The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about consumer topics and file a consumer complaint online or by calling 1-877-FTC-HELP (382-4357). Like the FTC on Facebook, follow us on Twitter, read our blogs, and subscribe to press releases for the latest FTC news and resources.
Thursday, November 19, 2020
Consumer Financial Protection Bureau Announces Settlement with Debt Collector for Credit Reporting Violation
The Consumer Financial Protection Bureau (Bureau) today announced a settlement with Afni, Inc. (Afni) to address its violations in providing information to consumer reporting agencies (CRAs). Afni is a non-bank Illinois-based debt collector that specializes in collecting debt on behalf of telecommunications companies and furnishes information to consumer reporting agencies (CRAs) about consumers’ credit. The consent order requires Afni to take certain steps to prevent future violations and imposes a $500,000 civil money penalty.
The Bureau found that Afni furnished information to CRAs that it knew or had reasonable cause to believe was inaccurate and failed to report to CRAs an appropriate date of first delinquency on certain accounts. The Bureau also found that Afni failed to conduct reasonable investigations of disputes made by consumers both to Afni and to CRAs about furnished information and failed to conduct investigations of disputes made to Afni in a timely manner. In addition, the Bureau found that Anfi failed to send required notices to consumers about the results of such investigations and failed to establish, implement, and update its policies and procedures regarding its furnishing of consumer information to CRAs. Afni’s conduct violated the Fair Credit Reporting Act (FCRA) and its implementing rule, Regulation V and, by engaging in these violations of the FCRA and Regulation V, Afni violated the Consumer Financial Protection Act.
Under the terms of the consent order, Afni must take certain steps to improve and ensure the accuracy of its furnishing of consumer information to CRAs and its policies and procedures relating to credit reporting and dispute investigation. These required steps include conducting monthly reviews of account information to assess the accuracy and integrity of information it furnishes. Afni must also conduct monthly reviews of consumer disputes and responses to assess whether its handling of consumer disputes complies with the FCRA, Regulation V, and its own policies and procedures. The consent order also requires Afni to retain an independent consultant to conduct a review of Afni’s activities, policies, and procedures relating to furnishing information and credit reporting to ensure that its current policies, practices, and procedures regarding furnishing of consumer information to CRAs comply with the FCRA and Regulation V.
Wednesday, July 15, 2020
Most of us are doing everything we can to stay healthy in the face of this terrible pandemic—staying home, homeschooling the kids, and making facemasks for family and neighbors. These critical efforts necessary to counter the pandemic have also led to massive, and seemingly overnight, economic impact. With so many of our family, friends, and neighbors experiencing loss of income or job loss, it is an unprecedented time, full of uncertainty and therefore stress. If you are experiencing financial hardship during this challenging time, the Consumer Financial Protection Bureau (CFPB) recommends that you reach out to your financial service provider and seek accommodation. Responsible banks, lenders, and creditors are ready to work with you and help you through this period. And they’re the best positioned to provide assistance catered to your circumstances. But please know that if you don’t get a reasonable result from your interaction—if there seems to be a miscommunication, miscalculation, or worse on their end, and you don’t know what to do— Turn to us. See https://youtu.be/w8ojgE3NwLU
Despite the changes in operations brought by the pandemic and stay-at-home orders, we are on the job fielding on average 30,000 complaints a month.
Since our founding by Congress after the financial crisis of 10 years ago, the CFPB has a dedicated staff whose sole job it is to hear about issues in the consumer financial marketplace, assemble the details and documents of the complaint, and engage directly with the companies involved until you get an answer.
This is all done in a secure way that protects your information.
We encourage you to engage first with the financial company involved, since they know about your loan or product and should be customer-focused. But sometimes you need to put some more people on your team.
If you feel that you can’t get a reasonable answer, build your case. The best complaints are the ones that explain, clearly and concisely:
- What happened, including key details and documents
- What you think would be a fair resolution
- What you’ve done to try and resolve it
Then go to consumerfinance.gov/complaint where you’ll be able to detail the issue and attach relevant documents. We'll forward your complaint and any documents you provide to the company and work to get a response from them. If we find that another government agency would be better able to assist, we will forward your complaint to them and let you know. By submitting online, you’ll also be able to track your status via our secure web-based Consumer Portal.
If you can’t submit online, you can submit a complaint over the phone by calling us at (855) 411-CFPB (2372), toll free, 8 a.m. to 8 p.m. ET, Monday through Friday. Our U.S.-based contact center can help you in over 180 languages and can also take calls from consumers who are deaf, have hearing loss, or have speech disabilities.
After you’ve submitted your complaint you can check its status at consumerfinance.gov/complaint or by calling us. We’ll also send you email updates along the way, so you know where you are in the process, and what’s next.
After the company responds to your complaint, we’ll email you, and you can log back in to review the response and provide feedback.
Your complaints give us important insight into the issues you face as a consumer. Complaints provide the Bureau with near real-time information about the types of challenges consumers are experiencing with financial products and services. We use them to inform our efforts in consumer education, create clear rules of the road for companies, and take action against bad actors in the marketplace. The Bureau also shares consumer complaint information with prudential regulators, the Federal Trade Commission, other federal agencies, and state agencies to ensure that the Bureau and other regulators have useful information to support consumers.
Help is here for you. In this time of uncertainty and fear, the more we can protect consumers from innocent mistakes as well as bad actors and fraudsters the healthier our overall financial well-being will be. We are all in this together.
Tuesday, July 14, 2020
FTC Takes Action against Marketer That Falsely Promised Consumers Next Day Shipping of Facemasks and Other Personal Protective Equipment
SuperGoodDeals capitalized on soaring demand for protective equipment from consumers worried about being exposed to COVID-19, agency alleges
The Federal Trade Commission charged an online marketer with falsely promising consumers next-day shipping of facemasks and other personal protective equipment (PPE) to deal with the coronavirus pandemic.
In a federal court complaint against SuperGoodDeals.com, Inc. and its owner, Kevin J. Lipsitz, the FTC alleged the company sought to capitalize on the soaring demand for PPE from consumers worried about being exposed to the coronavirus. Beginning in March, SuperGoodDeals’ website said PPE was “in stock,” and touted “Pay Today, Ships Tomorrow.”
But according to the FTC, it frequently it took weeks for SuperGoodDeals to ship the PPE merchandise customers ordered. The FTC’s latest Consumer Protection Data Spotlight shows that in April and May, the FTC received more than 34,000 complaints from consumers related to online shopping. More than 18,000 of those complaints related to items that were ordered but never delivered. The most common item reported not delivered was facemasks, with other reports including sanitizer, toilet paper, thermometers, and gloves as not received.
While online shopping complaints to the FTC have been on the rise for a number of years, reports of unreceived items in May 2020 alone represent a nearly two-fold increase over the number of reports in December 2019, the heart of the busy holiday shopping season.
“Unscrupulous merchants are taking advantage of consumers in their hour of need by not delivering goods—including masks and other personal protective equipment—as promised, and failing to provide required refunds,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “The FTC will not tolerate this, and we are working closely with criminal authorities to put a stop to it.”
The U.S. Attorney’s Office for the Eastern District of New York concurrently brought a criminal case against Mr. Lipsitz alleging that he engaged in price gouging and mail and wire fraud.
Online shopping problems like the ones cited in the FTC’s complaint against SuperGoodDeals are the largest source of coronavirus-related complaints the Commission has received from consumers since the pandemic began, according to figures released by the FTC.
According to the FTC’s complaint, SuperGoodDeals received hundreds of complaints about the shipping delays through emails, phone calls, and website chat messages. Some of the complaints were from customers who were in dire need of PPE, including one customer who ordered disposable masks for child welfare workers making in-home visits; another who ordered masks for a family member who is a nurse; and a third who ordered masks for her immunocompromised mother.
