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.

Announcements Mark Out a Clearer Path, but MSAs and Gifts Still Require Careful Review
Last week, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) announced significant changes to how it will view the legality of Marketing and Services Agreements (“MSAs”) under the Real Estate Settlement Procedures Act (“RESPA”).  Most strikingly, the Bureau formally rescinded its controversial Compliance Bulletin 2015-05:  RESPA Compliance and Marketing Services Agreements (Oct. 8, 2015) (“2015 MSA Bulletin”).  MSAs historically have been used as a way for settlement service providers to gain access to additional potential customers via paid advertising and marketing services.  But the 2015 Bulletin, issued after a string of Bureau RESPA enforcement actions, expressed the view that virtually all MSAs should be scrutinized and pose a high risk of violating RESPA’s prohibitions on paid referrals and/or the splitting of unearned fees.[1]

In addition to rescinding the prior guidance, the Bureau last week also released a slew of new “Frequently Asked Questions” (“FAQs”) on the legality of MSAs, gifts and promotional activities, and other RESPA matters.  In all, the Bureau’s actions last week on MSAs in particular amount to a further repudiation of aggressive RESPA interpretations that the agency advanced during the last decade.

On October 12, 2020, the California Attorney General provided public notice of a new Proposed Third Set of Modifications to the Regulations under the California Consumer Privacy Act (the “CCPA”).  You will be forgiven if you assumed that “final approval” of the existing Regulations back in August meant the Regulations were final—or at least we hope so because we made the same assumption.

Since August, however, it appears the AG was working behind the scenes to resurrect previously withdrawn Sections 999.306(b)(2) (covering offline notice of opt-out if a business substantially interacts with consumers offline); 999.315(c) (minimum standards for opt-out requests); and 999.326(c) (specific requirements for authorized agents).  The AG describes the newly proposed rules as follows: