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SEC requests comments on proposed amendments to whistleblower program
On June 28, the SEC voted to propose for public comment several rule amendments that seek to clarify certain existing rules and make technical amendments to its whistleblower program under Section 21F of the Securities Exchange Act. Among other things, the proposed changes would (i) allow awards based on money collected under deferred prosecution agreements and non-prosecution agreements entered into by the DOJ or a state attorney general in a criminal case, or settlement agreements entered into by the SEC outside of a judicial or administrative proceeding that address securities law violations; (ii) eliminate the potential double recovery under the definition of “related action”; (iii) authorize the SEC to adjust an award’s percentage as appropriate to advance the goals of rewarding and incentivizing whistleblowers; (iv) establish a uniform definition of “whistleblower” in response to the Supreme Court's decision in Digital Realty Trust, Inc. v. Somers (as previously covered in a Buckley Sandler Special Alert); and (v) clarify anti-retaliation protection requirements. The SEC also has included interpretative guidance on the terms “unreasonable delay” and “independent analysis.” Comments will be accepted for 60 days following publication in the Federal Register.
Federal Reserve, FDIC extend resolution plan filing deadline for 14 domestic firms
On July 2, the Federal Reserve Board and the FDIC announced that the deadline to file resolution plans, also known as living wills, for 14 domestic firms has been extended to December 31, 2019. This one-year extension provides more time for the agencies to provide feedback on the firms’ last round of resolution plan submissions, as well as for the firms to produce their next resolution plans as required by the Dodd-Frank Act. The agencies also issued a reminder that due to the recent passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act, banks with less than $100 billion in total consolidated assets are no longer bound by resolution plan requirements.
Federal Reserve issues enforcement actions against former bank employees
On June 26, the Federal Reserve released enforcement actions taken against two former bank employees for improper actions, including one employee who allegedly embezzled money from a bank’s customer on several occasions, and another who misappropriated funds through false representations and accounting entries to pay off personal and family members’ loans owed to the bank. The Federal Reserve issued consent prohibitions for both former employees, which prohibits them from, among other things, participating in any manner in the conduct of the affairs of any insured depository institution, or holding company or subsidiary of an insured depository institution.
OFAC publishes Global Magnitsky Sanctions Regulations
On June 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the issuance of regulations to implement the Global Magnitsky Human Rights Accountability Act, as well as Executive Order 13818, which calls for the blocking of property of certain persons involved in serious human rights abuses or corruption. Among other things, the Global Magnitsky Sanctions Regulations outline certain prohibitions related to: (i) transactions involving blocked property, in addition to expenses pertaining to the maintenance or liquidation of blocked property; (ii) the holding of funds in blocked interest-bearing accounts; and (iii) exempt transactions. OFAC further noted it plans to “supplement these regulations with a more comprehensive set of regulations, which may include additional interpretive and definitional guidance, general licenses, and statements of licensing policy.” The regulations took effect June 29.
Federal Reserve releases Comprehensive Capital Analysis and Review results
On June 28, the Federal Reserve released the results of the Comprehensive Capital Analysis and Review (CCAR) conducted for 35 firms. This is the eighth year the Fed has conducted the CCAR exercise for the largest U.S.-based bank holding companies. The Fed considers quantitative and qualitative factors in its evaluation, including projected capital ratios under hypothetical severe economic conditions and strength of the firm’s risk management, internal controls, and governance practices that support the capital planning process. This year, 18 firms were subject to both quantitative and qualitative assessments, and 17 firms were only subject to the quantitative assessment. The Fed objected to one firm’s capital plan based on qualitative concerns and issued conditional non-objections to two firms based on changes to the tax law that negatively affected capital levels. However, the one-time reductions are not considered a reflection of the firms’ performances under stress. Overall, U.S. firms have substantially increased their capital since 2009 when the first round of stress tests were conducted.
