InfoBytes, March 30, 2012 - A Weekly In-depth review of news & developments in the financial services industry.

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Federal Issues

FTC Finalizes Consumer Privacy Recommendations, Notes Mobile Issues On March 26, the FTC released an anticipated report on consumer privacy, calling on all companies to adopt certain practices to protect consumers' private information. The final report outlines three basic principles: (i) "privacy by design", (ii) simplified choice, and (iii) increased transparency. Though the report and recommended practices do not carry the force of law, the FTC encourages adoption of the recommendations to support innovation and commerce while improving consumer protection. The report also serves as a blueprint for what the FTC is seeking in federal privacy legislation. Pending congressional action, the FTC will continue to employ its existing enforcement authority to address unfair or deceptive practices, including practices that violate self-regulatory programs. Further, the FTC intends to support implementation of the framework by focusing on several substantive topics and stakeholder groups, including (i) do not track, (ii) mobile services, (iii) data brokers, (iv) large platform providers, and (v) industry codes of conduct. For example, the FTC will focus on mobile services by updating guidance about online advertising disclosures, including holding a workshop on model mobile disclosures on May 30, 2012. It also calls on mobile service providers to establish industry standards that address data collection, transfer, use, and disposal, particularly for location data.

CFPB Files Amicus in TILA Rescission Case On March 27, the CFPB announced that it recently filed an amicus brief in the U.S. Court of Appeals for the Tenth Circuit in a case involving the Truth in Lending Act (TILA) right to rescind a transaction, Rosenfield v. HSBC Bank, No. 10-1442 (10th Cir.). The CFPB argued that borrowers who do not receive the material disclosures required by TILA can rescind the transaction as long as they notify the lender of the cancellation within three years of consummation, even if they do not file suit within the three-year period. The CFPB urged the Tenth Circuit to reject the view of the majority of courts that the borrower must both notify the lender and file suit within three years. Citing both the statute and the CFPB's implementing Regulation Z, the CFPB argued that the holding in Beach v. Ocwen Federal Bank, 523 U.S. 410 (1998), that the right to rescind expires completely after three years, simply means that "consumers [must] exercise their rescission right by providing notice to their lender within three years of obtaining the loan," and that consumers could file suit after three years if the lender failed to honor the rescission notice. As an indication of the Bureau's intense interest in this issue, it noted that it plans to file amicus briefs on the same question in at least three other circuits in which briefing is still pending.

Senate Confirms Multiple Nominees On March 29, the U.S. Senate confirmed President Obama's three nominees for the FDIC Board of Directors: Martin Gruenberg, Thomas Hoenig, and Jeremiah Norton. However, the Senate did not confirm Mr. Gruenberg as Chair of the FDIC or Mr. Hoenig as the Vice Chair. Instead, Mr. Gruenberg will continue to serve as Vice Chair and will lead the board in an acting capacity. Thomas Curry was confirmed to serve as Comptroller of the Currency. As such, he will also sit on the FDIC Board, as he has in an independent position since 2004. The Senate also confirmed (i) Maurice Jones to be the Deputy Secretary of the Department of Housing and Urban Development, (ii) Christy Romero as Special Inspector General for the Troubled Asset Relief Program, (iii) Mary John Miller to serve as the Under Secretary for Domestic Finance at the U.S. Treasury Department, and (iv) Jon Leibowitz to another seven year term as Federal Trade Commission Chairman. Two nominees to the Federal Reserve Board, Jerome Powell and Jeremy Stein, remain pending in the Senate.

Federal Banking Regulators Propose Joint Revisions to Leveraged Finance Guidance On March 26, the Federal Reserve Board, the FDIC, and the OCC proposed revisions to the interagency leveraged finance guidance issued in 2001. Leveraged finance transactions are characterized by a borrower with a degree of financial or cash flow leverage that significantly exceeds industry norms as measured by various debt, cash flow, or other ratios. According to the agencies, the guidance needs to be revised given increasing leveraged lending volumes, deteriorating underwriting practices, limited protection of debt agreements, aggressive capital structures and repayment prospects, and less than satisfactory management information systems. Specifically, the agencies believe that the guidance should be updated to refocus attention on the following five key areas: (i) establishing a sound risk-management framework, (ii) underwriting standards, (iii) valuation standards, (iv) pipeline management, and (v) reporting and analytics. The agencies are accepting comments on the proposed guidance through June 8, 2012.

