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MoFo Reenforcement

The Enforcement Blog

EVENT: ALI CLE Webinar: SEC in 2017 – What’s Next? SEC Veterans Weigh In

Posted in Events

Thursday, March 9, 2017
12:30 p.m. – 2:00 p.m. EST

As the Trump Administration takes charge in 2017, the only thing that seems inevitable is that the regulatory and enforcement outlook will change. Initial indications point to a desire to relax or repeal certain regulations that may be regarded as burdensome to public companies. Also, proposed legislation would relax certain corporate governance and compensation-related measures that formed part of the Dodd-Frank Act. Proposed legislation also would address the types of cost-benefit analysis that would be required to support proposed regulation.

Don’t miss this chance to learn SEC regulations’ status and how they will likely change from experts who have been directly involved in rule-making and implementation of U.S. securities laws.

Topics to be discussed include:

  • Rules that were proposed but not adopted by the SEC as part of the Dodd-Frank Act rule-making mandate;
  • What to expect as far as corporate governance and executive compensation requirements;
  • Final rules adopted pursuant to the Dodd-Frank Act mandate relating to extractive minerals and specialized disclosures;
  • Future of the Disclosure Effectiveness initiative;
  • Likely status of the rules proposed by the SEC and not yet adopted;
  • Proposed changes affecting investment companies and their likely status; and
  • Anticipated enforcement areas of focus.

Speakers:

  • Andrew J. “Buddy” Donohue
    Former Chief of Staff, Director of Enforcement, and Director of Investment Management, SEC
  • Roberta Karmel
    Centennial Professor of Law, Brooklyn Law School,
    former SEC Commissioner
  • Troy Paredes
    Paredes Strategies LLC, former SEC Commissioner
  • Anna Pinedo
    Partner, Morrison & Foerster LLP

For more information, or to register, please click here.

Please contact cmg-events@mofo.com for a promotional code for discounted $99 tuition.

D.C. Circuit Grants En Banc Review on the Constitutionality of the CFPB Leadership Structure

Posted in CFPB

CFPB Director Richard Cordray has a little more job security this week than last week. On February 16, 2017, the U.S. Court of Appeals for the District of Columbia granted the CFPB’s request for an en banc review of its October 2016 decision finding the CFPB leadership structure unconstitutional. As detailed in our client alert: CFPB Hit by Major Setback In D.C. Circuit, the D.C. Circuit previously found that the single-director structure of the CFPB violated constitutional separation of powers principles. As a remedy, the D.C. Circuit had eliminated the director’s “for cause” tenure protection from the statute, which made the director fireable at will.

This grant of review vacates the October judgment and bolsters Director Cordray’s “for cause” tenure protection—at least for now. The rehearing is set to be heard on May 24, 2017. The D.C. Circuit has asked the parties to address the following three questions:

  1. Is the CFPB’s structure as a single-director independent agency consistent with Article II of the Constitution and, if not, is the proper remedy to sever the for-cause provision of the statute?
  2. Can the court appropriately avoid deciding the constitutional question given the panel’s ruling on the statutory issues in this case?
  3. If the en banc court, which has today separately ordered en banc consideration of Lucia v. SEC, 832 F.3d 277 (D.C. Cir. 2016), concludes in that case that the administrative law judge who handled the case was an inferior officer rather than an employee, what is the appropriate disposition of this case?

CFPB Evaluates Use of Alternative Data and Modeling Techniques in the Consumer Lending Credit Process

Posted in CFPB, Fair Lending, Privacy

On February 16, 2017, the CFPB issued a Request for Information regarding use of alternative data and modeling techniques in the consumer lending “credit process.” The CFPB defines the “credit process” broadly as all processes and decisions made by a creditor during the full life cycle of the credit product, including marketing, pre-screening, fraud prevention, application, underwriting, account management, credit authorization, setting of pricing and terms, and servicing and collection of debts. According to the Bureau, it is seeking information about the benefits and risks of using alternative data and modeling techniques in consumer lending as the agency begins to consider future activity to encourage responsible use of these techniques and reduce regulatory burdens that could impede their use. The Bureau is also interested in information as it relates to small business lending.

Read our client alert.

Trump Signs Executive Order on Core Principles for Regulating the United States Financial System

Posted in Regulatory Developments

On February 3, 2017, President Donald Trump signed an executive order outlining his core principles for regulating the United States financial system. We will continue to monitor news relating to the executive order and report developments on this blog.