The FTC alleged that SuperGoodDeals’ deceptive tactics violated the FTC Act, and that the company also violated the FTC’s Mail Order Rule, which requires that companies advertising that they can ship merchandise within a certain timeframe have a reasonable basis for the promised timeframe. The Rule also requires that, if companies find they cannot meet the promised timeframe, they must seek the customer’s consent to the delayed shipment, or refund their money. SuperGoodDeals did not notify consumers, seek their consent to delayed shipments, and they did not refund their money.
In addition to its false claims about next-day shipping, the FTC also alleged that some of the other merchandise sold through the SuperGoodDeals’ website, such as Yeti tumbler mug, were falsely advertised as “authentic” or “certified.”
The Commission vote authorizing the staff to file the complaint was 4-0-1, with Commissioner Rebecca Kelly Slaughter not participating. The complaint was filed in the U.S. District Court for the Eastern District of New York.
NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.
Wednesday, July 8, 2020
The members of the Federal Financial Institutions Examination Council (FFIEC) today highlighted the risks that will result from the transition away from LIBOR, and encouraged supervised institutions to continue their efforts to transition to alternative reference rates in order to mitigate financial, legal, operational, and consumer protection risks.
The financial services industry uses LIBOR as a reference rate for many financial products and instruments that include loans, investments, and deposits to a range of customers, as well as borrowings and derivatives. While some smaller and less complex institutions may have limited exposure to LIBOR- denominated instruments, the transition to alternative reference rates will affect almost every institution.
The statement also highlights the legal and consumer compliance risks associated with inadequate fallback language, when the contractual language does not contemplate LIBOR’s permanent discontinuance. Institutions should take steps to identify and address existing contracts with inadequate fallback language to mitigate potential legal risk as well as safety and soundness risk.
Financial institutions should have risk management processes in place to identify and mitigate their LIBOR transition risks that are commensurate with the size and complexity of their exposure and third-party servicer arrangements. The statement identifies areas where supervisory staff will focus their reviews of LIBOR transition planning and risk mitigation efforts at regulated institutions.
Risks to Institutions
Institutions can have a variety of on- and off-balance sheet assets and contracts that reference LIBOR including derivatives, commercial and retail loans, investment securities, and securitizations. On the liability side, Federal Home Loan Bank advances; other borrowings; derivatives; and capital instruments, including subordinated notes and trust preferred securities, can reference LIBOR. Moreover, many market participants rely on LIBOR for discounting and other purposes. An institution’s risk exposure from LIBOR’s discontinuation depends on the institution’s specific circumstances. Potential risks include:
• Operational difficulty in quantifying exposure;
• Financial, valuation, and model risk related to reference rate transition;
• Inadequate risk management processes and controls to support transition;
• Consumer protection-related risks;
• Limited ability of third-party service providers to support operational changes; and,
• Potential litigation and reputational risk arising from reference rate transition.
Friday, July 3, 2020
The Federal Trade Commission has released the final agenda for its fifth annual PrivacyCon event, which will be held online on July 21, 2020.
PrivacyCon 2020 will bring together a diverse group of stakeholders to discuss the latest research and trends related to consumer privacy and data security.
Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, will give opening remarks to kick off the event and will be followed by six panel discussions. The three morning sessions will focus on research related to health apps, artificial intelligence, and Internet of Things devices. The three afternoon sessions will feature discussions on research related to the privacy and security of specific technologies such as digital cameras and virtual assistants, international privacy, and miscellaneous privacy and security issues.
Links to the research that will be presented at PrivacyCon 2020 are available on the event page. PrivacyCon will take place online from 9 a.m. ET to 5 p.m ET. A link to view PrivacyCon 2020 will be posted on the event page prior to the start of the event. Registration is not required.
Revocation of Hong Kong Special Status for U.S. and Suspension of U.S. License Exceptions for Hong Kong
With the Chinese Communist Party’s imposition of new security measures on Hong Kong, the risk that sensitive U.S. technology will be diverted to the People’s Liberation Army or Ministry of State Security has increased, all while undermining the territory’s autonomy. Those are risks the U.S. refuses to accept and have resulted in the revocation of Hong Kong’s special status.
Commerce Department regulations affording preferential treatment to Hong Kong over China, including the availability of export license exceptions, are suspended. Further actions to eliminate differential treatment are also being evaluated. We urge Beijing to immediately reverse course and fulfill the promises it has made to the people of Hong Kong and the world.
Suspension of License Exceptions for Hong Kong
Effective June 30, 2020, BIS is hereby suspending any License Exceptions for exports to Hong Kong, reexports to Hong Kong, and transfers (in-country) within Hong Kong of items subject to the Export Administration Regulations (EAR), 15 CFR Parts 730-774, that provide differential treatment than those available to the People’s Republic of China. BIS is taking this action pursuant to Section 740.2(b) of the EAR, 15 CFR § 740.2(b), which provides that all License Exceptions are subject to revision, suspension, or revocation, in whole or in part, without notice.
A License Exception is an authorization contained in Part 740 of the EAR that allows exports, reexports, or transfers (in-country) under stated conditions, of items subject to the EAR that would otherwise require a license. As a result of this suspension, no items subject to the EAR may be exported to Hong Kong, reexported to Hong Kong, or transferred within Hong Kong based upon an authorization provided by a License Exception except for transactions that would otherwise be eligible for a license exception if exported to the People’s Republic of China. A license must instead be sought and obtained whenever a license requirement applies for an export to, a reexport to, or a transfer within, Hong Kong.
However, shipments of items that are removed from eligibility for a License Exception as a result of this action and were on dock for loading, on lighter, laden aboard an exporting or transferring carrier, or en route aboard a carrier to a port of export or reexport on June 30, 2020, pursuant to actual orders for export to Hong Kong, reexport to Hong Kong, or transfer within Hong Kong, may proceed to their destination under the previous License Exception eligibility.
Similarly, deemed export/reexport transactions involving Hong Kong persons authorized under a License Exception eligibility prior to June 30, 2020 may continue to be authorized under such provision until August 28, 2020, after which such transactions will require a license. Exporters, reexporters, or transferors (in-country) availing themselves of this 60-day savings clause must maintain documentation demonstrating that the Hong Kong recipient was hired and provided access to technology eligible for Hong Kong under part 740 prior to June 30, 2020.
BIS is taking this action because the Chinese Communist Party has imposed new security measures on Hong Kong which undermine its autonomy and thereby increase the risk that sensitive U.S. items will be illegally diverted to the Chinese People’s Liberation Army or Ministry of State Security, Iran, or North Korea.
Monday, June 29, 2020
USCIB joined with several other U.S. business associations in opposing a recent proposal to revise ISO 26000 on Social Responsibility, develop implementation guidelines or standards and create a new Technical Committee (TC) on Social Responsibility. After a five-year global negotiation, ISO 26000 was released in November of 2010 as a guidance document rather than a management systems for certification purposes and it remains a valuable resource for companies.
USCIB Vice President for Corporate Responsibility and Labor Affairs Gabriella Rigg Herzog observed that the proposal currently before ISO would, “not only reverse the consensus achieved over the five year negotiation, but would also divert resources and away from ongoing implementation and innovation in the field of social responsibility.”
Global stakeholders who also opposed this proposal included leading human rights NGOs, the International Trade Union Confederation, the International Organization of Employers (IOE), and the International Labor Organization (ILO). Moreover, and as was expressed by ILO Secretary-General Guy Ryder, adoption of this proposal would divert focus from and undermine universally accepted standards on human rights and labor issues, including the UN Guiding Principles on Business and Human Rights, ILO Conventions, the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, and the OECD Guidelines for Multinational Enterprises.
USCIB continues to follow this matter and will be in communication with members and our global affiliates as this matter develops.
