Nutter Bank Report, May 2014

The Nutter Bank Report is a monthly electronic publication of the firm's Banking and Financial Services Group and contains regulatory and legal updates with expert commentary from our banking attorneys.

Headlines 1. Banking Law Modernization Bill Progressing in Massachusetts Legislature 2. FDIC Recommends Strategies for Community Banks to Partner with CDFIs 3. Federal Reserve Amends the Identity Theft Red Flags Rule; Repeals Reg DD and Reg P 4. SEC Provides Guidance on Investment Adviser Due Diligence for Alternative Investments 5. Other Developments: Privacy, Thrifts and Mortgage Rules

1. Banking Law Modernization Bill Progressing in Massachusetts Legislature

   The House Ways and Means Committee of the Massachusetts General Court has reported out the banking law modernization bill sponsored by the Massachusetts Bankers Association, House 3881, as a new draft. The bill, now House 4110, was ordered on May 27 to a third reading where it will be reviewed by House Counsel, a significant step for the bill in the legislative process. Among its more significant provisions, the bill would simplify corporate governance provisions for Massachusetts savings banks, co-operative banks and trust companies now contained in Chapters 168, 170 and 172 of the General Laws of Massachusetts into a single chapter, a new Chapter 167J. The bill would replace a number of statutory provisions that specify various reserve and surplus account requirements with a general requirement that a bank must at a minimum be adequately capitalized as determined by the FDIC or the Commissioner of Banks. The bill would also replace statutory provisions that specify the contents of periodic reports that bank management must submit to the full board of directors or board of trustees with a provision that would allow the board to focus on matters of general importance to banking regulators, such as financial soundness, policies, strategic planning, management oversight and oversight of certain regulatory compliance programs. While the statute would still mandate periodic management reports, it would allow the board to determine the information, trends and analysis the reports would contain.

   Nutter Notes: The bill would also address certain practical considerations for mutual banks. For example, it would allow the trustees of a mutual savings bank (rather than the corporators) to elect the president of the bank. The bill would also authorize a mutual savings or co-operative bank board to fill up to 2 vacancies on the board arising between annual meetings, and it would authorize a board of a mutual bank to appoint officers during the year (rather than waiting until the next annual meeting). The banking law modernization bill would also address several areas in which state and federal financial services laws overlap with potentially confusing and redundant regulatory compliance and reporting burdens. The bill would provide that a state-chartered bank is required to comply with certain Federal consumer financial protection laws, such as the Electronic Fund Transfers Act and the Fair Credit Billing Act, and would grant the Commissioner of Banks examination and enforcement authority with respect to...