International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Friday, October 25, 2019

Third Freight Transportation Executive Pleads Guilty to Antitrust Charge

Conspiracy Targeted Shipments of Household Goods from the United States to Honduras

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.  

October 25, 2019 in Financial Regulation | Permalink | Comments (0)

Friday, August 16, 2019

Will London Legal Services Market Lose its Cache Post Brexit?

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:

  1. 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
  2. have their qualifications recognised and requalify under EU rules with few barriers compared to non-EU lawyers
  3. 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)
  4. be employed by EU law firms and companies (provided the jurisdiction in question allows the employment of lawyers)
  5. retain their freedom to establish a permanent presence in EU states, and extends this to English and Welsh law firms
  6. 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
  7. 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.

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.

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.

4. Scotland

Legal services business owners in Scotland should contact the relevant Scottish regulators - see further information for specific advice.

5. Further information

August 16, 2019 in Financial Regulation | Permalink | Comments (0)

Wednesday, July 31, 2019

FTC Sues Cambridge Analytica, Settles with Former CEO and App Developer

The Federal Trade Commission filed an administrative complaint against data analytics company Cambridge Analytica, and filed settlements for public comment with Cambridge Analytica’s former chief executive and an app developer who worked with the company, alleging they employed deceptive tactics to harvest personal information from tens of millions of Facebook users for voter profiling and targeting.

As part of a proposed settlement with the FTC, two of the defendants—app developer Aleksandr Kogan and former Cambridge Analytica CEO Alexander Nix—have agreed to administrative orders restricting how they conduct any business in the future, and requiring them to delete or destroy any personal information they collected. Cambridge Analytica has filed for bankruptcy and has not settled the FTC’s allegations.

The FTC alleges that Cambridge Analytica, Nix, and Kogan deceived consumers by falsely claiming they did not collect any personally identifiable information from Facebook users who were asked to answer survey questions and share some of their Facebook profile data. The FTC separately announced that Facebook will pay a record-breaking $5 billion penalty and submit to new restrictions that will hold the company accountable for the decisions it makes about its users’ privacy as part of a settlement resolving allegations that the company violated a 2012 FTC privacy order.

Kogan is the developer of a Facebook application called the GSRApp—sometimes referred to as the “thisisyourdigitallife” app. The GSRApp asked its users to answer personality and other questions, and collected information such as the “likes” of public Facebook pages by the app’s users and by the “friends” in their social network. During the summer of 2014, the FTC alleges, Kogan, together with Cambridge Analytica and Nix, developed, used, and analyzed data obtained from the GSRApp. The information was used to train an algorithm that then generated personality scores for the app users and their Facebook friends. Cambridge Analytica, Kogan, and Nix then matched these personality scores with U.S. voter records. The company used these matched personality scores for its voter profiling and targeted advertising services.

For this project, Kogan was able to re-purpose an existing app he had on the Facebook platform, which allowed the app to harvest Facebook data from app users and their Facebook friends. In April 2014, Facebook announced it would no longer allow app developers to access data from an app user’s Facebook friends. Facebook, however, allowed developers with existing apps on the Facebook platform to access this data for another year. The FTC alleges that the GSRApp was able to take advantage of this access to collect Facebook profile data from 250,000 to 270,000 users of the GSRApp located in the United States, as well as 50 million to 65 million of those users’ Facebook friends, including at least 30 million identifiable U.S. consumers.

The app users were paid a nominal fee to take the GSRApp survey. Almost half of the app users, however, originally refused to provide their Facebook profile information. To address this issue, the GSRApp began telling app users that it would not “download your name or any other identifiable information—we are interested in your demographics and likes.”

The FTC alleges, however, that this was false, and that the GSRApp in fact collected users’ Facebook User ID, which connects individuals to their Facebook profiles, as well as other personal information such as their gender, birthdate, location, and their Facebook friends list.

In addition, the FTC alleges that Cambridge Analytica falsely claimed until at least November 2018 that it was a participant in the EU-U.S. Privacy Shield framework, even though the company allowed its certification to lapse in May 2018. The Privacy Shield establishes a process to allow companies to transfer consumer data from European Union countries to the United States in compliance with EU law. The FTC also alleges that the company failed to adhere to the Privacy Shield requirement that companies that cease participation in the Privacy Shield affirm to the Department of Commerce, which maintains the list of Privacy Shield participants, that they will continue to apply the Privacy Shield protections to personal information collected while participating in the program.

As part of the proposed settlement with the FTC, Kogan and Nix are prohibited from making false or deceptive statements regarding the extent to which they collect, use, share, or sell personal information, as well as the purposes for which they collect, use, share, or sell such information. In addition, they are required to delete or destroy any personal information collected from consumers via the GSRApp and any related work product that originated from the data.

The Commission vote to issue the proposed administrative complaint against Cambridge Analytica, and to accept the proposed consent agreements with Kogan and Nix, was 5-0. The FTC will publish a description of the consent agreement packages in the Federal Register soon. The agreements will be subject to public comment for 30 days after publication in the Federal Register after which the Commission will decide whether to make the proposed consent orders final. Once processed, comments will be posted on Regulations.gov.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $42,530.

The FTC acknowledges the cooperation of the United Kingdom’s Information Commissioner’s Office. To facilitate international cooperation in this case, the FTC relied on key provisions of the U.S. SAFE WEB Act, which allows the FTC to share information with foreign counterparts to combat deceptive and unfair practices.

