Weekly RoundUp November 08, 2021

SEC Publishes Observations From its Registered Investment Company Initiatives

Editor's Note
In this Issue. The U.S. Securities and Exchange Commission’s (SEC) Division of Examinations recently published a risk alert spotlighting observations from its “RIC Initiatives”; the Federal Financial Institutions Examination Council (FFIEC) revised interagency examination procedures for the Truth in Lending Act (TILA) and Regulation Z; the Consumer Financial Protection Bureau (CFPB) released several guidance documents addressing debt collection rule validation information requirements; the Financial Industry Regulatory Authority (FINRA) is deleting the Rule 6500 Series and other rules related to the OTC Bulletin Board (OTCBB); and the Office of the Comptroller of the Currency (OCC) updated its “Retail Lending” booklet of the Comptroller’s Handbook. These developments are discussed in more detail below.
Editor's Note
Editor's Note
Editor's Note

Regulatory Developments

SEC Division of Examinations Publishes Observations From its Registered Investment Company Initiatives

The staff of the SEC’s Division of Examinations (the Division) recently published a risk alert spotlighting observations from its “RIC Initiatives” — 200+ examinations of mutual funds and ETFs and nearly 100 investment advisers between 2018 and 2019. The risk alert sought to answer three key questions and highlighted a number of frequently cited deficiencies or weaknesses, painting a broad picture of the Division’s observations of industry trends of where funds and advisers can improve with respect to compliance, while at the same time providing a peek into the Division’s evergreen focus areas.

Read the client alert to learn more about the Division’s observations and the key takeaways for funds and advisers reviewing their compliance programs.

Truth in Lending Act: Revised Interagency Examination Procedures and Rescissions

The FFIEC revised interagency examination procedures for the Truth in Lending Act (TILA) and Regulation Z. The revised interagency procedures reflect recent amendments to Regulation Z, including (i) the revised general qualified mortgage (QM) definition, (ii) the creation of a new category of QMs known as seasoned QMs, (iii) an extension of the sunset date for the temporary government-sponsored enterprise QM and (iv) a delay in the mandatory compliance date for the new general QM definition until October 1, 2022.

CFPB Issues Guidance on Debt Collection Rule Validation Information Requirements

On October 29, the CFPB released several guidance documents, including a new section of the Debt Collection Rule Frequently Asked Questions, addressing use of the model validation notice and the validation information special rule for certain residential mortgage debts, as well as a guidance document entitled, “Debt Collection Rule: Disclosing the Model Validation Notice Itemization Table”, illustrating how a debt collector can comply with the requirement to disclose certain required validation information. This guidance follows on the Spanish translation of the model validation notice released by the CFPB on October 18 in a broader effort to assist the industry in preparing to comply with the new Debt Collection Rule by its effective date of November 30, 2021.

Reminder – Upcoming Retirement of the OTC Bulletin Board (OTCBB)

In Regulatory Notice 21-28, FINRA announced that it is deleting the Rule 6500 Series, other rules related to the OTC Bulletin Board (OTCBB) and planning to cease its operation as of November 8, 2021. In anticipation of this change, FINRA has amended the TDDS, ORF TRAQS User Guide and ORF Web API specifications.

“In sharing the information in this Risk Alert, the Division encourages funds and their advisers to review their practices, policies, and procedures in these areas and to consider improvements in their compliance programs and disclosure practices, as appropriate." 
– The SEC’s Division of Examinations

Retail Lending: Revised Comptroller’s Handbook Booklet and Rescissions

On October 28, the OCC issued version 2.0 of the “Retail Lending” booklet of the Comptroller’s Handbook. This booklet discusses risks associated with retail lending and provides a framework for examiners’ evaluations of risk management activities.  The revised booklet: reflects changes to laws and regulations since this booklet was last updated; reflects OCC issuances published and rescinded since this booklet was last updated ; includes clarifying edits regarding supervisory guidance, sound risk management practices, and legal language; and revises certain content for general clarity. 

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Editors

Nicole Griffin
Samantha Kirby
William Stern
 

Contributors

Josh Burlingham
Sammy Tang
Serene Qandil