DOJ Reaches FCPA Settlement With Medical Device Company On March 26, the U.S. Department of Justice (DOJ) announced it had reached a settlement with a medical device company to resolve allegations that the company and its subsidiaries made improper payments in violation of the Foreign Corrupt Practices Act (FCPA). DOJ alleges that Biomet, its subsidiaries, employees, and agents made illegal payments to publicly-employed health care providers in Argentina, Brazil, and China in exchange for business with certain hospitals in those countries and then falsely recorded the payments on its books to conceal the true nature of the payments. The deferred prosecution agreement requires Biomet (i) to pay a $17.28 million criminal penalty, (ii) to implement a robust compliance program and internal controls, and (iii) to retain an outside compliance monitor for 18 months. Separately, Biomet agreed to disgorge $5.4 million of profits and interest to resolve parallel civil charges brought by the SEC.

FHFA IG Issues Report on Fannie and Freddie Conservatorship On March 28, the Inspector General (IG) for the Federal Housing Finance Agency (FHFA) published a white paper that provides a general assessment of the FHFA's conservatorship of Fannie Mae and Freddie Mac (the enterprises). The report provides background on the FHFA's oversight regime noting that it has evolved from one that strictly supervised the enterprises' activities, to one that allows more operational decision-making at the enterprise level. The IG argues that the FHFA should assume a more active role in managing the enterprises and specifically notes that the FHFA (i) does not independently test and validate enterprise decision-making and (ii) is not sufficiently proactive in its oversight and enforcement of enterprise activity. The white paper acknowledges the significant challenges that the FHFA faces in its mission and provides a discussion of the tensions presented by FHFA's dual role as conservator and regulator.

Freddie Mac Issues Selling System Conversion Reminder On March 23, Freddie Mac issued a reminder that on April 23, 2012, the selling system will be updated to reflect Uniform Loan Delivery Dataset named fields and layout.To assist sellers and provide information as to what is changing in the system, Freddie Mac issued a job aid identifying, among other things, (i) what to do before the system conversion, (ii) changes to export functionality, and (iii) expectations for historical data conversion.

State Issues

Utah Enacts Multiple Bills Related to Mortgages and Default Servicing. Recently, Utah enacted several bills to amend the state's mortgage licensing and servicing requirements, and to support enforcement of mortgage fraud. On March 19, the state enacted House Bill 191, the majority of which takes effect May 8, 2012. The bill makes numerous adjustments to the state's mortgage and real estate practices and licensing statutes, including revisions to certain definitions, licensing and renewal requirements, prohibited conduct, and record keeping and reporting requirements. House Bill 164, enacted on March 19, establishes new servicing requirements, including (i) requiring servicers to appoint a single contact person for residential properties in default and establishing responsibilities for the contact person, (ii) requiring notice to a default trustor before a notice of default is filed, and (iii) allowing a default trustor to seek foreclosure relief. Enacted on March 22, House Bill 280, extends for two years, through the end of 2014, an existing provision requiring a notice for residential rental property that is being foreclosed. Also enacted on March 22 was Senate Bill 281. That bill creates a mortgage and financial fraud unit within the state's Attorney General's office. Beginning July 1, 2012, the Attorney General's office will have a $2 million appropriation to establish the new unit to work with other state and local agencies to prevent, investigate, and prosecute mortgage and other financial fraud.

Wisconsin Streamlines Foreclosures on Abandoned Properties. On March 21, Wisconsin enacted Senate Bill 307 relating to foreclosures on abandoned properties. Under the new law, the redemption period for abandoned property is reduced from two months to five weeks from the date a judgment of foreclosure is entered. The length of time that a sheriff must publish the notice of a sale in a newspaper is reduced from six successive weeks to three successive weeks before the sale. The law also (i) adds a new provision that provides that in addition to the parties to an action to enforce a mortgage lien, a representative of the municipality where the property is located may also provide evidence or testimony to the court as to whether the property has been abandoned and (ii) delineates the specific factors a court must consider in determining whether a property is abandoned. The changes take effect April 5, 2012.