Click here to read the executive order.

The Latest Word (or Text) on TCPA Standing Post-Spokeo and Consent

Posted in Credit Reports

On January 30, 2017, in Van Patten v. Vertical Fitness Group, No. 14-55980, the Ninth Circuit Court of Appeals found that a Telephone Consumer Protection Act (TCPA) plaintiff had sufficiently alleged an Article III injury-in-fact, under the United States Supreme Court’s Spokeo, Inc. v. Robins decision.  The Ninth Circuit ultimately affirmed summary judgment in favor of the defendants, holding that the plaintiff had consented to receiving text messages from a gym by providing his phone number with his membership application and had not revoked that consent simply by cancelling the gym membership.

In 2009, the plaintiff Van Patten had provided his cell phone number when signing up for gym membership, but cancelled the membership three days later.  In 2012, he was sent text messages informing him of the new gym brand and offering a discount to renew his membership.  He filed suit claiming violations of the TCPA and California state law.

Standing to Assert Claims for Unsolicited Text Messages

With respect to standing, the Ninth Circuit reviewed Congressional history and common law principles to conclude that the plaintiff’s allegations regarding the unsolicited telemarketing text messages he received from Vertical Fitness were sufficient to establish Article III standing.  The Court distinguished Spokeo, “where a violation of a procedural requirement minimizing reporting inaccuracy may not cause actual harm or present any material risk of harm,” from the telemarketing text messages at issue in Van Patten.  Recognizing that a plaintiff cannot “allege a bare procedural violation, divorced from any concrete harm” to satisfy the injury-in-fact requirement, the Ninth Circuit nevertheless found that the plaintiff had alleged an injury sufficient to confer Article III standing.

For plaintiff’s claims under California Business and Professions Codes § 17538.41 and § 17200, however, the Ninth Circuit found the plaintiff lacked standing.  Both the California Unfair Competition Law and False Advertising Law provisions require “economic injury,” but the plaintiff could not “prove that the text messages caused him to suffer an economic injury.”  The Court reasoned that the plaintiff had an “unlimited text messaging plan” and “regardless of how many text messages Van Patten received during a month, he still paid the same monthly fee.”  The Ninth Circuit rejected Plaintiff’s “hypothetical and conjectural” argument that an additional text “ultimately affects his cellular telephone provider’s bundled pricing” because “cellular companies raise the prices of their bundled plans when text message traffic increases.”

Providing One’s Phone Number Is Consent To Be Contacted

When the plaintiff provided his cell phone number to the gym, he consented to be contacted on that number regarding issues “relate[d] to the type of transaction that evoked it.”  Van Patten had consented to communications inviting him to reactivate his gym membership where the texts were “related to the reason Van Patten gave his number in the first place, to apply for a gym membership.”

Although the Ninth Circuit held that a consumer may revoke consent previously given, that revocation “must be clearly made and express a desire not to be called or texted.”  The mere cancelling of Van Patten’s gym membership did not effectively revoke his consent to receive the text messages from Vertical Fitness.  Van Patten never told defendants to stop contacting him on his cell phone.

The Ninth Circuit, accordingly, affirmed summary judgment for defendants because the plaintiff had consented to receiving the texts.

Consent and revocation of consent continue to be the focus of many TCPA actions.  Companies communicating with customers and consumers, including via text message, should continue to carefully analyze the types of communications being sent and the procedures for responding to “opt-out” requests or requests to stop calling.

Parting Shot: Outgoing Administration Releases FinTech White Paper

Posted in Regulatory Developments

On January 13, 2017, a week before the change in Administration, the Obama White House issued a white paper entitled “A Framework for FinTech” (“White Paper”). The White Paper highlights various FinTech initiatives that were taken by the previous Administration and lays out policy objectives and principles that the Obama White House thought should be considered by FinTech stakeholders in the government and the private sector.

Read our client alert.

