The Consumer Financial Protection Bureau (“CFPB”) announced in March 2020 that it would develop a new advisory opinion program under which it would publish in the Federal Register responses to questions seeking clarification of ambiguities in federal consumer financial law.  On November 30, 2020, the CFPB issued a final Advisory Opinion Policy (“AO Policy”) setting forth specific procedures for its Advisory Opinion Program.

Opinions issued under the AO Policy will be interpretive rules under the Administrative Procedure Act that respond to a specific need for clarity on a statutory or regulatory interpretive question.  See 5 U.S.C. § 553(b).  Each advisory opinion will include a summary of the material facts or covered products, and the CFPB’s legal analysis of the issue.  The CFPB expects that its advisory opinions will apply not only to the requestor, but also “to similarly situated parties to the extent that their situations conform to the summary of material facts or coverage in the advisory opinion.”

On November 9, 2020 the FTC entered into a consent agreement with Zoom Video Communications, Inc. to address concerns over the videoconferencing platform’s security practices. With the onset of the COVID-19 pandemic, the need for a reliable, online videoconferencing and meeting platform skyrocketed. Zoom met that need. It advertised its platform as a secure space with various safety measures to protect user data, including “end-to-end” 256-bit encryption. In short order, individuals, businesses, and organizations quickly flocked to the user-friendly communications platform; and, by the end of April 2020 Zoom’s user base was booming.

Then came a backlash of sorts. The FTC began investigating Zoom’s security practices, and private plaintiffs brought class-action lawsuits alleging violations of the California Consumer Privacy Act and failure to adhere to Zoom’s terms of service. The FTC’s complaint alleged several concerns with Zoom’s advertising and security promises, concluding that Zoom made misleading claims about the strength of its encryption and security of its platform that gave customers a false sense of security. The five-count complaint alleged that Zoom:

A new law will require all federal judges to enter an order at the beginning of every criminal case advising prosecutors of their duties under Brady v. Maryland, 373 U.S. 83 (1963) to disclose exculpatory evidence to the defense. Intentional violations of the orders could subject prosecutors to stern sanctions – up to and including vacating a conviction or disciplinary action against the prosecutor – or even contempt.

Financial advisors have long used the Certified Financial Planner designation as an indicator to potential clients that they meet high standards of professionalism and ethics within their field.  The Certified Financial Planner Board of Standards, Inc. (the “CFP Board”), which grants the designation, markets it as demonstrating that its holder meets strict ethical standards.  Yet last year the CFP Board came under heavy criticism when investigative reporting showed a not insignificant number of CFP holders failed to disclose potential ethical violations, which resulted in incomplete or inaccurate information on the CFP Board’s website.  This criticism had a major impact:  the CFP Board revised its ethics code, revamped its disciplinary procedures, and is now signaling an increased focus on enforcing its standards.  As a result, financial advisors who previously did not face substantial scrutiny from the CFP Board may soon find themselves the focus of an enforcement regime eager to show its teeth.

On November 19, 2020, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued a risk alert, OCIE Observations: Investment Adviser Compliance Programs, to provide the industry with insights regarding their findings in their examinations relating to Rule 206(4)-7 under the Investment Advisers Act of 1940 (“Advisers Act”) or the Compliance Rule.

What is the Issue?
It may not be “death by a thousand cuts” but it may feel like it, as yet another mutual fund fee issue is being raised by the regulators. FINRA issued a “targeted examination letter” focused on Rights of Reinstatement (“RoR”) due to customers in certain mutual fund sales and purchases. RoRs involve fee waivers or rebates due to customers who redeem or sell shares in a fund and subsequently reinvest some or all of the proceeds from the sale/redemption in the same share class of that fund or another fund within the same fund family subject to stated terms and conditions. Interestingly, the time period between the sale/redemption and subsequent purchase of qualifying shares is determined by the fund issuers and described in the prospectuses or statement of additional information (“SAI”) and can vary from 90 days to 120 days, but can be as long as 365 days.[1] The waivers or rebates may involve a front-end sales charge waiver (often, but not always, involving A shares) or a rebate of all or part of a contingent deferred sales charge fee (“CDSC”) (for example, with C share transactions).

The recent final rule (the “Rule”) implementing the Fair Debt Collection Practices Act (“FDCPA”) only directly governs parties defined as “debt collectors” by the FDCPA, principally meaning those who collect delinquent debt for others.[1]  However, this Rule from the Consumer Financial Protection Bureau, accompanied by a 560-page Preamble, will also likely influence the collection activities of “creditors” — i.e., those collectors that fall outside that “debt collector” definition — in various ways.[2]  The Rule also will affect how creditors should work with the debt collectors they hire.  In this Alert, we focus specifically on these different impacts of the Rule on creditors.  The Rule will take effect one year from the date it is published in the Federal Register.

On October 27, the North American Securities Administrators Association[1] held its 2020 symposium on Fintech and Cybersecurity. A key theme of the symposium was the impact that the pandemic has had on fintech, cybersecurity, and regulating the financial markets  –  given that regulators and securities industry professionals are largely working from home. The panelists also discussed new technological innovations that are likely to impact both the fintech industry and cybersecurity.

On October 27, 2020, the Office of the Comptroller of the Currency (OCC) issued its final rule setting the test for determining who the ‘true lender’ is in a loan transaction, including in the context of a lending partnership between a federally-chartered bank and a non-bank third party. The final rule adopts the two-pronged test set forth in the OCC’s proposed ‘true lender’ rule issued in July of this year – a bank is the ‘true lender’ if, as of the date of origination, the bank (1) is “named as the lender in the loan agreement,” or (2) “funds the loan.”  The rule further clarified that if one bank funds the loan but another bank is named as the lender in the loan agreement, the bank identified in the loan agreement will be considered the ‘true lender’ of the loan. That clarification is consistent with the fundamental rule of the Truth-in-Lending Act, which always makes the party on the loan agreement the “creditor” on that loan.