July 31, 2019 in Financial Regulation | Permalink | Comments (0)

Tuesday, July 30, 2019

FTC Imposes $5 Billion Penalty and Sweeping New Privacy Restrictions on Facebook

Facebook, Inc. will pay a record-breaking $5 billion penalty, and submit to new restrictions and a modified corporate structure that will hold the company accountable for the decisions it makes about its users’ privacy, to settle Federal Trade Commission charges that the company violated a 2012 FTC order by deceiving users about their ability to control the privacy of their personal information. Watch archival video of the press conference.

Highest Penalties in Privacy Enforcement Actions - $148 million States vs. Uber, $230 million British Authority vs. British Airways (proposed), $275 million CFPB and States vs. Equifax, $5 billion FTC vs. Facebook.  Source: Federal Trade Commission. FTC.govThe $5 billion penalty against Facebook is the largest ever imposed on any company for violating consumers’ privacy and almost 20 times greater than the largest privacy or data security penalty ever imposed worldwide. It is one of the largest penalties ever assessed by the U.S. government for any violation.

The settlement order announced today also imposes unprecedented new restrictions on Facebook’s business operations and creates multiple channels of compliance. The order requires Facebook to restructure its approach to privacy from the corporate board-level down, and establishes strong new mechanisms to ensure that Facebook executives are accountable for the decisions they make about privacy, and that those decisions are subject to meaningful oversight.

“Despite repeated promises to its billions of users worldwide that they could control how their personal information is shared, Facebook undermined consumers’ choices,” said FTC Chairman Joe Simons. “The magnitude of the $5 billion penalty and sweeping conduct relief are unprecedented in the history of the FTC. The relief is designed not only to punish future violations but, more importantly, to change Facebook’s entire privacy culture to decrease the likelihood of continued violations. The Commission takes consumer privacy seriously, and will enforce FTC orders to the fullest extent of the law.”

“The Department of Justice is committed to protecting consumer data privacy and ensuring that social media companies like Facebook do not mislead individuals about the use of their personal information,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “This settlement’s historic penalty and compliance terms will benefit American consumers, and the Department expects Facebook to treat its privacy obligations with the utmost seriousness.”

More than 185 million people in the United States and Canada use Facebook on a daily basis. Facebook monetizes user information through targeted advertising, which generated most of the company’s $55.8 billion in revenues in 2018. To encourage users to share information on its platform, Facebook promises users they can control the privacy of their information through Facebook’s privacy settings.

Following a yearlong investigation by the FTC, the Department of Justice will file a complaint on behalf of the Commission alleging that Facebook repeatedly used deceptive disclosures and settings to undermine users’ privacy preferences in violation of its 2012 FTC order. These tactics allowed the company to share users’ personal information with third-party apps that were downloaded by the user’s Facebook “friends.” The FTC alleges that many users were unaware that Facebook was sharing such information, and therefore did not take the steps needed to opt-out of sharing.

In addition, the FTC alleges that Facebook took inadequate steps to deal with apps that it knew were violating its platform policies.

In a related, but separate development, the FTC also announced today separate law enforcement actions against data analytics company Cambridge Analytica, its former Chief Executive Officer Alexander Nix, and Aleksandr Kogan, an app developer who worked with the company, alleging they used false and deceptive tactics to harvest personal information from millions of Facebook users. Kogan and Nix have agreed to a settlement with the FTC that will restrict how they conduct any business in the future.

New Facebook Order Requirements

To prevent Facebook from deceiving its users about privacy in the future, the FTC’s new 20-year settlement orderoverhauls the way the company makes privacy decisions by boosting the transparency of decision making and holding Facebook accountable via overlapping channels of compliance.

New Facebook Privacy Compliance System - A multilayered incentive structure of accountability, transparency, and oversight - Source: Federal Trade Commission. FTC.govThe order creates greater accountability at the board of directors level. It establishes an independent privacy committee of Facebook’s board of directors, removing unfettered control by Facebook’s CEO Mark Zuckerberg over decisions affecting user privacy. Members of the privacy committee must be independent and will be appointed by an independent nominating committee. Members can only be fired by a supermajority of the Facebook board of directors.

The order also improves accountability at the individual level. Facebook will be required to designate compliance officers who will be responsible for Facebook’s privacy program. These compliance officers will be subject to the approval of the new board privacy committee and can be removed only by that committee—not by Facebook’s CEO or Facebook employees. Facebook CEO Mark Zuckerberg and designated compliance officers must independently submit to the FTC quarterly certifications that the company is in compliance with the privacy program mandated by the order, as well as an annual certification that the company is in overall compliance with the order. Any false certification will subject them to individual civil and criminal penalties.

The order also strengthens external oversight of Facebook. The order enhances the independent third-party assessor’s ability to evaluate the effectiveness of Facebook’s privacy program and identify any gaps. The assessor’s biennial assessments of Facebook’s privacy program must be based on the assessor’s independent fact-gathering, sampling, and testing, and must not rely primarily on assertions or attestations by Facebook management. The order prohibits the company from making any misrepresentations to the assessor, who can be approved or removed by the FTC. Importantly, the independent assessor will be required to report directly to the new privacy board committee on a quarterly basis. The order also authorizes the FTC to use the discovery tools provided by the Federal Rules of Civil Procedure to monitor Facebook’s compliance with the order.

As part of Facebook’s order-mandated privacy program, which covers WhatsApp and Instagram, Facebook must conduct a privacy review of every new or modified product, service, or practice before it is implemented, and document its decisions about user privacy. The designated compliance officers must generate a quarterly privacy review report, which they must share with the CEO and the independent assessor, as well as with the FTC upon request by the agency. The order also requires Facebook to document incidents when data of 500 or more users has been compromised and its efforts to address such an incident, and deliver this documentation to the Commission and the assessor within 30 days of the company’s discovery of the incident.

