Regulatory and Legislative
Interview with NASP Member Steve Thomas, Federal Home Loan Bank of Chicago, on the Mortgage Partnership Finance program
Originally established in 1997 as a business line of the Federal Home Loan Bank (FHLB) of Chicago, the Mortgage Partnership Finance program (MPF) program (in partnership with the other FHLBs), enables participating members of the FHLB system - mostly small to midsize community banks and credit unions - to sell fixed-rate loans (and some jumbo adjustable-rate mortgages, or ARM loans) into the secondary mortgage market. It provides these community lenders - some of whom may lack direct access to the secondary market - with more options for offering new mortgage products and/or improved rates for their customers. Click HERE to read the interview with Steve Thomas discussing the program's success.
Department of Labor's Fiduciary Rule to Become Applicable on June 9
On May 22, 2017, new Labor Secretary Alexander Acosta confirmed that the agency's fiduciary rule will no longer be delayed and become applicable on June 9. In an op-ed in The Wall Street Journal Secretary Acosta noted that two provisions will become applicable; one expands the scope of advisers who must act as fiduciaries and the other establishes impartial conduct standards. InvestmentNews provides FAQ's on the transition period from June 9 to January 1, 2018.
Click HERE to read the article in The Wall Street Journal and click HERE to read the FAQ's from InvestmentNews.
CBC Urges Private Sector to “Do Better” on Diversity
On May 16, 2017 the Congressional Black Caucus (CBC) – led by Chairman Cedric Richmond (D-La.), Congresswoman Barbara Lee (D-Calif.), and Congressman G. K. Butterfield (D-N.C.) – sent a letter to the private sector urging them to “do better” when it comes to board, C-suite, government affairs, trade association, and supplier diversity. The letter was sent to board chairs and CEOs at the U.S. Chamber of Commerce, Business Roundtable, Investment Company Institute, and the Organization for International Investment and includes a request for a meeting with these organizations.
In addition to Richmond, Lee, and Butterfield, the letter was signed by 44 other CBC members. Lee and Butterfield are co-chairs of the CBC Diversity Taskforce.
In addition to addressing the lack of diversity at corporations, the letter addresses the same issue at advocacy organizations. There is growing concern in the advocacy community that organizations are less committed to diversity under the Trump Administration because leadership at the White House and executive branch agencies is less diverse than it was under the Obama Administration. Click HERE to view the full letter.
NASP Submits Comment Letter on Proposed Amendments to the Federal Housing Finance Agency (FHFA) Regulations on Minority and Women Inclusion
Through the years NASP also worked closely with various elements of the federal government to keep the government and its instrumentalities informed of the challenges that our members face in trying to shatter the barriers to inclusion. On December 22, 2016, NASP issued a comment letter to the FHFA outlining comments and proposed improvements as well as a sampling of the practices that illustrate some of the degrees through which the regulated entities have gone to avoid inclusion, and to operate at times in a manner that is antithetical to the spirit of section 1116 (“Section 1116”) of the Housing and Economic Recovery Act of 2008 (“HERA”).
These regulations require the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) (together, Enterprises), and the Federal Home Loan Banks (Banks or Bank System) and the Bank System’s Office of Finance (collectively, the regulated entities) to promote diversity and ensure the inclusion and utilization of minorities, women, and individuals with disabilities and minority-, women-, and disabled-owned businesses in all business and activities at all levels, including management, employment, and contracting.
NASP reiterated the willingness to work with FHFA and the regulated entities to achieve the joint goals of (i) creating a culture of diversity and inclusion, and (ii) achieving higher levels of operational efficiency and profitability for the regulated entities. Click HERE to read NASP's comment letter.
The Public Comment period ends on December 27, 2016. Click HERE to read more on the FHFA's website.
February 23, 2016
Department of Labor Proposes Rule to Address Conflicts of Interest in Retirement Advice
The Department of Labor (DOL) has announced its highly anticipated final fiduciary rule, which is intended to help ensure that Americans saving for retirement get investment advice that is in their best interest. The DOL’s fiduciary rule and its exemptions can be accessed on the DOL's website by clicking HERE. To view the full press release from the DOL, click HERE.
Press Release: Waters, Tri-Caucus Announce Diversity Report Next Steps, Responses from Federal Financial Services Regulators
January 8, 2016
In response to a Democratic staff report highlighting shortcomings in personnel diversity policies and practices at seven major financial regulators, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, along with senior members of the panel and members of the Tri-Caucus, released the agencies’ responses to the report’s recommendations for enhancing diversity in the workplace and improving compliance with diversity statutes, particularly section 1116 of the Housing Economic Recovery Act and section 342 of the Dodd-Frank Wall Street Reform Act.
