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Financial Services Law Insights and Observations


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  • American Casino and Resort Company Pays $7 Million Penalty to Resolve Criminal FCPA Charges

    Federal Issues

    On January 17, Nevada-based gaming and resort company agreed to pay the DOJ nearly $7 million to resolve FCPA charges with a non-prosecution agreement (NPA) in connection with payments from 2006 to 2009 totaling almost $6 million to a business consultant to promote its brand in China and Macau. The company admitted that the payments were made “without any discernable legitimate business purpose,” that its executives had knowingly and willfully failed to implement adequate internal accounting controls to ensure that the payments were legitimate, and that it failed to prevent the false recording of those payments in its books and records, continued to make the payments even after warnings from its finance staff and an outside auditor, and terminated the finance department employee who raised those concerns.

    The $7 million criminal penalty is a 25-percent discount from the bottom of the U.S. Sentencing Guidelines fine range. In announcing the NPA, the DOJ credited the company for its full cooperation in the investigation, including conducting a thorough internal investigation and voluntarily providing evidence and information to the DOJ, and its extensive remedial measures, including expanding its compliance and audit programs and making significant personnel changes. The DOJ found particularly notable that the company no longer employs or is affiliated with any of the individuals implicated in the investigation and hired a new general counsel and new heads of its internal audit and compliance functions.

    In an unusual move, the DOJ’s announcement comes several months after the company resolved similar FCPA claims with the SEC in related proceedings last April. There the SEC filed a cease and desist order against the company and the company agreed to pay a civil penalty of approximately $9 million. The SEC alleged that the company violated the FCPA’s internal controls and books and records provisions in connection with more than $62 million in payments to a consultant operating in China and Macau who did not properly document how the money was used. The company had consented to the SEC’s order without admitting or denying the charges. Previous FCPA Scorecard coverage of the company’s SEC settlement can be found here.

    Federal Issues Securities FCPA International SEC DOJ

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  • Special Alert: Trump Administration Initiates “Regulatory Freeze”

    Federal Issues

    Buckley Sandler Special Alert

    On January 20, Reince Priebus, Chief of Staff to President Trump, issued a memorandum to the heads of executive departments and agencies initiating a regulatory review to be headed by the Director of the Office of Management and Budget (“OMB”). Congressman Mick Mulvaney (R-SC) has been nominated to fill that position.

    On behalf of the President, the memorandum asks the following of the agency and department heads:

    • No new regulations: “[S]end no regulation to the Office of the Federal Register (the ‘OFR’) until a department or agency head appointed or designated by the President after noon on January 20, 2017, reviews and approves the regulation.”
    • Withdraw final but unpublished regulations: “With respect to regulations that have been sent to the OFR but not published in the Federal Register, immediately withdraw them from the OFR for review and approval.”
    • Delay the effective date of published but not yet effective regulations: “With respect to regulations that have been published in the OFR but have not taken effect, as permitted by applicable law, temporarily postpone their effective date for 60 days from the date of this memorandum” and consider notice and comment to further delay the effective date or to address “questions of fact, law, or policy.” Following the delay, regulations that “raise no substantial questions of law or policy” would be allowed to take effect. For those regulations that do raise such questions, the agency or department “should notify the OMB Director and take further appropriate action in consultation with the OMB Director.”

    Rulemakings subject to statutory or judicial deadlines are exempt, and the OMB Director has the authority to grant further exemptions for “emergency situations or other urgent circumstances relating to health, safety, financial, or national security matters, or otherwise.”

    Click here to read full special alert

    If you have questions about the “freeze” or other related issues, visit our Consumer Financial Protection Bureau practice for more information, or contact a BuckleySandler attorney with whom you have worked in the past.

    Federal Issues OMB Bank Regulatory Trump Special Alerts

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  • GOP Senators Introduce Bill to Create Five-member Board of Directors at CFPB

    Federal Issues

    Last week, Sens. Deb Fischer (R-Neb.), Ron Johnson (R-Wis.) and John Barrasso (R-Wyo.) introduced a bill (S. 105) that would amend the Consumer Financial Protection Act of 2010 to replace the CFPB’s current single director with a bipartisan, five-member board. The proposed leadership structure would be similar to that of other financial regulators, including the FDIC, SEC and CFTC.

    Federal Issues FDIC Consumer Finance CFPB SEC CFTC

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  • House GOP Report Claims CFPB Violated APA

    Federal Issues

    On January 18, GOP members of the House Financial Services Committee released “The CFPB’s Vitiated Legal Case Against Auto-Lenders”, an investigative report prepared by GOP members who are of the belief that the CFPB likely has and continues to violate the Administrative Procedure Act. Relying mostly on internal CFPB documents obtained by the committee, the report focuses on the Bureau’s 2015 rule authorizing it to supervise larger participants in the auto lending market. In an accompanying press release, Committee Chairman Rep. Jeb Hensarling noted that the CFPB likely violated federal law when CFPB Director Richard Cordray failed to “heed CFPB attorneys who advised him to publish a list of institutions the Bureau believed would be subject to the proposed [auto-lending] rule” and/or “re-open the public comment period after it had closed.”

    The report was released amid uncertainty over the fate of Director Cordray as the new administration assumes office. As previously covered in InfoBytes, a group of Democratic senators sent a letter Jan. 10 to President-elect Trump urging him not to dismiss Cordray, and noting that an attempt by Trump to fire him would be hard-pressed to withstand a legal challenge. This latest investigative report was the third released by GOP members on the panel over the last 14 months concerning CFPB efforts to regulate auto lenders—which Rep. Hensarling describes as “dangerously out-of-control,” and “unconstitutional.”

    Federal Issues Consumer Finance CFPB Trump Cordray

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  • DOL Releases Second Set of FAQs Addressing Comments Concerning Fiduciary Rule

    Federal Issues

    On January 13, the Department of Labor (DOL) released a second set of frequently asked questions (FAQs) in response to comments from financial services firms and other stakeholders on its recently-released Fiduciary Rule, which redefines a fiduciary investment advisor under the Employee Retirement Income Security Act of 1974. The DOL issued an initial set of 34 answers to FAQs about the Fiduciary Rule back in October, focusing on the rule’s exemptions, such as the “best-interest contract” exemption and the “prohibited-transaction” exemption. The second set of FAQs provides further clarification on the scope of various exemptions regarding investment recommendations, but also includes guidance on topics such as: (i) investment education; (ii) general communications versus fiduciary investment advice; (iii) fees and other compensation; and (iv) platform providers.

    The FAQs further reflect, among other things, that an adviser charging clients a level asset-based fee for providing advice on 401(k) fund offerings may use revenue-sharing payments to offset part or all of that level fee, without running afoul of the fiduciary regulation. The guidance also clarifies that providing educational information to IRA and retirement customers about investment alternatives—such as product features, returns and fees—will not be considered “investment advice” so long as a bank does not make any specific investment recommendations. And, in question 34, the DOL explains that fiduciary status is not triggered by offering to customers an automatic sweep of any uninvested cash from the customer’s account into a short-term investment vehicle on a daily basis.

    Federal Issues Payments Fiduciary Rule Department of Labor

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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

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  • 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

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  • 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

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  • 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

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  • 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

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