PH FedACTion: Financial Regulatory Updates
Daily Financial Regulation Update - Saturday, April 25, 2020
April 25, 2020
FedACTion Task Force
PH Client Alerts
Click here to read more from our Coronavirus series.
Major Developments
President Trump Signs H.R. 266, the Paycheck Protection Program and Health Care Enhancement Act Into Law
Small Business Administration
The Small Business Administration Issues Interim Final Rule Imposing Additional Eligibility Criteria for the Paycheck Protection Program (PPP)
The Small Business Administration (SBA) through an Interim Final Rule clarified that hedge funds and private equity firms are ineligible to receive a PPP loan as such entities are primarily engaged in investment or speculation. The Interim Final Rule does not make portfolio companies of a private equity fund ineligible, but reiterates the application of the SBA’s affiliation rules. Moreover, the Interim Final Rule clarifies that a business that engages in legal gaming revenues is not rendered ineligible for a PPP loan. Finally, the Interim Final Rule codifies prior SBA guidance that any borrower that applied for a PPP loan prior to the issuance of the Interim Final Rule and repays the PPP loan in full by May 7, 2020 will be deemed by the SBA to have made the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant” in good faith.
COVID-19: Treasury Updates Paycheck Protection Program FAQ with Additional Guidance
April 24, 2020
The U.S. Department of the Treasury and Small Business Administration (SBA) updated their frequently asked questions (FAQs) to add four FAQs with respect to the Paycheck Protection Program (PPP), providing additional guidance that lenders must consider housing stipends toward annual compensation (FAQ 32); guidance on principal place of residence (FAQ 33); confirmation that farmers and ranchers are eligible borrowers, subject to the SBA’s affiliation rules (FAQ 34); and confirmation that agricultural cooperatives are eligible borrowers (FAQ 35).
Congress
Click here to view the full text of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), 116 HR. 748, Enacted March 27, 2020.
Click here to view the full text of the Paycheck Protection Program Increase Act of 2020, 116 HR. 266, Enacted April 24, 2020.
Click here to view a running list of proposed legislation from the Senate Committee on Banking, Housing, and Urban Affairs, Senate Committee on Small Business and Entrepreneurship, House Committee on Financial Services, and House Committee on Small Business.
U.S. Senate
Senators Brown, Schumer and Cardin Call on SBA Inspector General to Investigate Reports That Some PPP Lenders Have Prioritized Larger, Wealthier Clients
U.S. Senators Sherrod Brown (D-OH), Ranking Member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Senate Democratic Leader Chuck Schumer (D-NY), and Ben Cardin (D-MD), Ranking Member of U.S. Senate Committee on Small Business and Entrepreneurship, sent a letter to the Small Business Administration (SBA) Inspector General Mike Ware, calling for an investigation of reports that some lenders participating in the SBA’s Paycheck Protection Program prioritized the applications of certain larger and wealthier clients to the detriment of smaller businesses adversely impacted by the COVID-19 pandemic.
Federal Agencies
Federal Reserve Board
Federal Reserve Board Announces Interim Final Rule to Delete the Six-per-Month Limit on Convenient Transfers from the “Savings Deposit” Definition in Regulation D
April 24, 2020
The Federal Reserve Board announced an interim final rule to amend Regulation D (Reserve Requirements of Depository Institutions, 12 C.F.R. Part 204) to delete the six-per-month limit on convenient transfers from the “savings deposit” definition. The interim final rule allows depository institutions immediately to suspend enforcement of the six-per-month transfer limit and to allow their customers to make an unlimited number of convenient transfers and withdrawals from their savings accounts.
Federal Reserve Bank of New York
New York Fed Updates Commercial Paper Funding Facility FAQs
April 24, 2020
The Federal Reserve Bank of New York has updated its Commercial Paper Funding Facility (CPFF) Frequently Asked Questions to confirm an issuer can list more than three eligible commercial paper dealers on a separate page appended to its CPFF registration form submission.
Office of the Comptroller of the Currency
COVID-19 Financial Support Programs: Visitorial Authority of the OCC
April 24, 2020
The Office of the Comptroller of the Currency (OCC) issued a bulletin reiterating that federal law vests the OCC with exclusive visitorial authority over banks and reminding the institutions it supervises that the OCC’s exclusive authority generally precludes state and local officials from conducting examinations, requiring the production of institutions’ books or records, or exercising other visitorial authority with respect to such institutions.