West Virginia Establishes Rights for Tenants in Foreclosed Properties. On March 15, West Virginia enacted House Bill 3177, which will permit the owner of a residential rental property purchased at foreclosure to terminate an existing tenancy after giving the tenant 90 days notice, or not less than 30 days notice before the expiration of the lease, whichever is shorter. Tenants with month-to-month leases need only be provided with 30 days notice. The law details the content and method of delivery for the notices. The new provisions take effect January 1, 2013.

Indiana Enacts Foreclosure and Loan Administration Bills. On March 16, Indiana Governor Mitch Daniels signed House Bill 1238, which includes provisions allowing a mortgage creditor to file a petition to have a state court determine whether a property is abandoned. The bill also sets forth criteria and procedures for use by the court in making its determination. A finding from the court that a property is abandoned allows for an expedited foreclosure process.

Recently, Indiana enacted Senate Bill 298. The new law provides that if a mortgage or vendor's lien does not show the due date of the last installment, the mortgage or lien expires 10 years after the date of execution of the mortgage or lien instead of 20 years under the current law. The bill makes exceptions to the expiration period if a foreclosure action is brought prior to the expiration. It also provides for civil actions concerning an omitted party's interest in a property and sets forth factors that the court must consider in determining any rights of redemption. Lastly, the bill provides that: (i) the senior lien on which the foreclosure action was based is not extinguished by merger with the title to the property conveyed to a purchaser at the judicial sale until the interest of any omitted party has been terminated; and (ii) until an omitted party's interest is terminated, the purchaser at the judicial sale is the equitable owner of the senior lien.

Courts

Supreme Court Holds Only Pecuniary Damages Available Under Federal Privacy Act. On March 28, the U.S. Supreme Court ruled 5-3 that the Privacy Act of 1974, which regulates how federal agencies handle personal information, does not unequivocally authorize damages for mental or emotional distress. Cooper v. FAA, No. 10-1024, 2012 WL 1019969 (U.S. Mar. 28, 2012). In this case, an airline pilot sued the Federal Aviation Administration (FAA) and other federal agencies for impermissibly exchanging information about his HIV status in connection with a criminal investigation. The pilot claimed to suffer emotional and mental distress due to the disclosure. The U.S. Court of Appeals for the Ninth Circuit held that the term "actual damages" in the Privacy Act is not ambiguous and includes damages for mental and emotional distress. The Supreme Court reversed, holding, as the district court originally held, that the term is ambiguous and therefore does not waive the government's sovereign immunity from liability for nonpecuniary damages. The narrow ruling only directly impacts actions under the Privacy Act, and the court notes that "actual damages" can mean different things in different contexts. As such, the holding does not invalidate prior lower court rulings that "actual damages" under other statutes, including the Fair Credit Reporting Act and the Fair Housing Act, can include damages for emotional or mental distress.

Miscellany

UK Financial Regulator Issues Report on Bribery and Anti-Corruption Controls, Proposes New Guidance. On March 29, the United Kingdom's Financial Services Authority (FSA) published the findings of its thematic review into anti-bribery and corruption systems and controls in U.K.-based investment banks. The FSA review also looked at related topics including (i) gift-giving practices and controls, (ii) staff recruitment and vetting, (iii) training, and (iv) incident reporting. The FSA report concludes that the U.K. investment banking sector has been too slow and reactive in managing bribery and corruption risk, and that substantial work remains. In response, the FSA published proposed revisions to its regulatory guide, "Financial crime: a guide for firms." The FSA proposes to update Chapters 2 and 6 of Part 1 of the guide, with new guidance and examples of good and poor practice drawn from the report findings. The FSA also proposes to include a new Chapter 13 in Part 2 of the guide, which will consolidate all examples of good and poor practice highlighted in the thematic review. Stakeholders can submit comments on the proposed revisions through April 29, 2012.