In letters to Ranking Member Waters, the agencies indicated that they have reviewed the report’s recommendations, and made commitments to tackle the persistent challenges women and minorities encounter when seeking access to senior management positions and federal contracts. Ranking Member Waters also announced her intention to host a public roundtable in the coming months as part of her ongoing commitment to monitor regulators’ compliance with diversity initiatives and laws.
“While I am pleased that financial services agencies have expressed a willingness to enhance their efforts to improve diversity among their ranks, I know that we need real action from these agencies for women, minorities, and women- and minority-owned businesses to see results,” said Ranking Member Waters of the Committee on Financial Services. “Diversity isn’t just a ‘buzzword.’ It’s an essential component of any 21st century workforce, especially in the Federal government, which is why I’m looking to the financial services regulators to lead, and not follow, when it comes to this issue.”
“We are pleased that financial service agencies are demonstrating a commitment to greater African American inclusion in the workforce,” said Congressional Black Caucus Chairman G. K. Butterfield. “As we have stated before, a commitment to diversity at all levels is commendable but results are critical to ensuring that the workforce truly represents the United States.We look forward to financial service agencies making diversity not only a priority, but a reality.”
Congressional Asian Pacific American Caucus Chairwoman Judy Chu added, “I am encouraged that financial services agencies have made commitments to improve diversity and inclusion efforts that have been sorely lacking in this sector. As Chair of the Congressional Asian Pacific American Caucus, I know that our government works best when it reflects the diversity of our nation. I commend Ranking Member Waters for her leadership, and I look forward to working with her and my Tri-Caucus colleagues to ensure that financial services regulators reaffirm the commitments and values espoused in Dodd Frank and prioritize diversity among their ranks.”
“I appreciate the agencies’ responses to the report and hope their words are followed by actions. Our federal financial services agencies have a direct impact on the lives of all Americans, and employing a diverse workforce that is more reflective of the American people will only help them better understand the needs of the communities they serve. I look forward to continuing to work with my colleagues to ensure these agencies comply with existing diversity statutes and continue to make progress toward closing the diversity gap,” commented Rep. Torres on behalf of the Congressional Hispanic Caucus.
Rep. Al Green continued, “As the Ranking Member of the Financial Services Oversight and Investigations Subcommittee, I was honored to work under the leadership of the Honorable Maxine Waters to advocate for the auditing of workforce diversity within the federal financial regulatory agencies, which resulted in a report on this issue. I am heartened that the financial services agencies, have as a result of the report, indicated that they will work to improve diversity at their agencies. However, I still believe we need immediate, proactive remedies to have a meaningful impact on diversity deficiencies within the federal government—the largest employer in the United States. As a nation, we must continue to work to improve the inward and upward inclusion of minorities and women.”
“I am pleased that federal financial agencies have acknowledged the need to make deeper commitments in promoting and advancing the fair inclusion of women and minorities within the federal government. Federal agencies must do better; therefore, it is crucial that federal regulators fully develop diversity policies and initiatives required by section 342 of the Dodd-Frank Wall Street Reform Act to ensure the competitiveness of the U.S. in a global economy. This nation’s diversity is one of our greatest assets, it is time our government and financial services industries reflected that,” concluded Rep. Joyce Beatty, a member of the Financial Services Committee who is leading efforts to implement diversity provisions including section 1116 of the Housing and Economic Recovery Act of 2008 and section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Read the agency letter responses here.
The Federal Housing Finance Agency (FHFA) Released the Office of Minority and Women Inclusion Strategic Plan
The FHFA's OMWI fiscal year 2016 to fiscal year 2018 goals and objectives include: Design a Comprehensive OMWI Operational Structure Identify the components, and design an operational structure necessary for the effective and efficient delivery of OMWI programs and services; develop Clear and Meaningful Standards Develop standards for implementing D&I within the agency and guidance for use by the regulated entities; deliver Meaningful OMWI Communication Educate internal and external stakeholders on the OMWI mission and the inherent benefits and opportunities in achieving its objectives; strengthening the Understanding of Diversity, Inclusion, and Equal Opportunity Enhance understanding of the OMWI and EEO missions and ownership of the roles and responsibilities in fulfilling the missions, through knowledge, education, and training, both within the agency and for its regulated entities; and drive FHFA Cultural Awareness Serve as a catalyst for identifying and addressing FHFA’s cultural inclusion challenges and opportunities.
Click HERE to view the plan.
SEC Adopts New Measures to Curtail Pay to Play Practices by Investment Advisers
Washington, D.C., June 30, 2010
The Securities and Exchange Commission today voted unanimously to approve new rules to significantly curtail the corrupting influence of "pay to play" practices by investment advisers.