USCIB's positions include cost-effective, science and risk-based cooperative environmental and energy policies
• Address the challenges of climate change while protecting energy security, promoting innovation and efficiency and advancing resilience to climate impacts
• Provide multilateral solutions to trans-boundary environment, energy and climate challenges, and reject unilateral, arbitrary measures that disqualify technology or energy options
• Ensure science and risk-based life-cycle approaches to chemicals management in the APEC, the OECD, UNEP and the Strategic Approach to International Chemicals Management
• Support voluntary labeling and access to environmental information that protects confidential business information and provides credible information for consumer choices
Pro-growth, market oriented policies that promote sustainable development
• Develop multilateral and national partnership frameworks to incentivize private sector involvement in sustainable development planning, implementation and risk allocation minimization
• Maintain technology neutral policies and other enabling frameworks to encourage trade and investment in cleaner technologies and energy sources
Thursday, June 25, 2020
The FDIC, along with the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Farm Credit Administration, and the Federal Housing Finance Agency (collectively, the Agencies), have amended the swap margin requirements for a registered swap dealer that is an insured depository institution or is otherwise supervised by one of the Agencies.
In 2015, the Federal Deposit Insurance Corporation, the Federal Reserve Board of Governors, the Office of the Comptroller of the Currency, the Federal Housing Finance Agency, and the Farm Credit Administration (the “agencies”) issued a final rule requiring banks and other entities that engage in swaps activities (referred to as “covered swap entities”) to exchange initial and variation margin with their counterparties for swaps that are not centrally cleared.
Since 2015, the agencies’ supervisory experience has shown that banking organizations use inter-affiliate swaps for internal risk management purposes by transferring derivatives exposures to a centralized risk management function. In addition, after the rule was finalized, the largest firms have made significant progress implementing resolution strategies designed to recapitalize subsidiaries as protection against the types of affiliate failures envisioned under the rule.
In light of this experience and to provide covered swap entities flexibility regarding the internal allocation of collateral, the agencies are issuing a final rule designed to facilitate prudent risk management while also protecting safety and soundness:
o Facilitate Prudent Risk Management – The rule facilitates the ability of banking organizations to use inter-affiliate swaps to centralize risk management of their derivatives exposures by modifying the requirement that a covered swap entity collect initial margin from affiliates. Under the rule, a covered swap entity is not required to collect initial margin from affiliates when the aggregate amount of such initial margin is less than 15% of the covered swap entity’s tier 1 capital.
o Protect Insured Depository Institutions – The rule protects the Deposit Insurance Fund by preventing banking organizations from transferring significant levels of risk to insured depository institution subsidiaries. Specifically, the rule requires that, if the aggregate amount of initial margin for inter-affiliate swaps exceeds 15% of a covered swap entity’s tier 1 capital, the covered swap entity would be required to collect initial margin on all new contracts with affiliates.
o Maintain Safety and Soundness – The rule maintains key safeguards to protect safety and soundness by requiring covered swap entities to exchange variation margin with affiliates to reflect the change in value of each party’s obligations over the life of each contract. In addition, the rule does not amend the requirement that a covered swap entity exchange initial and variation margin with unaffiliated counterparties.
The rule also amends the requirements for covered swap entities by -
(1) facilitating the transition away from interbank offered rates (IBORs) and other interest rates that are expected to be discontinued or that are determined to have lost their relevance as a reliable benchmark due to significant impairment, and
(2) adding an additional initial margin compliance period for certain smaller counterparties.
Thursday, May 7, 2020
Statement from Assistant Attorney General Makan Delrahim on Sabre and Farelogix Decision to Abandon Merger
Sabre Corporation and Farelogix, Inc. announced today the termination of their merger agreement.
The Department of Justice filed a civil antitrust lawsuit on Aug. 20, 2019, to block Sabre’s $360 million acquisition of its disruptive rival Farelogix to preserve the significant head-to-head competition between these two companies that has substantially benefitted airlines and consumers.
Following an eight-day bench trial before the Honorable Leonard P. Stark in the U.S. District Court for the District of Delaware, the District Court on April 7 denied the department’s request to block the merger, ruling that it was bound by the Supreme Court’s decision in Ohio v. American Express Co., 138 S. Ct. 2274 (2018) (Amex), to hold that Sabre and Farelogix do not compete in a relevant market despite the District Court’s own factual findings that Sabre and Farelogix do compete. Just two days after the District Court issued its opinion, however, the United Kingdom’s Competition & Markets Authority (CMA) found the deal unlawful under U.K. competition law.
“The United Kingdom’s CMA decision to block Sabre’s acquisition of Farelogix confirms our view that the merger was anticompetitive,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. “We were disappointed with the District Court’s application of Amex to this merger case. We already had filed a protective notice to appeal to preserve our appellate options and now are considering whether to move to vacate the District Court’s opinion in light of the Defendants’ decision to terminate their deal.”
Wednesday, May 6, 2020
The Federal Financial Institutions Examination Council (FFIEC) on behalf of its members today issued a statement to address the use of cloud computing services and security risk management principles in the financial services sector.
Security breaches involving cloud computing services highlight the importance of sound security controls and management’s understanding of the shared responsibilities between cloud service providers and their financial institution clients. The statement does not contain new regulatory expectations, though it highlights that management should not assume that effective security and resilience controls exist simply because the technology systems are operating in a cloud computing environment.
The statement highlights examples of risk management practices for a financial institution’s safe and sound use of cloud computing services and safeguards to protect customers’ sensitive information from risks that pose potential consumer harm. The statement also provides a list of government and industry resources and references to assist financial institutions using cloud computing services.
Additional information on general risk management and outsourcing practices is available in the FFIEC Information Technology Examination Handbook’s “Outsourcing Technology Services” booklet and other documents published by FFIEC members.
Wednesday, April 15, 2020
Texas A&M University School of Law has launched a Covid-19 expert response team. Listen to Professor Neal Newman and William discussing the Covid-19 SBA forgiveness loans, deferral on paying the employer's Social Security tax, and the Employee Retention Tax Credit (YouTube). Find the response team members from all disciplines here: Download Texas A&M Coronavirus_Experts
For a business with by example 400 employees, a $5,000 credit per employee is worth $2,000,000 of tax-free tax credit that can be more beneficial than an SBA Loan. The SBA loan is not straight forward and regardless, is not in general allowed for business above 500 employees. The taxpayer must choose either one or the other - the PPP (forgivable employee retention) SBA loan or the employee retention tax credit. For small employers with less than say 250 employees (not exactly 'small' in most American minds) the answer is probably the SBA loan. But for employer with more than 350 employees, the answer is probably that the Employee Retention Tax Credit is worth more to the business. Watch the webinar above or ask your questions live this Thursday, April 16th (Register now for our webinar on Wednesday, April 16, at 2:00 EDT)
2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience
Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone. Questions? Contact customer service: TaxFactsHelp@alm.com| 800-543-0874
Tuesday, April 14, 2020
Covid-19 Tax Facts News: Coronavirus Response Act and Families First Act's Tax Relief for Small Business Owners
Texas A&M University School of Law has launched a Covid-19 expert response team. Listen to Professor Neal Newman and William discussing the Covid-19 SBA forgiveness loans, deferral on paying the employer's Social Security tax, and the Employee Retention Tax Credit (YouTube). Find the response team members from all disciplines here: Download Texas A&M Coronavirus_Experts
2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience
Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone. Questions? Contact customer service: TaxFactsHelp@alm.com| 800-543-0874
Thursday, March 26, 2020
Everything You Need to Know About Coronavirus Federal Small Business Stimulus Aid Programs (U.S. Chamber of Commerce)
Signed into law on March 6, The Coronavirus Preparedness and Response Supplemental Appropriations Act provides $8.3 billion in emergency funding for federal agencies to respond to the coronavirus outbreak, enabling the U.S. Small Business Administration to offer $7 billion in disaster assistance loans to small businesses impacted by COVID-19.
