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Financial Services Law Insights and Observations


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  • GAO Finds Continuing Significant Deficiency in CFPB's Internal Controls, Some Progress Made

    Federal Issues

    On November 15, the GAO released is annual review of the CFPB’s financial statements. The GAO report (GAO-17-138R) found: (i) that the CFPB’s financial statements were presented fairly and in accordance with generally accepted accounting principles; (ii) although internal controls could be improved, the CFPB maintained effective internal controls over financial reporting as of September 30, 2016; and (iii) no reportable noncompliance for fiscal year 2016 with provisions of applicable laws, regulations, contracts, and grant agreements the GAO tested. The GAO did identify a continuing significant deficiency in internal controls over accounting for property, equipment, and software, but also noted that the CFPB has made progress in correcting the deficiency, which was first identified in the previous year’s report.

    Commenting on the report, the CFPB stated that “it was pleased to receive an unmodified audit opinion on its fiscal years 2016 and 2015 financial statements.” The CFPB further concurred with the significant deficiency over accounting for its property, equipment, and software that GAO reported, and added that “it will continue to work to enhance its system of internal control and ensure the reliability of CFPB’s financial reporting.”

    Federal Issues Consumer Finance CFPB GAO

  • OCC Seeks Comments on Volcker Rule Reporting, Recordkeeping, and Disclosure Requirements

    Federal Issues

    On November 18, OCC published a notice seeking comments on various reporting, recordkeeping, and disclosure requirements associated with its regulations that implemented the Volcker Rule. Among other things, the OCC is seeking comments on: (i) whether the information sought is necessary for the OCC to perform its supervisory functions; (ii) the accuracy of the OCC’s estimate of the information collection burden; (iii) ways to enhance the quality, utility, and clarity of the information to be collected while also minimizing the collection burdens on respondents; and (iv) estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide the information. Comments must be submitted on or before January 17, 2017.

    Federal Issues Banking Consumer Finance Dodd-Frank OCC Disclosures Volcker Rule

  • Israel-Based Pharmaceutical Company Sets Aside $520 Million for Potential FCPA Settlement

    Federal Issues

    An Israel-based pharmaceutical  company, stated in its Form 6-K filed with the SEC on November 15, 2016, that it has set aside approximately $520 million for a potential settlement of FCPA matters being investigated by the SEC and DOJ. The company explained that the reserve relates to conduct that occurred between 2007 and 2013 in Russia, Mexico, and the Ukraine, and that it was discovered in the course of the investigation that began in early 2012 with the issuance of an SEC subpoena to the company, as well as a concurrent internal investigation of its worldwide business practices.

    Should the pharmaceutical company enter into a settlement, it will top the growing list of pharmaceutical companies that have been subject to multimillion dollar penalties for conduct in violation of the FCPA, including the following:

    • A $5.5 million settlement in 2016 of allegations relating to bribery of Chinese and Russian doctors;
    • A $20 million settlement in 2016 of allegations relating to bribery of Chinese health care professionals;
    • A $25 million settlement in 2016 of allegations relating to bribery of Chinese doctors;
    • A $14 million settlement in 2015 of allegations relating to bribery of healthcare professionals at state-owned hospitals in China;
    • A$29 million settlement in 2012 of allegations relating to bribery of government employed physicians in Russia, Brazil, China and Poland; and
    • A $70 million settlement in 2011 of allegations relating to conspiracy and bribery of doctors employed by state-controlled health care systems in Greece.


