Fed Offers Guidelines for Access to Master Accounts and Payment Services | Goodwin
THE FED OFFERS GUIDELINES FOR ACCESS TO MAIN ACCOUNTS AND PAYMENT SERVICES
On May 5, in response to a growing number of inquiries and access requests from companies with fintech charters and other restricted-use charters, the Federal Reserve invited the public to comment proposed guidelines assess requests for accounts and payment services with federal reserve banks. The guidelines take the form of six principles that reserve banks should take into account when considering requests for accounts and services from institutions, namely:
- Is the institution legally eligible to maintain an account with a Federal Reserve Bank and does it have a “well-founded, clear, transparent and enforceable legal basis for its operations”;
- Would the provision of an account and services present or create undue credit, operational, settlement, cyber or other risks to the Reserve Bank?
- Would the provision of an account and services present or create excessive credit, liquidity, operational, settlement, cyber or other risks to the entire payment system?
- Would providing an account and services create an undue risk to the financial stability of the United States?
- Whether the provision of an account and services would create an undue risk to the economy as a whole by facilitating activities such as money laundering, terrorist financing, fraud, cybercrime or other illicit activities; and
- Would providing an account and services to an institution interfere with the Federal Reserve’s ability to implement monetary policy?
In the event that the Federal Reserve grants a request for access, “it may impose (at the time of opening the account, granting access to the service, or at any time thereafter) relative obligations. to, or conditions or limitations of use of the account or services as necessary to limit operational, credit, legal or other risks posed to reserve banks, the payment system, financial stability or security. implementation of monetary policy or to address other considerations. “
Comments on the proposal are due within 60 days of posting in the Federal Register.
PPP LOAN FINANCING IS SOLD OUT FOR LENDERS OTHER THAN CDFIS AND MDIS
The SBA informed various banking professional associations that the funding for PPP loans has run out and that, as of May 5, 2021, the PPP application portal no longer accepts loan applications from any lender other than MDIs and CDFIs. The SBA has set aside around $ 6 billion in funding for previously submitted PPP loan applications, subject to hold codes that have yet to be resolved. In addition, approximately $ 8 billion remains available for PPP loans to be made by CDFIs and IDMs. Loan applications that have not yet received an SBA loan number have not been approved. Banks with applicants in this situation should consider referring those applicants to MDIs and CDFIs.
SBA UPDATES WHOLE PPP LOAN SALES GUIDANCE
On April 30, the SBA issued a notice of procedure expanding its guidelines on how lenders can sell entire PPP loans. The guidelines reaffirmed that lenders participating in the PPP can sell their entire interest in PPP loans to other participating lenders and that the prior written consent of the SBA is not required for such sales. The procedural notice addresses, among other things, eligible purchasers, documentation requirements, service obligations, and notification (but not approval) requirements to the ASB. The SBA noted that the procedural notice “applies to lender merger and acquisition transactions where the lender has PPP loans in its portfolio.”
FINCEN RENEWS GTO TARGETING LARGE METRO AREAS IN THE UNITED STATES
On April 29, FinCEN again renewed its Geographic Targeting Order (GTO) requiring title insurance companies to file reports identifying the people behind the businesses used to purchase residential real estate in covered markets in cash transactions of $ 300,000 or more. The GTO covers the following markets: California counties of San Diego, Los Angeles, San Francisco, San Mateo and Santa Clara; the Florida counties of Miami-Dade, Broward and Palm Beach; Cook County, Illinois; the City and County of Honolulu, Hawaii; Massachusetts counties of Suffolk and Middlesex; Clark County in Nevada; the New York boroughs of the Bronx, Brooklyn, Manhattan, Queens and Staten Island; the Texas counties of Bexar, Tarrant and Dallas; and King County in Washington. The GTO is part of an anti-money laundering effort under the bank secrecy law by tracking down illicit funds and collecting information. The GTO includes instructions for completing the required reports and is in effect from May 5, 2021 to October 31, 2021.
FINRA CHANGES TO THE PRIVATE PLACEMENT FILE FORM FOR THE DECLARATIONS REQUIRED BY RULES 5122 AND 5123 TO COME INTO FORCE ON MAY 22
In Regulatory Notice 21-10, FINRA announced that it had adopted form modifications that member firms use to file information and documents relating to private placements, subject to rules 5122 and 5123 for which there is no exemption from filing, as well as a explanation of terms used in the form. FINRA Rule 5122 imposes disclosure and filing requirements on members who sell a private placement of an unregistered security issued by a broker or controlling entity. “Control” by an entity is defined for the purposes of this rule to mean ownership of 50% or more of another entity, after the closing of the private placement in question. Rule 5123 imposes deposit requirements for private placements by persons other than a broker or controlling entity. The deposit must be made before the date of the first offer in a Rule 5122 private placement and within 15 days of the first sale in a Rule 5123 private placement. Both rules provide for several exemptions (in most cases identical) for various types of offers, including offers to qualified institutional buyers and qualified buyers. The amended form, which is to be used from May 22, requires additional information on (1) contingency offers (such as offers with minimum capital commitments to close), (2) the disciplinary history of the issuer, its officers and affiliates, (3) the intended use of the proceeds and (4) whether the private placement will involve a private transaction in securities of an associated person, subject to FINRA Rule 3280.
In the notice, FINRA said it intended to use its member supervisory reviews to obtain information about the private placement activities of its members, including private placements that are exempt from rules 5122. and 5123.
FINRA REMINDERS MEMBERS OF THE REQUIREMENTS WHEN USING PRIOR ARBITRATION AGREEMENTS FOR CLIENT ACCOUNTS
On April 21, FINRA issued Regulatory Notice 21-16 reminding member firms of the requirements applicable to pre-dispute arbitration agreements in accounts receivable. In the opinion, FINRA states that member firms are generally not allowed to include in client agreements provisions that:
- Limit the location of arbitration hearings, for example, by requiring that they be held in a particular city or state;
- Seek to shorten or extend the applicable limitation period;
- Limit a client’s right to bring class actions in court;
- Limit the ability to file a claim or limit the power of arbitrators to make certain types of awards, such as punitive damages or compensation for losses that do not result from the member’s gross negligence or willful misconduct; or
- Contain indemnification or make harmless arrangements that seek to compel the client to indemnify the member for all claims and losses arising out of the agreement, where the arrangements would have the effect of limiting the ability of the client to bring a claim against the member that the customer would otherwise have had the right to bring.
FINRA noted that the inclusion of provisions such as those discussed in the opinion could result in disciplinary action against the member.
LITIGATION AND ENFORCEMENT
UNITED STATES SUPREME COURT SIGNIFICANTLY LIMITS FTC CIVIL EXECUTION POWERS AMG CAPITAL DECISION
The United States Supreme Court has dealt the United States Federal Trade Commission (FTC) a severe blow in a recent ruling that ruled out the agency’s ability to seek monetary remedies in enforcement actions before a court. federal court. This new ruling has important implications for the FTC’s enforcement efforts, particularly in antitrust cases involving “late payment” and similar practices. In the wake of this sudden shutdown of an enforcement tool that has been used for decades, Congress is considering legislation explicitly granting the FTC the power to obtain fair monetary remedies in federal court. Read it customer alert to learn more.