Additionally, the order imposes significant new privacy requirements, including the following:

  • Facebook must exercise greater oversight over third-party apps, including by terminating app developers that fail to certify that they are in compliance with Facebook’s platform policies or fail to justify their need for specific user data;
  • Facebook is prohibited from using telephone numbers obtained to enable a security feature (e.g., two-factor authentication) for advertising;
  • Facebook must provide clear and conspicuous notice of its use of facial recognition technology, and obtain affirmative express user consent prior to any use that materially exceeds its prior disclosures to users;
  • Facebook must establish, implement, and maintain a comprehensive data security program;
  • Facebook must encrypt user passwords and regularly scan to detect whether any passwords are stored in plaintext; and
  • Facebook is prohibited from asking for email passwords to other services when consumers sign up for its services.

FTC Settlement with Facebook. $5 billion unprecedented penalty. New privacy structure at Facebook. New tools for FTC to monitor Facebook.  Source: Federal Trade Commission. FTC.gov

 

Alleged Violations of 2012 Order

The settlement stems from alleged violations of the FTC’s 2012 settlement order with Facebook. Among other things, the 2012 order prohibited Facebook from making misrepresentations about the privacy or security of consumers’ personal information, and the extent to which it shares personal information, such as names and dates of birth, with third parties. It also required Facebook to maintain a reasonable privacy program that safeguards the privacy and confidentiality of user information.

The FTC alleges that Facebook violated the 2012 order by deceiving its users when the company shared the data of users’ Facebook friends with third-party app developers, even when those friends had set more restrictive privacy settings.

In May 2012, Facebook added a disclosure to its central “Privacy Settings” page that information shared with a user’s Facebook friends could also be shared with the apps used by those friends. The FTC alleges that four months after the 2012 order was finalized in August 2012, Facebook removed this disclosure from the central “Privacy Settings” page, even though it was still sharing data from an app user’s Facebook friends with third-party developers.

Additionally, Facebook launched various services such as “Privacy Shortcuts” in late 2012 and “Privacy Checkup” in 2014 that claimed to help users better manage their privacy settings. These services, however, allegedly failed to disclose that even when users chose the most restrictive sharing settings, Facebook could still share user information with the apps of the user’s Facebook friends—unless they also went to the “Apps Settings Page” and opted out of such sharing. The FTC alleges the company did not disclose anywhere on the Privacy Settings page or the “About” section of the profile page that Facebook could still share information with third-party developers on the Facebook platform about an app users Facebook friends.

Facebook announced in April 2014 that it would stop allowing third-party developers to collect data about the friends of app users (“affected friend data”). Despite this promise, the company separately told developers that they could collect this data until April 2015 if they already had an existing app on the platform. The FTC alleges that Facebook waited until at least June 2018 to stop sharing user information with third-party apps used by their Facebook friends.

In addition, the complaint alleges that Facebook improperly policed app developers on its platform. The FTC alleges that, as a general practice, Facebook did not screen the developers or their apps before granting them access to vast amounts of user data. Instead, Facebook allegedly only required developers to agree to Facebook’s policies and terms when they registered their app with the Facebook Platform. The company claimed to rely on administering consequences for policy violations that subsequently came to its attention after developers had already received data about Facebook users. The complaint alleges, however, that Facebook did not enforce such policies consistently and often based enforcement of its policies on whether Facebook benefited financially from its arrangements with the developer, and that this practice violated the 2012 order’s requirement to maintain a reasonable privacy program.

The FTC also alleges that Facebook misrepresented users’ ability to control the use of facial recognition technology with their accounts. According to the complaint, Facebook’s data policy, updated in April 2018, was deceptive to tens of millions of users who have Facebook’s facial recognition setting called “Tag Suggestions” because that setting was turned on by default, and the updated data policy suggested that users would need to opt-in to having facial recognition enabled for their accounts.

In addition to these violations of its 2012 order, the FTC alleges that Facebook violated the FTC Act’s prohibition against deceptive practices when it told users it would collect their phone numbers to enable a security feature, but did not disclose that it also used those numbers for advertising purposes.

The Commission vote to refer the complaint and stipulated final order to the Department of Justice for filing was 3-2. The Department will file the complaint and stipulated final order in the U.S. District Court for the District of Columbia. Chairman Simons along with Commissioners Noah Joshua Phillips and Christine S. Wilson issued a statement on this matter. Commissioners Rohit Chopra and Rebecca Kelly Slaughter issued separate statements on this matter.

July 30, 2019 in Financial Regulation | Permalink | Comments (0)

Wednesday, July 24, 2019

Facebook Agrees to Pay $5 Billion and Implement Robust New Protections of User Information in Settlement of Data-Privacy Claims

Facebook will Pay the Largest Civil Penalty in a Data-Privacy Case in United States History

The Department of Justice, together with the Federal Trade Commission (FTC), today announced a settlement that requires Facebook to implement a comprehensive, multi-faceted set of compliance measures designed to improve user privacy and provide additional protections for user information. The settlement also requires Facebook to pay an unprecedented $5 billion civil penalty — the most ever imposed in an FTC case and among the largest civil penalties ever obtained by the federal government.