Uncertain Seas: European Financial and Regulatory Developments into 2017

Posted in Regulatory Developments

“There are greater storms in politics than you will ever find at sea. Piracy, broadsides, blood on the decks. You will find them all in politics.”  —David Lloyd George, British Prime Minister, 1916-1922

“The greater the difficulty the more glory in surmounting it. Skillful pilots gain their reputation from storms and tempests” —Epictetus

Lloyd George and Epictetus may be long gone but their words have much resonance with the events of 2016. The political fallout from the UK’s vote to leave the European Union (“EU”) was immediate and brutal and Lloyd George’s words above could have been written for the events in the UK in the aftermath of the vote. Prime Minister David Cameron resigned immediately and Theresa May became the new UK Prime Minister after a short and dramatic Conservative Party leadership election contest.  The new UK government has had to plot a course for the UK to negotiate its exit from the EU, regarded by many commentators as likely to be one of the most complex political and trade negotiations ever attempted. And this in a continuing febrile political environment with many Brexit supporters suspicious that the UK government will strike a deal with the EU that will neuter the effect of Brexit, many businesses and financial institutions concerned that a “hard” Brexit could result in a swift loss of access to the EU single market and many EU politicians keen that a hard line should be taken against the UK in negotiations to deter other member states from leaving.

As if that wasn’t enough, the election in November of Donald Trump to the Presidency of the United States shocked not only the political establishment in the US but almost the entire world. Again, despite some initial jitters, financial markets have remained relatively stable in the aftermath of his election but considerable uncertainty surrounds the direction of the new administration with President-elect Trump having made inconsistent statements on the stump, at times espousing protectionist views on trade whilst calling for less financial regulation and greater fiscal stimulus. We should have more clarity on some of these issues in the coming months.

Despite the uncertainty caused by the events of 2016, we expect the implementation of the new post-financial global regulatory framework to continue. However, the direction of travel is perhaps now more uncertain than it has been for a while. In the article in the following link, we highlight the principal areas of financial regulation and other important events impacting on financial regulation in the EU that have impacted markets over the recent past, as well as how we see these areas developing in 2017 and beyond.

To access a copy, click here.

NYDFS Significantly Revises Cybersecurity Proposal, Burdens Remain

Posted in Privacy, Regulatory Developments

On December 28, 2016, the New York State Department of Financial Services (NYDFS) released a significantly revised version of its controversial, proposed cybersecurity rules, initially proposed in September of last year. As we noted in our Client Alert at that time, the rules as originally proposed would have created one of the most comprehensive and detailed cybersecurity standards in the country, and would have created significant compliance and implementation challenges. As a result, the original proposal generated significant industry outcry, calling into question, among other things, the original proposal’s workability. Like the original proposal, the revised proposal would apply to any person “operating under or required to operate under a license, registration, charter, certificate, permit, accreditation or similar authorization under” New York banking, insurance and financial services law, including, for example, commercial banks, foreign banks with New York State-licensed offices, mortgage brokers and servicers, small-loan lenders, and money transmitters doing business in New York. The comment period regarding the revised proposal closes on January 27, 2017.

Read our client alert.

EVENT: 7th Annual Financial Services, Regulatory and Compliance Conference

Posted in Events

Wednesday, March 8, 2017
8:45 a.m. – 7:30 p.m. EST

The Ritz-Carlton Charlotte
201 East Trade Street
Charlotte, NC 28202

Please join Morrison & Foerster attorneys as we offer our insights regarding the future of financial services regulation. The morning sessions will focus on consumer financial services and privacy and cybersecurity developments. The afternoon sessions will focus on wholesale, capital markets and tax developments.

For more information and to register, please click here.

EVENT: Fed’s Final TLAC Rule

Posted in Events

Monday, December 19, 2016
4:15 p.m. – 4:45 p.m. EST

On December 15, 2016, the Federal Reserve Board will hold an open meeting to consider and approval the final rules relating to a long-term debt, total loss absorbing capacity (TLAC), and clean holding company requirement.  The long-awaited final rules will have important effects for U.S. G-SIBs and for foreign banks that are G-SIBs and subject to an intermediate holding company requirement.  Join us for an overview and our preliminary analysis.

We will provide an overview of:

  • The Fed’s final rules;
  • Principal differences between the proposed rules and the final rules;
  • Considerations for foreign banks subject to the rules;
  • An assessment of the U.S. internal TLAC requirement compared to the IHC requirement proposed by the European Commission; and
  • The anticipated effect of the Fed’s final rules on various financial products.

Speaker:

This will be an operator-assisted call; all lines will be muted, but we will provide for a Q&A.

Click here to register.