THE BIG PICTURE
For the latest advice for companies dealing with the fallout of the coronavirus, be sure to check out Paul Hastings’ targeted series: https://www.paulhastings.com/coronavirus
Public life ground to a halt in many areas of the United States and across the globe as officials implemented increasingly drastic social distancing measures to slow the spread of the coronavirus. The NBA suspended its season after a player tested positive for the virus, and the NHL quickly followed suit. On Wednesday, in an Oval Office address, the President announced a 30-day ban on travel from the European continent as the WHO formally declared the outbreak a pandemic. Confusion over the parameters of the administration’s policy led to chaos at airports as Americans abroad rushed to return home. Over the weekend, the ban was extended to the UK and Ireland. Cases in the U.S. topped 3,000 as of Sunday and top health officials such as Anthony Fauci warned the U.S. could face a spike in fatalities if we “go about our daily lives and not worry.” Over the weekend the CDC issued a recommendation that events with more than 50 people be canceled or postponed for the next 8 weeks.
On Friday, the President declared a national state of emergency, freeing up US$50B to respond to the rapidly evolving threat. In a rose garden address surrounded by business leaders, the President sought to assuage concerns that had rocked the stock market earlier in the week, leading to a rally before the closing bell. An 11 year bull market had ended on Wednesday after the largest single day drop since 1987. After facing fierce criticism over the delays in testing capacity that have hindered the national response, the President outlined corporate partnerships with the aim of eventually setting up drive-through testing in parking lots around the country. The President also announced plans to waive interest on all student loans held by federal government agencies.
After days of intensive negotiations between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin, the House voted 363-40 to pass H.R. 6201, the Families First Coronavirus Response Act, which would provide increased access to free testing, expanded sick leave benefits and US$1B in food aid. The vote came after the President announced his support via a series of tweets. Senate Majority Leader Mitch McConnell canceled a weeklong Senate recess to enable the chamber to consider and pass the measure, which they are expected to do early this week.
Another set of primaries were held on Tuesday, with the results further cementing former Vice President Joe Biden’s frontrunner status for the nomination. Biden emerged victorious in Idaho, Missouri, Mississippi, Michigan and Washington, with Sen. Bernie Sanders carrying only North Dakota. The outbreak has impacted the trajectory of the 2020 presidential race, with Georgia and Louisiana postponing primary votes until May. The DNC decided to move Sunday’s debate from Arizona to Washington, D.C. and decided to forgo a studio audience amid concern over coronavirus, while both Biden and Sanders canceled rallies.
Other highlights of last week include:
- The D.C. Circuit announced that it would hear en banc cases involving the House’s efforts to enforce a subpoena of former White House Counsel Don McGahn, and the House’s right to sue to block border wall construction. Both cases are set for oral argument April 28.
- The U.S. conducted retaliatory airstrikes in Iraq on Thursday following the death of U.S. and British service members in a rocket attack earlier in the week.
LAST WEEK ON THE HILL
HOUSE FINANCIAL SERVICES COMMITTEE
Waters Leads Letter Urging SEC to Protect Investors and Promote International Transparency: On Friday, Committee Chairwoman Maxine Waters (D-CA) led other members in sending a letter to SEC Chairman Jay Clayton, calling on the agency to issue a strong final rule to implement Section 1504 of Dodd-Frank, and extend the comment period to allow the public to provide input on the changes proposed in the rule. The lawmakers wrote, “in particular, we consider it essential that the final rule, at a minimum, be consistent with the existing international standard of oil, gas and mining transparency in order to maintain United States leadership on anti-corruption efforts and to fulfill the statutory directive.”
SENATE BANKING COMMITTEE
Hearing on “The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress”: On Tuesday, the full Committee met to receive testimony from Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger on the CFPB’s semiannual report, including key initiatives undertaken by the CFPB in the last year, Director Kraninger’s priorities for the CFPB in the upcoming work period, and additional legislative or regulatory opportunities to encourage financial innovation and widen access to financial products and services. Prior to the hearing, Committee Democrats released a report detailing the ways the agency has failed to live up to its mission under Director Kraninger’s leadership, including failing to defend the constitutionality of the CFPB, refusing to hold payday lenders accountable when they take advantage of servicemembers, letting student loan servicers off the hook and failing to enforce civil rights protections.
- Honorable Kathleen L. Kraninger, Director, Consumer Financial Protection Bureau
LEGISLATION INTRODUCED AND PROPOSED
H.R. 6192: Rep. Andy Barr (R-KY) introduced H.R. 6192, which would require the Secretary of the Treasury to honor the 100th anniversary of completion of coinage of the “Morgan Dollar” and the 100th anniversary of commencement of coinage of the “Peace Dollar.”
S. 3417: Sen. Patty Murray (D-WA) introduced the S. 3417, the Information Needed for Financial Options Risk Mitigation (INFORM) Act, which would require pension plans that offer participants and beneficiaries the option of receiving lifetime annuity payments as lump sum payments, to meet certain notice and disclosure requirements. In a statement, Murray argued that “No one should ever have to make a decision that could seriously affect their plans to securely retire without being given all the information they need to understand the consequences.”
