On December 3, 2020, the SEC announced that FinHub (the Strategic Hub for Innovation and Financial Technology) was being upgraded to an independent office. Acknowledging the importance of the all things fintech (emerging technologies and innovation in financial services), the SEC stated that creating a stand-alone office:
“[S]trengthens the SEC’s ability to continue fostering innovation in emerging technologies in our markets consistent with investor protection. The office will continue to lead the agency’s work to identify and analyze emerging financial technologies affecting the future of the securities industry, and engage with market participants, as technologies develop.”

As we previously explained, the Consumer Financial Protection Bureau’s (“CFPB”) recently finalized Advisory Opinion Policy allows any person or entity to request an advisory opinion from the agency.  When the CFPB finalized that Policy on November 30, 2020, it concurrently issued its first two advisory opinions: one addressing earned wage access (“EWA”) programs, and one concerning private education loan products.  This article specifically comments on the important EWA advisory opinion.

EWA programs generally allow employees to access wages they have already worked for and accrued, but have not yet been paid.  In its EWA advisory opinion, the CFPB stated that EWA programs incorporating several specific features do “not involve the offering or extension of ‘credit,’” and thus, do not fall under the purview of Regulation Z, which implements the Truth In Lending Act (“TILA”).

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.