In a complaint filed today, the United States alleges that Facebook violated an administrative order issued by the FTC in 2012 by misleading users about the extent to which third-party application developers could access users’ personal information. The complaint further alleges that Facebook violated the Federal Trade Commission Act by deceiving users about their use of this and additional sensitive information.

As reflected in the stipulated order filed with the complaint, Facebook has agreed to settle these allegations by paying a $5 billion civil penalty and implementing robust, new compliance measures that will change how Facebook prioritizes and approaches user privacy issues. These new compliance measures include appointment of an independent assessor to monitor Facebook’s conduct, privacy reviews for all new or modified Facebook products, establishment of a new Independent Privacy Committee on Facebook’s Board of Directors, annual compliance certifications by Facebook CEO Mark Zuckerberg, and various reporting and record-keeping requirements. Under the stipulated order, the Department of Justice and FTC will share responsibility for monitoring and enforcing Facebook’s compliance.

“The Department of Justice is committed to protecting consumer data privacy and ensuring that social media companies like Facebook do not mislead individuals about the use of their personal information,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “This settlement’s historic penalty and compliance terms will benefit American consumers, and the Department expects Facebook to treat its privacy obligations with the utmost seriousness.”

“Despite repeated promises to its millions of world-wide users that they could control how their personal information is shared, Facebook took steps to undermine consumers’ choices,” said FTC Chairman Joe Simons. “The magnitude of the $5 billion penalty and sweeping conduct relief are unprecedented in the history of the FTC.  The relief is designed not only to punish previous violations but, more importantly, to change Facebook’s entire privacy culture to decrease the likelihood of continued violations.  The Commission takes consumer privacy seriously, and will enforce FTC orders to the fullest extent of the law.”

This matter was handled by attorneys in the Civil Division’s Consumer Protection Branch, including Deputy Assistant Attorney General David M. Morrell, Director Gustav W. Eyler, Assistant Director Andrew E. Clark, Senior Litigation Counsel Lisa K. Hsiao, and Trial Attorneys Patrick R. Runkle and Jason Lee, in conjunction with staff at the FTC’s Division of Enforcement.

July 24, 2019 in Financial Regulation | Permalink | Comments (0)

Thursday, July 11, 2019

EU Adopts Regulation on Foreign Direct Investments

Skadden Law Form reports and analyzes here: On March 19, 2019, the European Union adopted a regulation for the screening of foreign direct investments into the EU (the Regulation).1 The Regulation sets forth national security factors that EU member states (Member States) and the EU Commission (the Commission) may consider when assessing foreign direct investments by non-EU investors. The Regulation entered into force on April 10, 2019, and will have direct effect in Member States from October 11, 2020.

Scope

The Regulation covers only investments by non-EU investors in the EU and does not extend to intra-European foreign investment flows. The Regulation broadly defines foreign direct investment as:

“an investment of any kind by a foreign investor that aims to establish or maintain lasting and direct links between the foreign investor and the entrepreneur to whom or the undertaking to which the capital is made available in order to carry out an economic activity in a Member State, including investments that enable effective participation in the management or control of a company carrying out an economic activity.”

Each Member State is responsible for establishing the appropriate criteria, through national legislation, for transactions that may qualify as foreign direct investments pursuant to their national law (e.g., acquisition of control, ownership thresholds, influence on sensitive activities or industries, etc.).

Read the full Skadden Law Form reports and analyzes here

July 11, 2019 in AML, Financial Regulation | Permalink | Comments (0)

Wednesday, July 10, 2019

State Street overcharged approximately 5,000 RICs for SWIFT messages by a total of over $110 million from 1998 to 2015

From 1998, and lasting into 2015, State Street overcharged its mutual fund clients and other registered investment companies (together, “RICs”) for certain reimbursable expenses, and reflected those overcharges in records of RIC clients. State Street acted as a custody bank for RICs. State Street entered into contracts with its RIC clients providing that State Street would bill them for outof-pocket expenses that State Street incurred in providing services to the RICs.

Instead, State Street charged the RICs a total of over $170 million more than State Street’s costs. The overcharges included expenses related to Society of Worldwide Interbank Financial Telecommunication (or “SWIFT”) messages, a secured messaging network used by banks and other financial institutions. State Street misled RICs by identifying SWIFT messages as an out-of-pocket expense in client fee schedules and invoices while in reality State Street applied a large undisclosed markup to SWIFT billings. State Street overcharged approximately 5,000 RICs for SWIFT messages by a total of over $110 million from 1998 to 2015.

State Street has been carrying out a process to reimburse RICs for the overcharges described above, including reasonable interest thereon. State Street’s reimbursement to RICs for
overcharges invoiced to RICs in or after October 2011 (the “affected RICs”) will satisfy the disgorgement and prejudgment interest ordered below in Section IV.B of the Order. State Street has provided a written description of its reimbursement methodology to the affected RICs and the Commission staff.

July 10, 2019 in Financial Regulation | Permalink | Comments (0)

Saturday, July 6, 2019

Joint Statement on CFTC-SEC Portfolio Margining Harmonization Efforts

Commodity Futures Trading Commission Chairman J. Christopher Giancarlo and Securities and Exchange Commission Chairman Jay Clayton issued the following joint statement:

“We and our colleagues at the CFTC and the SEC are committed to working together to ensure that our regulations are effective, consistent, mutually reinforcing, and efficient. In certain cases, these important objectives are best served by harmonizing our rules. We believe we should explore whether portfolio margining is an area where increased harmonization would better serve our markets and our investors. We have asked our staffs to work together to assess the potential for portfolio margining of uncleared swaps with security-based swaps, to consider further efficiencies in cleared swaps and security-based swaps portfolio margining, and to explore expanding portfolio margining to futures and cash equity positions. We are particularly interested in identifying opportunities for efficiency that also will ensure robust investor protection and market integrity. In the near future, staff at our two agencies will be seeking further input from the public regarding these issues, including soliciting written comments and conducting additional market outreach.”

