Senate Finance Committee Chair Wyden launches investigation of private placement life insurance actions

Senate Finance Committee Chair Ron Wyden (D-OR) launched Monday an investigation into the use of private placement life insurance by the wealthy to avoid and evade taxes. © Shutterstock Wyden recently forwarded correspondence to Lombard International, a subsidiary of the private equity firm Blackstone. “I write seeking information regarding the growing use of Private Placement […]

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Senate Finance Committee Chair Ron Wyden (D-OR) launched Monday an investigation into the use of private placement life insurance by the wealthy to avoid and evade taxes.

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Wyden recently forwarded correspondence to Lombard International, a subsidiary of the private equity firm Blackstone.

“I write seeking information regarding the growing use of Private Placement Life Insurance (PPLI) policies as a tax shelter for the wealthiest Americans,” Wyden wrote in the letter to Lombard International Chief Executive Officer Stuart Parkinson. “I am concerned that these insurance vehicles are being used without a genuine insurance purpose to invest in hedge funds and other investments while avoiding billions of dollars in federal taxes.”

Wyden said Lombard International (Lombard) is one of the market leaders in the PPLI industry. Lombard markets PPLI policies to invest in hedge funds, private equity funds, and other financial products while avoiding income and estate taxes.

“As Chairman of the Senate Finance Committee, I am conducting an investigation into the use of PPLI policies and other loopholes exploited by the wealthiest 1 percent of Americans to avoid paying their fair share in taxes,” Wyden wrote.

Wyden requested Lombard provide information that includes providing the current dollar value of assets under administration by Lombard International with respect to PPLI products held by Lombard clients, an explanation of how Lombard International calculates the dollar value of assets under administration about PPLI products, and a list of all pooled investment funds in which PPLI products of Lombard clients are invested, and the current fair market value for each such fund to the extent of aggregate Lombard client PPLI product ownership.

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CFTC modifies swap clearing requirement in support of transition away from LIBOR

The Commodity Futures Trading Commission (CFTC) recently issued a final rule modifying its interest rate swap clearing requirement regarding London Interbank Offered Rate (LIBOR).© Shutterstock The action, issued as part 50 of the CFTC’s regulations, removes the requirement to clear LIBOR interest rate swaps, in addition to certain other interbank offered rates, replacing them with […]

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The Commodity Futures Trading Commission (CFTC) recently issued a final rule modifying its interest rate swap clearing requirement regarding London Interbank Offered Rate (LIBOR).

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The action, issued as part 50 of the CFTC’s regulations, removes the requirement to clear LIBOR interest rate swaps, in addition to certain other interbank offered rates, replacing them with requirements to clear interest rate swaps referencing overnight, risk-free reference rates.

“The adoption of the final interest rate swap clearing requirement is another important milestone in the years-long global effort to facilitate a smooth transition away from reliance on LIBOR and other IBORs,” CFTC Chairman Rostin Behnam said. “The final rule promotes financial stability and mitigates systemic risk. As we focus our collective efforts on the fast approaching end of LIBOR, this rule provides legal certainty and regulatory transparency for DCOs, market participants, and our fellow international authorities.”

According to Benham, the ruling ensures cross-border harmonization in the interest rate swaps market.

“Many thanks to the staff of the Division of Clearing and Risk for their hard work on this important contribution to the LIBOR transition effort,” Benham said.

The final rule amends CFTC Regulation 50.4(a) and becomes effective 30 days after publication in the Federal Register.

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FTC initiates effort to gather public input addressing commercial data collection

The Federal Trade Commission (FTC) is initiating an effort to garner public comment regarding commercial data collection and use as a means of determining potential new regulations.© Shutterstock “Firms now collect personal data on individuals at a massive scale and in a stunning array of contexts,” FTC Chair Lina M. Khan said. “The growing digitization […]

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The Federal Trade Commission (FTC) is initiating an effort to garner public comment regarding commercial data collection and use as a means of determining potential new regulations.

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“Firms now collect personal data on individuals at a massive scale and in a stunning array of contexts,” FTC Chair Lina M. Khan said. “The growing digitization of our economy—coupled with business models that can incentivize endless hoovering up of sensitive user data and a vast expansion of how this data is used—means that potentially unlawful practices may be prevalent.”

