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Securities and Exchange Commission Rule Amended to Shorten the Securities Transaction Settlement Cycle

FIL-32-2017
July 26, 2017

Securities and Exchange Commission Rule Amended to Shorten the Securities Transaction Settlement Cycle

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Summary:

The Federal Deposit Insurance Corporation (FDIC) is issuing this announcement to highlight actions that banks should take to prepare for the change in the Securities Exchange Commission’s (SEC) rule governing the securities settlement cycle for securities transactions conducted by most broker-dealers. The effective date for the change is September 5, 2017.

Statement of Applicability to Institutions with Total Assets under $1 Billion: This Financial Institution Letter applies to all FDIC-supervised financial institutions.

Highlights:

Following an amendment to the SEC’s Securities Transaction Settlement Cycle Rule 15c6-1, effective September 5, 2017, the industry settlement cycle for transactions involving many U.S. securities, including equities, corporate and municipal bonds, unit investment trusts, and financial instruments composed of these products, will be shortened from the third business day after the trade date (T+3) to the second business day after the trade date (T+2).
FDIC-supervised institutions should prepare to meet the new T+2 settlement time period for trades related to banks’ securities activities that include banks’ investment and trading portfolios and securities settlement and servicing provided to banks’ custody and fiduciary accounts.
For many FDIC-supervised institutions, the majority of the changes needed to implement T+2 will be completed by third party industry custodians, systems and service providers, broker-dealers, through which institutions trade for themselves or on behalf of their fiduciary and custody accounts, and broker-dealers providing retail securities brokerage services to institution customers. For guidance on assessing and managing risks associated with third-party relationships, institutions should refer to FDIC FIL-44-2008, “Guidance for Managing Third Party Risk.”

Update to the Risk Management Manual of Examination Policies

FIL-31-2017
July 26, 2017

Update to the Risk Management Manual of Examination Policies

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Summary:

The FDIC Risk Management Manual of Examination Policies (Examination Manual) has been updated. The Report of Examination Instructions were updated primarily to incorporate guidance from the FDIC Board of Directors to examiners regarding supervisory recommendations, including matters requiring board attention (MRBA) and deviations from safety and soundness principles underlying statements of policy, among others. Instructions also were added for new Report of Examination schedules or updated for existing schedules as needed. A new Bank of Anytown reflects these instructions. The updated Manual is available on the FDIC’s website as a resource for all FDIC-supervised institutions.

Statement of Applicability to Institutions with Total Assets Under $1 Billion: This FIL applies to all FDIC-supervised financial institutions.

Highlights:

The revised Report of Examination Instructions:

Implement the July 29, 2016, FDIC Board of Directors statement on the Development and Communication of Supervisory Recommendations, by instructing examiners that:
- Supervisory Recommendations must address meaningful concerns; be communicated clearly and in writing in a Report of Examination (ROE) or on official FDIC letterhead; and discuss corrective action;
- Supervisory Recommendations in ROEs are to be communicated on the Examination Conclusion and Comments (ECC), Risk Management Assessment, or the MRBA schedules as appropriate; and
- Supervisory Recommendations related to deviations from the safety and soundness principles underlying statements of policy, guidance, or guidelines that are not included as appendices to FDIC Rules and Regulations are to be summarized on the ECC schedule and discussed in more detail on other report schedules including the MRBA schedule, if appropriate.
Include updated instructions for preparing the ECC and Concentrations schedules as well as the Officer’s Questionnaire.
Include instructions for the Information Technology and Operations Risk Assessment schedule added to the ROE last fall.
The new Bank of Anytown reflects the new or revised ROE instructions.

FDIC Updates Affordable Mortgage Lending Guide Information on State Housing Finance Agencies

FIL-30-2017
July 26, 2017

FDIC Updates Affordable Mortgage Lending Guide Information on State Housing Finance Agencies

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Summary:

The FDIC has updated the Affordable Mortgage Lending Guide, Part II: State Housing Finance Agencies to reflect the most up-to-date information available about the mortgage programs offered through state housing finance agencies (HFAs).

Statement of Applicability to Institutions with Less Than $1 Billion in Assets: This Financial Institution Letter applies to all FDIC-insured institutions.

