OCC SEEKS COMMENTS ON CLIMATE-RELATED FINANCIAL RISK MANAGEMENT PRINCIPLES FOR MAJOR BANKS
On December 16, the OCC published draft principles to support the identification, measurement, monitoring, control and general management of climate-related financial risks by national banks, federal savings associations and federal branches and agencies of foreign banking organizations with over $100 billion in total consolidated assets. The draft principles call on banks to manage both physical risk and transition risk, including credit risk, liquidity risk, operational, legal/compliance risk and other financial and non-financial risks through through governance, policies, procedures, limits, strategic planning, risk management, data and risk measurement and communication, and scenario analysis. Although these draft principles only target the largest banks, the OCC has recognized that all banks, regardless of size, can be significantly exposed to climate-related financial risks. Comments can be submitted until February 14, 2022.
ANTITRUST DIVISION SEEKS FURTHER PUBLIC COMMENT ON COMPETITIVE ANALYSIS OF BANK MERGER
On December 17, the Justice Department’s Antitrust Division (the Division) announced that it was seeking additional public comment on whether and how the Division should revise the 1995 Bank Merger Competitive Review Guidelines (Banking guidelines). This follows a September 1, 2020 Division announcement seeking comments on whether and how to revise the banking guidelines, with six specific questions. The December Request for Additional Comments adds a request for comment on whether and to what extent the Division’s competitive review of bank mergers should apply standards and incorporate factors other than those applicable to other industries. The deadline for additional comments is February 15, 2022.
COMMUNITY BANK LEVERAGE RATIO IS IN EFFECT
On December 21, the Agencies Posted an inter-agency statement regarding the optional framework for the leverage ratio of community banks (the framework). In 2019, the Agencies adopted the Optional Framework as a method of measuring capital adequacy for certain community banks. Depository institutions that have less than $10 billion in total consolidated assets and other qualifying criteria can opt into the framework, which includes a leverage ratio of 9%. In 2020, the agencies issued an interim rule (the Interim Rule) that (1) lowered the ratio from 9% to 8% due to the COVID-19 pandemic; and (2) established a two-quarter gradual transition period to return to the 9% leverage ratio. The interim rule expired on December 31, 2021. Effective January 1, 2022, the framework came into effect with the two-quarter grace period, during which eligible community banks can choose to join the framework, but can temporarily not meeting the requirements for as long as they are “well capitalized”, ie a leverage ratio of 8%.
“Weaknesses in how banks identify, measure, monitor and control potential physical and transitional risks associated with climate change could harm the safety and soundness of a bank, as well as the financial system as a whole. .”
– Office of the Comptroller of the Currency
WILLIAM BIRDTHISTLE APPOINTED DIRECTOR OF INVESTMENT MANAGEMENT DIVISION
On December 21, the SEC announcement the appointment of William Birdthistle as the new director of the Investment Management Division (the Division), which is the division of the SEC primarily responsible for developing regulatory policies to oversee investment firms and advisers. Mr Birdthistle replaces Sarah ten Siethoff (the current Associate Director of the Division’s Regulatory Office), who had served as “acting” Division Director since Dalia Blass stepped down about a year ago. Prior to joining the SEC, Mr. Birdthistle was a professor of law at the Chicago-Kent College of Law since 2006, where he specialized in the areas of investment funds, securities regulation and corporate governance. ‘business. During his tenure as a professor, Mr. Birdthistle wrote a book on mutual funds (entitled Empire of the Fund: How We Save Now) and has served as counsel of record in several amicus briefs to the United States Supreme Court. In recent years, he has also acted as an expert witness – for claimant shareholders – in a case of excessive charges brought under section 36(b) of the Investment Companies Act 1940. Before academia , Mr. Birdthistle practiced law for five years as an associate in the firm’s investment management practice. Mr. Birdthistle earned his JD from Harvard Law School.
SEC PROPOSES ACCELERATED AND IMPROVED REPORTING OF STOCK BUYBACKS
On December 15, the SEC announced that it had proposed rules that would improve and expand the existing reporting of corporate stock buybacks. The most significant proposal would require companies to report daily on purchases of any class of securities registered under Section 12 of the Securities Exchange Act of 1934.
Read it customer alert to learn more about the impact of the proposed rules on businesses and what they should do to address these issues.
FINCEN PROPOSES RULES TO IMPLEMENT OWNERSHIP REQUIREMENTS UNDER THE TRANSPARENCY ACT (CTA)
On December 7, FinCEN published a Notice of Proposed Rulemaking regarding a proposed implementation of part of the CTA, which was enacted earlier this year. The proposed rule would require that each “domestic reporting company” and each “foreign reporting company” (each, a reporting company), such as a corporation, limited liability company or other entity created by or registered to do business in filing a document with a secretary of state or similar official of a state or tribe, to file reports with FinCEN that identify each “beneficial owner” of that reporting company and each “applicant” who has filed an application to form or register the entity to do business.
Read it customer alert for more information on what reporting companies should consider in light of the proposed rule.
SEC STAFF PROVIDE CRS OBSERVATIONS, EXPECTATIONS AND BEST PRACTICES FORM
On December 17, SEC staff issued a statement regarding Form CRS disclosures required of broker-dealers and SEC-registered investment advisers who provide services to retail investors.
Read it customer alert for examples of health checks companies should consider related to substance and process, and access our chart which sets out the Committee’s observations to be taken into account during these reviews.
SEC AND PCAOB PREPARING TO IMPLEMENT FOREIGN COMPANIES RESPONSIBLE HOLDING ACT
The SEC has adopted final amendments that, together with final rules adopted by the Public Company Accounting Oversight Board (PCAOB) earlier this year and the recent determination by the PCAOB that it is unable to fully inspect or investigate an accounting firm registered in China and Hong Kong, will set the stage for the SEC to designate companies as “identified issuers by the Commission’ on the basis of annual reports submitted for financial years beginning after 18 December 2020.
Read it customer alert for more on what businesses need to know now.