FEDERAL GOVERNMENT RELATIONS
SEC Proposes First-Ever Climate Risk Disclosures for Public Companies
The Securities and Exchange Commission Monday proposed a much-anticipated set of requirements for public companies to disclose information about climate risks affecting them, their greenhouse gas footprints and any emissions-reduction plans they may have adopted. The proposed rule – for which comments are due by May 20 or 30 days after publication in the Federal Register, whichever is longer – has varying compliance dates, with deadlines for large accelerated filers coming as soon as 2024 for fiscal years ending in 2023, while smaller reporting companies will face their earliest deadlines in 2026 for fiscal years ending in 2025.
The proposal requires disclosure of a registrant’s direct greenhouse gas emissions (scope 1), indirect emissions from purchased energy (scope 2) and indirect emissions from activities upstream and downstream in a registrant’s “value chain,” if material (scope 3, which would include “financed emissions” in a bank’s lending portfolio). Smaller reporting companies would be exempt entirely from scope 3 disclosures, and due to their complexity scope 3 disclosures would phase in after scope 1 and 2 for larger registrants and also be subject to a safe harbor. Accelerated and large accelerated filers would need to obtain independent attestation reports for their disclosures of scopes 1 and 2 emissions.
Under the proposal, SEC registrants’ registration statements and periodic reports like Form 10-K would be required to disclose: how their boards and managers are overseeing climate-related risks; the material effects of climate-related risks on business plans, strategies and financial statements over various terms; how companies identify and manage climate-related risks; and any transition plans, scenario analyses or internal carbon pricing used by the registrant. There will also be a new requirement to disclose the effect of climate-related severe weather and other conditions within a registrant’s financial statements.
If a registrant has made a so-called net-zero commitment or adopted a plan to reduce its greenhouse gas footprint or exposures, it would be required to disclose the scope of covered activities, how it intends to achieve these goals, progress toward achieving them and the use of carbon offsets toward those goals.
NACHA Expands Same-Day ACH Limit to $1M
As expected, the National Automated Clearing House Association last Friday increased the dollar limit for same-day ACH transactions from $100,000 to $1 million. The change was executed in collaboration with the Federal Reserve and The Clearing House, the network’s two ACH operators.
“The growth of Same Day ACH in just over five years has been phenomenal as the payments community has welcomed this faster payment method,” said NACHA President and CEO Jane Larimer. “The success of Same Day ACH and the enacting of the new $1 million limit is further proof that the modern ACH Network is helping meet America’s growing need for faster payments.”
NACHA previously announced its plans to phase-in ACH limit increases. The second stage will take the limit from $1 million to $10 million in March 2023, and finally to the standard ACH limit of $99,999,999.99 by March 2024.
DOJ Issues Website Accessibility Guidance
The Department of Justice last Friday issued guidance providing additional clarity about website accessibility and how businesses and others can ensure compliance with the Americans with Disabilities Act. The guidance provides examples of website accessibility barriers, clarifies when the ADA requires web content to be accessible and offers tips for improving website accessibility. It also includes links to additional accessibility resources and existing technical standards.
“Even though businesses and state and local governments have flexibility in how they comply with the ADA’s general requirements of nondiscrimination and effective communication, they still must ensure that the programs, services, and goods that they provide to the public – including those provided online – are accessible to people with disabilities,” the guidance noted.
This guidance comes after a letter sent by 181 disability organizations last month requested the DOJ promulgate enforceable online accessibility standards by the end of the current administration.
“PAVE” Report Outlines Pathway to Homeownership Equity
The Biden administration has announced the release of its Interagency Task Force on Property Appraisal and Valuation Equity report designed to address racial and ethnic bias in the home appraisal process. The action plan details a set of commitments and actions, most of which can be taken using existing federal authorities, and include: Steps to enhance oversight and accountability of the appraisal industry and improve agency coordination and collaboration, agency guidance and policies to improve the process by which a valuation may be reconsidered, a proposed rule to establish quality control standards for automated valuation models, removal of educational and experience barriers that make it more expensive and reduces the number of new entrants into the appraisal profession, and the creation of an aggregated database of federal appraisal data to study, understand, and address appraisal bias.
