Financial Services Bulletin: Action At Federal Agencies

by Perkins Coie
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SEC Proposes Crowdfunding Rules

On Wednesday, October 23, 2013, the Securities and Exchange Commission (the "SEC") voted unanimously to propose rules to permit companies to offer and sell securities through "crowdfunding," under Title III of the Jumpstart Our Business Startups Act (the "JOBS Act").  The JOBS Act directs the SEC to implement rules for the Act's "crowdfunding" exemption to the SEC's securities registration requirements.  Crowdfunding is a term that describes fundraising over the internet through small individual contributions from a large number of people.

Under the proposed rules an eligible company could raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period.  Investors, over the course of a 12-month period, with an annual income and net worth of less than $100,000, could invest up to $2,000, or 5 percent of their annual income or net worth, whichever is greater.  Over the same period investors with an annual income or net worth equal to or greater than $100,000 could invest up to 10 percent of their annual income or net worth, subject to an annual limit of $100,000.  Notably, however, securities purchased in a crowdfunding transaction could not be resold for a period of one year.

Some companies will not be eligible to use the crowdfunding exemption, including, most prominently, non-U.S. companies and companies that are already SEC reporting companies.

The JOBS Act requires that crowdfunding transactions take place through an SEC-registered online intermediary, which can be either a broker-dealer or a funding portal.  These broker-dealers and funding portals will be a new type of SEC registrant, and will be required to provide investors with certain minimum forms of information and safeguards against fraud.

Perkins Coie LLP published an Update providing greater detail on the newly proposed SEC crowdfunding rules.

Read the SEC press release

Six Financial Regulatory Agencies Jointly Propose Standards for Assessing Diversity

On Wednesday, October 23, 2013, six federal regulatory agencies—including the Board of Governors of the Federal Reserve System (the "Fed"), the Consumer Financial Protection Bureau (the "CFPB"), the Federal Deposit Insurance Corporation (the "FDIC"), the National Credit Union Administration (the "NCUA"), the Office of the Comptroller of the Currency (the "OCC"), and the SEC—proposed joint standards for assessing the diversity policies and practices of the institutions they regulate.  Under Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), each agency's Office of Minority and Women Inclusion is required to develop standards for assessing diversity policies and practices in regulated entities.

The proposed standards cover four major areas: (1) institutional commitment to diversity; (2) workforce profile and employment practices; (3) business practices and procurement and supplier diversity; and (4) transparency of organizational diversity and inclusion.

Read the Fed press release

Read the CFPB press release

Read the FDIC press release

Read the NCUA press release

Read the OCC press release

Read the SEC press release

Agencies Propose Liquidity Risk Management Rule

On Thursday, October 24, 2013, the Fed proposed a rule to strengthen the liquidity risk management of large banks and savings associations.  This liquidity risk management rule was developed collaboratively by the Fed, with the FDIC and OCC.  The FDIC and OCC jointly announced the proposed rule on Wednesday, October 30, 2013 in substantially the same form as the Fed proposal.

The proposed rule would require covered institutions to maintain a standard level of high-quality liquid assets that could be converted easily and quickly into cash on each business day, in an amount equal to or greater than an institution's projected cash outflows less projected inflows over a 30-day period.

The proposed liquidity rule would be applicable to "banking organizations with $250 billion or more in total consolidated assets; banking organizations with $10 billion or more in on-balance sheet foreign exposure; systemically important, non-bank financial institutions that do not have substantial insurance subsidiaries or substantial insurance operations; and bank and savings association subsidiaries thereof that have total consolidated assets of $10 billion or more."

The liquidity proposal is based on a standard agreed to by the Basel Committee on Banking Supervision, and would also establish an enhanced prudential liquidity standard consistent with section 165 of the Dodd-Frank Act.  Under the proposal, U.S. covered institutions would begin a transition period on January 1, 2015, and would be required to be fully compliant by January 1, 2017.

Read the Fed press release

Read the FDIC press release

Read the OCC press release

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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