COVID-19 Regulatory Roundup

COVID-19 Regulatory Roundup

COVID-19 Regulatory Roundup


In the wake of the coronavirus (COVID-19) pandemic, regulatory agencies are issuing press releases and regulatory guidance affecting financial services firms on a near-daily basis to keep institutions and the public informed about regulatory activity and relief offered by regulators to deal with problems caused by the pandemic.

Below are summaries and links to guidance issued by the following US, UK, and European financial regulators concerning COVID-19.  These summaries address issues unique to financial services firms and institutions, and do not address other, generally applicable laws and emergency orders:

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U.S.-Based Regulators

SECURITIES AND EXCHANGE COMMISSION (SEC)

The SEC has created a Coronavirus Response page on its website that describes its operational initiatives, market-focused actions, guidance and targeted assistance and relief, investor protection efforts and other work of the agency in response to the effects of COVID-19.

Since late January, the SEC has issued the following notices:

COMMODITY FUTURES TRADING COMMISSION (CFTC)

The CFTC has created a Coronavirus Response page to highlight the Commission’s actions related to COVID-19.

The CFTC has issued a series of temporary, targeted relief to designated market participants designed to help facilitate orderly trading and liquidity in the U.S. derivatives markets:

  • CFTC Letter 20-02: Temporary Relief for Members of Designated Contract Markets and Swap Execution Facilities (March 17, 2020). Provided no action relief from certain time-stamping requirements through June 30, 2020.
  • CFTC Letter 20-03: Temporary Relief for Futures Commission Merchants and Introducing Brokers (March 17, 2020). Provided no action relief from requirements to keep records of oral communications and time stamps, and extended deadline for furnishing CCO’s annual report.
  • CFTC Letter 20-04: Temporary Relief for Floor Brokers (March 17, 2020). Provided no action relief from requirements to keep records of oral communications and time stamps, as well as requirements to be physically present at a trading location.
  • CFTC Letter 20-05: Temporary Relief for Retail Foreign Exchange Dealers (March 17, 2020). Provided no action relief from requirements to keep records of oral communications and time stamps.
  • CFTC Letter 20-06: Temporary Relief for Swap Dealers (March 17, 2020). Provided no action relief from requirements to keep records of oral communications and time stamps, and extended deadline for furnishing CCO’s annual report.
  • CFTC Letter 20-07: Temporary Relief for Swap Execution Facilities (March 17, 2020). Provided no action relief from requirements to keep records of voice communications.
  • CFTC Letter 20-08: Temporary Relief for Swap Execution Facilities (March 17, 2020). Provided no action relief extending deadline for furnishing CCO’s annual report and Q4 financial report.
  • CFTC Letter 20-09: Temporary Relief for Designated Contract Markets (March 17, 2020). Provided no action relief from certain audit trail requirements.
  • CFTC Letter No. 20-10: No-Action Position for Excluding Certain Commodity Swaps from Major Swap Participant Registration Threshold Calculation of an Insured Depository Institution (March 20, 2020). Provided no action relief to an IDI from considering energy-related commodity swaps in determining whether the institution must register with the CFTC as a major swap participant.
  • CFTC Letter No. 20-11: No-Action Positions for Commodity Pool Operators in Response to the COVID-19 Pandemic (March 20, 2020). Provided no action relief from certain filing deadlines.

The CFTC also published a COVID-19 Customer Advisory to advise the public to be on alert for frauds seeking to profit from recent market volatility related to COVID-19.

FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA)

FINRA has a COVID-19 / Coronavirus resource page on its website that contains, among other things, member guidance and answers to frequently asked questions.

FINRA issued its primary coronavirus-related guidance in Regulatory Notice 20-08, which reminded member firms to consider pandemic-related business continuity planning and provided guidance and regulatory relief to member firms from some regulatory requirements. (March 9, 2020)

The Notice provided guidance concerning the following topics related to the pandemic:

  • Review of member firm business continuity plans to consider pandemic preparedness;
  • Supervision and oversight obligations in light of remote offices or telework arrangements;
  • Heightened cybersecurity risks;
  • Temporary suspension of certain Form U4/BR updates for office of employment addresses;
  • Emergency Office Relocations and related heightened supervision;
  • Communicating with customers and related supervisory control policies and procedures; and
  • Communicating with FINRA and member firm emergency contacts.

The Notice further provided regulatory relief concerning:

  • Extensions of time for regulatory filings, responses to FINRA inquiries, matters and investigations upon a showing of need;
  • Extensions of time for expiring qualification examinations and regulatory element continuing education; and
  • Obligations of registered persons who are called into active duty for military and national guard service.

