Financial Services Weekly Roundup - June 2018

by Goodwin
Contact

Goodwin

Editor's Note
 

In This Issue. The Securities and Exchange Commission (SEC) issued a no-action letter that closes the gap in investor protection created by the SEC’s approval of FINRA Rule 2165; the SEC’s Investment Management Division issued updated custody rule FAQs; the Financial Crimes Enforcement Network (FinCEN) issued an advisory highlighting the connection between corrupt senior foreign political figures and their enabling of human rights abuses; the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) adopted a final rule to shorten the securities transaction settlement cycle to the T+2 period currently followed by registered broker-dealers and most other market participants; and the Consumer Financial Protection Bureau (CFPB) dismissed administrative proceedings against PHH Corp., ending this lengthy enforcement action. These and other recent developments are covered below.

Regulatory Developments

SEC Issues No-Action Letter to Investment Company Institute

On June 1, the SEC’s Division of Investment Management Staff (Staff) issued a no-action letter to the Investment Company Institute (ICI). The no-action letter closes a gap in investor protection created by the SEC’s approval of FINRA Rule 2165, which permits broker-dealers to place a temporary hold on disbursement requests upon reasonable belief of financial exploitation of Seniors and other “Specified Adults” (together, “Specified Adults”). FINRA’s Rule does not protect all Specified Adults because some mutual fund shareholder accounts are held directly with the mutual fund and serviced by the fund’s SEC-registered transfer agent. Under Section 22(e) of the Investment Company Act of 1940 (Act) a transfer agent (stepping into the shoes of a mutual fund) cannot lawfully delay the disbursement of redemption proceeds while it investigates whether financial exploitation is occurring.

Under the terms of the no-action letter, the Staff stated that it would not recommend enforcement action to the SEC against a mutual fund or its transfer agent under Section 22(e) of the Act if, in accordance with the conditions described in the ICI’s incoming letter, the transfer agent, acting on behalf of the mutual fund, temporarily delays for more than seven days the disbursement of redemption proceeds from the mutual fund account of Specified Adults held directly with the transfer agent based on a reasonable belief that financial exploitation of the Specified Adult has occurred, is occurring, has been attempted, or will be attempted. The conditions described in the ICI’s incoming letter correspond to the conditions imposed on broker-dealers under Rule 2165. For more information on FINRA Rule 2165, read the client alert issued by Goodwin’s Financial Industry practice.

SEC Investment Management Division Issues Updated Custody Rule FAQs

On June 5, the SEC’s Division of Investment Management Staff updated its “Staff Responses to Questions About the Custody Rule” to provide additional guidance regarding specific questions relating to custody arising out of IM Guidance Update 2017-01 “Inadvertent Custody: Advisory Contract Versus Custodial Contract Authority.” The new information is contained in Question II.11 and Question II.12 in the “Definition of Custody; Scope of the Rule” section of the FAQs.  In its response to Question II.11, the Staff clarifies that an adviser that does not have a copy of a client's custodial agreement, and does not know, or have reason to know whether the agreement would give the adviser Inadvertent Custody, need not comply with the custody rule with respect to that client's account if Inadvertent Custody would be the sole basis for custody.  Relief from complying with the custody rule is not available where the adviser recommended, requested, or required a client's custodian. In Question II.12, the Staff clarified its view on the application of the custody rule when an adviser has check-writing authority and the ability to deduct its advisory fee from client accounts.

FinCEN Issues Advisory on Human Rights Abuses Enabled by Corrupt Senior Foreign Political Figures and Their Financial Facilitators

On June 12, FinCEN issued an advisory to U.S. financial institutions to highlight the connection between corrupt senior foreign political figures (politically exposed persons) and their enabling of human rights abuses. The advisory describes a number of typologies used by politically exposed persons to access the U.S. financial system, obscure, and further their illicit activity. The advisory also identifies 14 “red flags” that may assist financial institutions in identifying the methods used by politically exposed persons that contribute directly or indirectly to human rights abuses or other illicit activity, through the U.S. financial system. These red flags include:

  • the use of third parties when that is not normal business practice or when it appears to shield a politically exposed person;
  • the use of family members, close associates, or corporate vehicles as legal entity owners or to otherwise obscure ownership;
  • declarations from the politically exposed person which are inconsistent with other publicly available information;
  • access to state funds;
  • the politically exposed person’s control over a transaction’s counterparty or correspondent;
  • transactions involving government contracts in unrelated sectors that connect to shell companies or involve expropriated assets;
  • seeking to use a financial institution “that would not normally cater to foreign or high-value clients.”

FinCEN will update these red flags and typologies as it continues investigating the methodologies associated with politically exposed persons and their financial facilitators. The advisory also reminds U.S. financial institutions of their due diligence and suspicious activity report (SAR) filing obligations related to such politically exposed persons and their financial facilitators.

