Bloomberg Law: Privacy & Data Security brings you single-source access to the expertise of Bloomberg Law’s privacy and data security editorial team, contributing practitioners,...
The Securities and Exchange Commission and the Commodity Futures Trading Commission April 10 voted unanimously in separate meetings to adopt a joint rule to require certain entities to put in place programs to help protect investors from identity theft.
Section 1088 of the Dodd-Frank Wall Street Reform and Consumer Protection Act shifted certain oversight functions under the Fair Credit Reporting Act from the Federal Trade Commission to the SEC and the CFTC for entities regulated by those agencies.
In February 2012, the commissions issued a joint identity theft proposed rule to protect investors from identity theft by ensuring that regulated entities create and maintain programs to respond to red flags (11 PVLR 417, 3/5/12).
The final rule is “substantially identical” to the proposal, Norm Champ, director of the SEC's Division of Investment Management, said at the SEC's meeting where the rule was considered.
Specifically, the rule requires that certain SEC-regulated entities, such as broker-dealers and investment advisers, set up programs that identify, detect, and respond to identity theft red flags. The CFTC's rule covers entities regulated by that agency, including futures commodity merchants, commodity trading advisers, and commodity pool operators.
For both agencies, however, entities are required to comply with the rule only if they meet the definition of “financial institution” or “creditor” under FCRA. Entities first must determine whether they meet one of these definitions and then determine whether they hold “covered accounts” that likely could be at risk for identity theft, according to SEC staff.
In addition, the rule provides guidance and examples of red flags to help companies set up their programs.
The rule, Champ said, will not be “new” to most of the SEC-regulated entities, because Dodd-Frank “in essence transferred” oversight of the FCRA requirements from the FTC to the SEC and the CFTC. He said the rule does not layer on new requirements or expand their scope.
Commissioner Luis Aguilar, however, noted that certain investment advisers, including advisers to hedge funds and private equity funds, may not have identity theft programs in place and will have to pay “particular attention” to the rule. Such entities were not required to register with the SEC until last year pursuant to Dodd-Frank.
The joint rule will become effective 30 days after publication in the Federal Register, and companies will be required to come into compliance six months after that date.
By Maria Lokshin
The joint proposed rule is available at http://www.sec.gov/rules/proposed/2012/ic-29969.pdf.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)