What does it mean for small business?
- The SBA is offering designated states and territories low-interest federal disaster loans to small businesses suffering substantial economic harm as a result of the coronavirus.
- These loans may be used by small businesses to pay fixed debts, payroll, accounts payable and additional bills that can’t be paid because of COVID-19’s impact. The interest rate is 3.75% for small businesses without other available means of credit. The interest rate for non-profits is 2.75%. Businesses with credit available elsewhere are not eligible.
- The SBA loans come with long-term repayments, up to a maximum of 30 years, in an effort to keep payments affordable. Loan terms are determined on a case-by-case basis, according to individual borrower’s ability to repay.
- The SBA has amended its disaster loan criteria to help borrowers still paying back SBA loans from previous disasters. By making this change, deferments through December 31, 2020, will be automatic. Hence, borrowers of home and business disaster loans do not have to contact SBA to request deferment.
Wednesday, March 18, 2020
The Central Bank of Ireland (Central Bank) recently undertook a Thematic Inspection of Cybersecurity Risk Management (Thematic Inspection) in Investment Firms and Fund Service Providers (Asset Management Firms). The purpose of the inspection was to determine the adequacy of cybersecurity controls and cybersecurity risk management practices of the inspected firms and to identify good practices.
The Thematic Inspection examined (i) cybersecurity risk governance, (ii) cybersecurity risk management frameworks and (iii) certain technical controls for mitigating cybersecurity risk. The on-site inspections included a point-in-time maturity assessment of key cybersecurity risk management practices in place across the selected firms.
The risks associated with IT and cybersecurity are key concerns for the Central Bank. The Central Bank’s ‘Cross Industry Guidance in respect of Information Technology and Cybersecurity Risks 2016’ (2016 Cross Industry Guidance) highlights that “firms are expected to have adequate processes in place to effectively address cyber risk. While it is recognised that there is no one size fits all solution to addressing this risk, all firms should understand the strategic implications of cyber risk. The cyber risk management elements of the IT risk management framework, including associated policies and procedures, should not be viewed as static.
Firms should review and update the framework regularly to reflect threat intelligence and changes in the internal and external operational environment”.
Friday, February 7, 2020
Court Enters Judgment That Significantly Modifies and Extends Consent Decree With Live Nation/Ticketmaster
The Department of Justice’s Antitrust Division announced on Dec. 19, 2019, that it would file a petition asking the court to clarify and extend by five and a half years the Final Judgment entered by the court in United States v. Ticketmaster Entertainment, Inc., et al., Case No. 1:10-cv-00139-RMC (July 30, 2010). Today, the court entered the Amended Final Judgment. The court also set the procedure for naming of the Independent Monitoring Trustee. The Independent Monitoring Trustee is just one term within the Amended Final Judgment that will make enforcement of the decree for the extended time period more efficient.
“Live Nation broke the promises they made to the court and the American people when they merged with Ticketmaster in 2010; today, we are holding them accountable,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. “The amended decree reimburses the American people millions of dollars and makes it easier for the Antitrust Division and state enforcers to identify and prosecute future transgressions.”
The 2010 Final Judgment permitted Live Nation to merge with Ticketmaster but prohibited the company from retaliating against concert venues for using another ticketing company, threatening concert venues, or undertaking other specified actions against concert venues for ten years. Despite the prohibitions in the Final Judgment, Live Nation repeatedly and over the course of several years engaged in conduct that, in the Department’s view, violated the Final Judgment. To put a stop to this conduct and to remove any doubt about defendants’ obligations under the Final Judgment going forward, the Department and Live Nation have agreed to modify the Final Judgment to make clear that such conduct is prohibited. In addition, Live Nation has agreed to extend the term of the Final Judgment by five and a half years, which will allow concert venues and American consumers to get the benefit of the relief the Department bargained for in the original settlement. The proposed modifications to the Final Judgment will also help deter additional violations and allow for easier detection and enforcement if future violations occur.
“When Live Nation and Ticketmaster merged in 2010, the Department of Justice and the federal court imposed conditions on the company in order to preserve and promote ticketing competition.” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. “Today’s enforcement action including the addition of language on retaliation and conditioning will ensure that American consumers get the benefit of the bargain that the United States and Live Nation agreed to in 2010. Merging parties will be held to their promises and the Department will not tolerate transgressions that hurt the American consumer.”
The Department today filed a motion in the U.S. District Court for the District of Columbia to reopen the docket in the underlying action, a necessary step towards filing the petition to clarify and extend the Final Judgment. The Department will file that petition once leave is granted by the court.
The clarifications to the Final Judgment the parties will seek include provisions that:
- Live Nation may not threaten to withhold concerts from a venue if the venue chooses a ticketer other than Ticketmaster;
- A threat by Live Nation to withhold any concerts because a venue chooses another ticketer is a violation of the Final Judgment;
- Withholding any concerts in response to a venue choosing a ticketer other than Ticketmaster is a violation by Live Nation of the Final Judgment;
- The Antitrust Division will appoint an independent monitor to investigate and report on Live Nation’s compliance with the Final Judgment;
- Live Nation will appoint an internal antitrust compliance officer and conduct regular internal training to ensure its employees fully comply with the Final Judgment;
- Live Nation will provide notice to current or potential venue customers of its ticketing services of the clarified and extended Final Judgment; and
- Live Nation is subject to an automatic penalty of $1,000,000 for each violation of the Final Judgment.
- Live Nation will pay costs and fees for the Department’s investigation and enforcement.
Along with the provisions described above, the proposed modifications to the Final Judgment, if approved by the court, include additional safeguards to ensure Live Nation does not punish venues that want to work with competing ticketers, and importantly, extends the term of the Final Judgment for five and half years.
Live Nation Entertainment Inc. is a Delaware corporation headquartered in Beverly Hills, California. It claims to be the largest live entertainment company in the world, active in three principal segments: concert promotion, ticketing services, and sponsorship & advertising. In 2018, Live Nation’s revenues were approximately $10.8 billion.
Ticketmaster is a wholly-owned subsidiary of Live Nation following their merger in 2010. It claims to be the world’s leading live entertainment ticketing sales and entertainment company. In 2018, Ticketmaster’s revenues were approximately $1.5 billion.
Thursday, February 6, 2020
FINRA announced it was conducting a retrospective review of its rules and administrative processes that help protect senior investors from financial exploitation in Regulatory Notice 19-27. In addition to the feedback we received during the comment process, FINRA will be seeking information through a voluntary survey to be issued next week about firms' experiences with these rules. Survey responses will be due by February 21.
Background & Discussion
FINRA’s rules are designed to protect investors, and FINRA places a particular emphasis on protecting vulnerable investors like seniors, many of whom are living on fixed incomes and budgets without the ability to offset significant losses over time or through other means. Recent evidence suggests that financial exploitation of seniors has been increasing, in terms of both magnitude and impact.2 Although studies indicate that financial exploitation of seniors is often perpetrated by strangers, family members and caregivers—rather than by broker-dealers or other financial services organizations—broker-dealers and other financial services organizations have an important role to play in protecting senior investors.3
To this end, FINRA is commencing a retrospective review of its rules and administrative processes that help protect senior investors from financial exploitation. The review will assess the effectiveness and efficiency of these rules and administrative processes and consider whether additional tools, guidance or changes are appropriate to further address suspected financial exploitation and other circumstances of financial vulnerability for senior investors.
FINRA periodically reviews its rule sets4 to determine whether they are meeting their intended objectives by reasonably efficient means. These reviews encompass not only the substance and application of a rule or rule set, but also FINRA’s processes to administer the rules. The reviews also can explore whether FINRA can provide additional resources to help member firms’ compliance efforts or otherwise further the regulatory objectives of the rules. Among other things, FINRA uses this process to determine whether there are gaps in FINRA’s rules that need to be addressed.
