Weekly RoundUp September 23, 2021

SEC Publishes Sample Climate Change Comment Letter

Editor's Note

In This Issue. The U.S. Securities and Exchange Commission (SEC) published a sample comment letter on climate change disclosures; the Financial Industry Regulatory Authority (FINRA) is conducting a review of brokerage firm practices related to the acquisition of customers through social media channels and how firms manage their obligations related to information collected from those customers and other individuals that may provide data to firms; FINRA also announced that the OTC Bulletin Board will cease operation; the Federal Deposit Insurance Corporation (FDIC) announced the launch of a new Mission-Driven Bank Fund to assist institutions that support low- and moderate- income, minority and rural communities; and the Office of the Comptroller of the Currency (OCC) issued a new booklet titled “Problem Bank Supervision”. These and other developments are discussed in more detail below.

Editor's Note
Editor's Note
Editor's Note

Regulatory Developments

SEC Publishes Sample Climate Change Comment Letter

On September 22, the staff of the Division of Corporation Finance (Staff) of the SEC published a sample comment letter on climate change disclosures. A brief statement that precedes the sample comment letter reiterates the view expressed in the SEC’s 2010 interpretive guidance that a variety of existing SEC disclosure rules may require companies to disclose the current and potential future material impacts of climate change on the company’s business and financial condition and performance. The Staff has been conducting an extensive review of climate change disclosure and compliance in Form 10-K reports. When the Staff has questions about a company’s climate change disclosures it has sent a comment letter to the company, and the sample comments reflect the Staff’s experience during this review, which is ongoing. The sample comment letter highlights the importance of a thorough review of company disclosures about climate change and related issues, both in SEC filings and in materials such as Corporate Social Responsibility (CSR) reports that companies prepare and post to their websites.

Read the client alert to learn what companies should do in response and what’s on the horizon.

Social Media Influencers, Customer Acquisition, and Related Information Protection

On September 16, FINRA announced that it will be conducting a review of brokerage firm practices in order to assess how firms utilize social media influencers (Influencers) for self-promotion and how they protect customer data sourced from social media activities. FINRA’s review will cover social media communications from January 1, 2020 through a date this year to be specified by FINRA; however, the end date will vary by firm. According to the announcement, an Influencer is defined as “any third party with whom the firm contracts or compensates to provide Social Media Communications.” Social Media Communications (SMC) is defined as “any communication with the public, including the provision of any content or advertisement about or on behalf of the firm, made pursuant to an arrangement with a third party, through Social Media.” FINRA is requesting firms to detail how they find and compensate Influencers and provide all SMCs disseminated by Influencers on behalf of firms. FINRA will be assessing written policies and procedures for the supervision of social media marketing, including whether firms are complying with SEC rules regarding the protection of customer financial and personal information. FINRA has not yet announced how many firms are targeted for the review. 

Upcoming Retirement of the OTC Bulletin Board

On September 17, FINRA announced in Regulatory Notice 21-28 that the OTC Bulletin Board (OTCBB) will cease operation. As such, members and vendors are advised to prepare for closure. Though the closing date has not yet been set, it may occur as soon as the fourth quarter of 2021; however, FINRA has confirmed that the closure will not occur prior to October 1, 2021.

FDIC to Launch New Mission-Driven Bank Fund

On September 16, the FDIC announced the launch of a new Mission-Driven Bank Fund (Fund) to support FDIC-insured Minority Depository Institutions (MDIs) and Community Development Financial Institutions (CDFIs). Microsoft and Truist Financial Corporation will lead the investment as anchor investors with Discover, Inc. joining as a founding investor. The combined initial commitment to the Fund is $120 million, with additional investments expected. The Fund is a collaborative investment framework designed to drive capital investments and other funding for MDIs and CDFIs that support low- and moderate- income, minority and rural communities. The FDIC will retain an advisory role with respect to the Fund; however, it will not contribute capital to, manage or have any involvement in the investment decisions of the Fund.

Problem Bank Supervision: New Comptroller’s Handbook Booklet and Rescissions

On September 13, the OCC issued a new booklet, “Problem Bank Supervision” (the Booklet). The Booklet identifies the OCC’s approach to timely identification and rehabilitation of problem banks, which includes advanced supervision, enforcement and resolution strategies. The newly released Booklet incorporates OCC Bulletin 2018-33 entitled “Prompt Corrective Action: Guidelines and Recissions,” replaces “An Examiner’s Guide to Problem Bank Identification, Rehabilitation, and Resolution” (January 2001), and provides an in-depth discussion of the OCC’s authority under 12 CFR Part 6. 

“Microsoft and Truist have answered the call to become anchor investors and to assist the FDIC in developing this Fund for the benefit of mission-driven banks and, most importantly, the people and places these institutions serve.”
– Jelena McWilliams, Chairman of the FDIC 

SEC Makes Cybersecurity Top Priority; Sanctions Firms for Cybersecurity Failures

There is little doubt that the SEC is making cybersecurity a top priority. As a part of these increasing efforts, on August 30, the SEC sanctioned eight registered broker-dealers and investment advisers (including various affiliated firms) for failing to implement cybersecurity practices and/or modify them following data security incidents.

According to the SEC, each of the eight firms was the victim of a business email compromise. Each compromise lasted for over a year, with some lasting nearly three years, without being detected and resulting in the exposure of personal information of thousands of the firms’ customers and clients.

Read the client alert to learn more about the breach and key takeaways.

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