Firm News

Join Us! 2012 Fair Lending Today Conference on Compliance, Regulatory and Litigation Issues and the CFPB in Today's Changing Enforcement Environment, hosted by BuckleySandler

 

2012 Panel Topics Include:

  • Overview: A New Agency Emerges
  • The Justice Department and Fair Lending: Disparate Impact Escapes Potential Elimination in Magner
  • Mortgage Servicing Developments: The AG/DOJ Settlement, the CFPB, and Ongoing Enforcement
  • Anatomy of a CFPB Enforcement Action
  • The CFPB's Fair Lending Agenda for Auto, Private Student Lenders, and Non-Secured Lending
  • New CFPB Enforcement Priorities for Credit Cards
  • Fair and Responsible Banking Risk Management Update

When: Monday, April 30, 2012

Where: The Fairmont Hotel in Washington, DC

Registration required. This conference is open to all financial services companies and others subject to CFPB oversight. Please no outside law firms, government agency personnel, consultant firms or media. For more information visit www.fairlendingtoday.com or contact fairlending@buckleysandler.com.

BuckleySandler LLP will be hosting a complimentary webinar entitled "The Consumer Financial Protection Bureau: A Recap of Activities To Date and Predictions for Actions Ahead" on Tuesday, April 17, 2012 from 2:00 PM - 3:15 PM ET. In this webinar, BuckleySandler attorneys Jeff Naimon, Jonice Gray Tucker, and Lori Sommerfield will recap the CFPB's recent activities and provide guidance for institutions which are regulated by the CFPB. The webinar will include discussion of issues related to the protection of confidential data provided by institutions in examination, enforcement, and other contexts as well as bills currently pending in Congress to provide greater assurances to the industry that privileged information will not be further disclosed by the CFPB.

Registration required. This webinar is open to all financial services companies and others subject to CFPB oversight. Please no outside law firms, government agency personnel, consulting firms, or media. After registering and being approved, you will receive a confirmation email containing instructions for joining the webinar. Click here to register: https://www1.gotomeeting.com/register/149905752

David Baris will be speaking at the NACD/AABD Bank Director Workshop on April 12, 2012 in Fort Lauderdale, Florida. The topic of the presentation is "Bank Director Liability and Practical Steps to Minimize It."

David Krakoff will be speaking at ACI's 27th National Conference on the Foreign Corrupt Practices Act in New York, NY on April 17, 2012. Mr. Krakoff's session will focus on defending executives in FCPA investigations.

James Parkinson will be speaking at a PLI program seminar entitled "Foreign Corrupt Practices Act 2012" in San Francisco, California on April 17, 2012 and in New York, New York on May 4, 2012.

Donna Wilson will be moderating a panel entitled "BANKS UNDER SCRUTINY: The Civil, Criminal, Regulatory and Insurance Fallout from Mortgage Foreclosures and Bank Failures" at the ABA Section of Litigation annual meeting in Washington DC, April 18-21, 2012.

Andrew Sandler will be speaking at the 2012 Marquis National Compliance Conference in Fort Worth, Texas on April 18, 2012. Mr. Sandler's session will cover the view from Washington, DC on CRA, HMDA, and Fair Lending.

Jonice Gray Tucker will be speaking at the National Community Reinvestment Coalition's Annual Conference on April 20, 2012 in Washington, D.C. Ms. Tucker will be a panelist at a session entitled: "Challenging the Use of Discriminatory Overlays."

David Krakoff will be speaking at the ALI-ABA Environmental Crimes Conference in Washington, DC on April 26, 2012. Mr. Krakoff's session will discuss the key issues at the outset of an environmental criminal action.

Jonice Gray Tucker and Amanda Raines will be participating in a D.C. Bar Women Litigators' Committee panel entitled, "Women Litigators: What We Do Right" on April 26, 2012 in Washington, D.C. The panel will discuss those characteristics that female litigators have which make them effective and persuasive advocates.

Benjamin Klubes and Jonice Gray Tucker will be speaking at The Financial Services Roundtable's Spring Meeting of the Lawyers Council on May, 3, 2012, in a session entitled "Litigation & Enforcement Update."