In conducting the review of rules relating to financial exploitation of senior investors, FINRA staff will follow a similar process to that of previous retrospective rule reviews. In general, the review process consists of an assessment and an action phase. During the assessment phase, FINRA will:
- evaluate the efficacy and efficiency of the rule or rule set as currently implemented, including FINRA’s internal administrative processes;
- seek input from both external and internal stakeholders;
- draw on the expertise of its advisory committees and other subject-matter experts inside and outside of the organization; and
- seek out the views and experiences of other stakeholders, including industry, member firms, investors, investor advocates, interested groups and the public.
Upon completion of this assessment, FINRA staff will consider appropriate next steps, which may include some or all of the following: modifications to the rules, updated or additional guidance, administrative changes or technology improvements, additional tools, educational materials or other resources, or additional research or information gathering.
The action phase will then follow. To the extent action involves modification of rules, FINRA will separately engage in its usual rulemaking process to propose amendments to the rules based on the findings. This process will include input from FINRA’s advisory committees and an opportunity for comment on specific proposed revisions in a Regulatory Notice or rule filing with the Securities and Exchange Commission (SEC), or both.
Request for Comment
Protecting Senior Investors
FINRA has prioritized protecting senior investors and addressed financial exploitation of senior investors in numerous ways, including:
- identifying senior investor issues as an examination priority;5
- launching the dedicated FINRA Securities Helpline for Seniors® (Helpline)—available at (844) 57-HELPS—to provide senior investors and their family members with a supportive place to get assistance from specially trained FINRA staff related to concerns they have with their brokerage accounts and investments;6
- creating national standards that give member firms tools—including permitting firms to place temporary holds on disbursements when they have a reasonable belief of financial exploitation and requiring firms to request information from customers about a trusted contact—to address suspected financial exploitation of senior investors and other vulnerable adults (i.e., FINRA Rules 2165 (Financial Exploitation of Specified Adults) and 4512 (Customer Account Information));7
- collaborating with the North American Securities Administrators Association (NASAA) and the SEC to address senior investor protection, including issuing a Senior Safe Act Fact Sheet designed to raise awareness among member firms, investment advisers and transfer agents about the Act and its immunity provisions;8
- issuing alerts and articles educating investors about important issues and highlighting risks facing senior investors;9
- conducting and funding research on senior investors and financial fraud, and engaging with national, state and grassroots partners to develop and distribute fraud prevention resources, educate consumers, and provide training for law enforcement professionals, victim advocates and other people on the front lines of fighting financial fraud;
- issuing Regulatory Notices emphasizing member firms’ obligations to senior investors and providing guidance on how to fulfill those obligations;10 and
- bringing disciplinary actions for misconduct against senior investors.11
Related Rules and Administrative Processes
FINRA is interested in whether additional tools, guidance or changes to FINRA rules or administrative processes are appropriate to further address financial exploitation and other circumstances of financial vulnerability for senior investors. To that end, FINRA is requesting comment on the functioning of its rules and administrative processes that most directly apply to financial exploitation of senior investors. An overview is set forth below. FINRA recognizes that other FINRA rules and administrative processes not listed here affect member firms’ ability to address suspected financial exploitation and FINRA welcomes comment on them as well.
FINRA Rule 2165
Rule 2165 permits a member firm to place a temporary hold on a disbursement of funds or securities from the account of a “specified adult” customer when the firm reasonably believes that financial exploitation of that adult has occurred, is occurring, has been attempted or will be attempted.12 Rule 2165 provides member firms and their associated persons with a safe harbor from FINRA Rules 2010 (Standards of Commercial Honor and Principles of Trade), 2150 (Improper Use of Customers’ Securities or Funds; Prohibition Against Guarantees and Sharing in Accounts) and 11870 (Customer Account Transfer Contracts) when member firms exercise discretion in placing temporary holds on disbursements of funds or securities from the accounts of specified adults consistent with the requirements of the rule.
Application to Transactions
While placing a hold pursuant to Rule 2165 stops funds or securities from leaving a customer’s account, the rule currently does not apply to transactions in securities by or for the senior investor.13 Customers can be exploited through transactions as well as disbursements. However, extending Rule 2165 to transactions may raise complicated issues, such as the possibility of changes in a security’s price during the hold and complying with a member firm’s best execution obligations.14
Application When No Indication of Financial Exploitation
Rule 2165 provides member firms with a useful tool in protecting a senior investor’s assets from financial exploitation by a third party. However, some member firms have requested that FINRA extend the temporary hold provision to situations where a firm has a reasonable belief that the customer has an impairment, such as diminished capacity, that renders the individual unable to protect his or her own interests, irrespective of whether there is evidence that the customer is the victim of financial exploitation by a third party.
Length of Time of Temporary Holds
Rule 2165 allows a member firm to place a temporary hold on a specified customer’s account for up to 25 business days if the criteria in the rule are satisfied. The rule also provides that this period may be extended by a state agency or a court. A number of member firms have indicated that 25 business days is not a long enough period in some instances to resolve the matter and that it can be difficult to obtain an extension from a state agency or a court. These member firms have asked that FINRA extend the period in the rule or create a different mechanism for receiving an extension.
FINRA Rule 4530 (Reporting Requirements) requires member firms to report specified events to FINRA. Although FINRA considers whether a member firm or associated person had acted consistent with Rule 2165 when assessing reported information about a hold on a disbursement, Rule 2165’s safe harbor does not extend to reporting requirements pursuant to Rule 4530. For some situations, FINRA has developed problem codes for use in reporting pursuant to FINRA Rule 4530 to provide clarity regarding the reportable event. To date, FINRA has not developed a dedicated problem code for Rule 2165-related reporting.
Form U4 (Uniform Application for Securities Industry Registration or Transfer), which is used by member firms to register associated persons with FINRA and the appropriate jurisdictions, and Form U5 (Uniform Termination Notice for Securities Industry Registration), which is used by member firms to terminate the registration of associated persons with FINRA and the appropriate jurisdictions, require disclosing customer complaints that meet specified criteria. Rule 2165’s safe harbor does not extend to complaints about an associated person whose actions were within the safe harbor that may be reportable on Forms U4 or U5. Rather, whether a complaint is reportable depends on the criteria for reporting under Forms U4 or U5.
FINRA Rule 3240 (Borrowing From or Lending to Customers)
Lending arrangements between registered persons and customers is an area of interest for FINRA because of the potential for misconduct. Rule 3240 provides a regulatory framework to give member firms greater control over, and supervisory responsibilities for, lending arrangements between registered persons and their customers. Furthermore, member firms may choose to prohibit all or some types of lending arrangements between registered persons and their customers.
Rule 3240 prohibits registered persons from borrowing money from or lending money to their customers unless the member firm has written procedures allowing the lending arrangements and: (1) the customer is a member of the registered person’s immediate family; (2) the customer is engaged in the business of lending money and is acting in the course of the business; (3) the customer and the registered person are both registered persons of the same firm; (4) the lending arrangement is based on a personal relationship outside of the broker-customer relationship; or (5) the lending arrangement is based on a business relationship outside of the broker-customer relationship. With the exception of lending arrangements described in (1) and (2) above, Rule 3240 requires that registered persons notify the member firm and the member firm pre-approve in writing the lending arrangements.
FINRA has brought disciplinary actions against registered persons for violating Rule 3240 involving lending arrangements with senior investors. For example, FINRA brought an action against a registered person who entered into lending arrangements with several senior customers contrary to Rule 3240 and firm procedures.15 In another example, FINRA brought an action against a registered person who attempted to mischaracterize a loan from a senior investor as proceeds from the sale of farm equipment.16 FINRA also has learned of other instances where registered persons have attempted to avoid the rule’s obligations by having another registered person handle the account or by listing a spouse on loan documents.