Highlights:

The Affordable Mortgage Lending Guide, Part II: State Housing Finance Agencies is designed as a resource for community banks to gain an overview of a variety of products, compare different products, and identify next steps to expand or initiate a mortgage lending program.
The publication describes state HFA products and programs that provide home purchase support, including down payment closing cost assistance, mortgage tax credit certificates, and homeownership education and counseling.
Changes to the publication include:
These changes also have been made to the information available online at the FDIC’s Affordable Mortgage Lending Center.
The Affordable Mortgage Lending Guide also includes Part I: Federal Agencies and Government Sponsored Enterprises and Part III: Federal Home Loan Banks.
To receive notices of updates to the Affordable Mortgage Lending Center, subscribe at https://service.govdelivery.com/accounts/USFDIC/subscriber/new

FTC Six-Month Accomplishments

Federal Trade Commission Acting Chairman Maureen K. Ohlhausen released a summary of the agency’s major accomplishments since President Trump named her to the position in January. “I have pursued my long-held principles by promoting economic liberty, protecting consumers (including the military community and small business) and competition, reforming regulation, and increasing agency transparency,” the Acting Chairman said. “In my first 6 months as Acting Chairman, we have accomplished much of this ambitious agenda,” Ohlhausen stated.

ECONOMIC LIBERTY – Acting Chairman Ohlhausen’s first initiative established an FTC Economic Liberty Task Force to collaborate with state leaders and other stakeholders on occupational licensing reform. The Task Force submitted comments on a state bill to reduce licensing requirements; launched a new website – ftc.gov/econliberty; and conducted dozens of interviews with a variety of stakeholders. The Task Force will hold a public roundtable on July 27, 2017, focusing on license portability, including for the military community, among other issues. “Economic liberty is fundamental to our American way of life and I have spent much of my career advancing it. Unfortunately, too many citizens now need a government permission slip to work,” said Ohlhausen.

REGULATORY REFORM and AGENCY STREAMLINING – Excessive regulation and bureaucracy create significant burdens on the public, while diverting resources from the agency’s core mission to protect consumers and promote competition. Acting Chairman Ohlhausen directed staff to find ways to reduce agency requests, add transparency, and lighten regulatory burdens.

Last week, the agency announced several measures by the Bureau of Consumer Protection to streamline information requests to businesses, while preserving the agency’s ability to conduct thorough investigations. In June, the agency announced proposals to minimize or eliminate certain regulations that may no longer be in the public interest, including the 1966 Picture Tube rule and the 1959 Textile Rule. Further streamlining will occur as the FTC continues its regular, systematic reviews of all rules and guides, assessing their costs and benefits to consumers and businesses.

SMALL BUSINESS – At the Acting Chairman’s direction, the agency launched a new small business website – ftc.gov/SmallBusiness – with information to help small business owners avoid scams and protect their systems and customer data from threats. The site, which includes a new Small Business Computer Security Basics guide, also has information on other cyber threats such as ransomware and phishing schemes.

The FTC kicked off a new “Engage, Connect, and Protect” Initiative, launching a nationwide dialogue on cybersecurity with small businesses. The first event is today in Portland, Oregon, in conjunction with the National Cybersecurity Alliance’s conference on “Understanding your Cybersecurity: 5 Steps to Protect Your Business.” Several other events are forthcoming.

STICK WITH SECURITY – At Acting Chairman Ohlhausen’s direction, the Federal Trade Commission is publishing lessons from closed investigations, as well as FTC enforcement actions, to help businesses protect and secure consumer data. These new posts will build on the FTC’s Start with Security guide.

PRIVACY – In June, Acting Chairman Ohlhausen oversaw the Connected Cars workshop, with NHTSA, which focused on balancing the privacy and safety impacts of this technology with consumer benefits. The agency also recently announced the 2018 PrivacyCon, with a new focus on the economics of privacy, including how to quantify the harms that result from information exposures. Other topics will include the privacy and security implications of emerging technologies, such as the Internet of Things, artificial intelligence, and virtual reality.

CONSUMER PROTECTION ENFORCEMENT – Under Acting Chairman Ohlhausen’s leadership, the agency has continued to pursue its long-standing consumer protection mission. During her tenure, the FTC filed or settled 44 consumer protection matters in district court, reached 14 administrative consent agreements related to consumer protection, and distributed $86,519,000 in redress to over a million consumers.