    Federal Issues FCPA International SEC DOJ Bribery China

  • Major Global Financial Company Pays $264 Million to Settle FCPA Investigation of its Referral Hiring Practices in China

    Federal Issues

    A major global financial company (“Company”) and a Hong Kong subsidiary (“Subsidiary”) agreed on November 17, 2016, to pay approximately $264 million to the DOJ, SEC, and the Federal Reserve, putting an end to a nearly three year, multi-agency investigation of the Subsidiary’s “Sons and Daughters” referral program through which the children of influential Chinese officials and executive decisions makers were allegedly given prestigious and lucrative jobs as a quid pro quo to retain and obtain business in Asia. The conduct occurred over a seven year period, included the hiring of approximately 100 interns and full-time employees at the request and referral of Chinese government officials, and resulted in more than $100 million in revenues to the Company and approximately $35 million in profit to the Subsidiary.

    The Subsidiary entered into a non-prosecution agreement and agreed to pay a $72 million criminal penalty, as well as to continue cooperating with the ongoing investigation and/or prosecution of individuals involved in the conduct. Additionally, the Subsidiary agreed to enhance its compliance programs and report to DOJ on the implementation of those programs. DOJ asserts in its press release that the Subsidiary admitted that, beginning in 2006, senior Hong Kong-based investment bankers set up the referral program as a means to influence the decisions of Chinese officials to award business to the Subsidiary, going so far as to link and prioritize potential hires to upcoming business opportunities, as well as to create positions for unqualified candidates where no appropriate position existed. The Subsidiary also admitted that its bankers and compliance personnel worked together to paper over these arrangements and hide the true purpose of the hire.

    DOJ acknowledged that while the Subsidiary did not voluntarily or timely disclose its conduct, in determining an appropriate resolution DOJ considered a number of actions taken by the Company, including the commencement of a thorough internal investigation, the navigation of foreign data privacy law to produce documents from foreign countries, and the provision of access to foreign-based employees for interviews in the US. Additionally, DOJ considered the employment actions taken by the Subsidiary, which resulted in the departure of 6 employees and the discipline of 23 employees.

    In connection with the same conduct, the Company also settled allegations with the SEC and the Federal Reserve. In a cease and desist order filed today, the SEC found that the Company violated the anti-bribery, books and records, and internal controls provisions of the Securities Exchange Act of 1934. The SEC considered the Company’s remedial actions and cooperation with the ongoing investigation, ordering the Company to pay over $105 million in disgorgement and $25 million in interest. Finally, in a consent cease and desist order filed today, the Federal Reserve Board imposed an approximately $62 million civil monetary penalty on the Company for operating an improper referral hiring program and failing to maintain adequate enterprise-wide controls to ensure candidates were vetted and hired appropriately and in accordance with anti-bribery laws and company policies. This order, among other things, requires the Company to enhance its oversight and controls of referral hiring practices and anti-bribery policies, as well as to continue cooperating with the ongoing investigation.

    Federal Issues Banking Federal Reserve International SEC DOJ Bribery China

  • Election Results: Preliminary Thoughts and Reactions

    Federal Issues

    As a result of last Tuesday’s election, Republicans will control the White House and both houses of Congress in 2017. It is likely there ultimately will be some significant changes affecting financial services regulation and enforcement, but they will take time to implement. The President-elect has articulated sympathy for less regulation and opposition to the Dodd-Frank Act but also an unconventional economic populism. The Congressional Republicans have already prepared, and in some cases passed, more specific changes to limit and cabin the CFPB. We anticipate efforts focused on changing the CFPB Director and CFPB structure, reduced regulation that may encourage product innovation (particularly in the FinTech space), and potentially less emphasis on certain Department of Justice (“DOJ”) enforcement initiatives such as fair lending and the Residential Mortgage-Backed Securities (“RMBS”) task force. Nonetheless, we expect continued enforcement and supervisory activity, including by states and by prudential regulators that are less directly tied to shifting political winds.


    Click here to read the full special alert



    * * *


    Questions regarding the matters discussed in this alert may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.