The FTC seeks to address harmful commercial surveillance and relaxed data security practices. Commercial surveillance is defined as the business of collecting, analyzing, and profiting from information about people.

An FTC-hosted virtual public forum on Sept. 8 will provide the public with an opportunity to share input.

The FTC acknowledged while it currently does not possess the authority to enforce regulations over credit unions, the advance notice of proposed rulemaking (ANPR) suggests rulemaking designed to regulate the collection and use of consumers’ data economy-wide.

Additionally, FTC maintains the NAFCU-opposed American Data Privacy and Protection Act (ADPPA) could provide the FTC broad authority to implement and enforce new data privacy and data security standards, including over credit unions.

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Measure targets “broken tax code” behind Big Oil profiteering

Senate Finance Chair Ron Wyden (D-OR) recently joined 13 colleagues in detailing the Taxing Big Oil Profiteers Act, which seeks to address oil company profiteering.© Shutterstock “Our broken tax code is working for Big Oil, not American families. While Americans pay more to fill up their gas tanks, Big Oil companies are raking in record […]

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Senate Finance Chair Ron Wyden (D-OR) recently joined 13 colleagues in detailing the Taxing Big Oil Profiteers Act, which seeks to address oil company profiteering.

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“Our broken tax code is working for Big Oil, not American families. While Americans pay more to fill up their gas tanks, Big Oil companies are raking in record profits, rewarding their CEOs and wealthy shareholders with massive stock buybacks, and using special loopholes in the tax code to pay next to nothing in taxes,” Wyden said. “Our tax code should benefit the American people, not oil executives and their wealthy shareholders. Our Taxing Big Oil Profiteers Act would help reverse perverse incentives to price gouge by doubling the corporate tax rate on companies’ excess profits, eliminating egregious buybacks, and reducing accounting tricks.”

Companies providing relief to consumers by reducing prices or investing in new supplies would not be impacted by the legislation.

The bill imposes a 25 percent excise tax on stock repurchased by the corporation while closing a loophole, enabling oil companies to game the value of their inventories by using an accounting method ensuring they are deducting the newest, most expensive inventory rather than the oldest, least expensive inventory.

“What we’re proposing here is pretty simple—giant oil and gas corporations shouldn’t be profiting off a crisis at the expense of people in Washington state who are just trying to fill up their cars to get to work, pick up their kids, and get around,” said U.S. Sen. Patty Murray (D-WA), a co-sponsor of the bill.

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Group of senators advocate for adoption of SEC insider trading rule

A group of lawmakers recently forwarded correspondence to the Securities and Exchange Commission (SEC), supporting a proposed SEC rule regarding 10b5-1 plans addressing corporate executives’ safe harbor trading.© Shutterstock U.S. Sens. Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), Tammy Baldwin (D-WI), and Bernie Sanders (I-VT) sent a letter to SEC Chair Gary Gensler regarding the […]

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A group of lawmakers recently forwarded correspondence to the Securities and Exchange Commission (SEC), supporting a proposed SEC rule regarding 10b5-1 plans addressing corporate executives’ safe harbor trading.

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U.S. Sens. Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), Tammy Baldwin (D-WI), and Bernie Sanders (I-VT) sent a letter to SEC Chair Gary Gensler regarding the proposed rule, maintaining it would bolster transparency and curb corporate executive abuse of trading their company’s stock.

The SEC created the 10b5-1 safe harbor 12 years ago to allow corporate executives to sell their stock holdings without running afoul of insider trading laws.

“While these plans were designed to prevent insider trading, evidence indicates that corporate insiders have misused them to obtain huge windfalls making questionable trades at the expense of ordinary investors,” the legislators wrote. “A recent report in the Wall Street Journal identified ‘scores of examples where company insiders adopted a plan when a quarter was nearly complete and sold stock under the plan before that quarter’s results were announced’ and found that ‘insiders who sold within 60 days reaped $500 million more in profits than they would have if they sold three months later,’ indicating that the abuse of 10b5-1 plans is widespread and costly, further underscoring the urgent need for stronger rules.”

The senators are seeking the SEC’s expeditious consideration of additional stronger rules preventing the practices while protecting capital markets.

Additional SEC proposal strengthening measures favored by lawmakers include extending the “cooling-off period” between the adoption of a trading plan and the execution of that plan from 120 days to 180 days and eliminating the availability of a safe harbor for single-trade plans, rather than allowing one single-trade plan per 12 month period.

