Category

Financial Privacy

12 April 2018

The British Private Equity & Venture Capital Association issues “Guide to GDPR for the Funds Industry”

The British Private Equity & Venture Capital Association has issued a Guide to GDPR for the Funds Industry focusing on practical guidance, including explanations of what the GDPR is and why it is relevant for the funds industry.  Authors included Sidley lawyers William RM Long, Geraldine Scali, Vishnu Shankar, Francesca Blythe, Denise Kara and Eleanor Dodding.

The GDPR, or the General Data Protection Regulation, is a new EU data privacy law that comes into force on 25 May 2018. The GDPR is intended to provide a single harmonised data privacy law that applies across the EU and is appropriate for the use of Personal Data in the 21st century. The GDPR imposes many new data protection requirements on the collection, use and disclosure of Personal Data which will be relevant to firms and imposes significant fines of up to 4% of annual worldwide turnover.

The Guide describes how key parts of the GDPR will apply to firms and key obligations and issues for firms to consider in dealing with the GDPR.  Read more.

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10 April 2018

Financial Crimes Enforcement Network Issues New Frequently Asked Questions on Customer Due Diligence Requirement

On April 3, 2018, the Financial Crimes Enforcement Network (FinCEN) issued new frequently asked questions (FAQs) regarding its customer due diligence rule (CDD Rule).

The CDD Rule applies to banks, broker-dealers in securities, mutual funds, futures commission merchants and introducing brokers in commodities (collectively, covered financial institutions or CFIs).

The CDD Rule includes four core elements of customer due diligence, each of which should be included in the anti-money-laundering (AML) program of a CFI: (1) customer identification and verification, (2) beneficial ownership identification and verification, (3) understanding the nature and purpose of customer relationships to develop a customer risk profile and (4) ongoing monitoring for reporting of suspicious transactions and, on a risk basis, maintaining and updating customer information. The second element — the beneficial ownership requirement — is new. FinCEN has described the other elements as preexisting AML program requirements for CFIs, although the third and fourth prongs were, at most, implicit requirements.

FinCEN issued new FAQs on the CDD Rule on July 19, 2016. These FAQs are timely because the May 11, 2018 compliance date for the CDD rule is fast approaching.

Here, we summarize several key takeaways regarding the beneficial owner requirement from the new FAQs.

(more…)

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02 March 2018

SEC Issues New Guidance on Cybersecurity Disclosure Requirements

On February 21, 2018, the U.S. Securities and Exchange Commission issued interpretive guidance (the Guidance) to assist public companies in drafting their cybersecuritydisclosures in SEC filings. See 83 FR 8166 (Feb. 26, 2018). In his public statement accompanying the issuance of this guidance, SEC Chairman Jay Clayton said he believed that “providing the Commission’s views on these matters will promote clearer and more robust disclosure by companies about cybersecurity risks and incidents, resulting in more complete information being available to investors.”1 In this new guidance, the SEC is likely intending to signal how it may focus future enforcement concerning the cybersecurity disclosure obligations of public companies, and their underlying disclosure controls, procedures and certifications. (more…)

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01 March 2018

Monetary Authority of Singapore Consults on Proposed E-Payments User Protection Guidelines

On Feb. 13, 2018, the Monetary Authority of Singapore (MAS) issued a Consultation Paper on the Proposed E-Payments User Protection Guidelines (Consultation Paper). Under the Consultation Paper, the MAS proposes to issue a set of guidelines (Guidelines) to standardize the protection offered to individuals or micro-enterprises from losses arising from unauthorized or mistaken payment transactions.

The Guidelines are part of MAS’s ongoing review of Singapore’s regulatory framework for payment services.  They are meant to provide general guidance and are not intended to be comprehensive or to replace or override any legislation.