FINRA Rule 4512
Rule 4512 requires member firms to make reasonable efforts to obtain the name of and contact information for a trusted contact person upon the opening of a non-institutional customer’s account or when updating account information for a non-institutional account in existence prior to the effective date of the amendments (existing account). The trusted contact person is intended to be a resource for the member in administering the customer’s account, protecting assets and responding to possible financial exploitation. Member firms are not prohibited from opening and maintaining an account if a customer fails to identify a trusted contact person as long as the member firm makes reasonable efforts to obtain the information.
A Registered Person Being Named a Beneficiary, Executor, or Trustee or Holding a Power of Attorney or Similar Position
Many registered representatives develop close and trusted relationships with their customers, which in some instances have resulted in the customer naming the registered representative as the customer’s beneficiary, executor, or trustee or holding a power of attorney or a similar position. These positions of trust may present significant conflicts of interest, and FINRA has taken steps to address misconduct in this area.17 To further address these potential conflicts of interest, FINRA intends to consider rulemaking to explicitly prohibit or limit the ability of registered persons to be named a beneficiary, executor, power of attorney, trustee or similar position of trust on the account of a non-family member customer. Any such proposed rulemaking would be published for comment in a separate Regulatory Notice.
FINRA’s Sanction Guidelines provide both general principles that apply to the overall process of determining sanctions for every case and specific recommendations of a range of sanctions for particular rule violations. The Sanction Guidelines familiarize member firms with a wide variety of typical securities industry rule violations, and the range of disciplinary sanctions that may result from those rule violations. The goals of the Sanction
Guidelines are to assist FINRA’s adjudicators in determining the appropriate sanctions in disciplinary proceedings and to provide consistency in the imposition of sanctions. The Sanctions Guidelines include some “principal considerations” to be considered when determining appropriate sanctions. Although the exercise of undue influence and level of sophistication are principal considerations, the customer’s age or physical or mental impairments are not currently principal considerations.18
Request for Comments
FINRA seeks answers to the following questions with respect to addressing financial exploitation and other circumstances of financial vulnerability for senior investors:
1. Should Rule 2165’s safe harbor be extended to apply to transactions in securities, in addition to disbursements of funds and securities? If so, how should changes in security prices be addressed (e.g., where a hold is terminated: (i) by a state regulator or agency of competent jurisdiction or a court of competent jurisdiction; or (ii) upon a determination that there is not financial exploitation)? Are there other implications of extending the safe harbor to transactions?
2. Should Rule 2165’s safe harbor be extended to apply where there is a reasonable belief that the customer has an impairment that renders the individual unable to protect his or her own interests (e.g., a cognitive impairment or diminished capacity), irrespective of whether there is evidence that the customer may be the victim of financial exploitation by a third party? What burdens would be placed on member firms and their registered persons if the safe harbor were extended in this way?
3. Should FINRA extend the temporary hold period in the rule or create a different mechanism to obtain an extension? If so, for how long? How frequently has your firm placed a temporary hold pursuant to Rule 2165 and what has been the duration of any holds? When a hold was placed, did the firm’s internal review find support for the reasonable belief of financial exploitation that prompted placing the hold?
4. Has your firm identified any unintended consequences when placing or attempting to place a temporary hold on disbursement of funds or securities from an account under Rule 2165?
5. To gain a better understanding of the effectiveness of the trusted contact provision in Rule 4512: what methods have firms used in seeking to obtain trusted contact person information? What methods have firms found most helpful in obtaining such information? What have been the response rates from new and existing customers in providing the trusted contact person information?
Has your firm suspected financial exploitation of a customer, but not had the trusted contact person information? If so, what did your firm do, if anything? Has your firm sought assistance from trusted contact persons, and, if so, was this outreach constructive?
7. Should FINRA develop a dedicated Rule 2165-related problem code for use in meeting reporting requirements pursuant to FINRA Rule 4530?
8. Is guidance needed to address when complaints related to placing a temporary hold pursuant to Rule 2165 should be reported on Forms U4 and U5? To what extent have registered persons received complaints in situations relating to disbursement holds, and have they been reportable complaints?
9. Has Rule 3240 been effective in addressing potential misconduct in lending arrangements between registered persons and their senior customers? Has Rule 3240 been effective more generally as an investor-protection measure?
10. Should the types of permissible lending arrangements in Rule 3240 be modified or should the rule cover a broader range of lending arrangements or relationships?
11. Should the rule address borrowing and lending arrangements that were entered into prior to the existence of a broker-customer relationship?
12. Should Rule 3240 apply for a specified period following an individual ceasing to be a customer (colloquially, a cooling-off period) of the firm or where a customer is reassigned to a different registered representative?
13. Should FINRA amend the Sanctions Guidelines to add as a principal consideration the fact that a victimized customer is a “specified adult” (i.e., a person 65 or older or a person 18 or older who the member reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her own interests)?
General Effectiveness, Challenges and Economic Impact
14. Has each rule (mentioned above) effectively addressed the problem(s) it was intended to mitigate? To what extent has the original purposes of, and the need for, a rule been affected by subsequent changes to the risk environment, the markets, the delivery of financial services, the applicable regulatory framework, or other considerations? Are there alternative ways to achieve the goals of a rule that FINRA should consider?
15. What has been your experience with implementation of Rules 2165, 3240, 4512 and 4530 related to senior investors, including any ambiguities in the rule or challenges to comply with it?
16. What have been the economic impacts, including costs and benefits, of the rules mentioned above? To what extent do the costs and benefits have a disproportionate impact on firms based on size and business model? Have the rules led to any negative unintended consequences?
17. Should FINRA require additional disclosure or heightened supervision for any particular product or investment strategy that is marketed to senior investors?
18. Can FINRA make rules, guidance or attendant administrative processes related to senior investors more efficient and effective? If so, how?
19. What additional guidance, tools or resources would be helpful to firms or the investing public to address suspected financial exploitation and other circumstances of financial vulnerability for senior investors? Are there areas where FINRA or the FINRA Investor Education Foundation should conduct additional research or publish additional materials to promote greater awareness and education?
20. Are there other approaches, policies, rules, programs or partnerships not discussed herein that are within FINRA’s jurisdiction and mandate that would further benefit senior investors?
In addition to comments responsive to these questions, FINRA invites comments on any other aspects of the rules that commenters wish to address. FINRA further requests any data or evidence in support of comments. FINRA welcomes input not only as to whether or not the current rules are effective and efficient, but also specific suggestions as to how the rules should be changed. As discussed above, FINRA will separately consider during the action phase specific changes to the rules.
- Persons submitting comments are cautioned that FINRA does not redact or edit personal identifying information, such as names or email addresses, from comment submissions. Persons should submit only information that they wish to make publicly available. See Notice to Members 03-73 (November 2003) (Online Availability of Comments) for more information.
See, e.g., Consumer Financial Protection Bureau, Office of Financial Protection for Older Americans, Suspicious Activity Reports on Elder Financial Exploitation: Issues and Trends (Feb. 2019). The Report found that suspicious activity report (SAR) filings on elder financial exploitation quadrupled from 2013 to 2017, with financial institutions filing 63,500 SARs reporting elder financial abuse in 2017. The Report also states that these SAR filings likely represent only a tiny fraction of the actual 3.5 million incidents of elder financial exploitation estimated to have happened that year. As covered in the Report, financial institutions that must file SARs include banks, casinos, money services businesses, brokers or dealers, insurance companies, mutual funds, futures commissions merchants and introducing brokers in commodities, loan or finance companies, and housing government-sponsored enterprises.