Acting Chairman Ohlhausen has also expanded the agency’s focus on military consumers. This includes a new military.consumer.gov website and a series of Military Financial Consumer conferences.

COMPETITION ENFORCEMENT – Chairman Ohlhausen has aggressively challenged conduct that abuses government process for anticompetitive purposes. The agency brought a case against ViroPharma Inc. alleging it engaged in sham petitioning to delay the market entry of generic competitors. The agency filed an administrative complaint against the Louisiana Board of Real Estate Appraisers alleging that it improperly sought to impose a price floor on real estate appraisal services.

As for merger enforcement, the parties in the Draft Kings/FanDuel matter abandoned their planned merger after the Commission sought a preliminary injunction in federal district court. The FTC has also successfully negotiated merger settlements requiring divestitures in a variety of industries, including pharmaceuticals, agricultural chemicals, animal vaccines, and others.

“The last six months have been productive and successful. I’ve advanced the agency’s mission to protect consumers and promote competition, refocused agency resources to better serve the public, and pruned unnecessary and outdated regulations,” Ohlhausen said. “I look forward to continuing to pursue my positive agenda on behalf of American consumers.”

The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about consumer topics and file a consumer complaint online or by calling 1-877-FTC-HELP (382-4357). Like the FTC on Facebook, follow us on Twitter, read our blogs and subscribe to press releases for the latest FTC news and resources.

Stick with Security: FTC to Provide Additional Insights on Reasonable Data Security Practices

As part of its ongoing efforts to help businesses ensure they are taking reasonable steps to protect and secure consumer data, the Federal Trade Commission is publishing a series of blog posts using hypothetical examples based on lessons from closed investigations, FTC law enforcement actions, and questions from businesses. These new posts will build on the FTC’s Start with Security guide for businesses.

FTC Acting Chairman Maureen K. Ohlhausen pledged earlier this year to be more transparent about the lessons learned from the FTC’s closed data security investigations and to provide additional information for businesses about practices that contribute to reasonable data security, culminating in this “Stick with Security” Initiative.

In the first blog post published today, the FTC highlights some of the themes that have emerged from an examination of closed FTC data security investigations. For example, while news reports might call attention to a data breach, they might not focus on the fact that the company that suffered the breach had encrypted the data, which substantially reduces the risk of consumer injury. Another lesson gleaned is that security researchers’ valuable work can alert us to new vulnerabilities, but sometimes the risk of a vulnerability being exploited to cause consumer injury is more theoretical than likely. Another key lesson is that in almost every closed case, the entities involved used the same common-sense security fundamentals outlined in the FTC’s Start with Security guide for businesses.

The FTC’s Business Blog will publish an additional post each Friday.

FTC Returns Money to Vacation Prize Scheme Victims

The Federal Trade Commission is mailing 53,240 checks totaling more than $532,000 to people who paid VGC Corp of America for expensive vacation packages they never received.

According to the FTC’s complaint, the company advertised a vacation package worth thousands of dollars as a prize to people who called and answered a trivia question. Callers were told they had won, but had to pay up to $400 in “taxes” or “fees.”

Under settlements with the FTC and the State of Florida, the defendants are banned from selling vacation packages and required to pay money for restitution.

The FTC never requires consumers to pay money or provide account information to cash a refund check. Recipients should deposit or cash checks within 60 days. If they have questions about the case, they should contact the FTC’s refund administrator, Epiq Systems, Inc., at 844-308-8911.

To learn more about the FTC’s refund program, visit www.ftc.gov/refunds.

FTC Acting Chairman Ohlhausen Selects D. Bruce Hoffman as Acting Director of the Agency’s Bureau of Competition

Federal Trade Commission Acting Chairman Maureen K. Ohlhausen announced today that she has selected D. Bruce Hoffman, a partner at the law firm of Shearman & Sterling LLP, to be the Acting Director of the FTC’s Bureau of Competition, effective August 7, 2017.

“Bruce brings tremendous qualifications to his new role as Acting Director of the Bureau of Competition, and I am thrilled he will be joining us in August,” said Acting Chairman Ohlhausen. “His prior service to the Commission – as the Bureau’s Deputy Director, and Associate Director for Regional Litigation – and his stellar accomplishments in the private sector make him exceedingly well qualified to head the Bureau. My priorities as Acting Chairman are to ensure the FTC protects competition and promotes free-market principles, while reducing regulatory burdens on legitimate businesses. Bruce will be instrumental in ensuring that the agency achieves these goals.”

