Client Alerts & Publications Archive

On January 7, 2013, the Basel Committee on Banking Supervision (Committee) issued major revisions to the “liquidity coverage ratio” (LCR) it published in 2010.

In this Issue:

• FFIEC Proposed Guidance on Social Media
• Mortgage Servicing Rules
• Mandatory Escrow Accounts for Higher-Priced Mortgages

The Consumer Financial Protection Bureau’s new Ability-to-Repay and Qualified Mortgage Standards Rule is lengthy and complicated. It is not a disclosure rule but instead requires a creditor to revise loan products and its origination and underwriting practices, including compensation to its employees and third party loan originators. Following is a summary of significant parts of the Rule. The Rule provides compliance options, each which should be analyzed based on the creditor’s customers and its operational capabilities.

The beginning of each year provides an opportunity for investment advisers to review annual compliance and regulatory matters, including issues related to private investment funds and commodity pools. This alert briefly summarizes some of the primary issues that advisers might consider in their 2013 annual review and update processes. Many of these issues apply to unregistered advisers as well as registered advisers.

In this issue: 

• Ability to Repay and Qualified Mortgage Rule
• Illinois Consumer Installment Loan Act and Payday Loan Reform Act Amendments
• CFPB and Five States Bring Action Against Debt Relief Service Provider
• Deposit Account Disclosures

In this issue:

• Remittance Transfer Rule
• Request for CARD Act Comments
• Project Catalyst and the Trial Disclosures Program

On December 18, 2012 the Basel Committee on Banking Supervision published a consultative document entitled “Revisions to the Securitisation Framework.” The paper contains the Committee’s proposed revisions to the securitization framework following its “fundamental review” of the existing framework.

In a brief, unanimous decision released this week, the Supreme Court clarified in its decision in Los Angeles County Flood Control District v. Natural Resources Defense Counsel, Inc., Case No. 11-460, that the "flow of water from an improved portion of a navigable waterway into an unimproved portion of the very same waterway does not qualify as a discharge of pollutants" under the Clean Water Act. 

Late in the evening of January 1, 2013, Congress passed the American Taxpayer Relief Act of 2012, avoiding the tax portion of the so-called “fiscal cliff.” President Obama signed ATRA into law on January 2, 2013.

After several years of proposed changes to the rules governing broker-dealer communications with the public, the Financial Industry Regulatory Authority, Inc. announced in June 2012 that the final, modified rule will be effective as of February 4, 2013. FINRA received a number of questions since the announcement and recently released additional guidance on the Advertising Regulation page of its website. This Client Alert summarizes several of the issues addressed in the latest guidance. 

In this issue:

• Advertising Rewards
• In re Crane: An Update
• FTC Revises the Children’s Online Privacy Protection Rule 

By letter dated December 7, 2012, the Division of Swap Dealer and Intermediary Oversight  of the Commodity Futures Trading Commission released interpretive guidance significantly expanding the scope of its October 11, 2012 interpretive letter. The October 11 Letter confirmed that securitization vehicles that satisfy five criteria, including a requirement that they operate consistent with either Regulation AB or Rule 3a-7 under the Investment Company Act of 1940, should not be “commodity pools” as a result of holding a swap nor should their operators be required to register as “commodity pool operators” under the Commodity Exchange Act and CFTC rules. 

New Financial Industry Regulatory Authority, Inc. rules governing broker-dealer “know your customer” and suitability obligations (FINRA Rules 2090 and 2111) became effective July 9, 2012. FINRA recently issued additional guidance on the scope of the terms “customer” and “investment strategy”. FINRA also recently created a suitability website that aggregates questions and answers with respect to FINRA Rule 2111. This Client Alert summarizes the issues addressed in the latest guidance. 

In this issue:

• Debt Collection
• Mortgage Banking
• Expiration of the Temporary Unlimited Deposit Insurance Coverage of Noninterest-Bearing Transaction Accounts 
• 2013 Dollar Annual Threshold Adjustments

In This Issue: Expenditure of Build America Bond Proceeds on Bond Insurance Is a Capital Expenditure, IRS Revises Instructions to Form 8038-G, Treasury’s 2012-2013 Priority Guidance Plan 

A recent ruling from the federal district court in Minnesota reinforces the idea that an employer needs to take active steps to assure that an employee does not take otherwise confidential or privileged documents when the employee leaves the company, or the confidentiality or privilege is likely to be waived. In today’s world of electronically stored information and documents, this becomes increasingly difficult. 

In this issue:

• General Purpose Reloadable Pre-paid Cards
• “Commercially Reasonable” Online Banking Security Procedures
• Servicemember’s Civil Relief Act Updates

Earlier this month, the Treasury published its 2012-2013 Priority Guidance Plan for the twelve-month period from July 2012 through June 2013. The 2012 - 2013 Priority Guidance Plan represents projects the Treasury and the Internal Revenue Service intend to work on actively during the twelve month period covered by the plan, but does not place any deadline on completion of such projects. The Treasury intends to periodically update and republish the 2012-2013 Priority Guidance Plan during the plan year to reflect additional items that the Treasury publishes during the plan year. Section references below are to the Internal Revenue Code. 

