NYDFS to Streamline Confidential Supervisory Information Disclosure Process

Weiner Brodsky Kider PC

Weiner Brodsky Kider PC

The New York State Department of Financial Services (NYDFS) recently issued a new proposed regulation, which takes into account public comments received on the NYDFS’ original proposed regulation, that would allow regulated entities to share “confidential supervisory information” (CSI) with their attorneys and accountants/auditors (i.e., professional advisors) without first obtaining approval from NYDFS.  Comments on the new proposed regulation are due by November 8, 2020.

The NYDFS noted in the Regulatory Impact Statement that the proposed regulation will make it easier for regulated entities to share CSI (e.g., reports, memoranda, or correspondence relating to NYDFS investigations and examinations) with professional advisors by providing a “streamlined” disclosure process for these classes of professionals.  Presently, regulated entities need prior written approval from NYDFS each time they want to share CSI with their professional advisors.  

Under the exemption provided in the proposed regulation, regulated entities may disclose CSI to professional advisors without first obtaining written approval from the NYDFS if they meet certain conditions.  Specifically, regulated entities may disclose CSI to a professional advisor without the NYDFS’ prior written approval as long as there is a written agreement in place with such professional advisor in which the advisor agrees to:

  • Except as permitted by the regulation, abide by the regulation’s prohibition on the dissemination of CSI;
  • Use the CSI only for the purpose of providing legal representation or auditing services under the written agreement;
  • Only disclose the CSI to its employees, directors, or officers to the extent “necessary and appropriate for business purposes,” and on the condition that such persons maintain the confidentiality of such information; and
  • Return or certify the destruction of the CSI at the conclusion of the engagement.

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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