In addition, a number of recent studies indicate that the vast majority of elder financial exploitation is perpetrated by strangers, family members and caregivers, rather than by brokerdealers or other financial services organizations. See, e.g., Consumer Financial Protection Bureau’s Office of Financial Protection for Older Americans, Suspicious Activity Reports on Elder Financial Exploitation: Issues and Trends, at 18 (Feb. 2019); Statistics and Data on Elder Abuse, The National Center for Elder Abuse, Who are the Perpetrators?.
- See id.
- A rule set is a group of rules identified by FINRA staff to contain a similar subject, characteristics or objectives.
- See 2019 Risk Monitoring and Examination Priorities Letter (January 2019).
- See www.finra.org/investors/highlights/finrasecurities- helpline-seniors.
- See Regulatory Notice 17-11 (March 2017).
- See the Seniors Safe Act Fact Sheet .
- See, e.g., articles such as Protecting Seniors from Financial Exploitation; Investor Alerts such as Power of Attorney and Your Investments–10 Tips, Plan for Transition: What You Should Know About the Transfer of Brokerage Account Assets on Death, and Seniors Beware: What You Should Know About Life Settlements; and FINRA’s Retirement webpage for investors.
- See, e.g., Regulatory Notice 07-43 (Sept. 2007) (reminding member firms of their obligations relating to senior investors and highlighting industry best practices to serve these customers); Regulatory Notice 09-42 (July 2009) (reminding member firms of their obligations with variable life settlement activities); Regulatory Notice 11-52 (Nov. 2011) (reminding member firms of their obligations regarding the supervision of associated persons using senior designations); Regulatory Notice 16-12 (April 2016) (providing guidance on member firm responsibilities for sales of pension income stream products); Regulatory Notice 17-11 (Mar. 2017) (discussing new senior rules and potential financial exploitation of seniors).
- See, e.g., John W. Cutshall, Order Accepting Offer of Settlement, Case ID 2014041590801 (April 11, 2019); Steven Anthony Olejniczak, Letter of Acceptance, Waiver and Consent, Case ID 2016050107901 (May 8, 2017).
- The definition of “specified adult” in Rule 2165 covers those investors who are particularly susceptible to financial exploitation. A “specified adult” is (A) a natural person age 65 and older or (B) a natural person age 18 and older who the member reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her own interests. See Rule 2165(a)(1). Supplementary Material .03 to Rule 2165 provides that a member’s reasonable belief that a natural person age 18 and older has a mental or physical impairment that renders the individual unable to protect his or her own interests may be based on the facts and circumstances observed in the member’s business relationship with the person.
- For example, Rule 2165 would not apply to a customer’s order to sell his shares of a stock. However, if a customer requested that the proceeds of a sale of shares of a stock be disbursed out of his account at the member firm, then the rule could apply to the disbursement of the proceeds where the customer is a “specified adult” and there is reasonable belief of financial exploitation.
- See, e.g., FINRA Rule 5310 (Best Execution and Interpositioning).
- See, e.g., Michael Mendenhall, OHO Decision, Case ID 2009020489901 (July 25, 2012) (where the registered representative violated Rule 3240 in receiving inappropriate loans from several senior customers).
- See, e.g., Katherine Ann White, OHO Decision, Case ID 2015045601401 (April 7, 2017) (where the registered person claimed that the receipt of a $10,000 cashier’s check (plus $600 profit over the following six months) from a senior investor was not a loan but represented the purchase price for the sale of farm equipment that was never delivered to the customer).
- See, e.g., Robert Torcivia, Letter of Acceptance, Waiver and Consent, Case ID 2015044686701 (Sept. 26, 2018) (finding, under the facts of the case, that the registered representative violated Rule 2010 in relation to accepting beneficiary designations and having powers of attorney for senior customers and failing to inform the firm of these arrangements).
- See FINRA Sanction Guidelines (March 2019).
Wednesday, January 15, 2020
Maria Christina “Meta” Ullings, the former senior vice president of cargo sales and marketing for Martinair N.V. (Martinair Cargo) and a Dutch national, was extradited from Italy, the Department of Justice announced today.
On Sept. 21, 2010, in the U.S. District Court for the Northern District of Georgia in Atlanta, Ullings was indicted for participating in a long-running worldwide conspiracy to fix prices of air cargo. A fugitive for almost 10 years, Ullings was apprehended by Italian authorities in July 2019 while visiting Sicily. Ullings initially contested extradition in the Italian courts, but after the Court of Appeals of Palermo ruled that she be extradited, she waived her appeal. She arrived in Atlanta on Jan. 10 and made her initial appearance today in the U.S. District Court for the Northern District of Georgia.
“This extradition ruling by the Italian courts – the seventh country to extradite a defendant in an Antitrust Division case in recent years, and the second to do so based solely on an antitrust charge – demonstrates that those who violate U.S. antitrust laws and seek to evade justice will find no place to hide,” said Assistant Attorney General Makan Delrahim of the Department of Justice’s Antitrust Division. “The Division appreciates the cooperation of the Italian authorities in this matter. With the assistance of our law enforcement colleagues at home and around the world, the Division will aggressively pursue every avenue available in bringing price fixers to justice.”
According to the indictment, Ullings conspired with others to suppress and eliminate competition by fixing and coordinating certain surcharges, including fuel surcharges, charged to customers located in the United States and elsewhere for air cargo shipments. These air cargo shipments included heavy equipment, perishable commodities, and consumer goods destined for American consumers and shipped by American producers. Ullings is alleged to have participated in the conspiracy from at least as early as January 2001 until at least February 2006.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.
Including Ullings, a total of 22 airlines and 21 executives have been charged in the Justice Department’s investigation into price fixing in the air transportation industry. To date, more than $1.8 billion in criminal fines have been imposed and seven executives have been sentenced to serve prison time.
Ullings is charged with violating the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million criminal fine for individuals. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
Thursday, December 26, 2019
To provide greater transparency into the FDIC's examination processes, the FDIC Division of Risk Management Supervision has updated the Risk Management Manual of Examination Policies (Manual) by inserting Part VI, Appendix: Examination Processes and Tools, Examination Documentation Modules. The Examination Documentation Modules were developed in 1997 to provide examiners with tools to identify and assess the range of matters considered during examination activities, and they are updated periodically. The Modules direct examiners to use a risk-focused approach in conducting examination activities, thereby facilitating an efficient and effective supervisory program.
Statement of Applicability to Institutions with Total Assets under $1 Billion: This Financial Institution Letter (FIL) provides information and procedural direction to FDIC supervisory personnel. This FIL is informational and does not require action on the part of insured institutions.
- The Examination Documentation (ED) Modules have been an examination tool used by FDIC examiners since 1997. The Modules are periodically revised and updated to reflect changes in laws, regulations, and policies.
- The modules are used in the risk-focused examination framework to tailor examination procedures to the business model, complexity and risk profile of individual financial institutions. The extent to which each module is completed will vary depending on the complexity and risk profile of each institution.
- The ED Modules are organized by banking activities and processes in three categories: Primary Modules cover examination planning and the assessment of Capital, Asset Quality, Management, Earnings, Liquidity, and Sensitivity (CAMELS) areas; Supplemental Modules cover additional program areas; and Reference Modules provide more detailed procedures for specific banking activities that are addressed at a higher level in the Primary and Supplemental Modules.
- The ED Modules will be added to the Manual beginning with the Primary and Supplemental Modules. To receive notice of subsequent issuances, subscribe to FDIC updates by email.
- This FIL will expire 12 months from issuance.
- FDIC-Supervised Institutions
- Chief Executive Officer
- Risk Management Manual of Examination Policies (Basic Examination Concepts and Guidelines - Section 1.1)
- Risk Management Manual of Examination Policies (Examination Documentation (ED) Modules - Section 22.1)
Friday, October 25, 2019
Francis Alvarez, owner of a large freight forwarding company, pleaded guilty to an antitrust charge for her role in a multi-year, nationwide conspiracy to fix prices for international freight forwarding services, the Department of Justice announced today.
