OCC GRANTS A NATIONAL TRUST BANK CHARTER TO ANOTHER CRYPTOCURRENCY FIRM
On April 23, the OCC granted preliminary conditional approval to Paxos, the third cryptocurrency firm that has obtained approval to charter a national trust bank. A national trust bank is a type of nondepository national bank whose activities are limited to fiduciary ones. They are appealing to cryptocurrency firms since FDIC insurance is not required, and because the federal charter preempts various state laws with which state-chartered trust banks or trust companies must grapple. Paxos’ application indicated that it would: engage in custody services; act as a payment, exchange or other agent; provide KYC as a service; provide custody and management of USD stablecoin reserves; and offer other cryptocurrency services. This chartering action follows on, and cites to, an OCC interpretive letter issued earlier this year permitting national trust banks to engage in activities permissible for a state trust bank or trust company under state law in the state where the national bank is located, such as acting as a custodian, even if those state-authorized activities are not necessarily considered fiduciary in nature under federal law.
CFPB DELAYS MANDATORY COMPLIANCE DATE FOR GENERAL QUALIFIED MORTGAGE FINAL RULE
On April 27, the CFPB issued a final rule delaying the mandatory compliance date of the General Qualified Mortgage (QM) Final Rule from July 1, 2021 to October 1, 2022 in order to “help ensure that consumers continue to have access to responsible, affordable mortgage credit and preserve flexibility for consumers affected by the COVID-19 pandemic and its economic effects.” While the QM Final Rule already became effective on March 1, 2021, delaying the mandatory compliance date provides creditors seeking to originate General QM loans with the option of complying with either the revised, price-based General QM loan definition or the original, total monthly debt to total monthly income (DTI)-based General QM loan definition until October 1, 2022. The delay also provides lenders with more time to use the Government-Sponsored Enterprise (GSE) Patch before its availability becomes potentially limited after July 1, 2021 due to recent revisions to the Preferred Stock Purchase Agreements entered into by the Department of the Treasury and the Federal Housing Finance Agency.
“It’s deeming the activities that we have identified in the business plan to be those that can be carried out by a national trust, that we have the right team in place and the right controls and plan in place to control our risk and to operate as a national trust company.”
– Dan Burstein, General Counsel at Paxos
AGENCIES INVITE COMMENT ON PROPOSED RULE FOR INCOME TAX ALLOCATION AGREEMENTS
On April 22, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and OCC invited comment on a proposed rule that updates and codifies existing guidance on income tax allocation agreements involving depository institutions and their affiliates. Under the proposed rule, banks that file tax returns as part of a consolidated tax filing group would be required to enter into tax allocation agreements with their holding companies and other members of their consolidated group. The proposed rule also describes the provisions required to be included in such tax allocation agreements and specifies their regulatory reporting treatment. Comments must be received within 60 days of the proposed rule’s publication in the Federal Register.
NYSE PROPOSES AMENDMENT TO LIMIT LISTED CLOSED-END FUND INVESTMENTS IN PRIVATE FUNDS
On April 20, the U.S. Securities and Exchange Commission gave notice of the NYSE’s proposed amendment to Section 102.04 of the NYSE Listed Company Manual to establish limits on investments in unregistered investment vehicles (private funds) by listed closed-end funds. The proposed amendment would prevent the initial listing of a closed-end fund if, at the time of listing, the closed-end fund invests on an aggregate basis more than 15 percent of the fund's net assets in Private Funds or invests more than five percent of the fund's net assets in any single Private Fund. In addition, the amendment would require a listed closed-end fund that invests in or intends to invest in Private Funds to adopt fundamental policies providing that the fund: (i) may not make additional investments in Private Funds if, immediately after the investment, Private Funds would represent more than 15 percent of such fund's net assets or the investment in an individual Private Fund would represent more than five percent of such fund's net assets; and (ii) will take specified actions upon exceeding those limits, including notifying the NSYE and the fund’s board of directors. The proposed amendment would require fund management to provide a report to the fund’s board of directors within one business day of the occurrence with an explanation of the extent and causes of the occurrence and a plan to reduce the fund’s investments in Private Funds to comply with the limits of Section 102.04. If a fund exceeds the limits for 30 days upon the occurrence, the fund’s board of directors, including a majority of independent directors, must assess whether the plan presented to it continues to be in the best interest in the fund.
The proposed amendment would include a new definition of “Private Funds” to mean: (1) in the case of a U.S. domestic entity, a limited partnership, limited liability company, trust, corporation or similar incorporated or unincorporated entity that would be an investment company under Section 3(a) of the Investment Company Act of 1940 (the Investment Company Act) but for the exception provided from that definition by either Sections 3(c)(1) or 3(c)(7) of the Investment Company Act and (2) in the case of a foreign entity, an entity that is only permitted to offer its securities in the U.S. in a private offering that complies with Section 7(d) and either 3(c)(1) or 3(c)(7) of the Investment Company Act and the interpretations of the SEC thereunder. The proposed definition of Private Funds excludes any funds that are issuers of collateralized debt obligations (CDOs) or collateralized loan obligations (CLOs). Comments to the proposed amendment are due by May 17, 2021.
AMERICAN RESCUE PLAN: HOW TO NAVIGATE NEW CONTINUATION COVERAGE STANDARDS FOR COBRA
On March 11, President Biden signed the American Rescue Plan Act of 2021 (ARPA), the latest COVID-19 relief bill, into law. Under ARPA, employers will generally be obligated to advance the cost of continuation coverage required under the Consolidated Omnibus Budget Reconciliation Act (COBRA continuation coverage) for eligible individuals from April 1, 2021 to September 30, 2021, with the right to recover the amounts advanced through tax credits. Read the client alert to learn more about eligibility, tax credits, notices and forthcoming guidance.