Interagency Guidance for Financial Institutions on Coronavirus Disease-Related Loan Modifications

Posted in banking, Consumer Financial Services, Consumer Lending, Lending, U.S. Financial Market

On Sunday night, March 22, 2020, the federal banking agencies (OCC, FDIC, NCUA, Federal Reserve), the Consumer Financial Protection Bureau and the State Conference of Bank Supervisors issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus.

The Guidance does two key things:

1. Short-term loan modifications granted to borrowers that have become financially distressed as a result of economic conditions created by COVID-19 will not result in a loan being classified a troubled debt restructuring (TDR). According to U.S. GAAP, a restructuring of a loan or other credit constitutes a TDR if the lender/creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

The banking agencies have confirmed with staff of the Financial Accounting Standards Board that short-term (e.g., six months or less) loan modifications made on a good faith basis in response to COVID-19 for borrowers who were current prior to any relief, are not TDRs. Modification actions can include payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.

2. Furthermore, bank regulators will not criticize bankers for granting short-term loan modification relief, as long as the action taken is done in good faith. The explicit statement in the Guidance that bankers will not be criticized by their regulators removes a significant impediment to bankers providing short-term loan modification relief – an impediment that chilled bankers in the months and years following the 2008/2009 Financial Crisis from providing such relief.

See The Interagency Guidance.

All Systems Go? LIBOR Transition Efforts During the COVID-19 Pandemic

Posted in banking, Banks, Client Alert, LIBOR, Real Estate, Risk Management, United Kingdom

As the COVID-19 situation continues to evolve, market volatility, workplace disruptions and a shuttering of everyday life are becoming increasingly commonplace. While the 2021 LIBOR phase-out may not seem top of mind during the current crisis, speculation is mounting about whether the pandemic will delay or otherwise alter the phasing out of the “world’s most important number.”

As a refresher, the LIBOR transition was fueled by a lack of transparency in pricing this key index. Per the Loan Syndications and Trading Association, $200 trillion of LIBOR-based contracts were derived from less than $1 billion of daily LIBOR trading, leaving the benchmark subject to manipulation and fraud.

Read the full GT Alert, All Systems Go? LIBOR Transition Efforts During the COVID-19 Pandemic.

Exempt Offering Framework Amendment Proposal

Posted in Capital Markets, Compliance, Corporate Governance, Financial Regulation, Regulatory Compliance, Securities

On March 4, 2020, the Securities and Exchange Commission (SEC) announced its proposal to harmonize, simplify, and improve the exempt offering framework under the Securities Act of 1933 (the “Securities Act”).1 The SEC’s proposals are the result of the responses submitted to the SEC in connection with the concept release issued June 18, 2019, soliciting public comment on possible ways to harmonize and improve the securities offering framework (the “Concept Release”). The proposed amendments, among other things, address the ability of issuers to move from one exemption to another, increase the offering limits for Regulation A, Regulation Crowdfunding, and Rule 504 offerings, provide consistent rules governing offering communications between investors and issuers, and harmonize disclosure and eligibility requirements. The public will have until May 3, 2020 to comment on the proposed amendments.

Read the full alert here: “Exempt Offering Framework Amendment Proposal.”

FinCEN Ruling Clarifies Currency Transaction Report (CTR) Filing Obligations of Financial Institutions

Posted in Financial Crimes Enforcement Network, GT Alert, white collar

On Feb. 10, 2020, the U.S. Department of the Treasury, Financial Crimes Enforcement Network (FinCEN) published administrative ruling FIN-2020-R001, to clarify requirements of financial institutions reporting on currency transactions involving sole proprietorships and legal entities operating under a “doing business as” (DBA) name (“FinCEN Ruling”). The FinCEN Ruling, which becomes effective April 6, 2020 (Sept. 1, 2020, for BSA E-Filing batch filers), replaces and rescinds two previous FinCEN rulings: FIN-2006-R003 and FIN-2008-R001, which were based on the now obsolete FinCEN Form 104. The FinCEN Ruling addresses reporting obligations when filing using the current CTR FinCEN Form 112.

Read the full GT Alert, “FinCEN Ruling Clarifies Currency Transaction Report (CTR) Filing Obligations of Financial Institutions.”

* Special thanks to Laura Buchholz for her valuable assistance in preparing this GT Alert.

FDIC and OCC Extend Comment Period for Proposed Changes to the Community Reinvestment Act Regulations

Posted in banking, Banks, FDIC, Investment Regulation

On Feb. 19, the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency (collectively, the “Agencies”) announced an extension of the public comment period on the Notice of Proposed Rulemaking (NPRM) to amend the regulations implementing the Community Reinvestment Act (CRA). The Agencies announced they are extending the public comment deadline to April 8, 2020.

The Agencies previously released proposed regulations on Dec. 12, 2019, seeking to make comprehensive changes to the CRA regulatory framework. The purpose of the proposed changes is to ensure the CRA remains an effective and efficient tool for encouraging banks to serve the needs of their communities. The proposed rule seeks to amend the CRA in four key areas: (1) clarifying the type of activities that would qualify for CRA credit; (2) expanding the type of activities and the location of the activities that would count toward CRA obligations; (3) establishing an objective standard to evaluate a bank’s CRA performance; and (4) revising data collection, recordkeeping and reporting of CRA activities.

The initial comment period on the NPRM was set to close on March 9, 2020. However, the Agencies received written requests asking to extend the comment period. After finding that an extension of the comment period would provide the public an additional opportunity to prepare comments to address the matters raised by the NPRM, the Agencies concluded it was appropriate to grant a 30-day extension of the NPRM comment period to April 8, 2020.

