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  • Senate Banking Committee Announces Subcommittee Assignments for 115th Congress

    Federal Issues

    On January 17, the Senate Committee on Banking, Housing and Urban Affairs Chairman Mike Crapo (R-Idaho) and Ranking Member Sherrod Brown (D-Ohio), announced subcommittee assignments for the 115th Congress. The Senators named to head each subcommittee are listed below:

    • Dean Heller of Nevada will be the new chairman of the Securities, Insurance and Investment subcommittee. Sen. Mark Warner of Virginia will continue to serve as ranking member.
    • Pat Toomey of Pennsylvania will remain chairman of the Financial Institutions and Consumer Protection subcommittee. Sen. Elizabeth Warren of Massachusetts will be the new ranking member.
    • Tom Cotton of Arkansas will become chairman of the Economic Policy subcommittee. Sen. Heidi Heitkamp of North Dakota will be the new ranking member.
    • Ben Sasse of Nebraska will chair the National Security and International Trade and Finance subcommittee. Sen. Joe Donnelly of Indiana will serve as ranking member.

    Sen. Tim Scott of South Carolina will continue to chair the Housing, Transportation and Community Development subcommittee. Sen. Robert Menendez of New Jersey will remain ranking member.

    Federal Issues Banking Mortgages U.S. Senate Congress

  • CFPB Releases Updated Student Loan Payback Playbook Prototype

    Federal Issues

    According to a January 17 blog post by CFPB Student Loan Ombudsman Seth Frotman, the CFPB has released an updated student loan Payback Playbook prototype, incorporating changes that the Bureau implemented after reviewing thousands of public comments submitted by student loan borrowers, consumer advocates, and other industry members. According to Mr. Frotman, the Bureau worked together with the Departments of Education and Treasury to develop “prototype disclosures” that “outline[] a path to affordable payments for struggling borrowers who are trying to avoid student debt distress.” The CFPB reports that it has shared the Payback Playbook prototype and the underlying consumer feedback data with the Department of Education. The joint efforts are part of a broader Department of Education initiative branded “A New Vision for Serving Student Loan Borrowers.

    Federal Issues Consumer Finance CFPB Student Lending Department of Treasury Department of Education

  • OCC Announces Launch of New Central Application Tracking System (CATS)

    Federal Issues

    On January 17, the OCC launched the first phase of its Central Application Tracking System (CATS), a new web-based system for banks to file licensing and public welfare investment applications and notices. CATS provides a secure, electronic system through which authorized national banks, federal savings associations, federal branches, and banking agencies may draft, submit, and track their licensing and public welfare investment applications and notices. CATS will replace the existing e-Corp and CD-1 Invest application tools. As explained in OCC Bulletin 2016-37, the new program is being launched in three phases to help banks transition from the existing tools. The second and third phases of the CATS rollout are scheduled to begin in the spring of 2017. When ready, CATS will be accessible through BankNet, the secure portal for OCC-regulated banks.

    Federal Issues Banking OCC Fintech FSA

  • OCC Finalizes Rule Addressing Receiverships of Uninsured National Banks

    Federal Issues

    On December 20, the OCC announced the publication of its final rule implementing a framework for receiverships of national banks that are not insured, and thus not subject to receivership, by the FDIC under the Federal Deposit Insurance Act (“FDIA”). As discussed in a previous InfoBytes post, the OCC has not historically appointed a receiver for uninsured banks, opting instead to rehabilitate or resolve such institutions without a receiver. This OCC final rule—which goes into effect on January 19, 2017—reflects the OCC’s current belief that establishing and clarifying a receivership framework for uninsured banks “will be beneficial to financial market participants and the broader community of regulators.”

    Among other things, the rule seeks to provide clarity to market participants with respect to the following key issues: (i) when and how a receiver for uninsured bank may be appointed; (ii) the powers held by the receiver of an uninsured bank; (iii) the two methods through which parties holding claims against an uninsured depository institution can seek approval of those claims; (iii) the order of payment for administrative expenses and claims against an uninsured bank; and (iv) the treatment of fiduciary or custodial assets. Notably, the OCC did not explicitly address whether the new rule will also apply to FinTech companies should they obtain a special purpose national bank charter as proposed recently by the OCC.

    Federal Issues FDIC Banking OCC

  • Chilean Chemical Company Settles FCPA Charges With SEC and DOJ

    Federal Issues

    On January 13, Chilean chemical and mining company agreed to pay nearly $30.5 million to resolve criminal and civil FCPA charges in connection with payments to politically-connected individuals in Chile. The company admitted that, from at least 2008 to 2015, it made approximately $15 million in payments to Chilean politicians, political candidates, and individuals connected to them.  Many of the payments violated Chilean tax law and/or campaign finance limits and were not supported by documentation.  Rather, the company made many of these payments to third-party vendors associated with the politically-connected individuals based on fictitious contracts and invoices for non-existent services.  The company falsely recorded many of these payments in its books and records.

    The company agreed to a three-year deferred prosecution agreement (DPA) with the DOJ, including a $15,487,500 criminal penalty, and agreed to retain an independent compliance monitor for two years.  The criminal penalty reflected a 25 percent discount from the low end of the U.S. Sentencing Guidelines fine range due to the company’s full cooperation and substantial remediation.  The company also agreed to pay a $15 million penalty to the SEC pursuant to an Administrative Order Instituting Cease-and-Desist Proceedings to settle the SEC’s charges that the company violated the books and records and internal controls provisions of the FCPA.

    This settlement demonstrates the jurisdictional-reach of the U.S. government in enforcing the FCPA.  The Chilean company with no U.S. operations, agreed to settle both the SEC’s and DOJ’s charges even though the entirety of the conduct occurred outside of the United States and was committed by foreign nationals.  The only tie to the United States referenced in the SEC and DOJ settlement papers is that the company is registered with the SEC as a foreign private issuer (its Series B shares have been listed on the NYSE since 1993).

