February 2012 Client Alerts

March 6, 2012

Authored by: Bryan Cave

FINRA Issues Guidance on Protection of Customer Accounts

A recent alert from the Financial Industry Regulatory Authority (“FINRA”) is encouraging broker-dealers to reexamine their policies and procedures relating to protection of customer assets and accounts.  FINRA Regulatory Notice 12-05 advises broker-dealers that FINRA has received an increasing number of reports of customer funds being stolen as a result of instructions e-mailed to firms from customer e-mail accounts that have been compromised.  With that notice, FINRA also issued an Investor Alert advising the public about the reported incidents.  To learn more about the Notice and Alert, please click here to read the Alert published by the White Collar Defense & Investigations and Securities Litigation & Enforcement Client Service Groups and Data Privacy & Security Team on February 6, 2012.

Reporting Cybersecurity Risks — New Obligations for Publicly Traded Companies 

Most companies are aware that they may be required to report data security breaches to consumers and, in some instances, state attorneys general, the FTC, or HHS.  Publicly traded companies should bear in mind that they have to notify another group — their investors.  The SEC last year offered  first-of-its kind guidance on when companies should report cybersecurity incidents in their disclosure statements.  To learn more about the new requirements, please click here to read the Alert published by the Data Privacy & Security Team on February 14, 2012.

DOL Issues Final Fee Disclosure Rule

Earlier this year, the Department of Labor issued a final rule on the disclosure requirements for a contract or arrangement for services to a covered plan to be deemed “reasonable” under Section 408(b)(2) of the Employee Retirement Income Security Act of 1973 (“ERISA”).  These disclosure requirements become effective July 1, 2012 and apply to service contracts and arrangements entered into both before and after that date.  To learn more about the disclosures required and what plans or contracts may be excluded from the rule, please  Click here to read the Alert published by the Employee Benefits and Executive Compensation Client Service Group on February 7, 2012. 

Important Limits on Class Action Arbitration Waivers

Companies that face class action claims should take note of two recent federal court decisions that could make it harder to avoid class actions through the use of mandatory arbitration clauses in contracts with customers.  The decisions, one from a California district court and the other from a New York appellate court, emphasize the limits on waivers of class action arbitration, despite recent United States Supreme Court opinions that breathed new life into such waiver provisions.   To learn more about the decisions and the issues considered, please click here to read the Alert published by the Class and Derivative Actions Client Service Group on February 6, 2012.

Court Issues Order Affecting the Sale of Gift Cards in New Jersey

In 2010, New Jersey amended its unclaimed property statute to allow for the escheat of the remaining balance of gift cards after two years of inactivity.  The amended statute also required gift card issuers to retroactively escheat all funds from inactive gift cards sold within the last five years, among other provisions.  A recent Third Circuit opinion partially enjoined enforcement of the new law.  To learn more about the provisions  of the law enjoined and those permitted,  please click here to read the Alert published by the Retail Team on February 14, 2012. 

 New York Trial-Level Courts Uphold Local Laws Banning High Volume Hydraulic Fracturing

A number of local governments in New York State, in response to a highly publicized campaign to prevent the use of high volume hydraulic fracturing to extract natural gas from the Marcellus Shale formation in the State, have enacted local laws prohibiting oil and gas drilling activities within their jurisdictions.  In February, two trial-level courts in New York rejected challenges to those laws.  For a review of the decisions and a quick summary of hydrofracking regulatory initiatives by the New York State Department of Environmental Conservation, Delaware River Basis Commission and U.S. Environmental Protection Agency, please click here to read the Bulletin published by the Environmental client Service Group on February 29, 2012.

Bank Payments as Services Under U.S. Sanctions

It may not be obvious intuitively, but it is worth remembering that U.S. prohibitions on the provision of services to those who are the object of U.S. economic sanctions are regarded by OFAC and most banks as applying to the transfer or remittance of funds.  Prohibitions under EU or other non-U.S. economic sanctions may apply to the provisions of services as well.  Please click here to read a Memorandum published by the International Trade Group regarding how sanctions apply to the transfer or remittance of funds.

Sanctions v. Iran

The Senate Banking Committee has sent to the floor a bill that would significantly expand the extraterritorial reach of U.S. sanctions against Iran by subjecting foreign affiliates owned or controlled by U.S. companies to the same restrictions as their U.S. parents.  Under current law, the U.S. draws a sharp distinction between U.S.-incorporated entities and their foreign affiliates.  To learn more about how this bill would change U.S. sanctions law, please click here to read a Memorandum published by the International Trade Group on February 24, 2012.

Latest OFAC Designation Likely to Disrupt Licensed Transactions with Iran

On January 23, 2012, the Office of Foreign Assets Control (“OFAC”) added Bank Tejarat, Iran’s third-largest bank, to the Specially Designated Nationals List for providing assistance to other Iranian banks and entities sanctioned by OFAC for participating in proliferation activities relating to Iran’s nuclear weapon and missile programs. To learn more about the impact of this action and subsequent action by the European Union, please  click here to read International Regulatory Bulletin No. 494 published February 3, 2012 by the International Trade Group.

Sanctions Against Libya

The President has extended U.S. sanctions against Libya for another year despite the overthrow of Qadhafi.  To read about what the extension means, please click here for the February 24, 2012 Memorandum published by the International Trade Group.

New European Sanctions Against Syria

The EU has announced new sanctions against the Syrian Central bank that require anyone who is a national of a member state or is present within the territory of the EU to freeze all assets of the Syrian Central Bank and several Syrian ministers.  To learn more, please click here to read a Memorandum published by the International Trade Group on February 27, 2012.

 Ineligibility of Freight Forwarders Could Cause Headaches for Defense Trade

On February 16, the government added a list of freight forwarders, all of which are  significantly involved in defense trade, to the Excluded Party List System.  The freight forwarders pleaded guilty to federal antitrust charges, which led to debarment from government contracting and grants.  To learn about the potential problems that could result  from the debarment, please click here for the International Regulatory Bulletin No. 495 published by the International Trade Group on February 24, 2012. 

 Deciphering Proposed Changes to EU Data Protection

On January 25, 2012 the EU Commission published details of a long-awaited proposal for a renewed data privacy concept that would be applicable to EU member states.  While law firms and news sources immediately reported on the proposal, many of the headlines exaggerated the proposal’s direct impact unnecessarily raising concerns among businesses that operate in the EU or sell products to EU consumers.  For a summary of the proposal and the law making process, please click here to read the Bulletin published by the Data Privacy and Security Team on February 6, 2012.

 UK Employment Law Changes for 2012

For a summary of the key changes to UK employment law taking place, please click here to read the February 2012 Briefing published by the Labour and Employment Client Service Group, London.