Jonice Gray Tucker will be participating in an American Bar Association webinar focusing on the Federal-State Mortgage Servicing Settlement on May 15, 2012.

Mortgages

FHFA IG Issues Report on Fannie and Freddie Conservatorship. On March 28, the Inspector General (IG) for the Federal Housing Finance Agency (FHFA) published a white paper that provides a general assessment of the FHFA's conservatorship of Fannie Mae and Freddie Mac (the enterprises). The report provides background on the FHFA's oversight regime noting that it has evolved from one that strictly supervised the enterprises' activities, to one that allows more operational decision-making at the enterprise level. The IG argues that the FHFA should assume a more active role in managing the enterprises and specifically notes that the FHFA (i) does not independently test and validate enterprise decision-making and (ii) is not sufficiently proactive in its oversight and enforcement of enterprise activity. The white paper acknowledges the significant challenges that the FHFA faces in its mission and provides a discussion of the tensions presented by FHFA's dual role as conservator and regulator.

Freddie Mac Issues Selling System Conversion Reminder. On March 23, Freddie Mac issued a reminder that on April 23, 2012, the selling system will be updated to reflect Uniform Loan Delivery Dataset named fields and layout.To assist sellers and provide information as to what is changing in the system, Freddie Mac issued a job aid identifying, among other things, (i) what to do before the system conversion, (ii) changes to export functionality, and (iii) expectations for historical data conversion.

Utah Enacts Multiple Bills Related to Mortgages and Default Servicing. Recently, Utah enacted several bills to amend the state's mortgage licensing and servicing requirements, and to support enforcement of mortgage fraud. On March 19, the state enacted House Bill 191, the majority of which takes effect May 8, 2012. The bill makes numerous adjustments to the state's mortgage and real estate practices and licensing statutes, including revisions to certain definitions, licensing and renewal requirements, prohibited conduct, and record keeping and reporting requirements. House Bill 164, enacted on March 19, establishes new servicing requirements, including (i) requiring servicers to appoint a single contact person for residential properties in default and establishing responsibilities for the contact person, (ii) requiring notice to a default trustor before a notice of default is filed, and (iii) allowing a default trustor to seek foreclosure relief. Enacted on March 22, House Bill 280, extends for two years, through the end of 2014, an existing provision requiring a notice for residential rental property that is being foreclosed. Also enacted on March 22 was Senate Bill 281. That bill creates a mortgage and financial fraud unit within the state's Attorney General's office. Beginning July 1, 2012, the Attorney General's office will have a $2 million appropriation to establish the new unit to work with other state and local agencies to prevent, investigate, and prosecute mortgage and other financial fraud.

Wisconsin Streamlines Foreclosures on Abandoned Properties. On March 21, Wisconsin enacted Senate Bill 307 relating to foreclosures on abandoned properties. Under the new law, the redemption period for abandoned property is reduced from two months to five weeks from the date a judgment of foreclosure is entered. The length of time that a sheriff must publish the notice of a sale in a newspaper is reduced from six successive weeks to three successive weeks before the sale. The law also (i) adds a new provision that provides that in addition to the parties to an action to enforce a mortgage lien, a representative of the municipality where the property is located may also provide evidence or testimony to the court as to whether the property has been abandoned and (ii) delineates the specific factors a court must consider in determining whether a property is abandoned. The changes take effect April 5, 2012.

West Virginia Establishes Rights for Tenants in Foreclosed Properties. On March 15, West Virginia enacted House Bill 3177, which will permit the owner of a residential rental property purchased at foreclosure to terminate an existing tenancy after giving the tenant 90 days notice, or not less than 30 days notice before the expiration of the lease, whichever is shorter. Tenants with month-to-month leases need only be provided with 30 days notice. The law details the content and method of delivery for the notices. The new provisions take effect January 1, 2013.

Indiana Enacts Foreclosure and Loan Administration Bills. On March 16, Indiana Governor Mitch Daniels signed House Bill 1238, which includes provisions allowing a mortgage creditor to file a petition to have a state court determine whether a property is abandoned. The bill also sets forth criteria and procedures for use by the court in making its determination. A finding from the court that a property is abandoned allows for an expedited foreclosure process.