CFPB announces settlement with national bank to resolve alleged TILA violations
On June 29, the CFPB announced a $335 million settlement with a national bank who allegedly violated the Truth in Lending Act by failing to properly implement annual percentage rate (APR) reevaluation requirements, which would reduce APRs for certain consumer credit card accounts, consistent with Regulation Z. According to the consent order, the Bureau also claimed the bank failed to put in place reasonable written policies and procedures to conduct the APR reevaluations. Under the terms of the consent order, the bank is required to pay $335 million in restitution to affected consumers and implement corrected policies and procedures to ensure proper APR reevaluation processes. The Bureau further noted that it did not assess civil monetary penalties due to efforts undertaken by the bank to self-identify and self-report violations to the Bureau. The bank also voluntarily corrected the deficiencies, took steps to initiate remediation to affected consumers, and implemented compliance management system enhancements.
FDIC releases May enforcement actions
On June 29, the FDIC announced a list of orders of administrative enforcement actions taken against banks and individuals in May 2018. The 14 orders include “five Section 19 orders; two civil money penalties; one removal and prohibition order; two terminations of consent orders; two terminations of insurance; one order for restitution; one modification of removal and prohibition order; and one modification of civil money penalty order.” The order for restitution is for violations of certain laws, regulations, and a 2016 consent order “relating to statutory lending limits and restrictions on loans to borrowers classified as ‘substandard.’” The civil money penalty orders relate to (i) unsafe or unsound practices and breaches of fiduciary duty, and (ii) a violation of Regulation O concerning the handing of certain loans from the bank to the respondent. The announcement also notes that there are no administrative hearings scheduled for July 2018.
OCC issues updates to Comptroller’s Handbook
On June 28, the OCC issued Bulletin 2018-18, which revises and updates certain booklets of the Comptroller’s Handbook. Among other things, the revisions and updates (i) clarify the applicability of each booklet to community, midsize, and large banks: (ii) incorporate Uniform Interagency Consumer Compliance Rating System revisions; (iii) provide asset management and Bank Secrecy Act/Anti-Money Laundering/Office of Foreign Assets Control risk assessment examiner guidance to ensure consistency with the Federal Financial Institutions Examination Council BSA/AML Examination Manual’s appendixes J and M; (iv) incorporate relevant aspects of the Dodd-Frank Act; (v) clarify the roles of banks’ boards of directors and management; and (vi) “include revised concepts and references regarding third-party risk management; new, modified, or expanded bank products or services; and corporate and risk governance.” The revised booklets are: Bank Supervision Process, Community Bank Supervision, Compliance Management Systems, Federal Branches and Agencies Supervision, and Large Bank Supervision.
FDIC, Federal Reserve seek comment on proposed 2019 resolution plan
On June 29, the FDIC and Federal Reserve issued (here and here) a joint request for public comment on proposed revisions to resolution plan guidance for the eight largest and most complex U.S. banks. Resolution plans, also known as living wills, outline a bank’s strategy for rapid and orderly resolution under bankruptcy in the event of material financial distress or failure of the company, and help to reduce the risk that a bank’s failure will cause serious adverse effects on the financial stability of the U.S. The proposed guidance would apply beginning with the July 1, 2019 resolution plan submissions. The proposed guidance also would incorporate agency expectations for addressing derivatives, trading, payment, clearing, and settlement activities. The FDIC and Federal Reserve will accept comments on the proposed guidance for 60 days following publication in the Federal Register.
CFPB studies how borrowers transition out of student loan debt
On June 29, the CFPB released a new Data Point report from the Office of Research titled, “Final Student Loan Payments and Broader Household Borrowing,” which examines how student borrowers transition out of their student loan debt and repayment patterns are interconnected with general household finances. Among other things, the report found (i) 94 percent of final payments exceed the scheduled payment, and the median final payment made is 55 times larger than the scheduled payment; (ii) student borrowers who pay off loans early are 31 percent more likely to take out their first mortgage in the year following the student loan payoff than in the previous year; and (iii) student borrowers who pay off loans on schedule are likely to use new monthly savings to pay down other debts. The CFPB’s findings suggest (i) the timing of student loan payoffs may be determined by life events such as increases in wealth and household formations, and (ii) continuing to study student loan payoffs may help predict the evolution of the student loan market.