“I am honored to be asked to serve at such a critical time in the agency’s history,” Hoffman stated.

Hoffman is Global Co-Head of Shearman & Sterling’s Antitrust Group, focusing on antitrust and unfair competition, including merger reviews, government investigations, and private and government antitrust litigation. Previously, he led the global competition practice at Hunton & Williams, representing clients in the supermarket, funeral, and music industries, among others.

Hoffman earned a B.A. from Penn State University and a J.D. from the University of Florida, College of Law. He served on the Florida Law Review and was the recipient of the W.D. McDonald Prize for graduating first in his law school class.

Hoffman will replace Acting Bureau of Competition Director Markus Meier, who will return to leading the Bureau’s Health Care Division. “I am grateful to Markus for his exemplary service at the Bureau and look forward to him once again leading the Health Care Division,” said Acting Chairman Ohlhausen.

FTC to Host Cybersecurity Roundtables with Small Businesses

The Federal Trade Commission is hosting small business owners in a series of public roundtables across the United States to discuss the most pressing challenges small businesses face in protecting the security of their computers and networks.

Engage, connect, protect - small business & data security roundtables The Engage, Connect, and Protect Initiative: Small Business and Data Security Roundtables are part of an ongoing initiative by Acting FTC Chairman Maureen K. Ohlhausen aimed at helping small businesses, which included the launch of a new website in May focused on helping small business owners avoid scams and protect their computers and networks from cyberattacks. There are more than 28 million small businesses nationwide, employing nearly 57 million people, according to the Small Business Administration (SBA).

“The FTC has been a leader in guiding businesses of all sizes on how to protect the data in their care,” Acting Chairman Ohlhausen said. “Companies with only a few employees face unique challenges when it comes to cybersecurity. We’ll use what we learn in the roundtables to tailor our practical resource materials for small businesses.”

The first roundtable event will take place July 25 in Portland, Oregon, in partnership with the National Cyber Security Alliance (NCSA), the SBA, and other organizations. This event will be followed by a roundtable discussion in Cleveland, Ohio, on September 6, hosted by the FTC and the Council of Smaller Enterprises and in collaboration with the SBA. Another roundtable event will take place later in September in Des Moines, Iowa, sponsored by the NCSA.

The roundtables will bring together FTC staff along with the SBA and other federal partners, industry associations, and the small business community. The comments and feedback generated by the roundtables will be used to help the FTC and its partners provide additional education and guidance for small business owners on cybersecurity issues.

Small business owners also can provide feedback on cybersecurity issues they face by emailing [email protected]. Find out more about some of the questions the roundtables will explore on the FTC’s Business Blog.

FTC Requires Baxter International and Claris Lifesciences to Divest 2 Types of Pharmaceutical Products as Condition of Baxter Acquiring Injectable Drugs Business from Claris

Baxter International Inc. and Claris Lifesciences Limited have agreed to divest two types of pharmaceutical products to settle Federal Trade Commission charges that Baxter’s proposed $625 million acquisition of Claris’ injectable drugs business is anticompetitive.

According to a complaint filed by the FTC, the acquisition as proposed is likely to:

reduce current competition in the United States for the antifungal agent fluconazole in saline intravenous bags, which is used to treat fungal and yeast infections. In the U.S. market, Illinois-based Baxter and India-based Claris are two of only four significant competitors selling fluconazole in saline intravenous bags and have a combined estimated market share of nearly 60 percent.
reduce imminent, future competition in the U.S. market for intravenous milrinone, which dilates the blood vessels, lowers blood pressure and allows blood to flow more easily through the cardiovascular system. Used as a short-term treatment for life-threatening heart failure, intravenous milrinone is currently sold in the United States by three companies – Baxter, Hikma and Pfizer. Claris is expected to enter this market shortly, once its pending application at the FDA is approved.

In generic pharmaceutical markets like those at issue here, reducing the number of significant suppliers from four to three is likely to harm consumers through higher drug prices. Similarly, in a market with three current suppliers, depriving consumers of a pending, fourth viable supplier is likely to maintain prices at higher levels than would have occurred had the expected entry occurred.