Recently, Indiana enacted Senate Bill 298. The new law provides that if a mortgage or vendor's lien does not show the due date of the last installment, the mortgage or lien expires 10 years after the date of execution of the mortgage or lien instead of 20 years under the current law. The bill makes exceptions to the expiration period if a foreclosure action is brought prior to the expiration. It also provides for civil actions concerning an omitted party's interest in a property and sets forth factors that the court must consider in determining any rights of redemption. Lastly, the bill provides that: (i) the senior lien on which the foreclosure action was based is not extinguished by merger with the title to the property conveyed to a purchaser at the judicial sale until the interest of any omitted party has been terminated; and (ii) until an omitted party's interest is terminated, the purchaser at the judicial sale is the equitable owner of the senior lien.

Banking

Senate Confirms Multiple Nominees  On March 29, the U.S. Senate confirmed President Obama's three nominees for the FDIC Board of Directors: Martin Gruenberg, Thomas Hoenig, and Jeremiah Norton. However, the Senate did not confirm Mr. Gruenberg as Chair of the FDIC or Mr. Hoenig as the Vice Chair. Instead, Mr. Gruenberg will continue to serve as Vice Chair and will lead the board in an acting capacity. Thomas Curry was confirmed to serve as Comptroller of the Currency. As such, he will also sit on the FDIC Board, as he has in an independent position since 2004. The Senate also confirmed (i) Maurice Jones to be the Deputy Secretary of the Department of Housing and Urban Development, (ii) Christy Romero as Special Inspector General for the Troubled Asset Relief Program, (iii) Mary John Miller to serve as the Under Secretary for Domestic Finance at the U.S. Treasury Department, and (iv) Jon Leibowitz to another seven year term as Federal Trade Commission Chairman. Two nominees to the Federal Reserve Board, Jerome Powell and Jeremy Stein, remain pending in the Senate.

Federal Banking Regulators Propose Joint Revisions to Leveraged Finance Guidance. On March 26, the Federal Reserve Board, the FDIC, and the OCC proposed revisions to the interagency leveraged finance guidance issued in 2001. Leveraged finance transactions are characterized by a borrower with a degree of financial or cash flow leverage that significantly exceeds industry norms as measured by various debt, cash flow, or other ratios. According to the agencies, the guidance needs to be revised given increasing leveraged lending volumes, deteriorating underwriting practices, limited protection of debt agreements, aggressive capital structures and repayment prospects, and less than satisfactory management information systems. Specifically, the agencies believe that the guidance should be updated to refocus attention on the following five key areas: (i) establishing a sound risk-management framework, (ii) underwriting standards, (iii) valuation standards, (iv) pipeline management, and (v) reporting and analytics. The agencies are accepting comments on the proposed guidance through June 8, 2012.

Litigation

CFPB Files Amicus in TILA Rescission Case. On March 27, the CFPB announced that it recently filed an amicus brief in the U.S. Court of Appeals for the Tenth Circuit in a case involving the Truth in Lending Act (TILA) right to rescind a transaction, Rosenfield v. HSBC Bank, No. 10-1442 (10th Cir.). The CFPB argued that borrowers who do not receive the material disclosures required by TILA can rescind the transaction as long as they notify the lender of the cancellation within three years of consummation, even if they do not file suit within the three-year period. The CFPB urged the Tenth Circuit to reject the view of the majority of courts that the borrower must both notify the lender and file suit within three years. Citing both the statute and the CFPB's implementing Regulation Z, the CFPB argued that the holding in Beach v. Ocwen Federal Bank, 523 U.S. 410 (1998), that the right to rescind expires completely after three years, simply means that "consumers [must] exercise their rescission right by providing notice to their lender within three years of obtaining the loan," and that consumers could file suit after three years if the lender failed to honor the rescission notice. As an indication of the Bureau's intense interest in this issue, it noted that it plans to file amicus briefs on the same question in at least three other circuits in which briefing is still pending.