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Sens. Warren, Luján advocate enhanced corporate misconduct enforcement

U.S. Sens. Elizabeth Warren (D-MA) and Ben Ray Luján (D-NM) recently forwarded correspondence to U.S. Department of Justice (DOJ) personnel, encouraging the agency to use authority to ban corporations committing misconduct from government contracting. © Shutterstock Warren and Luján sent a letter to Attorney General Merrick Garland and Deputy Attorney General Lisa Monaco regarding the […]

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U.S. Sens. Elizabeth Warren (D-MA) and Ben Ray Luján (D-NM) recently forwarded correspondence to U.S. Department of Justice (DOJ) personnel, encouraging the agency to use authority to ban corporations committing misconduct from government contracting.

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Warren and Luján sent a letter to Attorney General Merrick Garland and Deputy Attorney General Lisa Monaco regarding the matter, noting the DOJ possesses underutilized authority enabling the ability to bar an individual or company from contracting with the government for a certain period of time.

Entities can be debarred for a wide range of misconduct, including misconduct falling outside of a company’s contracting activities with the government.

“We cannot allow these corporate entities to continue to engage in criminal misconduct and get by with a mere slap on the wrist,” Warren said. “The Department of Justice can and should expand its use of these suspension and debarment authorities to protect the use of government resources and discourage recidivism by big business.”

The senators are urging the DOJ to use debarment authority for corporate entities, not just individuals; use debarment government-wide; use suspension authority; and consider debarment for all corporate misconduct.

“No one is above the law,” Luján said. “Corporate criminals must be held accountable, and it’s critical that the Justice Department utilizes its authority to ensure that no one can abuse public trust. Along with Sen. Warren, I’m calling on the Justice Department to use its debarment power and put an end to corporations taking advantage of the government.”

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CFPB targets failed financial company consumer data safeguards

The Consumer Financial Protection Bureau (CFPB) recently confirmed in a circular that financial companies might violate federal consumer financial protection law when failing to safeguard consumer data. © Shutterstock “Financial firms that cut corners on data security put their customers at risk of identity theft, fraud, and abuse,” CFPB Director Rohit Chopra said. “While many […]

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The Consumer Financial Protection Bureau (CFPB) recently confirmed in a circular that financial companies might violate federal consumer financial protection law when failing to safeguard consumer data.

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“Financial firms that cut corners on data security put their customers at risk of identity theft, fraud, and abuse,” CFPB Director Rohit Chopra said. “While many nonbank companies and financial technology providers have not been subject to careful oversight over their data security, they risk legal liability when they fail to take common-sense steps to protect personal financial data.”

Per the CFPB, financial companies are at risk of violating the Consumer Financial Protection Act if they do not have adequate measures to protect against data security incidents, with the agency citing the 2017 Equifax data breach as an example.

Two years ago, the CFPB charged Equifax with violating the Consumer Financial Protection Act to address misconduct related to data security.

According to the CFPB circular, multi-factor authentication increases the level of difficulty for adversaries to compromise enterprise user accounts and gain access to sensitive customer data; unauthorized password use is a common data security issue, as well as the use of default enterprise logins or passwords; and protocols immediately updating software and addressing vulnerabilities once they become publicly known can reduce such circumstances.

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Lawmakers urge OCC to rescind, replace cryptocurrency guidance

U.S. Sens. Elizabeth Warren (D-MA), Dick Durbin (D-IL), Sheldon Whitehouse (D-RI), and Bernie Sanders (I-VT) recently forwarded correspondence to the Office of the Comptroller of the Currency Acting Comptroller of the Currency Michael Hsu, advocating for the previously issued cryptocurrency guidance to be rescinded and replaced.© Shutterstock “We write to inquire about the Office of […]

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U.S. Sens. Elizabeth Warren (D-MA), Dick Durbin (D-IL), Sheldon Whitehouse (D-RI), and Bernie Sanders (I-VT) recently forwarded correspondence to the Office of the Comptroller of the Currency Acting Comptroller of the Currency Michael Hsu, advocating for the previously issued cryptocurrency guidance to be rescinded and replaced.