July 6, 2019 in Financial Regulation | Permalink | Comments (0)

Wednesday, July 3, 2019

Merrill Lynch Commodities Pays $25 Million for Deceptive Trading Practices on U.S. Commodities Markets

Merrill Lynch Commodities Inc. (MLCI), a global commodities trading business, has agreed to pay $25 million to resolve the government’s investigation into a multi-year scheme by MLCI precious metals traders to mislead the market for precious metals futures contracts traded on the Commodity Exchange Inc. (COMEX), announced Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office.

According to MLCI’s admissions, beginning by at least 2008 and continuing through 2014, precious metals traders employed by MLCI schemed to deceive other market participants by injecting materially false and misleading information into the precious metals futures market.  They did so by placing fraudulent orders for precious metals futures contracts that, at the time the traders placed the orders, they intended to cancel before execution.  In doing so, the traders intended to “spoof” or manipulate the market by creating the false impression of increased supply or demand and, in turn, to fraudulently induce other market participants to buy and to sell futures contracts at quantities, prices and times that they otherwise likely would not have done so.  Over the relevant period, the traders placed thousands of fraudulent orders.

MLCI entered into a non-prosecution agreement (NPA) and agreed to pay a combined $25 million in criminal fines, restitution and forfeiture of trading profits.  Under the terms of the NPA, MLCI and its parent company, Bank of America Corporation (BAC), have agreed to cooperate with the government’s ongoing investigation of individuals and to report to the Department evidence or allegations of violations of the wire fraud statute, securities and commodities fraud statute, and anti-spoofing provision of the Commodity Exchange Act in BAC’s Global Markets’ Commodities Business, whose function is to conduct wholesale, principal trading and sales of commodities.  MLCI and BAC also agreed to enhance their existing compliance program and internal controls, where necessary and appropriate, to ensure they are designed to detect and deter, among other things, manipulative conduct in BAC’s Global Markets Commodities Business.

The Department reached this resolution based on a number of factors, including MLCI’s ongoing cooperation with the United States and MLCI and BAC’s remedial efforts, including conducting training concerning appropriate market conduct and implementing improved transaction monitoring and communication surveillance systems and processes.

The Commodity Futures Trading Commission (CFTC) announced a separate settlement with MLCI today in connection with related, parallel proceedings.  Under the terms of the resolution with the CFTC, MLCI agreed to pay approximately $25 million, which includes a civil monetary penalty of $11.5 million, as well as restitution, and disgorgement, with restitution and disgorgement credited for any such payments made to the Department.  In addition, the CFTC order imposes upon MLCI other remedial and cooperation obligations in connection with any CFTC investigation pertaining to the underlying conduct. 

As part of the investigation, the Department obtained an indictment against Edward Bases and John Pacilio, two former MLCI precious metals traders, in July 2018.  Those charges remain pending in the U.S. District Court for the Northern District of Illinois.  See United States v. Edward Bases and John Pacilio, 18-cr-48 (N.D. Ill.).  All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Download MLCI Non-prosecution Agreement and Attachments

July 3, 2019 in Financial Regulation | Permalink | Comments (0)

Thursday, June 27, 2019

Does DOL’s HRA Proposal Go Far Enough? Bloink & Byrnes Go Thumb to Thumb

full debate transcript available here: The two professors argue over whether the proposal to expand HRAs helps small businesses and their workers.

June 27, 2019 in Financial Regulation | Permalink | Comments (0)

Tuesday, June 25, 2019

The 10 Key Facts to Understanding Annuities

a slide show presentation by William Byrnes & Robert Bloink 

  1. There are four broad ways to classify an annuity
  2. There are four parties to an annuity contract
  3. There are Deferred Annuities, and then there are Longevity Annuities
  4. read the full slideshow and accompanying analysis paper on ThinkAdvisor here

June 25, 2019 in Financial Regulation | Permalink | Comments (0)

Friday, June 21, 2019

A debate: SECURE Act’s Change of RMD Rules: Bloink & Byrnes Go Thumb to Thumb

Read the full debate on ThinkAdvisor here: The bill would raise the existing age threshold from 70 1/2 to age 72 for IRAs. Is this just a giveaway to wealthy retirees?

By Robert Bloink and William H. Byrnes

June 21, 2019 in Financial Regulation | Permalink | Comments (0)

Tuesday, June 18, 2019

Who’s Responsible for Your Parents’ Nursing Home Cost? It’s Not Who You Think...

Regardless of these factors, clients have to be reminded about the importance of LTC planning—and that this is not always an issue that’s only relevant for those clients nearing retirement.

As clients’ parents age, we should remember that children may, in some cases, be held financially responsible for their parents’ nursing home costs—and that this is no longer an outlandish idea, but one that has actually been legally enforced in the courts within the last five years. Providing clients with viable LTC insurance alternatives can help them avoid the shock of unexpectedly facing the financial burden of paying for parents’ nursing home costs—whether they are legally obligated to do so, or simply want to help their parents receive the best care possible.