THIS WEEK ON THE HILL
House Financial Services Committee Postpones March Hearings: On Thursday, House Financial Services Committee Chairwoman Maxine Waters announced the postponement of all remaining public hearings for March due to the urgent public health crisis resulting from the pandemic coronavirus.
Federal Reserve Announces Emergency Coronavirus Action: On Sunday, the Federal Reserve announced that it would cut interest rates and buy billions in bonds and mortgage backed securities in an attempt to bolster the economy. In a statement the Board acknowledged the effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook. In light of those developments, the Committee has decided to lower the target range for the federal funds rate to 0 to 1/4 percent. The Committee noted that it expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.
Agencies Encourage Financial Institutions to Meet Financial Needs of Customers and Members Affected by Coronavirus: On Monday, the Federal Reserve, CFPB, FDIC, NCUA, OCC, and CSBS issued a joint statement encouraging financial institutions to meet the financial needs of customers and members affected by the coronavirus. The agencies acknowledged the potential impact of the coronavirus on the customers, members, and operations of many financial institutions and noted that they will provide appropriate regulatory assistance to affected institutions subject to their supervision.
Federal and State Financial Regulators Issue Interagency Statement on Supervisory Practices Regarding Financial Institutions Affected by Tornadoes in Tennessee: On Thursday, the Federal Reserve, CSBS, FDIC, NCUA, OCC, and Tennessee Department of Financial Institutions, issued a statement recognizing the serious impact of tornadoes in Tennessee on the customers and operations of many financial institutions and noted that they will provide appropriate regulatory assistance to affected institutions subject to their supervision. The agencies encouraged institutions operating in the affected areas to meet the financial services needs of their communities.
FINRA Issues Guidance on Pandemic-Related Business Continuity Planning and Regulatory Relief: On Monday, the Financial Industry Regulatory Authority released guidance reminding member firms to consider pandemic-related business continuity planning, including whether their business continuity plans (BCPs) are sufficiently flexible to address a wide range of possible effects in the event of a pandemic in the United States. Each member firm was also encouraged to review its BCP to consider pandemic preparedness and to review its emergency contacts to ensure that FINRA has a reliable means of contacting the firm. FINRA also provided pandemic-related guidance and regulatory relief to member firms from some requirements regarding oversight in the face of remote office or telework arrangements. As coronavirus related risks decrease, member firms were told they should expect to return to meeting any regulatory obligations for which relief has been provided.
SEC Adopts Investor Disclosure Improvements for Variable Annuities and Variable Life Insurance Contracts: On Wednesday, the SEC announced that it has adopted a new rule and related form and rule amendments to simplify and streamline disclosures for investors about variable annuities and variable life insurance contracts. The changes permit the use of a concise, reader-friendly prospectus designed to improve investors’ understanding of the contracts’ features, fees, and risks. The framework’s use of layered disclosure and technology will provide investors with a roadmap so that they can more easily access information that they need to make an informed investment decision.
SEC Adopts Amendments to Reduce Unnecessary Burdens on Smaller Issuers by More Appropriately Tailoring the Accelerated and Large Accelerated Filer Definitions: On Thursday, the SEC adopted amendments to the accelerated filer and large accelerated filer definitions. The amendments will more appropriately tailor the types of issuers that are included in the definitions, thereby reducing unnecessary burdens and compliance costs for certain smaller issuers while maintaining investor protections. As a result of these amendments, smaller companies will no longer be required to obtain a separate attestation of their ICFR from an outside auditor.
SEC Staff Provides Guidance to Promote Continued Shareholder Engagement, Including at Virtual Annual Meetings, for Companies and Funds Affected by the Coronavirus: On Friday, the SEC announced that the SEC staff has published guidance to assist public companies, investment companies, shareholders, and other market participants affected by COVID-19 with their upcoming annual shareholder meetings. The guidance is designed to facilitate the ability of companies to hold these important meetings, including through the use of technology, and engage with shareholders while complying with the federal securities laws. “The SEC staff recognizes that many public companies and other market participants are transitioning to teleworking, virtual meetings and other contingency measures to address health concerns,” said SEC Chairman Jay Clayton. “Our staff stands ready to facilitate these transitions, and we encourage market participants to contact us with requests for guidance or relief. The SEC has itself moved to teleworking and virtual meetings and remains fully operational.”
SEC Takes Targeted Action to Assist Funds and Advisers, Permits Virtual Board Meetings and Provides Conditional Relief from Certain Filing Procedures: On Friday, the SEC announced regulatory relief for funds and investment advisers whose operations may be affected by the coronavirus. The relief provided covers in-person board meetings and certain filing and delivery requirements for certain investment funds and investment advisers. The impacts of the coronavirus may delay or prevent funds and advisers operating in affected areas from meeting certain regulatory obligations due to restrictions on large gatherings, travel and access to facilities, the potential limited availability of personnel, and similar disruptions. The relief is designed to enable funds and advisers to meet those obligations and to continue their operations, while recognizing that there may be temporary disruptions outside of their control.