Brent Feller and Anjali Vij wrote an article entitled Employee Costs Related to Capital Projects, Can you Finance Them with Tax-exempt Bond Proceeds?, which was recently published in the October issue of the Dispatch, from the Illinois Government Finance Officers Association. 

This Country Survey aims to provide a balanced view of the equipment finance and leasing market in the US. Although the economic background is universally well documented, some brief indicators are provided regarding the conditions for business.

By letter dated October 11, 2012, the Division of Swap Dealer and Intermediary Oversight of the Commodity Futures Trading Commission 1 released interpretive guidance confirming that certain securitization vehicles should not be included within the definition of “commodity pool” and that operators of such vehicles should not be included within the definition of “commodity pool operator” under the Commodity Exchange Act and CFTC rules. Separately, in a no-action letter dated October 11, 2012, the Division conditionally extended the deadline for registration as a commodity pool operator from October 12, 2012 to December 31, 2012 for vehicles that are commodity pools solely by virtue of their involvement with swaps. 

The Financial Industry Regulatory Authority, Inc. recently issued a revised rule proposal to address debt research conflicts of interest. FINRA originally published a concept proposal on debt research in March 2011 followed by a formal rule proposal in February 2012. FINRA now seeks comment on a revised rule proposal that includes amended exemptions for research distributed to certain institutional investors and for firms with limited principal debt trading activity. The revised proposal also includes other changes in response to comments on the prior proposal. 

In this issue:

1. Treasury Report Highlights Increased Bond Examination Activity by the IRS
2. Possible Cuts to Federal Subsidies for Build America Bonds and Tax Credit Bonds
3. Management of Electric Transmission and Distribution System Does Not Result in Private Business Use 

On August 10th, the Governor signed into law two bills (former HB 4662, now Public Act 97-0920, and former HB 4663, now Public Act 97-0921), making Illinois one of a growing number of states with statutes that address trust decanting and directed trusts. The new statutes will go into effect January 1, 2013. This client alert covers the trust decanting statute. Our prior client alert addressed the directed trust statute.

On Friday, September 14, 2012, the Office of Management and Budget sent a report to Congressional lawmakers discussing major cuts in federal payments to issuers of Build America Bonds and other direct-pay bonds that will have to be made if Congress is forced to make $1.2 trillion in across-the-board cuts to the federal fiscal 2013 budget under the Congressionally- mandated sequestration process. 

The Securities and Exchange Commission recently proposed rules to eliminate the prohibition against general solicitation and general advertising in securities offerings conducted in reliance on Rule 506 of Regulation D and Rule 144A under the Securities Act of 1933, as directed by the Jumpstart Our Business Startups Act. The proposed rules are intended to create increased opportunities for private companies, including private funds, to reach a larger and broader potential investor audience. Comments on the proposed rules are due by October 5, 2012. 

The U.S. Treasury recently released a report from the Treasury Inspector General for Tax Administration that states that the Internal Revenue Service more than doubled the number of bond examinations conducted per year from the number of examinations it conducted during previous reporting periods. 

The Financial Industry Regulatory Authority, Inc. recently announced the new FINRA Rule 5123 will be effective December 3, 2012. The new rule requires FINRA member firms to file copies of any offering documents used in non-public offerings of securities. The new rule includes several key exemptions, such as offerings solely to certain institutional investors, very high net worth individuals and employees as well as offerings made pursuant to Rule 144A under the Securities Act of 1933. 

In this issue:

• Using Customer Cell Phone Numbers
• Collection
• Payments Using Mobile Devices
• Arbitration

On August 10th, the Governor signed Public Act 97-0921 (former HB 4662 and 4663) making Illinois one of a growing number of states with statutes that address directed trusts and trust decanting. These new statutes will go into effect January 1, 2013. This client alert covers the directed trust statute.

On June 22, 2012, the Second District Illinois Appellate Court entered a ruling affirming the judgment of the DuPage County Circuit Court awarding summary judgment in favor of Elgin Community College District No. 509, thereby striking down plaintiffs!/tax objectors! allegations that the District had issued certain of its bonds at excessive interest rates and with an unlawful premium. 

The Municipal Securities Rulemaking Boards Interpretative Guidance on Underwriter Fair Dealing Obligations contained in Notice 2012-25 will become effective for bonds sold on or after August 2, 2012. The Notice imposes expansive code of conduct and disclosure requirements on underwriters of municipal securities under the “fair dealing” provisions of MSRB Rule G-17, which provides in pertinent part:

“In the conduct of its municipal securities activities, each broker, dealer and municipal securities dealer shall deal fairly with all persons and shall not engage in any deceptive, dishonest, or unfair practice.” 