FINRA’s website also contains links to guidance concerning the following topics:

  • FINRA Operating Status
  • Regulatory Relief and Business Continuity Planning for Member Firms
  • Impact on Membership Application Program
  • Postponement of In-Person Arbitration & Mediation Hearings
  • Postponement of OHO Hearings
  • Impact on FINRA Events & Conferences
  • COVID-19 Guidance on FINRA-Administered Exams
  • Investor Education
  • CAT Updates on COVID-19
  • State “Shelter-in-Place” and “Stay-at-Home” Orders

Additional Guidance

THE FEDERAL RESERVE

The Federal Reserve has created a COVID-19 Resources page on its website that contains a series of links to coronavirus-related press releases:

FEDERAL RESERVE BANK OF NEW YORK

The New York Fed recently released a resource hub with curated information for business owners, employees, nonprofit, and community organizations impacted by the coronavirus, or COVID-19.  The hub is organized by topic and includes links to resources about:

Press Releases

OFFICE OF THE COMPTROLLER OF THE CURRENCY (OCC)

The OCC created a COVID-19 (Coronavirus) Information Page on its website with information to assist regulated institutions and their customers to manage the impact of the outbreak. The page provided the following links for use by national banks, federal savings associations, federal branches of foreign banks operating in the US, and their customers:

Consumer Information

News Releases

Supervisory Guidance

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)

The FDIC has created a Coronavirus (COVID-19) Information for Bankers and Consumers page on its website with links to FAQs for those impacted by Coronavirus, divided by financial institutions and bank customers. The page also provides the following links to FDIC press releases and publicly issued letters:

Information for Use by Financial Institutions

Information for Use by Bank Customers

FEDERAL TRADE COMMISSION (FTC)

The FTC has created a page on its website that outlines its operational initiatives and other work of the agency in response to the effects of COVID-19.

The FTC’s Premerger Notification Office (PNO) has also published guidance regarding changes to the Hart-Scott Rodino filing process, which have also been adopted by the Department of Justice (DOJ), Antitrust Division, including:

  • Starting on Tuesday, March 17 at 8:30AM, all HSR filings must be submitted via Accellion to the Agencies.
  • The PNO and DOJ review of filings will continue as normal.
  • If a filing is deficient, PNO staff will contact the filer to coordinate the submission of additional or amended materials. In general, the submission of a page or two will generally be permitted by email. If filings are more than a page or two, the filer will need to use Accellion, an electronic file transfer system, and PNO staff will be in touch as necessary.
  • After the resumption of normal agency operations, all filing parties may have to submit hard copies or DVDs of filings made using the temporary e-filing system to both PNO and DOJ.
  • PNO and DOJ will not be granting early termination during the use of the temporary e-filing system.

Press Releases

DEPARTMENT OF JUSTICE (DOJ)

The Justice Department urged members of the public to report suspected fraud schemes related to COVID-19 and Attorney General Barr directed all U.S. Attorneys to prioritize the investigation and prosecution of Coronavirus-related fraud schemes. (March 16, 2020)

In a follow-up memorandum, Deputy Attorney General Jeffrey Rosen further directed each U.S. Attorney to appoint a Coronavirus Fraud Coordinator to serve as the legal counsel for the federal judicial district on matters relating to the Coronavirus, direct the prosecution of Coronavirus-related crimes, and to conduct outreach and awareness. (March 19, 2020)

The FBI issued a Public Service Announcement warning the public of the rise in COVID-19-related fraud schemes, which included examples of fraud schemes observed by the FBI since the pandemic began. (March 20, 2020)

DOJ – Antitrust Division

On March 17, 2020, the DOJ’s Antitrust Division adopted a series of temporary changes to its civil merger investigation processes, which will remain in place during the pendency of the coronavirus (COVID-19) event.  The DOJ joined the Federal Trade Commission in making changes to the Hart-Scott-Rodino filing process.

Other civil process changes include the following:

  • For mergers currently pending or that may be proposed, the Antitrust Division is requesting from merging parties an additional 30 days to timing agreements to complete its review of transactions after the parties have complied with document requests. If circumstances require, the Division may revisit its timing agreements with merging parties in light of further developments.
  • The Antitrust Division will conduct all meetings by phone or video conference (where possible), absent extenuating circumstances.
  • All scheduled depositions temporarily will be postponed and will be rescheduled using secure videoconferencing capabilities.