Full analysis on ThinkAdvisor here

June 18, 2019 in Financial Regulation | Permalink | Comments (0)

Monday, June 17, 2019

Retirees Beware: IRS Pension Buyout Stance Shifts (Again) analysis by Robert Bloink & William Byrnes

The lump sum payment versus annuity stream question has long been an issue for those clients fortunate enough to have access to a traditional pension—but the choice is one that clients usually face as they approach retirement, rather than once they have already begun to receive annuity payouts.

The recent IRS change of course on this issue may add complications into the mix and encourage lump sum offers for retired clients who are already in pay status. Because lump sum offers have historically been an attractive way for pension plan sponsors to reduce the financial exposure associated with the plan itself, a new crowd of retired clients may soon be facing the choice of whether to accept a lump sum or continue with annuity payouts—and making sure that choice is informed will be vital to protecting these clients’ future financial security.

read the full analysis here on ThinkAdvisor

June 17, 2019 in Financial Regulation | Permalink | Comments (0)

Friday, June 7, 2019

Department of Justice Opens Review of ASCAP and BMI Consent Decrees

As part of The Department of Justice’s ongoing review of legacy antitrust judgments, the Antitrust Division today announced that it has opened a review of its consent decrees with The American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI).  For more than seventy-five years, these decrees have governed the process by which these two organizations license rights to publicly perform musical works.  The purpose of the Division’s review is to determine whether the decrees should be maintained in their current form, modified, or terminated.

ASCAP and BMI are the two largest performing rights organizations in the United States.  Their primary function is to pool the copyrights held by their composer, songwriter, and publisher members or affiliates and collectively license public performance rights to music users such as radio and television stations, streaming services, concert venues, bars, restaurants, and retail establishments.  The Antitrust Division first entered into consent decrees with ASCAP and BMI in 1941 and they have since been modified – the ASCAP decree most recently in 2001 and the BMI decree in 1994.  The decrees require ASCAP and BMI to issue licenses covering all works in their repertory upon request from music users.  If the parties are unable to agree on an appropriate price for a license, the decrees provide for a “rate court” proceeding in front of a U.S. district judge.  Neither decree contains a termination date.

“The ASCAP and BMI decrees have been in existence in some form for over seventy-five years and have effectively regulated how musicians are compensated for the public performance of their musical creations,” said Makan Delrahim, Assistant Attorney General for the Antitrust Division.  “There have been many changes in the music industry during this time, and the needs of music creators and music users have continued to evolve.  It is important for the Division to reassess periodically whether these decrees continue to serve the American consumer and whether they should be changed to achieve greater efficiency and enhance competition in light of innovations in the industry.”   

The Antitrust Division has posted an invitation for public comment on its public website (https://www.justice.gov/atr/antitrust-consent-decree-review-ascap-and-bmi-2019), inviting interested persons, including songwriters, publishers, licensees, and other industry stakeholders to provide the Division with information or comments relevant to whether the ASCAP and BMI decrees should be modified, terminated, or retained unchanged.  The period for public comment ends on July 10, 2019.

June 7, 2019 in Financial Regulation | Permalink | Comments (0)

Thursday, June 6, 2019

SEC Passes Regulation Best Interest by 3-1 Vote

Read the ThinkAdvisor analysis here: The Securities and Exchange Commission passed by a 3-1 vote Wednesday its controversial Regulation Best Interest, which SEC Chairman Jay Clayton said would “substantially enhance the broker-dealer standard of conduct beyond existing suitability obligations.”

The agency also passed by a 3-1 vote the three other prongs of the advice-standards package — the Form CRS Relationship Summary, the Standard of Conduct for Investment Advisers, and a new Interpretation of “Solely Incidental.”

SEC Commissioner Robert Jackson, a Democrat, dissented, stating that his hope was that the rules the SEC announced Wednesday would leave “no doubt that investors come first. Sadly, I cannot say that. Today’s rules maintain a muddled standard. Today’s rules simply do not require that investors’ interests come first.”

Jackson stated that he couldn’t vote for any of the four prongs of the plan put forth Wednesday. Neither Reg BI nor the advisor recommendations “requires Wall Street to put investors’ interest first,” Jackson said.

By Melanie Waddell article here.

 

June 6, 2019 in Financial Regulation | Permalink | Comments (0)

Standalone LTCI Premiums Skyrocket, but Alternatives Abound - analysis by Robert Bloink & William Byrnes

Premiums on standalone long-term care insurance policies have been steadily increasing for years—and the qualification requirements attached to the policies have made standalone LTC difficult to obtain for even younger clients. read analysis here

The newest development in the LTC planning arena, however, can have a significant impact on clients who already maintain standalone LTC policies—state approvals of rate increases at an alarmingly rapid rate have led to situations where clients can no longer afford to maintain LTC policies that they may have had in effect for years.  For this particular group of clients, LTC planning may be even more important than for clients who never purchased the insurance to begin with—meaning that advisors should become well-versed in the alternatives that might present viable solutions for clients who can no longer afford to maintain their standalone LTC policies.

READ THINK ADVISOR Advisors should become well-versed in the alternative solutions for clients who can no longer afford LTC policies.

June 6, 2019 in Financial Regulation | Permalink | Comments (0)

Saturday, May 18, 2019

International Competition Network Adopts Framework for Competition Agency Procedures and Recommended Practices on Investigative Process

At its annual conference, the International Competition Network (ICN) established a Framework on Competition Agency Procedures (CAP) that reflects the commitment by its participants to uphold fundamental procedural fairness principles and adopted Recommended Practices for Investigative Process that offer aspirational guidance and norm-setting principles on procedural fairness. The ICN also presented reports on vertical mergers, vertical restraints, competition agency design, and private enforcement, the Department of Justice and the Federal Trade Commission (FTC) announced today. The ICN announced that the United States will host the 2020 ICN annual conference in Los Angeles, California.