Under the proposed settlement, the parties will divest all of Claris’s rights to fluconazole in saline intravenous bags and milrinone in dextrose intravenous bags to New Jersey-based pharmaceutical company Renaissance Lakewood LLC. Also under the order, if the Commission determines that Renaissance is not an acceptable acquirer, or that the divestiture is not carried out in an acceptable way, the parties are required to unwind the sale of rights to Renaissance and divest the products to a Commission-approved acquirer within six months of the date the order becomes final. The Commission may also appoint a trustee in the event that the parties fail to divest the products as required, and may appoint an Interim Monitor to ensure the parties’ compliance with the Commission’s order, including the parties’ transfer of the relevant business information and provision of the specified transition services.

The order requires Baxter to supply Renaissance with fluconazole in saline intravenous bags and milrinone in dextrose intravenous bags for up to five years while transferring the manufacturing technology to Renaissance or its contract manufacturing designee. Baxter is also required to assist Renaissance in establishing its manufacturing capabilities and securing the necessary FDA approvals.

Further details about the consent agreement are set forth in the analysis to aid public comment for this matter.

The Commission vote to issue the complaint and accept the proposed consent order for public comment was 2-0. The FTC will publish the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through August 21, 2017, after which the Commission will decide whether to make the proposed consent order final. Comments can be filed electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $40,654.

The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about how competition benefits consumers or file an antitrust complaint. Like the FTC on Facebook, follow us on Twitter, read our blogs and subscribe to press releases for the latest FTC news and resources.

Appraisal Threshold for Commercial Real Estate Transactions

FIL-29-2017
July 19, 2017

Appraisal Threshold for Commercial Real Estate Transactions

Summary:

The FDIC, the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency (the Agencies) are jointly issuing a notice of proposed rulemaking titled Real Estate Appraisals (Appraisal NPR) that will be published in the Federal Register for a 60-day comment period. The Appraisal NPR proposes to increase the current appraisal threshold for commercial real estate (CRE) transactions from $250,000 to $400,000. The Appraisal NPR addresses comments received during the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) review process, which requires that, not less than once every ten years, the Agencies, along with the Federal Financial Institutions Examination Council, conduct a review of the Agencies’ regulations to identify outdated or otherwise unnecessary or burdensome regulatory requirements.

Statement of Applicability to Institutions Under $1 Billion in Total Assets: This Financial Institution Letter applies to all FDIC-supervised institutions.

Highlights:

Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Title XI) requires the Agencies to adopt regulations prescribing standards for appraisals used in connection with federally related transactions within the jurisdiction of each agency, including that they be performed by certified or licensed appraisers. The Agencies’ appraisal regulations were last amended in 1994.
The Agencies’ appraisal regulations identify categories of real estate-related financial transactions that do not require appraisals. In particular, Title XI authorizes the Agencies to establish a threshold level below which an appraisal is not required.
Under current thresholds, all real estate-related financial transactions with a value of $250,000 or less, as well as qualifying business loans secured by real estate that are $1 million or less, do not require appraisals. Qualifying business loans are business loans that are not dependent on the sale of, or rental income derived from, real estate as the primary source of repayment.
For real estate-related financial transactions at or below the applicable thresholds, the interagency appraisal regulations require financial institutions to obtain an appropriate evaluation of the real property collateral that is consistent with safe and sound banking practices, but that does not need to be performed by a licensed or certified appraiser or meet the other Title XI appraisal standards.
The Appraisal NPR creates a new definition of, and separate category for, commercial real estate transactions and proposes to raise the threshold for requiring an appraisal from $250,000 to $400,000 for those transactions.
No increase in the qualifying business loan threshold is being proposed, but the Agencies are requesting data and information about this threshold.
No increase in the residential real estate transaction threshold is being proposed, but the Appraisal NPR requests comment on whether other factors should be considered in evaluating this threshold.

Securities and Exchange Commission Rule Amended to Shorten the Securities Transaction Settlement Cycle

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Update to the Risk Management Manual of Examination Policies

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FDIC Updates Affordable Mortgage Lending Guide Information on State Housing Finance Agencies

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Appraisal Threshold for Commercial Real Estate Transactions

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