    Federal Issues Banking Consumer Finance CFPB Dodd-Frank RMBS Special Alerts DOJ Fintech Trump

  • FFIEC Finalizes Updated Uniform Interagency Consumer Compliance Rating System

    Federal Issues

    On November 7, the Federal Financial Institutions Examination Council (FFIEC) announced the issuance of an updated Uniform Interagency Consumer Compliance Rating System, more commonly known as the “CC Rating System.” In final guidance the FFIEC explains that the new rating system has been re-designed “to better reflect current consumer compliance supervisory approaches and to more fully align the CC Rating System with the Agencies’ current risk-based, tailored examination processes.” The agency also notes that the revisions “were not developed to set new or higher supervisory expectations for financial institutions and their adoption will represent no additional regulatory burden” (emphasis added).

    Under the new CC Rating System, institutions will be assessed on a 1-to-5 rating scale in three distinct categories: (i) board and management oversight; (ii) compliance program and violations of law; and (iii) consumer harm. The new rating system will be used by all FFIEC member agencies – including CFPB in its evaluation of non-depository institutions. FFIEC member agencies plan to implement the updated rating system on consumer compliance examinations that begin on or after March 31, 2017.

    Federal Issues Consumer Finance CFPB FFIEC

  • White to Testify Before House Financial Services

    Federal Issues

    SEC Chair Mary Jo White is scheduled to testify later this month at separate House Financial Services Committee hearings, a spokesman for the panel said.  White will appear before the committee on November 15 to answer questions regarding the SEC’s agenda, operations, and budget request. She will be the only witness.

    Federal Issues Consumer Finance CFPB SEC U.S. House House Financial Services Committee

  • Financial Stability Oversight Council will hold its first post-election meetings on November 16

    Federal Issues

    On November 16, Treasury Secretary Jack Lew will preside over a meeting of the Financial Stability Oversight Council (FSOC). The agenda will include both an open and an executive session. The preliminary agenda for the open session includes an update on the work of the Alternative Reference Rates Committee, an update on the council's review of the asset management industry and revisions to the council's regulations under the Freedom of Information Act. The preliminary agenda for the executive session includes a presentation on stress tests of central counterparties conducted by the CFTC, a discussion of confidential data related to the Council’s review of asset management products and activities, and an update on the annual re-evaluation of the designation of a non-bank financial company.

    Open session Council meetings are made available to the public via live webcast and also can be viewed after they occur here. Meeting minutes for the most recent Council meeting are generally approved at the next Council meeting and posted online soon afterwards. Meeting minutes for past Council meetings are available here. Readouts for past Council meetings are available here.

    Federal Issues Consumer Finance Nonbank Supervision CFTC FSOC Department of Treasury

  • Comptroller Curry Announces OCC Will Issue a Paper Soon Describing OCC's Thoughts on National FinTech Charters

    Federal Issues

    In prepared remarks delivered November 3 at the Chatham House “City Series” Conference in London, Comptroller of the Currency Thomas J. Curry discussed the OCC’s approach to regulating FinTech innovation. In his speech, entitled “The Banking Revolution: Innovation, Regulation and Consumer Choice,” Mr. Curry discussed the rapid growth of worldwide investment in FinTech over the past five years and walked through various regulatory responses to those developments–including the OCC’s guiding principles for its regulatory approach to innovation and its decision to establish a team dedicated to implementing those principles. The Comptroller emphasized that the OCC is still deciding whether to grant national charters to FinTech companies that conduct banking activities, but added that the agency would issue a paper “soon” describing the agency’s thoughts on the subject and inviting public comment.

    Federal Issues Consumer Finance Digital Commerce OCC Fintech Virtual Currency

  • SBA Rebrands Core Business Loan Programs

    Federal Issues

    In a November 1 memorandum, the Small Business Administration (SBA) announced that the names of the popular 7(a) and 504 loan programs have been changed. The “7(a) program” will now be rebranded as the “SBA Advantage Loan Program,” while “504 loans” will be known going forward as the “SBA Grow Loan Program.” The SBA’s memo did not announce any substantive changes to the loan programs.

    Federal Issues Consumer Finance SBA


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