Securities and Exchange Commission
SEC Forms Cross-Divisional COVID-19 Market Monitoring Group
April 24, 2020
The Securities and Exchange Commission (SEC) announced the formation of an internal, cross-divisional COVID-19 Market Monitoring Group. The temporary, senior-level group will assist the SEC and its various divisions and offices in (i) SEC and staff actions and analysis related to the effects of COVID-19 on markets, issuers, and investors and (ii) responding to requests for information, analysis, and assistance from fellow regulators and other public sector partners.
Commodity Futures Trading Commission
CFTC Provides Additional Relief to Market Participants in Response to COVID-19
April 24, 2020
The Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight (DSIO) announced that, in response to the COVID-19 pandemic, it has issued additional targeted no-action relief to registrants listing new principals and to applicants for registration as associated persons (APs) from the requirement to submit a fingerprint card for any such principal or AP registration applicant. Subject to conditions stated in the letter, DSIO will grant such no-action relief until July 23, 2020, or until the National Futures Association notifies the public that it has resumed processing fingerprints, whichever is earlier.
Consumer Financial Protection Bureau
Consumer Financial Protection Bureau Outlines Mortgage Loan Transfer Process to Prevent Consumer Harm
April 24, 2020
The Consumer Financial Protection Bureau (CFPB) outlined practices to provide a roadmap to mortgage servicers to facilitate an effective and efficient mortgage servicer transfer process and avoid any potential consumer harm. Examples of practices that servicers may consider as contributing to compliance include (i) developing a servicing transfer plan that includes a communications plan, testing plan (for system conversion), a timeline with key milestones and an escalation plan for potential problems, and (ii) engaging in quality control work after a transfer of preliminary data to validate that the data on the transferee’s system matches the data submitted by the transferor.
Small Business Administration
SBA Office of Inspector General Issues White Paper on Risk Awareness and Lessons Learned from Prior Audits of Entrepreneurial Development Programs For Consideration in Connection with the Administration of Funds Related to COVID-19
April 23, 2020
The Small Business Administration (SBA), Office of Inspector General published a White Paper to provide the SBA information regarding lessons learned and identified risks from prior audits and other reviews that it should consider as it implements mandates to administer federal funds to Small Business Development Centers (SBDCs), Women’s Business Centers (WBCs), and resource partner associations related to the COVID-19 pandemic. The increase in federal funds to SBDCs, WBCs and resource partner associations and expedited timeframes will place additional stress on existing controls. The document is intended to assist SBA with ensuring that funds are used as intended and that program goal and objectives are met.
International
European Commission
Coronavirus Global Response: EU launches pledging effort
April 24, 2020
The European Union is joining forces with global partners to kick-start a pledging effort – the Coronavirus Global Response – starting on May 4, 2020. The World Health Organization and global health organizations have launched a joint call for action to develop fast and equitable access to safe, quality, effective and affordable diagnostics, therapeutics and vaccines against coronavirus. To raise funds in support of this endeavor, the European Union and its partners will organize a worldwide pledging marathon. Countries and organizations around the world are invited to pledge to help reach the target of €7.5 billion in initial funding.
Bank of England
Extension of the Contingent Term Repo Facility (CTRF)
April 24, 2020
The Bank of England announced that it will continue to offer three-month and one-month term Contingent Term Repo Facility (CTRF) operations on a weekly basis through May 2020, with the final operation scheduled on May 29, 2020.
Bank of England Prudential Regulatory Authority
UK Financial Conduct Authority
FCA confirms support for motor finance and high-cost credit customers facing payment difficulties due to COVID-19
April 24, 2020
The Financial Conduct Authority will be introducing the package of measures outlined last week to support consumer credit customers facing payment difficulties due to the COVID-19 global pandemic. The temporary measures being implemented include a three-month payment freeze for motor finance, buy-now pay-later, rent-to-own and pawnbroking agreements. For high-cost, short term credit (including payday loans), payments will be frozen for one month with no additional interest to be charged.