CFTC Postpones Agriculture Conference, Relocates Open Meeting to Washington: On Wednesday, the CFTC announced that it would postpone this year’s Agricultural Commodity Futures Conference, which was scheduled to take place April 1-2 in Overland Park, Kansas, as well as relocate its open meeting scheduled for March 31 at the Federal Reserve Bank of Kansas City to CFTC headquarters in Washington. Chairman Heath Tarbert said in a statement, “The CFTC’s top priority is the health and safety of our employees and members of the public who attend our events. We continue to monitor the situation closely. In the meantime, the agency continues normal operations across all four of our offices, and the Commission will continue to conduct public rulemakings.”
CFTC to Hold an Open Commission Meeting on March 19: On Thursday, the CFTC announced that it will hold an open meeting on Thursday, March 19 at 10:00 a.m. to consider the following: (1) Final Rule: Amendment to Regulation 23.161—Compliance Schedule Extension for Initial Margin Requirements for Uncleared Swaps; (2) Proposed Rule: Amendments to Compliance Requirements for Commodity Pool Operators on Form CPO-PQR; (3) Final Interpretive Guidance: Retail Commodity Transactions Involving Certain Digital Assets; and (4) Other Commission Business. As a precaution due to the coronavirus, members of the public, including media, will not be able to attend the open meeting in person.
FDIC Extends Comment Period on Modernizing Agency's Signage & Advertising Requirements: On Wednesday, the FDIC extended the public comment period for its Request for Information (RFI) on potential ways to modernize the FDIC’s sign and advertising rules, last updated in 2006. Interested parties responding to FDIC’s RFI may now submit comments through April 20, 2020.
Waters Urges FDIC Not to Grant ILC Charters until Agency Finalizes Upcoming Rule: On Friday, House Financial Services Committee Chair Maxine Waters (D-CA), wrote to FDIC Chair Jelena McWilliams, calling on the agency not to grant any new Industrial Loan Company (ILC) charters until after the agency receives and considers feedback on a forthcoming new regulatory proposal regarding ILCs. Waters wrote that, “[t]o the extent the FDIC issues a proposal for public comment that will change the rules for ILCs and their parent companies as soon as next week, I would encourage the FDIC not to approve any new ILC application until after the agency receives and considers feedback on the new regulatory proposal from experts, stakeholders, and Congress and finalizes any new rules.”
Small Business Administration to Provide Disaster Assistance Loans for Small Businesses Impacted by Coronavirus: On Thursday, the SBA announced that it would provide Economic Injury Disaster Loans of up to US$2M in assistance for a small business. The loans will provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. Additionally, the SBA affirmed that it will continue to assist small businesses with counseling and navigating their own preparedness plans through its network of 68 District Offices and numerous Resource Partners located around the country.
FCC Chairman Launches “Keep Americans Connected Pledge”: On Friday, FCC Chairman Ajit Pai called on broadband and telephone service providers to promote connectivity for Americans impacted by the disruptions caused by the coronavirus pandemic by taking the “Keep Americans Connected Pledge” to not terminate residential or small business consumers for the next 60 days, open access to public Wi-Fi hotspots, and waive late fees. Nearly 70 providers have taken the pledge.
COMINGS AND GOINGS AT THE AGENCIES
Division of Corporation Finance Chief Accountant and Disclosure Review Program Director Kyle Moffatt to Leave SEC: On Thursday, the SEC announced that Kyle Moffatt, Chief Accountant and Disclosure Program Director in the Division of Corporation Finance, would leave the agency in March after nearly 20 years of public service. Upon Mr. Moffatt’s departure, Lindsay McCord, Deputy Chief Accountant in the Division of Corporation Finance, will become Acting Chief Accountant.
OTHER NOTEWORTHY ITEMS
Brown Calls on Administration to Address Federally-Assisted Housing Coronavirus Concerns: On Wednesday, Sen. Sherrod Brown (D-OH), who serves as Ranking Member of the Senate Banking Committee wrote to Vice President Mike Pence, Secretary Ben Carson, and Secretary Sonny Perdue asking that the Administration and the White House Coronavirus Task Force take steps to address the health and economic concerns of millions of Americans who live in federally-assisted housing properties. Brown called on the Administration to engage with residents, owners, and managers of federally-assisted housing to provide guidance on how to keep residents healthy and safe and to work to prevent evictions and an increase in homelessness due to Coronavirus.
Brown Again Calls for FSOC Briefing on Coronavirus Response: On Wednesday, Sen. Sherrod Brown
(D-OH), who serves as Ranking Member of the Senate Banking Committee called on Treasury Secretary Steven Mnuchin, Chair of the Financial Stability Oversight Council (FSOC), and FSOC member agencies to schedule a meeting of the Council and brief the Senate Banking Committee on the Council’s plan to address the threat of an economic downturn due to coronavirus.