The ICN held its 18th annual conference, hosted by Colombia’s Superintendence of Industry and Commerce, on May 15-17, 2019, in Cartagena, Colombia. Nearly 500 delegates from more than 80 jurisdictions participated, including competition experts from international organizations and the legal, business, academic, and consumer communities. The Department of Justice’s delegation was headed by Assistant Attorney General Makan Delrahim, and FTC Chairman Joseph J. Simons led the FTC delegation. The conference highlighted the achievements of the ICN working groups on cartels, mergers, unilateral conduct, competition advocacy and agency effectiveness, and featured discussion of the challenges of digitalization.

The conference approved two significant instruments to promote and strengthen procedural fairness in competition agency proceedings. The CAP came into effect on May 15, 2019, with the ICN announcing 62 participating agencies. The CAP establishes fundamental, procedural fairness principles that address non-discrimination, transparency, notice and meaningful engagement, timely resolution, confidentiality protections, impartiality, access to information and opportunity to defend, representation by counsel, written decisions, and independent review. By joining the CAP, competition agencies affirmatively indicate their intention to adhere to the principles laid out in the Framework. The principles are further supported by implementation provisions that facilitate agency-to-agency cooperation on procedures and regular review of CAP operations. While sponsored by the ICN, the CAP is open to all competition agencies around the world, including both ICN members and agencies that are not members of the ICN.

The U.S. Department of Justice served as co-chair for the Agency Effectiveness Working Group, which developed the Recommended Practices for Investigative Process in conjunction with the FTC.  The Recommended Practices establish detailed, aspirational, procedural fairness norms for competition agency investigative tools, transparency, engagement during investigations, decision-making safeguards, and confidentiality protections. As Recommended Practices, they are the ICN highest level consensus statement on agency procedures and procedural fairness.

“The ICN has become a crucial instrument for dialogue, cooperation, and convergence within the global antitrust community,” said Assistant Attorney General Delrahim.  “The Annual Conference provides us all with an opportunity to reflect on the great progress that has been made in competition policy and enforcement around the world, as well as the challenges that lie ahead.”

On May 15, 2019, Assistant Attorney General Delrahim spoke on a panel celebrating the launch of the ICN CAP. The panel recognized the historic nature of the multilateral framework. The principles outlined by the Multilateral Framework on Procedures, as described by Assistant Attorney General Delrahim in a speech at the Council on Foreign Relations on June 1, 2018, served as a foundation for the CAP.  The CAP was adopted by the ICN on April 3, 2019, and it became open for all competition agencies to join as participants on May 1, 2019.

Chairman Simons helped lead the conference’s panel discussion of Merger Review in the 2020s. The Panel explored whether and how digitalization and globalization are likely to change merger review in the 2020s, given their continued influence on the evolution of competition policy. The FTC has for the past three years co-chaired the ICN’s Merger Working Group, which promotes convergence toward best practices in merger process and analysis and seeks to reduce the public and private costs of multijurisdictional merger reviews. This year, the Merger Working Group presented a report on vertical mergers and promoted the use of its Framework for Merger Review Cooperation, developing explanatory material on the types of documents typically exchanged in multijurisdictional merger review to support sound enforcement cooperation.

“Understanding how a market works is crucial to assessing a merger’s competitive impact, and more learning about digital markets can help refine our competition assessments. Yet digital markets do not require significant changes to our existing merger laws or analysis,” said Chairman Joseph Simons. “This is because our antitrust framework has consistently proven that it is sufficiently robust and flexible to fit new markets and new ways of doing business.”

Deputy Assistant Attorney General Roger Alford moderated a panel discussing agency effectiveness through organizational design.  The panel was part of the Agency Effectiveness Working Group project on competition agency choices in the design of their enforcement programs.

Randolph Tritell, Director of the FTC’s Office of International Affairs, led the concluding panel, showcasing how diverse competition agencies around the world benefit from implementing all types of ICN work product.

The Unilateral Conduct Working Group presented its project on vertical restraints. The project examined a series of hypothetical vertical restraints and their effect on competition and potential resulting efficiencies. 

The Cartel Working Group presented a new chapter on private enforcement for the working group’s Anti-Cartel Enforcement Manual and a report on leniency incentives.

The Advocacy Working Group compiled case studies as part of its Strategy Project, with specific examples of how agencies have developed strategies and assessed their advocacy initiatives. The working group also drafted a report on ICN member competition advocacy initiatives involving digital markets.

Created in October 2001 to increase understanding of competition policy and promote convergence toward sound antitrust enforcement around the world, the ICN, founded by 15 agencies including the Department of Justice’s Antitrust Division and the FTC, has grown to 139 member agencies from 126 jurisdictions, supported by a wide network of non-government advisors from around the world.

