07.07.2011
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Updates
FFIEC Releases Supplemental Guidance on Internet Banking Authentication
On Tuesday, June 28, 2011, the Federal Financial Institutions Examination Council (FFIEC) issued supplemental guidance to the Authentication in an Internet Banking Environment, which was issued in October 2005. The clarifying guidance reinforces the regulatory framework established in 2005 and was issued in reaction to the increased growth of electronic banking, the greater sophistication of threats and increased risks for financial institutions and their customers. Included in the guidance is the need to conduct risk assessments, implement effective strategies to mitigate any identified risk, and raise customer awareness of potential threats.
SEC Proposes Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants
On Wednesday, June 29, 2011, the SEC proposed rules imposing business conduct standards for both security-based swap dealers and major security-based swap participants. The proposed rules implement certain requirements under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). The SEC is hoping to add needed transparency through the proposed rules, which require affected parties to communicate in a fair and balanced manner and to make certain disclosures, including conflicts of interest and material incentives to potential counterparties. The SEC also intends to impose additional requirements for interactions with "special entities," including municipalities, pension plans, endowments and similar entities.
CFTC Issues No-Action Letter regarding Certain Commodity Exchange Act Provisions after July 16
On Thursday, June 30, 2011, the CFTC issued a draft staff no-action letter intended to act as supplementary exemptive relief providing for greater clarity surrounding the regulatory framework for swaps at the effective date of Title VII of the Dodd-Frank Act, or July 16, 2011. The draft no-action letter specifies that the CFTC would not recommend commencing an enforcement action for failure to comply with certain provisions of the Commodity Exchange Act. The draft no-action letter, however, does not hinder the CFTC's ability to enforce applicable anti-fraud and anti-manipulation authority. The draft no-action letter is slated to automatically expire as of December 31, 2011.
SEC Provides Guidance and Interim Relief and Exemptions Regarding Security-Based Swaps
On Friday, July 1, 2011, the SEC clarified which securities laws will apply to security-based swaps under Title VII of the Dodd-Frank Act as of July 16, 2011, the effective date of the Dodd-Frank Act.
Under the Dodd-Frank Act, starting on July 16, security-based swaps will be defined as “securities” subject to existing federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC granted temporary relief and a number of exemptions in order to confirm that many of the requirements under the Exchange Act applicable to securities will not extend to security-based swaps as of July 16. The SEC noted, however, that federal securities laws provisions prohibiting fraud and manipulation will apply to security-based swaps as of July 16.
In addition, the SEC approved an interim final rule providing exemptions from the Securities Act, the Trust Indenture Act and other provisions of the federal securities laws to allow certain security-based swaps to continue to trade and be cleared as they have pre-Dodd-Frank. That interim relief will continue until the SEC adopts rules further defining “security-based swap” and “eligible contract participant.”
The Federal Reserve Board and FTC issue rules on credit score disclosure requirements
On Wednesday, July 6, 2011, the Federal Reserve Board and the Federal Trade Commission jointly issued final rules to implement the new credit disclosure requirements in section 615(h) of the Fair Credit Reporting Act (the “FCRA”) added by section 1100F of the Dodd-Frank Act. The rules amend Regulation V (Fair Credit Reporting) and Regulation B (Equal Credit Opportunity). Under the rules, if a credit score is used in setting material terms of credit or in taking adverse action, creditors must disclose credit scores and related information consumers in a notices under the FCRA.
Read the Federal Reserve Board press release