Pay to play is the practice of making campaign contributions and related payments to elected officials in order to influence the awarding of lucrative contracts for the management of public pension plan assets and similar government investment accounts. The rule adopted by the SEC today includes prohibitions intended to capture not only direct political contributions by investment advisers, but also other ways that advisers may engage in pay to play arrangements.
"The selection of investment advisers to manage public plans should be based on the best interests of the plans and their beneficiaries, not kickbacks and favors," said SEC Chairman Mary L. Schapiro. "These new rules will help level the playing field, allowing advisers of all sizes to compete for government contracts based on investment skill and quality of service."
The new SEC rule has three key elements:
The new rule becomes effective 60 days after its publication in the Federal Register. Compliance with the rule's provisions generally will be required within six months of the effective date. Compliance with the third-party ban and those provisions applicable to advisers to registered investment companies subject to the rule will be required one year after the effective date.
Across the country, state and local governments manage money as part of many important public programs. Such programs include public pension plans that pay retirement benefits to government employees, retirement plans in which teachers and other government employees can invest money for their retirement, and plans that allow families to invest money for college (commonly known as "529 plans").
The assets overseen by these governments are substantial. Public pension plans alone hold more than $2.6 trillion of assets and represent one-third of all U.S. pension assets. 529 plans today hold approximately $100 billion in assets.
The Role of an Investment Adviser
To help manage this money, state and local governments often hire outside investment advisers. These investment advisers may directly manage the money in the pension funds or government programs for these state and local governments.
In some cases, these advisers may provide advice to the governments about which investments they should make, or which investment options they should make available as choices to workers investing for retirement or families investing for college. Additionally, the advisers may manage the mutual funds or other investments in which employees' or families' money is invested.
In return for their advice, the investment advisers typically charge the governments fees that come out of the assets of the pension funds for which the advice is provided. If the advisers manage mutual funds or other investments that are options in a plan, the advisers receive fees from the money in those investments.
Selecting an Investment Adviser
The investment advisers are often selected by one or more trustees who are either themselves elected officials, or are appointed by elected officials. While such a selection process is common, the fairness of the selection process can be undermined in two ways.
On the one hand, the process can be undermined when advisers seeking to do business with state and local governments make political contributions to elected officials or candidates, hoping to influence the selection process. On the other hand, elected officials or their associates may ask advisers for political contributions, or otherwise foster a perception that only advisers who make contributions will be considered for selection. Hence the term: "pay to play."
In recent years, the SEC has charged investment advisers with engaging in pay to play practices. Investment advisers who engage in such practices compromise their obligations to put their clients' interests first. Pay to play practices distort the process by which investment advisers are selected and can harm the pension, retirement or 529 plans, which may receive inferior advisory services and pay higher fees. Pay to play practices also create an uneven playing field among investment advisers, and may hurt smaller advisers who cannot afford the required contributions.
Prohibitions of the Pay to Play Rule
Advisers and government officials engaging in pay to play practices may try to hide the true purpose of contributions or payments. The SEC today adopted a rule that includes prohibitions intended to capture not only direct political contributions by advisers, but other ways advisers may engage in pay to play arrangements.
Restricting Political Contributions
Under the new rule, an investment adviser who makes a political contribution to an elected official in a position to influence the selection of the adviser would be barred for two years from providing advisory services for compensation, either directly or through a fund.
The rule applies to the investment adviser as well as certain executives and employees of the adviser. Additionally, the rule applies to political incumbents as well as to candidates for a position that can influence the selection of an adviser.
There is a de minimis provision that permits an executive or employee to make contributions of up to $350 per election per candidate if the contributor is entitled to vote for the candidate, and up to $150 per election per candidate if the contributor is not entitled to vote for the candidate.
Banning Solicitation of Contributions
The pay to play rule prohibits an adviser and certain of its executives and employees from asking another person or political action committee (PAC) to:
1. Make a contribution to an elected official (or candidate for the official's position) who can influence the selection of the adviser.
2. Make a payment to a political party of the state or locality where the adviser is seeking to provide advisory services to the government.
Banning Certain Third-Party Solicitors
The pay to play rule also prohibits an adviser and certain of its executives and employees from paying a third party, such as a solicitor or placement agent, to solicit a government client on behalf of the investment adviser, unless that third party is an SEC-registered investment adviser or broker-dealer subject to similar pay to play restrictions.
Restricting Indirect Contributions and Solicitations
Finally, the pay to play rule would prohibit an adviser and certain of its executives and employees from engaging in pay to play conduct indirectly, such as by directing or funding contributions through third parties such as spouses, lawyers or companies affiliated with the adviser, if that conduct would violate the rule if the adviser did it directly. This provision prevents advisers from circumventing the rule by directing or funding contributions through third parties.