The CRA has not been substantially updated since the 1990s. The extension of the comment period offers banks and other CRA stakeholders a keen opportunity to modernize the current regulatory framework.

LIBOR Transition Newsletter – Issue 3

Posted in Client Alert, GT Alert, LIBOR

Welcome to the third issue of Greenberg Traurig’s LIBOR Transition Newsletter, where we provide updates, analysis, and occasional commentary on the latest developments relating to the highly anticipated phasing-out of LIBOR at the end of 2021 – less than two years from now. This issue covers the following:

  • ARRC Releases a Consultation on Potential Spread Adjustment Methodologies
  • Bank of England, FCA and Sterling Working Group Joint Statement
  • Other Recent Developments, including comments from Federal Reserve Chairman Jerome Powell
  • Most-Favored Nation Clauses in LIBOR Fallback Provisions

Read the full GT Libor Transition Newsletter.

Crypto Asset Custody Regulations in Japan

Posted in Blockchain, Blockchain Technology Task Force, Client Alert, cryptocurrency, GT Alert

On Jan. 14, 2020, the Financial Services Agency of Japan published draft amendments of enforcement orders, cabinet office ordinances and guidelines concerning the recently amended and enacted crypto asset laws. The amended laws enhance the regulations on transactions related to crypto assets, such as cryptocurrency trades and administration, crypto derivatives, and security token offerings.

The proposed amendment provides details for the regulations on crypto assets, including those on crypto custody services.

Read the full GT Alert.

SEC Issues MD&A Disclosure Guidance and Proposes Amendments to Modernize and Enhance MD&A Financial Disclosures

Posted in Capital Markets, Client Alert, Financial Regulation, GT Alert, Securities, Securities and Exchange Commission

On Jan. 30, 2020, the Securities and Exchange Commission (SEC) issued (i) guidance regarding the disclosure of key performance indicators (KPIs) and metrics in Management’s Discussion and Analysis, or MD&A (the “Guidance”), which is effective immediately and applies to the upcoming annual reports on Form 10-K and 20-F as well as related earnings releases; and (ii) a proposal to eliminate duplicative disclosures required by Regulation S-K Items 301 (Selected Financial Data), Item 302 (Supplementary Financial Information), and Item 303 (MD&A), and modernize and enhance MD&A disclosures for the benefit of investors, while simplifying compliance efforts for companies (the “Proposed Amendments”). In addition, on Jan. 24, 2020, the SEC staff issued certain Compliance & Disclosure Interpretations, or C&DIs, to clarify recent changes that allow companies to omit in the MD&A the earliest of the three years in certain circumstances. This GT Alert summarizes the guidance and proposed amendments.

Read the full GT Alert.

2020 SEC Exam Priorities for Securities Industry Registrants

Posted in Brokers, Client Alert, Compliance, FINRA, Fintech, GT Alert, investment advisor, OCIE, SEC, Securities and Exchange Commission

The Office of Compliance Inspections and Examinations (OCIE) of the U.S. Securities and Exchange Commission (SEC) released its annual list of 2020 Examination Priorities on Jan. 7, 2020. Many of OCIE’s 2020 examination priorities, including the focus on retail investors, fraud, conflicts (and related disclosures), among others, are perennial risk areas that OCIE routinely prioritizes. While the SEC release discusses new issues in greater detail than continuing areas of interest, practitioners must continue to focus on these areas and monitor whether the SEC provides guidance throughout the year.

Most securities industry participants (with a specific emphasis on registered investment advisers (RIAs), broker-dealers, registered investment companies, municipal advisors, and transfer agents) are subject to examination. Such examinations remain firmly grounded in four pillars: promoting compliance, preventing fraud, identifying and monitoring risk, and informing policy. Accordingly, OCIE has continued its practice of organizing its priorities around thematic areas. This year’s areas are:

  • Retail Investors, Including Seniors and Those Saving for Retirement
  • Information Security
  • Financial Technology (Fintech) and Innovation, Including Digital Assets and Electronic Investment Advice
  • Additional Focus Areas Involving RIAs and Investment Companies
  • Additional Focus Areas Involving Broker-Dealers and Municipal Advisors
  • Anti-Money Laundering (AML) Programs
  • Market Infrastructure
  • Focus on Oversight of FINRA (Financial Industry Regulatory Authority) and MSRB (Municipal Securities Rulemaking Board)

Read the full GT Alert.

FINRA’s 2020 Risk Monitoring and Examination Priorities Letter

Posted in Client Alert, Consumer Financial Services, Financial Regulation, FINRA, GT Alert, Regulatory Compliance

On Jan. 9, 2020, the Financial Industry Regulatory Authority (FINRA) released its 2020 Risk Monitoring and Examination Priorities Letter, in which it identifies its areas of examination focus for 2020. The cover note also highlights key changes in FINRA’s risk monitoring and examination program. These changes include the consolidation of FINRA’s three examination programs into a single risk monitoring framework. As part of this new framework, FINRA expects to categorize every FINRA member firm (“Firm”) into one of five business categories: (1) Retail; (2) Capital Markets; (3) Carrying and Clearing; (4) Trading and Execution; and (5) Diversified. Additionally, the cover note details FINRA’s plans to assign each Firm a senior agency leader who will be responsible for the Firm’s examination and risk monitoring.

As part of FINRA’s continuing efforts to provide Firms with compliance and risk management support, the president’s note also points out that this year’s Priority Letter includes a list of practical considerations and questions that Firms may use to assess and evaluate their risk management programs, as well as a new appendix with links to additional FINRA resources related to examination priorities.

Read the full GT Alert.