s civil investigative demands (CIDs) and associated processes. The public’s input, including that of entities who have received CIDs and of attorneys representing such entities, would be used to assist the CFPB in determining whether any changes are appropriate to update, streamline, or revise the CFPB’s processes to minimize regulatory burdens, as well as what aspects should not be changed. Comments must be received by March 27, 2018.
Client Alert: Brokerage Industry Enhances Measures to Fight Elder Financial Exploitation
On February 5, new FINRA Rule 2165 (Financial Exploitation of Specified Adults) becomes effective, as does an amendment to existing FINRA Rule 4512 (Customer Account Information). Together, these rules will implement FINRA’s new “Trusted Contact Person” framework and will permit broker-dealers to place a temporary hold on disbursement requests upon reasonable belief of financial exploitation of seniors and other “Specified Adults.” While this new framework will impose certain requirements on broker-dealers, it will also enable them to intervene, when necessary, to combat financial exploitation of elderly clients and others who may be suffering from diminished cognitive capacity. For more information, read the client alert issued by Goodwin’s Financial Industry practice.
Client Alert: Brokerage Industry Enhances Measures to Fight Elder Financial Exploitation
On February 5, new FINRA Rule 2165 (Financial Exploitation of Specified Adults) becomes effective, as does an amendment to existing FINRA Rule 4512 (Customer Account Information). Together, these rules will implement FINRA’s new “Trusted Contact Person” framework and will permit broker-dealers to place a temporary hold on disbursement requests upon reasonable belief of financial exploitation of seniors and other “Specified Adults.” While this new framework will impose certain requirements on broker-dealers, it will also enable them to intervene, when necessary, to combat financial exploitation of elderly clients and others who may be suffering from diminished cognitive capacity. For more information, read the client alert issued by Goodwin’s Financial Industry practice.
Client Alert: FTC Announces New Thresholds for 2018
As required by the HSR Act, on January 26, the FTC released its annual adjustments to the reporting thresholds. The key number to remember is now $84.4 million. Generally, transactions valued at $84.4 million or more must be reported and cleared by the federal antitrust authorities before the transaction may close. The adjustments will become effective 30 days after imminent publication in the Federal Register. The anticipated effective date is therefore on or about February 25, 2018. The revised thresholds will apply to all transactions that close on or after the effective date. For more information, read the client alert issued by Goodwin’s Antitrust and Competition practice.
Client Alert: Deadline Approaching for Reporting 2017 ISO Exercises and ESPP Transfers
Section 6039 of the Internal Revenue Code requires corporations to provide information statements to employees (including former employees) and information filings to the IRS regarding exercises of incentive stock options (ISOs) by employees and former employees. Similar information statements and filings are required to report transfers of shares of stock by employees and former employees that were purchased under an employee stock purchase plan (ESPP) designed to meet the requirements of Section 423 of the Internal Revenue Code. To satisfy the information return and statement requirements, companies will need to complete and file Form 3921 with respect to ISO exercises and Form 3922 with respect to ESPP transfers, as applicable. For more information, read the client alert issued by Goodwin’s practice.
Enforcement & Litigation
In August 2016, the U.S. District Court for the Central District of California granted partial summary judgment to the CFPB in a federal lawsuit against a California-based online payday lender, its individual owner, its subsidiary and a servicer of its loans (Defendants), where the CFPB alleged that Defendants used a “rent-a-tribe” scheme to avoid state usury and licensing laws in violation of the Consumer Financial Protection Act (CFPA). But that ruling only established liability; on January 19, the court issued Findings of Fact and Conclusion of Law, ultimately awarding a statutory penalty of only $10 million — much lower than CFPB’s proposed $52 million. View the Enforcement Watch blog post.
Goodwin News
Partner William Weintraub and associate Barry Bazian discuss the complex issue of whether a trustee may sell or assign the bankruptcy estate’s avoidance claims. The duo expects the framework the court will employ depends on whether the proposed purchaser or assignee of the claims will pursue recovery for its own benefit or for the benefit of the estate. Read the full article. This material is reprinted from Volume 26, issue #6 (December 2017) of the Norton Journal of Bankruptcy Law and Practice, with permission. Copyright (c) 2017 Thomson Reuters/West. For more information about this publication please visit www.legalsolutions.thomsonreuters.com.
Elder Financial Protection Seminar for Legal and Compliance Personnel – February 7
Goodwin is hosting an Elder Financial Protection Seminar, a forum for legal and compliance personnel (often the first and last lines of defense) to discuss emerging issues in the financial industry. The seminar will focus on the banking, brokerage and trust/fiduciary sectors and will feature a premiere lineup of speakers, including industry professionals, regulators and trade groups. To register for the event, click here.
This week’s Roundup contributors: Alex Callen and Justin Pierce.