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19 February 2018

Cybersecurity Identified as an SEC OCIE Examination Priority for 2018

On February 7, 2018, the SEC’s Office of Compliance Inspections and Examinations (OCIE) released its 2018 National Exam Program Examination Priorities (2018 Exam Priorities) and, once again, identified cybersecurity as one of its main areas of focus.  According to OCIE, each of its examination programs will prioritize cybersecurity. The 2018 Exam Priorities include five main focus areas:  (1) cybersecurity; (2) compliance and risks in critical market infrastructure; (3) matters of importance to retail investors, including seniors and those saving for retirement; (4) oversight of the Financial Industry Regulatory Authority (FINRA) and Municipal Securities Rulemaking Board (MSRB); and (5) anti-money laundering programs.  For an in-depth discussion regarding the entirety of the 2018 Exam Priorities, see Sidley’s previous analysis here(more…)

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13 February 2018

SEC Office of Compliance Inspections and Examinations Publishes 2018 Exam Priorities

On February 7, 2018, the Office of Compliance Inspections and Examinations (OCIE) of the U.S. Securities and Exchange Commission (the Commission) released its annual National Exam Program Examination Priorities (Exam Priorities).1 As has been widely reported, the Exam Priorities’ general focus areas include:

  • retail investors
  • compliance and risks in critical market infrastructure
  • oversight of the Financial Industry Regulatory Authority (FINRA) and Municipal Securities Rulemaking Board (MSRB)
  • cybersecurity
  • anti-money laundering (AML) programs

The majority of these Exam Priorities are not surprising because they reflect the Commission’s continued focus on retail investors, conflicts of interest, fee disclosure, cybersecurity, cryptocurrency and AML programs.2 The Exam Priorities can serve as a roadmap for firms to assess their policies, procedures and compliance programs, and to prepare for OCIE exams. This post outlines and elaborates on each of the Exam Priorities. (more…)

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07 December 2017

U.S. Treasury Expresses National Perspective In Response to NAIC Insurance Data Security Model Law

On October 26, 2017, the U.S. Department of Treasury released a 176-page Report examining the current regulatory framework for asset management and insurance industries.  The Report, titled A Financial System That Creates Economic Opportunities: Asset Management and Insurance, identifies laws and regulations that are inconsistent with the Trump Administration’s Core Principles for financial regulation as set forth in Executive Order 13772 (Feb. 3, 2017), and makes recommendations to ensure alignment.  For data privacy and security, the Report commented on the Insurance Data Security Model Law (the “Model Law”) adopted by the National Association of Insurance Commissioners’ (the “NAIC”) on October 24, 2017 (for more information on the development of the Model Law, see our prior coverage).  The Model Law attempts to set a baseline for cybersecurity, although it depends on legislative action on the state level. (more…)

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13 November 2017

U.S. Consumer Financial Protection Bureau’s Principles for Data Aggregation Services Could Have Broad Implications

On Oct. 18, 2017, the Consumer Financial Protection Bureau (CFPB) released a set of consumer protection principles (Principles) designed to protect consumer interests in the market for services built around consumer-approved use of financial information. The Principles are targeted to so-called “data aggregation” or “screen scraping” services that collect customer information in order to provide financial planning or other services. Over the past few years, data aggregation services and banks have struggled to develop the right model for sharing customer account data. The Principles issued by the CFPB seek to provide a potential data-sharing model for banks and data aggregation services while protecting consumer interests.

(more…)

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31 October 2017

Article 29 Working Party Publishes Draft Guidelines on Notification of Personal Data Breaches Notification Under the GDPR

On October 3, 2017, the Article 29 Working Party (“WP29”) adopted draft guidelines regarding notification of personal data breaches under the EU’s General Data Protection Regulation (“GDPR”) which will require breach notification within 72 hours of awareness of a breach. (“Draft Guidelines”) (The Draft Guidelines appear to have been released for public comment during the week of 16th October). The deadline for comment is November 24, 2017. The Draft Guidelines are available here. The WP29 is a collective of EU data privacy supervisory authorities (“DPAs”). (more…)

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24 August 2017

Eighth Circuit Rejects Implied Premise that a Hack Is Tantamount to Inadequate Information Security, Ruling Such “ ‘Naked Assertions’ … Cannot Survive a Motion to Dismiss.”

The Eighth Circuit held on August 21 that, in the absence of actual injury in a data breach case, “massive class action litigation should be based on more than allegations of worry and inconvenience.”  The Court found that no customers of the defendant securities brokerage firm had suffered fraud or identity theft resulting in financial loss from a 2013 data security incident.*  Kuhns v. Scottrade, Inc., Nos. 16-3426, 16-3542 (8th Cir. Aug. 21, 2017).

In a decision that is replete with great holdings and quotable language for defendants in data breach litigation, the Eighth Circuit demonstrated that even where constitutional standing is found, plaintiffs will not likely succeed if they can allege no real injury even years after the hack occurred. (more…)

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