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“We write to inquire about the Office of the Comptroller of the Currency’s (OCC) November 2021 interpretive letter authorizing banks to engage in certain cryptocurrency (crypto) activities and the activities that banks have been permitted to engage in under OCC’s guidance,” the legislators wrote. “Each of the prudential regulators, including the OCC, is responsible for safeguarding our financial system from undue risk and ensuring the safety and soundness of the banking system. In light of recent turmoil in the crypto market, however, we are concerned that the OCC’s actions on crypto may have exposed the banking system to unnecessary risk and ask that you withdraw existing interpretive letters that have permitted banks to engage in certain crypto-related activities.”

Under the previous acting comptroller, the OCC issued several interpretive letters related to cryptocurrency, which determined that banks were authorized to engage in certain crypto-related activities that included providing cryptocurrency custody services for customers, holding deposits that serve as reserves for certain stablecoins, and using independent node verification networks (INVNs) and stablecoins for payment activities.

“Given the risks posed by cryptocurrencies to banks and their customers, we request that you withdraw OCC Interpretive Letters 1170, 1172, 1174, and 1179 and coordinate with the Federal Reserve and the Federal Deposit Insurance Corporation to develop a comprehensive approach that adequately protects consumers and the safety and soundness of the banking system,” the legislators concluded.

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CFPB rule outlines digital marketing finance protection compliance

The Consumer Financial Protection Bureau (CFPB) has issued an interpretive rule detailing when financial firm digital marketing providers must comply with federal consumer financial protection law. © Shutterstock “When Big Tech firms use sophisticated behavioral targeting techniques to market financial products, they must adhere to federal consumer financial protection laws,” CFPB Director Rohit Chopra said. […]

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The Consumer Financial Protection Bureau (CFPB) has issued an interpretive rule detailing when financial firm digital marketing providers must comply with federal consumer financial protection law.

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“When Big Tech firms use sophisticated behavioral targeting techniques to market financial products, they must adhere to federal consumer financial protection laws,” CFPB Director Rohit Chopra said. “Federal and state law enforcers can and should hold these firms accountable if they break the law.”

Digital marketers executing the role of service providers can be held liable by the CFPB or other law enforcers for committing unfair, deceptive or abusive acts or practices, in addition to other consumer financial protection violations.

When digital marketing providers extend beyond traditional advertising, they are typically covered by the Consumer Financial Protection Act. The measure contains an exception for companies solely providing time or space for advertising a consumer financial product or service through print, newspaper or electronic media.

The CFPB maintains that the exception does not cover firms materially involved in developing a content strategy.

The CFPB’s interpretive rule, officials indicated, explains that digital marketers who provide material services to financial firms and other consumer protection enforcers can sue digital marketers to stop consumer financial protection law violations.

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FHFA details requirements for servicers maintaining fair lending data

The Federal Housing Finance Agency (FHFA) notes that Fannie Mae and Freddie Mac will require mortgage lenders and servicers to transmit fair lending information to servicers with other loan information.© Shutterstock According to the FHFA, the requirement will include a borrower’s language preference, with data to be maintained containing the borrowers’ age, race, ethnicity, and […]

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The Federal Housing Finance Agency (FHFA) notes that Fannie Mae and Freddie Mac will require mortgage lenders and servicers to transmit fair lending information to servicers with other loan information.

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According to the FHFA, the requirement will include a borrower’s language preference, with data to be maintained containing the
borrowers’ age, race, ethnicity, and gender, and transferred with servicing throughout the mortgage term.

“The need for collection and maintenance of quality fair lending data is a lesson learned from the foreclosure crisis and COVID-19 response,” FHFA Director Sandra L. Thompson said. “Having fair lending data travel with servicing will help servicers do the important work of providing assistance to borrowers in need, helping to further a sustainable and equitable housing finance system.”​

The servicer requirement is slated to be implemented on March 1, 2023, following a May 2022 announcement indicating lenders would collect borrowers’ language preference data.

Senate Committee on Banking, Housing and Urban Affairs Chairman Sherrod Brown (D-OH) recently commended FHFA for requiring lenders to collect a borrower’s language preference and housing counseling information when they apply for a mortgage.

“It’s common sense – if you’re talking with a homeowner or trying to help them get back on track with their payments, you should know what language they’re most comfortable with,” Brown said in a statement regarding the FHFA maintenance requirements.

Brown said the action would ensure the nation’s housing system serves all eligible homebuyers.

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