    Federal Issues Securities Criminal Enforcement FCPA SEC DOJ DPA

  • UK-based Manufacturer Settles FCPA Charges As Part of $800 Million Global Bribery Investigation Resolution

    Federal Issues

    On January 17, a UK-based manufacturer and distributor for the civil aerospace, defense aerospace, marine, and energy sectors worldwide, agreed to pay nearly $170 million to the DOJ to resolve charges that it conspired to violate the anti-bribery provisions of the FCPA around the world. The settlement with the DOJ (via a three-year deferred prosecution agreement (DPA)), was a fraction of the company's $800 million global resolution in connection with bribes paid to government officials in exchange for government contracts in China, India, Indonesia, Malaysia, Nigeria, Russia, Thailand, Brazil, Kazahkstan, Azerbaijan, Angola, and Iraq.

    In addition to settling with the DOJ, the company resolved charges with the UK SFO by entering into a DPA and agreeing to pay a fine of $604,808,392.  The company entered into a leniency agreement with the Brazilian Ministério Público Federal (MPF) and agreed to pay a penalty of $25,579,170.

    According to the DPA Statement of Facts, the company admitted that between 2000 and 2013, it conspired to violate the anti-bribery provisions of the FCPA by paying more than $35 million in bribes to foreign officials in exchange for confidential information and/or government contracts.  Many of these contracts benefited RRESI, the company’s indirect U.S. subsidiary.  The company made the majority of the bribes by inflating commission payments to third-party intermediaries, who then paid part of the commission as bribes to government officials.

    The DOJ lauded the company’s cooperation in its investigation and as a result, the company received a 25 percent reduction from the low end of the U.S. Sentencing Guidelines fine range due.  However, the DOJ refused to award the company any voluntary disclosure credit.  The DOJ has been transparent that it only will award voluntary disclosure credit when the disclosure occurs prior to an imminent threat of disclosure or government investigation. Here, that test was not satisfied because the company did not disclose the conduct until after media reports and the related SFO inquiry began.

    Federal Issues Criminal Enforcement FCPA DOJ Bribery DPA UK Serious Fraud Office China

  • Medical Device Company Reaches Second FCPA Settlement in the Span of Five Years

    Federal Issues

    On January 18, a Texas-based medical device company admitted wrongdoing and agreed to pay approximately $6 million to the SEC to settle FCPA books and records and internal controls charges in connection with improper payments made by its Brazilian subsidiary to doctors through third parties. In related non-FCPA proceedings, the company also agreed to pay a $8.25 million penalty to resolve various accounting violations. Each of the four former executives consented to accounting-related SEC orders without admitting or denying the findings. Filing of each can be found here, here, here, and here.

    According to the Administrative Order Instituting Cease-and-Desist Proceedings, the company’s Brazilian subsidiary employed third-party commercial representatives and distributors to make improper payments to doctors employed at government-owned hospitals to induce them to use the company’s products, thereby increasing sales.  The company also improperly recorded revenue, leading to the related accounting charges.

    In settling with the SEC, The company has now resolved two separate FCPA cases in the span of five years.  In 2012, the company resolved FCPA actions with both the SEC and DOJ in connection with bribes paid to Mexican officials by its Mexican subsidiary.  Given the prior corruption and internal controls issues, the SEC found that the company failed to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances to detect and prevent such payments.  The company agreed to hire a compliance consultant for one year.

    Federal Issues Securities FCPA SEC

  • D.C. Circuit Grants PHH Request to Respond to Solicitor General's Brief

    Federal Issues

    Over the objections of the CFPB, the D.C. Circuit today granted the request of PHH Corp. to file a supplemental brief responding to arguments in support of en banc review that were raised for the first time in a brief filed by the U.S. Solicitor General on the December 22, 2016.  PHH’s supplemental brief is due on or before January 27, 2017.  For additional background, please see our summaries of the panel decision, the CFPB’s petition for rehearing, and the D.C. Circuit’s order directing PHH to respond and the Solicitor General to provide views.

    Federal Issues Consumer Finance CFPB PHH v. CFPB RESPA Mortgages Litigation

  • CFPB Announces Leadership Changes

    Federal Issues

    On January 6, the CFPB announced several leadership changes. Specifically, Leandra English is returning to the CFPB to serve as the Chief of Staff; Jerry Horton will serve as the CFPB's Chief Information Officer; Paul Kantwill will serve as the Bureau's Assistant Director for Servicemember Affairs; John McNamara will serve as Assistant Director of Consumer Lending, Reporting, and Collections Markets; and Elizabeth (Eli) Reilly will serve as the CFPB's Chief Financial Officer.

    Federal Issues Consumer Finance CFPB

  • Rep. Wilson Introduces Bill to Delay Fiduciary Rule

    Federal Issues

    On January 6, Rep. Joe Wilson (R-S.C.) introduced the Protecting American Families’ Retirement Advice Act, a bill that would delay by two years the effective date of the Department of Labor’s “fiduciary rule.” As discussed previously on InfoBytes, the fiduciary rule—which is presently set to take effect in April 2017—expands the definition of “investment advisor” to include a “wider array of advice relationships,” thereby imparting new standards on financial advisors and brokers handling retirement accounts. In a statement, Rep. Wilson described the Fiduciary Rule as “one of the most costly, burdensome regulations to come from the Obama Administration.” Wilson’s proposed legislation seeks to delay the rule’s implementation in order to “giv[e] Congress and President-elect Donald Trump adequate time to re-evaluate.”

    Federal Issues Banking President-Elect Congress Fiduciary Rule Agency Rule-Making & Guidance

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