Press Releases

FINANCIAL CRIMES ENFORCEMENT NETWORK (FINCEN)

FinCEN issued a release encouraging financial institutions to communicate concerns related to the coronavirus and remain alert to related illicit financial activity. FinCEN requested financial institutions affected by the pandemic to contact FinCEN and their functional regulator as soon as practicable if a COVID-19-affected financial institution has concern about any potential delays in its ability to file required Bank Secrecy Act (BSA) reports. (March 16, 2020)

NEW YORK STATE DEPARTMENT OF FINANCIAL SERVICES (NYDFS)

The NYDFS has redesigned its website to prominently display links to various coronavirus guidance directly from its homepage. The links concerning healthcare and paid family leave are geared toward consumers, as is a Consumer Alert concerning coronavirus driven scams and fraud.

The following industry guidance and press releases are found on a link containing Coronavirus Information for Consumers and Businesses:

Industry Guidance

Press Releases

UK-Based Regulators

FINANCIAL CONDUCT AUTHORITY (FCA)

The FCA website contains a coronavirus page, with links relevant to firms and consumers.

FCA Information for Firms on Coronavirus (COVID-19) Response

Among other things, the FCA provided firms with guidance concerning regulatory changes and impact on consumers related to specific products and activity, including insurance, mortgages, unsecured debt, and access to cash.

From an operational perspective, the FCA instructed regulated firms to have contingency plans to deal with major events and meet regulatory obligations, and included a link to a recent consultation paper published jointly by the FCA and Bank of England concerning operational resilience matters that firms should consider. The FCA also gave regulatory relief and/or guidance concerning, market trading and reporting, delayed Consultation Papers and Calls for Input, and delays to publications and other activity.

On March 20, 2020, the FCA published expectations for general insurance firms during coronavirus (Covid-19) pandemic, which included general instructions to treat customers fairly.

That same day, it also issued guidance for mortgage lenders on treating customers fairly.

It also issued a statement on key workers in financial services.

On March 25, 2020 HM Treasury, the FCA and the Bank of England published an open letter to UK banks on lending.

That same day the FCA published, jointly with the Bank of England, a short statement on LIBOR transition plans.

On March 26, 2020, the FCA, the Financial Reporting Council (the UK’s accounting and audit regulator) and the Bank of England issued a joint statement on supporting capital markets.  They put in place temporary relief on financial reporting for listed companies, under which firms may delay announcing results for 6 months from year-end without risking a suspension of their listing.  They also published an associated Q&A Document.

The same day, the FCA released a short statement on financial resilience for solo-regulated firms.

Coronavirus (COVID-19): Support for Consumers

Consumer guidance included information concerning retail insurance products, and general guidance intended to ensure that customers had access to cash, were treated fairly, and were aware that insurance providers must consider the needs of consumers potentially affected by the pandemic. The FCA further provided guidance for consumers to avoid scams and fraudulent schemes related to COVID- 19.

BANK OF ENGLAND

The Bank of England provided links to Letters, New Releases, Market Notices and Monetary Policy Committee releases on its Response to Coronavirus website. In addition to general links related to Government Response and Government guidance to employers and businesses, the Bank of England provided links to the following:

EU Regulators

EUROPEAN CENTRAL BANK (ECB)

The ECB has issued a letter to the significant institutions, several press releases and an FAQ on ECB supervisory measures in reaction to the coronavirus:

  • Letter to significant institutions on contingency preparedness in the context of COVID-19 (March 3, 2020): Reminded supervised institutions that preparations for employee safety and business continuity should include consideration of the main risks associated with a potential pandemic, and listed some examples for appropriate action (g., assessing whether alternative and sufficient back-up sites could be established in light of possible pandemic, assessing and urgently testing the capacity of existing IT infrastructure, and assessing risks of increased cyber-security fraud)
  • Press release on operational precautions linked to coronavirus (March 4, 2020): Described internal ECB-measures such as a temporary no visitors-policy.
  • Press release on temporary capital and operational relief in reaction to coronavirus (March 12, 2020): Among other things, announced that banks were allowed to fully use capital and liquidity buffers; relief in the composition of capital provided for by CRD V as of January 2021 would be brought forward; and ECB would consider rescheduling on-site inspections.
  • Press release on provision of further flexibility to banks in reaction to coronavirus (March 20, 2020): Introduction of relief measures with regard to NPL, g. supervisors would exercise flexibility regarding the classification of debtors as “unlikely to pay” when banks call on public guarantees granted in the context of coronavirus, and supervisors would deploy full flexibility when discussing with banks the implementation of NPL reduction strategies.
  • FAQ on ECB supervisory measures in reaction to the coronavirus (March 20, 2020): Provided more details on the measures announced in the abovementioned press releases.
  • Recommendation on dividend distributions during the COVID-19 pandemic (March 27, 2020): ECB Recommended that at least until October 1, 2020 no dividends (defined as any cash pay-out that is subject to the approval of the general assembly) are paid out and no irrevocable commitment to pay dividends is undertaken by the credit institution for the financial year 2019 and 2020 and that credit institutions refrain from share buy-backs aimed at remunerating shareholders.
  • Recommendation on dividend distributions during the COVID-19 pandemic (March 27, 2020): ECB Recommended that at least until October 1, 2020 no dividends (defined as any cash pay-out that is subject to the approval of the general assembly) are paid out and no irrevocable commitment to pay dividends is undertaken by the credit institution for the financial year 2019 and 2020 and that credit institutions refrain from share buy-backs aimed at remunerating shareholders.

