In this Weekly Roundup Issue. The Consumer Financial Protection Bureau (CFPB), the Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC) requested public comment on proposed guidance for addressing reconsiderations of value for residential real estate transactions; the OCC released is Semiannual Risk Perspective Report; and the CFPB published its Semi-Annual Report to Congress, and extended the deadline for public comments about the data broker industry. These and other developments are discussed in more detail below.
In observance of the Juneteenth holiday, our newsletter will be on hiatus next week. Our distribution will resume the week of June 26.
Regulatory Developments
Federal Agencies Propose Interagency Guidance on Reconsiderations of Value for Residential Real Estate Valuations
On June 8, the CFPB, FDIC, Federal Reserve, NCUA, and OCC requested public comment on proposed guidance addressing reconsiderations of value (ROV) for residential real estate transactions. The proposed guidance provides examples of policies and procedures that financial institutions can implement to help identify, address, and mitigate valuation discrimination risk, including allowing consumers to provide information that may not have been considered in an appraisal and addressing deficiencies identified in an appraisal. The proposed guidance also explains how financial institutions can create or enhance ROV processes that comply with applicable laws and regulations, including safety and soundness standards, preserve appraiser independence, and are responsive to consumers.
Comments must be received within 60 days of the proposed guidance’s publication in the Federal Register.
OCC Releases Semiannual Risk Perspective
On June 14, the OCC released its Semiannual Risk Perspective Spring 2023 report, which highlights the key issues facing the federal banking system. The five main areas of focus in the report include: the operating environment, bank performance, special topics in emerging risks, trends in key risks, and supervisory actions. Acting Comptroller Michael Hsu reiterated in his public remarks that the OCC continues to closely monitor the conditions of the institutions that the agency supervises.
“Looking ahead, the OCC expects banks to ‘be on the balls of their feet’ with regards to risk management, just as our examiners are.”
- Acting Comptroller of the Currency, Michael Hsu
CFPB Publishes Semi-Annual Report
On June 8, the CFPB published its Semi-Annual Report to Congress for the period beginning April 1, 2022, and ending September 30, 2022, covering rules and orders adopted, initiatives conducted, and plans for rules, orders, and other initiatives. The report also analyzes complaints received and state and federal enforcement actions taken, among other topics.
CFPB Extends Deadline for Public Comment on Data Brokers
On June 8, the CFPB announced that it was extending the comment deadline related to its March 15 Request for Information about the data broker industry and the collection and sale of consumer information. The deadline is being extended to July 15 in order to give the public additional time to share with the CFPB data, analysis, research, experiences with, and other information about data brokers.
SEC Announces Focus Areas for Next Stage of Marketing Rule Exams
On June 8, the Securities and Exchange Commission’s Division of Examinations (EXAMS) published a Risk Alert regarding its priorities for the next stage of examinations with respect to Rule 206(4)-1 (the Marketing Rule). EXAMS’ additional stated priorities are: (i) “testimonials” and “endorsements”; (ii) third-party ratings; and (iii) accurate completion of the new “Marketing Activities” sub-item on Form ADV.
To learn more, view our recent client alert on this announcement.
Enforcement and Litigation Developments
SEC Sues Binance and Coinbase: What Are the Allegations and What Is Next?
In the span of two days, June 5 and June 6, the US Securities and Exchange Commission (SEC) commenced proceedings against the largest crypto asset exchange in the world, Binance.com; its affiliated US exchange, Binance.US; and the largest crypto asset exchange in the US, Coinbase, a public company listed on Nasdaq. In each case, the SEC alleged violations of the Securities Act of 1933 (the Securities Act) and the Securities Exchange Act of 1934 (the Exchange Act), most significantly for operating unregistered trading platforms. While not unexpected in both cases in light of (i) the Commodity Futures Trading Commission’s March 2023 action against Binance, and (ii) Coinbase’s well-publicized receipt of and response to an SEC Wells Notice, the actions are nonetheless alarming to the industry.
In a recent client alert, Goodwin’s Digital Currency and Blockchain team summarizes the allegations contained in the respective complaints, the relief sought, related litigation and developments, and what to expect next as litigation proceeds.
Blueprint of the Advisers Act-Related SPAC Enforcement Actions So Far
On May 30, the SEC announced the third settlement of an enforcement action alleging violations of the Investment Advisers Act of 1940 (the Advisers Act) with respect to activities concerning special purpose acquisition companies (SPACs).
Taking a step back and looking at the three enforcement actions together, one can see what the SEC has been focusing on in this space and also what it has not been focusing on (yet). The primary key element shared by these enforcement actions is that in all three, the SEC asserts that the investment adviser affiliated with the SPAC failed to provide timely disclosure of conflicts of interest relating to the fact that (i) the SPAC sponsor was owned at least in part by affiliated advisory personnel (alongside either affiliated private funds or third parties) and (ii) the affiliated private funds also invested in the SPAC sponsor and/or engaged in other SPAC-related transactions.
Investment advisers should review whether these facts exist with respect to any affiliated SPACs to consider their potential exposure and any disclosures that may be warranted.
To learn more, view a recent client alert.
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