In this issue:

1. IRS Provides New Financial Restructuring Resources on Its Website
2. Joint Committee on Taxation Releases Report on State and Local Government Finance 3. IRS Releases Guidance Addressing Qualified Energy Conservation Bonds
4. Strategic Alliance Agreement Does Not Create Private Business Use 

The Internal Revenue Service recently released Notice 2012-44, which provides guidance concerning qualified energy conservation bonds. QECBs are taxable bonds that can be issued by state or local governments to finance certain energy conservation projects, including: (i) reducing energy consumption in publicly owned buildings by at least 20 percent; or (ii) implementing green community programs. QECBs may also be issued to finance certain electricity-producing facilities, such as wind facilities and solar facilities. 

The Securities and Exchange Commission recently approved the Municipal Securities Rulemaking Boardʼs proposed interpretative notice on the obligations of underwriters to municipal securities issuers under the fair dealing and anti-fraud provisions of MSRB Rule G-17. The Notice establishes a comprehensive code of conduct for underwriters in their dealings with municipal entities and imposes detailed disclosure obligations relating to the underwriterʼs role, compensation, and conflicts of interest, as well as the risks associated with complex municipal securities financings. The Notice takes effect on August 2, 2012. 

The Internal Revenue Service recently released Notice 2012-44, which provides guidance concerning qualified energy conservation bonds. QECBs are taxable bonds that can be issued by State or local governments to finance certain energy conservation projects, including: (i) reducing energy consumption in publicly-owned buildings by at least 20 percent; and (ii) implementing green community programs. QECBs may also be issued to finance certain electricity-producing facilities, such as wind facilities and solar facilities.

The Securities and Exchange Commission recently adopted a new rule requiring that national securities exchanges establish listing standards for public company boards of directors and compensation advisers. 

In this issue:

• Debt Suspension Agreements
• Elder Financial Abuse
• UDAAP

In this issue:

• Fair Lending - Disparate Impact
• CFPB Enforcement
• Overdrafts

With slightly less than six months remaining before the reappearance of the lower $1 million exemption from US gift tax, we are resending our June 2011 Client Alert regarding the advantages of using part or all of the $5 million (now $5.12 million) gift tax exemption before it expires at year-end.

Please contact your Chapman and Cutler LLP Trust and Estate attorney to discuss how and whether you may benefit from this unprecedented gifting opportunity. 

The Securities and Exchange Commission recently approved the Municipal Securities Rulemaking Board rule proposals governing the conduct of brokerʼs brokers. The new rules consist of (a) new MSRB Rule G-43 governing the municipal securities activities of brokerʼs brokers and certain alternative trading systems; (b) amendments to MSRB Rules G-8, G-9, and G-18 concerning recordkeeping, record retention, and agency trades by brokerʼs brokers; and (c) interpretive notice on the duties of dealers that use the services of brokerʼs brokers. The new rule, amendments, and interpretive notice become effective on December 22, 2012. 

Over the course of the last few years, the Financial Industry Regulatory Authority, Inc. has proposed changes to the rules governing broker-dealer communications with the public. After receiving significant comments on earlier proposals, FINRA recently announced that the Securities and Exchange Commission has now approved the proposed rule change, as modified by Amendments Nos. 1, 2, and 3, and will be effective as of February 4, 2013.

In this issue:

• Deposit Account Agreements
• Regulatory Enforcement Landscape Has Changed
• Dispute Resolution
• Holder in Due Course Rule

In 2012, the Securities and Exchange Commission adopted Rule 206(4)-5 and related amendments to certain other rules under the Investment Advisers Act of 1940. These rule changes are intended to prevent “pay to play” practices by investment advisers seeking to manage funds for state and local governments. 

On June 7, 2012, the Board of Governors of the Federal Reserve System released final rules relating to “Risk Capital Guidelines: Market Risk” to be issued jointly with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. The FDIC approved the rule on June 12, 2012 and the OCC will likely approve the rule within the week. 

On June 12, 2012, the Federal Deposit Insurance Corporation Board of Directors met to consider three notices of proposed rulemaking regarding the standardized approaches rule and the Basel III general and advanced approaches rules. The Board of Governors of the Federal Reserve System proposed these rules at their June 7, 2012 meeting.

The comment period for the NPRs ends September 7, 2012. 

On May 22, 2012, the Illinois General Assembly passed House Bill 4687, amending the Illinois Open Meetings Act. Once the Governor signs the bill, it will become effective January 1, 2013. 

New Financial Industry Regulatory Authority, Inc.  rules governing broker-dealer “know your customer” and suitability obligations become effective July 9, 2012. In response to several requests, FINRA recently issued Regulatory Notice 12-25 providing additional guidance on implementing the suitability rule. This Client Alert highlights several of the key issues addressed in the guidance.  

The Municipal Securities Rulemaking Board (“MSRB”) recently issued a notice seeking comments on a concept proposal that would require underwriters and municipal advisers to publicly disclose on the MSRBʼs Electronic Municipal Market Access (“EMMA”) system whether they have made or received certain payments in connection with new issues of municipal securities.