FinCEN Finalizes Rule on Use of FinCEN Identifiers in Beneficial Ownership Information Reporting

Regulatory Developments

FinCEN Finalizes Rule on Use of FinCEN Identifiers in Beneficial Ownership Information Reporting
On November 8, FinCEN issued a final rule (Rule) regarding the use of entity FinCEN identifiers for reporting beneficial ownership information under the CTA. The Rule amends the September 2022 FinCEN final rule regarding beneficial ownership information reporting under the CTA. The Rule clarifies that a reporting company may report another entity’s FinCEN identifier and full legal name in lieu of the information required of the reporting company’s beneficial owners if (i) the other entity has obtained a FinCEN identifier and provided that FinCEN identifier to the reporting company, (ii) an individual is or may be a beneficial owner of the reporting company by virtue of an interest in the reporting company that the individual holds through an ownership interest in the other entity, and (iii) the beneficial owners of the other entity and of the reporting company are the same individuals.

Federal Agencies Announce 2024 Dollar Thresholds for TILA and CLA
On November 13, the CFPB and Federal Reserve announced their annual adjustment to the dollar thresholds used to determine whether consumer credit and lease transactions, other than private education loans and loans secured by real property, are subject to certain requirements under Regulations M and Z. Effective January 1, 2024, the thresholds will increase from $66,400 to $69,500, meaning that transactions $69,500 or less will be subject to the protections of the regulations.

Also on November 13, the CFPB, the Federal Reserve, and OCC announced that the threshold for whether higher-priced mortgage loans are subject to special appraisal requirements will increase from $31,000 to $32,400, effective January 1, 2024, meaning that mortgage loans of $32,400 or less will be exempt from TILA’s special appraisal requirements.

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FDIC Proposes Guidelines Establishing Standards for Corporate Governance and Risk Management for Covered Institutions with Total Assets of $10 Billion or More
On October 3, the Federal Deposit Insurance Corporation (FDIC) approved proposed guidelines establishing standards for corporate governance and risk management for covered institutions with total assets of $10 billion or more (Proposed Guidelines). The Proposed Guidelines were approved by a vote of 3 – 2, with Chairman Gruenberg and Directors Chopra and Hsu voting in favor of the proposal and Vice Chairman Hill and Director McKernan voting against it.

The Proposed Guidelines would provide standards for corporate governance and risk management for covered institutions, including standards outlining the general obligations and duties of the board of directors, expectations for board composition and board committee structures and responsibilities, and expectations for the establishment of an independent risk management function incorporating a three lines-of-defense model.

The Proposed Guidelines were prompted by the FDIC’s observations that financial institutions with poor corporate governance and risk management practices were more likely to fail. In the view of the FDIC, the three lines-of-defense model, together with the proposed, expanded duties and oversight of the board, are intended to ensure a bank’s safety and soundness and reduce the likelihood of its failure and the magnitude of any loss. The establishment of multiple checks within a bank’s risk management function and program are intended to prevent a “single point of failure” within the bank.

Read more about this topic in a recent client alert.

UK HNW and Sophisticated Investor Exemptions: More Financial Promotion Changes
Goodwin previously wrote on the impact of changes to the financial promotion rules that came into effect earlier this year. On November 7, the UK Government published the proposed changes to the Financial Promotion Order 2005 (FPO). The proposed changes accompanied its response to its consultation on the changes to the FPO exemptions for high-net-worth individuals and sophisticated investors. The changes will result in:

• Raised financial thresholds to qualify for the exemptions to account for inflation
• Tightened eligibility criteria to reduce the risk of capturing ordinary consumers
• More robust statements that investors will be required to complete when using the exemptions

The changes are due to come into effect on January 31 2024. The Financial Conduct Authority will also likely consult on further changes to its rules. We outline these changes in this client alert.

On-Demand Webinar: Corporate Transparency Act (CTA) Compliance for Private Investment Funds
On November 7, Goodwin hosted an overview of the CTA specific to Private Investment Funds. You can view a recording of that webinar and the materials can be found here.

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