On April 10, 2013, the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) jointly adopted rules that require broker-dealers, mutual funds, investment advisers and certain other regulated entities to adopt programs designed to detect “red flags” and prevent identity theft. These rules implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, that amended the Fair Credit Reporting Act (“FCRA”) to direct the SEC and the CFTC to adopt rules requiring regulated entities to address risks of identity theft. The 2003 amendments to the FCRA required other regulatory authorities to issue identity theft red flags rules, but did not authorize or require the SEC or the CFTC to issue their own rules.Continue Reading...
On January 10, 2013, the Consumer Financial Protection Bureau (the “CFPB”) issued final rules (the “Ability-to-Repay Rules”) amending Regulation Z under the Truth in Lending Act (“TILA”) to implement the ability-to-repay requirement for residential mortgage loans and protections from liability for qualified mortgages and certain other consumer protections as required by Sections 1411, 1412 and 1414 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”).
On January 10, 2013, the Consumer Financial Protection Bureau (CFPB) released its final “Ability-to-Repay/Qualified Mortgage” rules. The rules and the concurrent proposed amendments were posted on the CFPB’s website following published remarks by Director Richard Cordray and a two-hour “field hearing” in Baltimore, MD. The bureau also promised to publish plain-language booklets and educational videos to help guide lenders through the maze of new rules.
The rules, which are over 800 pages long, are “final” in the sense that they have been revised from the proposed rules that were released for comment last summer, and they are now “official.” However, the rules do not take effect for another year (January 10, 2014), and the bureau issued an additional 184-page “concurrent proposal” containing potential amendments to the new rules that address and/or clarify unresolved issues such as exemptions for certain nonprofit creditors and homeownership stabilization programs, an additional definition of a qualified mortgage for certain loans made and held in portfolio by small creditors such as community banks and credit unions, and inclusion of loan originator compensation in the points and fees calculation. Notwithstanding the pending amendments and delayed effective date, the rules issued last week will have an enormous impact on the mortgage lending business, and their complexity makes prompt commencement of implementation work essential.
In a joint-agency media conference and press release with the Federal Trade Commission today, the Consumer Financial Protection Bureau used the “rulemaking-through-enforcement” method of regulation to create several de-facto guidelines for what is “unfair, deceptive, or abusive” in mortgage advertising. Bypassing the more arduous rulemaking process, the CFPB published “sample warning letters” that effectively made the following advertising practices illegal:
On October 11, 2012, the U.S. Commodity Futures Trading Commission (CFTC) issued two interpretive letters and today, issued a no-action letter. The letters were issued to the National Association of Real Estate Investment Trusts (NAREIT), the American Securitization Forum (ASF) and certain persons designated as swap persons and ICE/NYMEX contract persons, respectively.
Recently adopted rules under the Dodd–Frank Act establish a comprehensive new regulatory framework for swaps, including their use and those who use them. We have prepared the below questions and answers to help clarify issues regarding the new rules. The questions and answers are not intended to be comprehensive or to address every situation but, rather, are intended to provide a general overview and explanation of matters related to the regulation of swaps.
New FINRA Rule 5123 will require each FINRA member that sells a security in a private placement, subject to certain exemptions, to file with FINRA a copy of any private placement memorandum, term sheet or other offering document used in connection with such private placement within 15 calendar days after the date of the first sale, or to indicate to FINRA that no such offering documents were used. Due to the exemptions, the regulatory burden of this new requirement will fall primarily on offerings of Section 3(c)(1) private investment funds and other offerings made to individuals or retail investors. A copy of FINRA Regulatory Notice 12-40 (September 2012) (Private Placements of Securities) is available here.
SEC Proposes Rules Relating to General Solicitation and General Advertising for Rule 506 and Rule 144A Offerings.
On August 29, 2012, the Securities and Exchange Commission proposed amendments to Rule 506 of Regulation D and Rule 144A under the Securities Act of 1933, as required by Section 201(a) of the Jumpstart Our Business Startups Act (“JOBS Act”). The proposed amendments will permit certain unregistered exempt offerings of securities using general solicitation and general advertising. A copy of the SEC’s proposing release is available here.
The Consumer Financial Protection Bureau recently issued two notices of proposed rulemaking implementing Truth-in-Lending Act and Real Estate Settlement Procedures Act regulations required by the Dodd-Frank Act. These NPRs represent the CFPB’s first step toward its stated goal of establishing national standards for mortgage servicing.
The NPRs incorporate many of the provisions of the March 2012 National Mortgage Settlement among state attorneys general, the federal government, and five of the largest mortgage loan servicers and propose additional rules related to a number of fundamental servicing activities, including borrower communications, loss mitigation, information management, and complaint and error resolution. A detailed discussion of the NPRs and the proposed rules is attached.
On August 13, 2012, the U.S. Commodity Futures Trading Commission (“CFTC” or “Commission”) issued a joint final rulemaking in conjunction with the U.S. Securities and Exchange Commission (“SEC”) further defining the term “Swap” as required under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted in July 2010 in response to the 2008 financial crisis. Title VII of the Act established a new framework for the regulation of the over-the-counter (“OTC”) derivatives markets. The Act requires the CFTC and SEC to establish a number of new regulations to implement the requirements of the Act, including further definitions of what constitutes a “Swap,” as well as defining two new classes of market participants: Swap Dealers and Major Swap Participants. Together, these foundational definitions determine which market participants may be subject to more than 50-plus new CFTC regulations.