FBI Fin Crimes Chief Calls for Dialogue with Regulators on SAR Objectives
Speaking at an industry event Wednesday, Aaron Tapp, section chief for the Federal Bureau of Investigation’s financial crimes section, told financial crimes professionals that it “might be time to have a conversation” between regulators and law enforcement to discuss how financial institutions can best provide actionable information to law enforcement while meeting their regulatory obligations.
“The [Anti-Money Laundering Act of 2020] was maybe a start in that direction,” Tapp noted. “But I think it may be time for us to sit down and look at how can we get to the core of this problem [in a simpler way]? Technology has evolved, the types of crimes have evolved, we’re seeing all types of evolution in the crypto space – it might be time for that conversation to occur.”
From a law enforcement perspective, Tapp noted that it is useful when filing Suspicious Activity Reports for bankers to “think like an investigator,” and provide as much information as possible about the “subject, victims, venue…what are the actual loss amounts.” He also emphasized the importance of timely communication between financial institutions and law enforcement in cases that require a SAR filing. “The sooner the conversation can occur between the financial institution and the investigative agency, the better,” Tapp said.
Federal Banking Regulators Propose Modernizing Administrative Proceedings Rules
The Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and National Credit Union Administration proposed to update rules governing administrative proceedings for financial institutions to allow the use of electronic communications and technology. The interagency proposal would update the uniform rules of practice and procedure that have largely remained unchanged since 1996.
In the proposal, the Fed said that by 2006, paper pleadings were virtually eliminated in administrative hearings but without rules in place to address electronic pleadings, the administrative law judges opted to dictate procedures regarding electronic filing and other items on an ad hoc basis in their scheduling orders.
The proposal would also remove remaining references to the Office of Thrift Supervision, which was abolished in 2011. Other changes include replacing gender references such as “him or her,” “his or her,” and “himself or herself” with gender neutral terminology and replacing the word “shall” in the rule with the terms “must,” “will,” or other appropriate language. Comments are due 60 days after publication in the Federal Register.
Assistant AG: DOJ Considers Involving CCOs in Corporate Resolutions
To ensure the independence and authority of compliance officers, in all of the Department of Justice’s corporate resolutions regarding AML compliance violations – including guilty pleas, deferred prosecution agreements or non-prosecution agreements – it will now consider requiring both chief executive officers and chief compliance officers to certify that a company has remedied the situation, Assistant Attorney General Kenneth Polite announced during an industry event Wednesday.
In addition, Polite said that in certain resolutions where companies are required to provide annual self-reports to the DOJ on the state of their compliance programs, “we will consider requiring the CEO and the CCO to certify that all compliance reports submitted during the term of the resolution are true, that they are accurate, that they are complete.”
“By taking this step, we are ensuring that chief compliance officers receive all relevant compliance-related info and can voice any concerns they may have prior to certification,” Polite said. “Today’s announcement is not punitive in nature – it is intended to empower compliance professionals to have the data, to have the access, to have the voice and the stature in your organizations to ensure that [the DOJ understands] that your company has an ethical and compliance-focused environment.”
CFPB Issues Guidance Targeting Review Fraud
The Consumer Financial Protection Bureau has issued policy guidance regarding potentially illegal practices related to consumer reviews. The CFPB’s guidance describes certain business practices related to customer reviews that are generally unlawful under the Consumer Financial Protection Act, including:
- Contractual “gag” clauses: Attempting to silence consumers from posting an online review.
- Fake reviews: Laundering fake reviews to improve ratings.
- Review suppression or manipulation: Limiting the posting of negative reviews or manipulating reviews to trick or confuse consumers.
The CFPB said its effort is related to the Federal Trade Commission’s recent vote to put hundreds of businesses on notice about fake reviews and misleading endorsements. It encouraged banks to ensure their customer review practices comply with all applicable laws, including the Consumer Financial Protection Act.