May 18, 2019 in Financial Regulation | Permalink | Comments (0)

Saturday, May 4, 2019

FTC and CFPB Report on 2018 Activities to Combat Illegal Debt Collection Practices

Agencies provide annual summary of work to combat illegal debt collection practices

The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (Bureau or CFPB) reported on their 2018 activities to combat illegal debt collection practices. The annual report to Congress on the administration of the Fair Debt Collection Practices Act (FDCPA) highlights both agencies’ efforts to stop unlawful debt collection practices, including robust law enforcement, education and public outreach, and policy initiatives. Federal Trade Commission Enforcement of the Fair Debt Collection Practices Act In Calendar 2018: Report To the Bureau of Consumer Financial Protection (also known as Consumer Financial Protection Bureau)

In the report, the FTC states that it filed or resolved a total of seven cases against 52 defendants, and obtained more than $58.9 million in judgments. The FTC also banned 32 companies and individuals that engaged in serious and repeated law violations from ever working in debt collection again. The FTC continued its aggressive efforts to curb egregious debt collection practices, including initiating or resolving four actions involving phantom debt collections. The FTC returned $853,715 to consumers who lost money to two phantom debt collection operations previously stopped by the FTC. In 2018, the FTC also:

  • Initiated or resolved three other actions, in addition to the phantom debt cases, to protect consumers from unlawful debt collections practices;
  • Deployed educational materials through multiple channels and formats to inform consumers about their rights and educate debt collectors about their responsibilities under the FDCPA and FTC Act;
  • Collaborated with an informal network of about 16,000 community-based organizations and national groups as part of its outreach efforts;
  • Distributed 13.4 million print publications to various organizations, businesses, and government agencies;
  • Logged more than 60 million views of its business and consumer education websites, with more than 592,000 views of the consumer videos on the FTC’s channel at YouTube.com/FTCvideos, and over 280,000 email subscribers to its consumer blogs;
  • Supplied more than 24,000 copies of a fotonovela (graphic novel) on debt collection, developed for Spanish speakers, to raise awareness about scams targeting the Latino community;
  • Logged more than 4.7 million page views on its Business Center that houses business education resources; and
  • Issued a new Staff Perspective discussing the various financial issues that military servicemembers face, including the unique challenges that can arise in the debt collection context.

In the report, the Bureau states its intent to issue a Notice of Proposed Rulemaking on debt collection that will address issues ranging from communication practices to consumer disclosures. The Bureau highlights in the report that it handled approximately 81,500 debt collection complaints related to first-party (creditors collecting on their own debts) and third-party collections. Debt collection is among the most prevalent topics of consumer complaints about financial products or services received by the Bureau. In 2018, the Bureau engaged in six public enforcement actions arising from alleged FDCPA violations. The Bureau brought an action that resulted in an $800,000 civil penalty. It also accepted a judgment in favor of the defendant in a second case. Four other FDCPA cases remain in active litigation. In 2018, the Bureau also:

  • Filed briefs as amicus curiae in two cases arising under the FDCPA – one in the Supreme Court and one in federal court of appeals;
  • Identified one or more violations of the FDCPA through its supervisory examinations;
  • Conducted a number of non-public investigations of companies to determine whether they engaged in collection practices that violated the FDCPA or the Dodd-Frank Act (DFA);
  • Provided consumer debt collection educational materials, which have consistently remained among the most-viewed categories in “Ask CFPB,” an interactive online consumer education tool;
  • Trained, as of the end of 2018, over 26,535 staff and volunteers in social service organizations on Your Money Your Goals – a financial empowerment toolkit;
  • Continuously operated the 21-day email course called “Get a Handle on Debt Boot Camp,” a program to get periodic messages about steps to manage debt effectively, which attracted 19,294 sign-ups since launching in November 2017;
  • Offered five sample letters that consumers may use when they interact with debt collectors, which have now been downloaded more than 607,000 times as of December 2018;
  • Offered print publications on financial topics including debt collections, such as the bilingual brochure “Know Your Rights When a Debt Collector Calls”; and
  • Continued research projects and market monitoring and outreach activities to improve its understanding of the debt collection market, and to better understand the benefits, costs and impacts of potential rules, including a report on collecting telecommunication debt, which have aided in the ongoing development of a potential debt collection rule.

The FTC and the Bureau share enforcement responsibilities under the FDCPA. Last month, the agencies reauthorized their memorandum of understanding that continues coordination between the agencies in enforcement, sharing of supervisory information and consumer complaints, and collaboration on consumer education.

The FTC and the Bureau remain vigilant in their efforts to monitor the debt collection industry and stop unlawful conduct that harms both consumers and legitimate businesses. The CFPB’s annual report to Congress on the FDCPA, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, includes information provided by the FTC in its letter to the CFPB.

May 4, 2019 in Financial Regulation | Permalink | Comments (0)

Sunday, April 28, 2019

determinations of whether a company has the ability to exercise a controlling influence over another company for purposes of the Bank Holding Company Act or the Home Owners’ Loan Act.

The Board is seeking comment on proposed revisions to its rules regarding the definition of control in the Bank Holding Company Act (“BHC Act”), and the Home Owners’ Loan Act
(“HOLA”). Download Control-proposal-fr-notice-20190423

Under the BHC Act, control is defined by a three-pronged test: a company has control over another company if the first company (i) directly or indirectly or acting through one or more other persons owns, controls, or has the power to vote 25 percent or more of any class of voting securities of the other company; (ii) controls in any manner the election of a majority of the directors of the other company; or (iii) directly or indirectly exercises a controlling influence over the management or policies of the other company. 

HOLA includes a substantially similar definition of control. The proposed revisions are intended to provide bank holding companies, savings, and loan holding companies, depository institutions, investors, and the public with a better understanding of the facts and circumstances that the Board generally considers most relevant when assessing controlling influence. The increase in transparency due to the proposed rule should provide greater clarity and ensure consistency of decision-making, thereby reducing regulatory burden for banking organizations and investors.

April 28, 2019 in Financial Regulation | Permalink | Comments (0)