According to a one-count felony charge filed in the Southern District of Florida in Miami, Florida, Alvarez and her co-conspirators agreed to fix, raise and maintain prices for freight forwarding services provided in the United States and elsewhere from at least as early as September 2010 until at least August 2014. Alvarez is president and owner of a Houston-based freight forwarding company.
In addition to admitting to participating in this conspiracy, Alvarez has agreed to pay a criminal fine and cooperate with the ongoing investigation. The terms of the plea agreement are subject to approval of the court. Alvarez will be sentenced at a later date.
Alvarez is the third individual to face charges for participating in this conspiracy. Two of Alvarez’s co-conspirators, Roberto Dip and Jason Handal, were charged and pleaded guilty in November 2018. In June 2019, Dip and Handal were sentenced to eighteen- and fifteen-month prison terms, respectively, for their roles in the scheme.
“Alvarez and her co-conspirators cheated American consumers shipping goods to Honduras by conspiring to raise prices and pocket the proceeds of their illegal scheme,” said Assistant Attorney General Makan Delrahim of the Justice Department's Antitrust Division. “The Antitrust Division is committed to working with our law enforcement partners to protect those consumers and restore integrity to this market.”
“This is an example of businesses and their executives manipulating commerce and deceiving the American public for their own financial gain,” said Special Agent in Charge Bryan A. Vorndran of the FBI’s New Orleans Office. “Francis Alvarez and her co-conspirators violated U.S. antitrust laws. Using their knowledge and experience in the freight-forwarding trade, they exploited consumers through an elaborate price-fixing scheme. The FBI, along with our partners at the Department of Justice Antitrust Division, remain committed to upholding the Constitution and protecting consumers against fraud, deceit and illegal activity.”
Freight forwarders arrange for and manage the shipment of goods, including by receiving, packaging and otherwise preparing cargo destined for international ocean shipment.
Alvarez is charged with price fixing in violation of the Sherman Act, which carries a maximum sentence of 10 years in prison and a $1 million fine for individuals. The maximum fine for an individual may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
The ongoing investigation into price fixing in the international freight forwarding industry is being conducted by the Antitrust Division’s Washington Criminal I Section and the FBI’s New Orleans Field Office. Anyone with information in connection with this investigation is urged to call the Antitrust Division’s Washington Criminal I Section at 202-307-6694, visit www.justice.gov/atr/contact/newcase.html or call the FBI tip line at 415-553-7400.
Friday, August 16, 2019
Britain’s legal sector set for significant slowdown in event of no-deal Brexit
Britain – Europe’s biggest international provider of legal services and number two in the world – could take a £3.5bn hit from a no deal Brexit, solicitors' leaders warned today.
“According to our estimates, the volume of work in legal services would be down £3.5bn* – nearly 10% lower than under an orderly Brexit,” said Law Society of England and Wales president Simon Davis as the Law Society launched its UK-EU future partnership - legal services sector report.
“Our sector contributed £27.9 billion to the UK in 2018 – 1.4% of GDP – and in 2017 posted a trade surplus of £4.4 billion, according to the Office for National Statistics (ONS). Much of this balance of payments surplus is down to access provided by EU Lawyers’ Directives.
“In general, we have a trade surplus with the EU27 when it comes to services. We have a trade deficit when it comes to manufacturing.
“And in 2018 the total tax contribution of legal and accounting activities was estimated to be £19.1 billion – potentially funding the salaries of doctors, nurses, teachers and police officers.
“That is why we are urging the UK government to negotiate a future agreement that enables broader access for legal services so that English and Welsh solicitors can maintain their right to practise in the EU.
“Such an agreement should replicate the Lawyers’ Directives, which provide EU-wide rights on services and establishment, as other models are unlikely to deliver the comprehensive practice rights that have substantially contributed to the UK legal sector’s large export surplus of £4.4bn as of 2017.
“There are precedents for such agreements providing necessary in-depth frameworks on legal services: the EU has association agreements through the EEA with Norway, Liechtenstein and Iceland and with Switzerland. These extend the application of the Lawyers’ Directives to EFTA countries.
"The UK legal system is globally respected and the liberalisation of services in the EU has directly contributed to its success."
Notes to editors
*Using constant 2017 prices, the Law Society research unit estimates that the volume of work in the legal services sector would be down £3.5 billion in a no-deal Brexit scenario.
The Law Society’s UK-EU future partnership and legal services report outlines with case studies some of the practical challenges of leaving the EU without a deal or with a deal that pays no attention to professional and business services.
At present, the EU legal services framework allows solicitors in England and Wales to:
- advise their clients across the EU on all matters of concern to them and in all types of law, including English law, EU law and the law of the host state
- have their qualifications recognised and requalify under EU rules with few barriers compared to non-EU lawyers
- to employ local lawyers in a different member state and retain the ability to form partnerships with lawyers from all EU member states (provided the jurisdiction in question allows the employment of lawyers)
- be employed by EU law firms and companies (provided the jurisdiction in question allows the employment of lawyers)
- retain their freedom to establish a permanent presence in EU states, and extends this to English and Welsh law firms
- have all communications with their EU clients and vice versa protected by the EU legal professional privilege (LPP) at EU level, i.e. they cannot be disclosed without the permission of the client
- represent their clients in the Court of Justice of the European Union (CJEU), domestic courts and other fora (such as arbitral proceedings and alternative dispute resolution mechanisms)
For more information, the Law Society’s August 2018 Legal sector forecast report includes our most recent estimates of the effects of Brexit on the legal sector.
If you are a legal services business owner in the UK or the EU you need to make sure you can continue to practise after a no-deal Brexit.
1. Legal services business owners with UK qualifications in the EU, Norway, Iceland or Liechtenstein
If you are a UK lawyer with ownership interests in the EU, Norway, Iceland or Liechtenstein (EEA-EFTA) you need to contact the local regulator for specific advice.
2. Legal services business owners with qualifications from the EU, Norway, Iceland or Liechtenstein in England, Wales or Northern Ireland
Lawyers with qualifications from EU, Norway, Iceland or Liechtenstein (EEA-EFTA) and Registered European Lawyers (RELs) need to take one or more of the following actions to continue to own, or part own, a legal services business in England, Wales or Northern Ireland after Brexit:
- requalify in England, Wales or Northern Ireland
- become a Registered Foreign Lawyer
- make the necessary changes to their practice or business structure to comply with the new regulatory arrangements
This will need to be done before Brexit for lawyers who are not RELs, and the end of December 2020 for RELs.
EU lawyers and Registered European Lawyers (RELs) who own or part own regulated legal services firms in England, Wales or Northern Ireland should contact their UK regulator for specific advice.
Registered European Lawyers (RELs) may also own unregulated legal businesses.
3. Employing lawyers from the EU, EEA and Switzerland after Brexit
There will be no change to the way EU, EEA and Swiss citizens prove their right to work until 1 January 2021. This remains the case in a no-deal Brexit. Irish citizens will continue to have the right to work in the UK and prove their right to work as they do now, for example by using their passport.
You can find more information in the guidance on employing EU, EEA and Swiss citizens.
EU and EEA-EFTA businesses in England, Wales or Northern Ireland employing EU, and/or EEA-EFTA lawyers should contact their relevant UK regulator for specific advice.
Legal services business owners in Scotland should contact the relevant Scottish regulators - see further information for specific advice.
5. Further information
- The EU Commission preparedness notice on the recognition of professional qualifications
- The EU Commission Brexit preparedness seminar on professional qualifications, intellectual property, civil justice, company law, consumer protection and personal data