EUROPEAN BANKING AUTHORITY (EBA)
  • Statement on actions to mitigate the impact of COVID-19 on the EU banking sector (March 12, 2020): In order to enable banks to address any operational challenges, the EBA postponed the EU-wide stress test exercise to 2021; in addition, the EBA recommended that national supervisory authorities plan supervisory activities, including on-site inspections, in a flexible way, and possibly postpone those deemed non-essential.
  • Statement on the application of the prudential framework regarding Default, Forbearance and IFRS9 in light of COVID-19 measures (March 25, 2020):
    • Loans in default: Public moratoria (and similar private moratoria) shall not trigger the past due criterion as such; delays are counted based on the modified schedule of payments. If loans are renegotiated in a way that the financial position of the lender does not diminish, there is no default on the grounds of a distressed restructuring under the unlikely to pay criterion.
    • Classification of forbearance: General moratoria will not necessarily lead to a reclassification of a loan under the definition of forbearance, and the moratoria being introduced as a response to COVID-19 pandemic are generally not to be considered borrower-specific with this regard.
    • IFRS9: Public or private moratoria, aimed at addressing the adverse systemic economic impact of the COVID-19 pandemic, should not by themselves automatically trigger the conclusion that a significant increase in credit risk has occurred. In assessing the credit risk, institutions would be expected to distinguish between obligors for which the credit standing would not be significantly affected by the current situation in the long term, from those that would be unlikely to restore their credit worthiness.
  • Statement on consumer and payment issues in light of COVID19 (March 25, 2020):
    • Consumer protection: Institutions shall act in the interest of the consumer, in particular when engaging with customers regarding temporary measures for consumer and mortgage loans in identified cases. Such measures must be granted in compliance with EU law (in particular, the rules on information disclosure). New/additional charges in relation to contingency measures as well as the cross selling of products shall be carefully considered from a legal and reputational perspective. The acceptance of general temporary measures should not automatically affect the consumer´s credit rating.
    • Payment services: Payment services providers shall facilitate consumer´s ability to make payments without the need for physical contact by making use of the exemption from strong customer authentication for contactless payments and thereby applying the maximum threshold of EUR 50 per transaction.
  • Statement on postponed activities (March 25, 2020): EBA extends the deadlines of ongoing public consultations by two months, postpones all public hearings already scheduled and runs them remotely, and extends the deadlines for specified data collection exercises.

EUROPEAN SECURITIES AND MARKETS AUTHORITY (ESMA)

ESMA has published a general recommendation to financial market participants, followed by several specific public statements:

  • Recommendation for COVID-19 impact (March 11, 2020): ESMA made general recommendations to financial market participants with regard to business continuity planning, market disclosure, financial reporting and fund management.
  • Public statement (March 18, 2020): Postponement of the reporting obligations related to securities financing transactions.
  • Public statement (March 20, 2020): Taping requirement under MiFID II could be replaced by other measures (such as written minutes), if the coronavirus situation did not allow for taping (g., due to the sudden remote working by a significant part of staff).
  • Public statement (March 25, 2020): ESMA provides issuers with guidelines on the accounting implications of the economic support and relief measures on recognized financial instruments and their conditions. If the support measures provide temporary relief to debtors affected by COVID-19 and the net economic value of the loan is not significantly affected the modification of the terms of the instrument would be unlikely to be considered as substantial.
  • Public statement (March 26, 2020): Postponement of the reporting obligations related to securities financing transactions under the SFTR and under MiFIR
  • Press release (March 27, 2020): ESMA confirms application date of equity transparency calculations for equity instruments under MiFID II/MiFIR.
  • Public statement (March 27, 2020): ESMA expects national authorities not to prioritise supervisory action against issuers whose securities are admitted to trading on regulated markets in respect of upcoming publication deadlines under the Transparency Directive with regard to annual/half-yearly financial reports.