FinCEN Customer Due Diligence Rule Becomes Effective

FinCEN’s customer due diligence rule (CDD rule), which requires covered financial institutions to, among other things, collect information on the significant beneficial owners of customers that are legal entities, became effective on  May 11, 2018. For a quick refresher on the CDD rule’s requirements, please see our previous client alert, which discussed issues critical to understanding and complying with the rule, including due diligence requirements and procedures, the definition of account, the definition of legal entity customer, the identification of beneficial owners, reliance on the due diligence efforts of other financial institutions, and recordkeeping requirements. In addition, as reported in the April 4 edition of the Roundup, FinCEN issued FAQs concerning the CDD rule on April 3, 2018. The FAQs address some of the common questions that continue to arise as banks and other financial institutions implement the CDD rule, including the manner in which the rule applies to investment funds and other pooled investment vehicles and whether and how to look through investors to determine beneficial ownership.

CFPB Announces Engagement Transformation

The CFPB announced that it has begun transforming its Stakeholder Outreach and Engagement work after receiving public feedback on its external engagements. The CFPB will continue the Consumer Advisory Board and continue forums for the Community Bank Advisory Council and Credit Union Advisory Council. Current advisory groups will be reconstituted and made smaller through the 2018 application and selection process. Alongside the restructuring, the CFPB intends to increase its strategic outreach including regional town halls, roundtable discussions at CFPB headquarters, and regular national calls. The first town hall meeting took place in Topeka, Kansas on June 8, 2018, to discuss Fighting Elder Financial Exploitation in the Kansas Community presented by the Kansas Attorney General.

OCC and FDIC Adopt Final Rule to Shorten Securities Transaction Settlement Cycle

On June 1, the OCC and the FDIC announced a final rule to shorten the standard settlement cycle for securities transactions (purchases and sales) by institutions supervised by the OCC and FDIC. Effective October 1, 2018, FDIC- and OCC-supervised institutions will be required to settle most securities transactions within two business days of trade date (“T+2”). Currently, OCC- and FDIC-supervised institutions are required to settle security transactions within three business days of trade date. The T+2 settlement cycle is the standard settlement cycle currently followed by registered broker dealers. The new rule is intended to reduce settlement exposure and to align OCC- and FDIC-supervised institutions’ settlement practices with other market participants.

Enforcement & Litigation

CFPB Dismisses Administrative Proceedings Against PHH Corp.

On June 7, the CFPB issued an order dismissing administrative proceedings against PHH Corp.  The dismissal follows a January 31, 2018, opinion by the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit) reinstating the court’s prior interpretation of Section 8 of the Real Estate Settlement Procedures Act (RESPA). According to the order, the CFPB determined that further agency proceedings were unnecessary given that the D.C. Circuit’s interpretation “is now the law of this case” and therefore “PHH did not violate RESPA.” The order brings an end to the long-running enforcement action. View the Enforcement Watch blog post.

In the Wake of ACA International, Four Cases Follow Suit

On March 16, the D.C. Circuit issued a long-awaited ruling in ACA Int’l v. FCC, which struck down the Federal Communications Commissions’ (FCC’s) expansive interpretation of the Telephone Consumer Protection Act’s (TCPA’s) “automatic telephone dialing system” (ATDS) definition. As LenderLaw Watch analyzed more fully here, the D.C. Circuit focused on (a) whether the equipment has the “capacity” to perform the enumerated statutory functions of an ATDS (i.e., storing or producing telephone numbers “using a random or sequential number generator” and dialing such numbers) and, if so, (b) whether that capacity was used to make the challenged call. Four district court decisions have come down since, which have all followed ACA Intl. View the LenderLaw Watch blog post.

FTC Settles Claims Against Student Loan Debt Relief Company for Over $17.7 million

On May 31, the Federal Trade Commission (FTC) announced that it settled claims against a student loan debt relief company as part of a coordinated federal-state enforcement initiative to target deceptive student loan debt relief scams, called “Game of Loans.” The FTC settled allegations that a student loan debt relief company violated the FTC Act, Telemarketing Sales Rule, and Credit Repair Organizations Act by allegedly charging unlawful advance fees and making false promises to enroll consumers in loan forgiveness programs and provide credit repair services. View the Enforcement Watch blog post.

FTC Settles Claims Against Student Loan Debt Relief Company for Over $9 Million

On May 31, the FTC announced that it settled claims against a loan debt relief company in connection with its coordinated federal-state enforcement initiative to target deceptive student loan debt relief scams, called “Game of Loans.” The FTC settled claims that the company violated the FTC Act, Telemarketing Sales Rule, and Credit Repair Organizations Act. The company allegedly participated in a debt relief operation that preyed on consumers with student loan debt by claiming to be associated with the Department of Education and offering loan forgiveness programs. View the Enforcement Watch blog post.

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.

© Goodwin | Attorney Advertising

Written by:

Goodwin
Contact
more
less

Goodwin on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.