Supreme Court Holds Only Pecuniary Damages Available Under Federal Privacy Act. On March 28, the U.S. Supreme Court ruled 5-3 that the Privacy Act of 1974, which regulates how federal agencies handle personal information, does not unequivocally authorize damages for mental or emotional distress. Cooper v. FAA, No. 10-1024, 2012 WL 1019969 (U.S. Mar. 28, 2012). In this case, an airline pilot sued the Federal Aviation Administration (FAA) and other federal agencies for impermissibly exchanging information about his HIV status in connection with a criminal investigation. The pilot claimed to suffer emotional and mental distress due to the disclosure. The U.S. Court of Appeals for the Ninth Circuit held that the term "actual damages" in the Privacy Act is not ambiguous and includes damages for mental and emotional distress. The Supreme Court reversed, holding, as the district court originally held, that the term is ambiguous and therefore does not waive the government's sovereign immunity from liability for nonpecuniary damages. The narrow ruling only directly impacts actions under the Privacy Act, and the court notes that "actual damages" can mean different things in different contexts. As such, the holding does not invalidate prior lower court rulings that "actual damages" under other statutes, including the Fair Credit Reporting Act and the Fair Housing Act, can include damages for emotional or mental distress.

Privacy/Data Security

FTC Finalizes Consumer Privacy Recommendations, Notes Mobile Issues. On March 26, the FTC released an anticipated report on consumer privacy, calling on all companies to adopt certain practices to protect consumers' private information. The final report outlines three basic principles: (i) "privacy by design", (ii) simplified choice, and (iii) increased transparency. Though the report and recommended practices do not carry the force of law, the FTC encourages adoption of the recommendations to support innovation and commerce while improving consumer protection. The report also serves as a blueprint for what the FTC is seeking in federal privacy legislation. Pending congressional action, the FTC will continue to employ its existing enforcement authority to address unfair or deceptive practices, including practices that violate self-regulatory programs. Further, the FTC intends to support implementation of the framework by focusing on several substantive topics and stakeholder groups, including (i) do not track, (ii) mobile services, (iii) data brokers, (iv) large platform providers, and (v) industry codes of conduct. For example, the FTC will focus on mobile services by updating guidance about online advertising disclosures, including holding a workshop on model mobile disclosures on May 30, 2012. It also calls on mobile service providers to establish industry standards that address data collection, transfer, use, and disposal, particularly for location data.

Criminal Enforcement

DOJ Reaches FCPA Settlement With Medical Device Company. On March 26, the U.S. Department of Justice (DOJ) announced it had reached a settlement with a medical device company to resolve allegations that the company and its subsidiaries made improper payments in violation of the Foreign Corrupt Practices Act (FCPA). DOJ alleges that Biomet, its subsidiaries, employees, and agents made illegal payments to publicly-employed health care providers in Argentina, Brazil, and China in exchange for business with certain hospitals in those countries and then falsely recorded the payments on its books to conceal the true nature of the payments. The deferred prosecution agreement requires Biomet (i) to pay a $17.28 million criminal penalty, (ii) to implement a robust compliance program and internal controls, and (iii) to retain an outside compliance monitor for 18 months. Separately, Biomet agreed to disgorge $5.4 million of profits and interest to resolve parallel civil charges brought by the SEC.

UK Financial Regulator Issues Report on Bribery and Anti-Corruption Controls, Proposes New Guidance. On March 29, the United Kingdom's Financial Services Authority (FSA) published the findings of its thematic review into anti-bribery and corruption systems and controls in U.K.-based investment banks. The FSA review also looked at related topics including (i) gift-giving practices and controls, (ii) staff recruitment and vetting, (iii) training, and (iv) incident reporting. The FSA report concludes that the U.K. investment banking sector has been too slow and reactive in managing bribery and corruption risk, and that substantial work remains. In response, the FSA published proposed revisions to its regulatory guide, "Financial crime: a guide for firms." The FSA proposes to update Chapters 2 and 6 of Part 1 of the guide, with new guidance and examples of good and poor practice drawn from the report findings. The FSA also proposes to include a new Chapter 13 in Part 2 of the guide, which will consolidate all examples of good and poor practice highlighted in the thematic review. Stakeholders can submit comments on the proposed revisions through April 29, 2012.

 

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