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An Insiders View of Dealing with State Attorneys General: Insights for Financial Services Firms Wednesday, January 18th.

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Presentation on theme: "An Insiders View of Dealing with State Attorneys General: Insights for Financial Services Firms Wednesday, January 18th."— Presentation transcript:

1 An Insiders View of Dealing with State Attorneys General: Insights for Financial Services Firms Wednesday, January 18th

2 2 Agenda Welcome / introduction of subject matter experts (SMEs) State AG and congressional activity round-up Webinar Topics – Dealing with State AGs – the AGs, in context – Interacting with State AGs – four practical concepts – A key best practice – responding to CIDs (and admin. subpoenas, etc.) Concluding remarks

3 3 State AG Activities Roundup Mortgage Foreclosure Multistate Group – Media reports DOJ reaching out beyond the five largest servicers – Indications additional servicers contacted re: settlement outlines State AG activities – Washington, DC, meeting of several AGs (CA, DE, MA, NY, et al.) – Examination of alternatives to Multistate Group settlement talks

4 4 Recess appointment of Director Cordray on January 4 th – Support from some in Congress – e.g., Sen. Reid is confident the appointment will be upheld against any court challenge – Opposing views – e.g., Rep. Patrick McHenry stated that the unprecedented appointment of Mr. Cordray runs counter to the constitutional requirements for a recess appointment…. Press reports say that a hearing with the Director before Rep. McHenrys House Oversight Subcommittee is set for Jan 24 th – CFPB has been active since the recess appointment Startup of non-bank supervision program announced on January 5 th Director Cordray will attend a CFPB field hearing on payday lending in Birmingham, AL on January 19 th Congressional (and other) Activities Round-up

5 5 Dealing With State AGs: The AGs, in Context Current context for State AGs is dynamic – Nearly all states are budget cutting (e.g., California AGs plan to cut over 100 enforcement agents due to fiscal situation) – The Dodd-Frank Act and the CFPB have impacted all state AGs New cooperative relationships with Federal regulators have begun AGs will be testing the parameters of Federal statutory preemption – Outreach to State AGs (and their staffs) may be uniquely timely

6 6 Interacting With State AGs: Four Practical Concepts for Financial Services Firms The Lay of the Land – The State AGs dont occupy exactly the same space, state-by-state Some have independent prosecutorial powers, others dont Independence from the governor and legislature varies, too You need to learn the lay of the land

7 7 Interacting With State AGs: Four Practical Concepts for Financial Services Firms Trademarking – It is up to you to establish your brand with AGs and their staffs Someone needs to be the face of your firm, proactively Learn who to call before you really need to know who to call

8 8 Become a watchdog – Once initial contacts are made, keep them alive – Watch for changes in the AGs staff and in the AGs priorities Interacting With State AGs: Four Practical Concepts for Financial Services Firms

9 9 Sustain your effort – Assume the worst – if theres a media storm on an issue, assume the AG (and staff) will see the worst item, not the best – Reach out to contacts, even if you feel immune from whats on the publics (and probably the AGs) radar screen – Communicate why the AGs concern is with someone else and not you

10 10 A Key Best Practice – Responding to CIDs (and Administrative Subpoenas, etc.) A Civil Investigative Demand (CID) is a demand – not a request – for information – Some states refer to them as administrative subpoenas – May be issued by an AG or state agency (depending on authorizing statute) to any person or entity that may have information related to an investigation – Information sought may include documents, testimony, and responses to interrogatories – Unlike a subpoena, CIDs are issued without judicial oversight – They may be challenged in the courts

11 11 Authority to issue a CID – Statutory authority granted to AGs and other government agencies – CIDs may be broad in scope – California: head of each department has authority to issue CIDs to investigate any violation or potential violation of law, administrative rules, or order issued by the department Defined investigative powers under specific statutory provisions – New York: AG and others have power to issue CIDs for information regarding, among others, potential securities and antitrust violations and consumer fraud A Key Best Practice – Responding to CIDs

12 12 Demand or request for information? – There is no per se requirement to respond to a CID However, the AG or other issuing agency can obtain a court order to compel a response – Failure to respond is then punishable by contempt Some AGs may also compel a response without recourse to the courts New York Martin Act provides the AG authority to issue a subpoena to compel compliance with a CID in matters involving violations of the securities laws A Key Best Practice – Responding to CIDs

13 13 A recipient of a CID may also seek to limit the scope of the CID, extend the time to respond, or challenge its issuance – Negotiate with the AG or issuing agency or move to strike or quash – Relevant factors: Relevance and importance of the information to the investigation Is the recipient a target of, or witness in, the investigation Is the CID within the scope of the authorizing statute Reasonableness of requested extension of time Courts will generally enforce CIDs A Key Best Practice – Responding to CIDs

14 14 Challenging a CID – Motion to set aside, strike, or quash CIDs must meet statutory and judicial requirements – New York: will only be quashed if utterly irrelevant to any proper inquiry. New York v. John Thain: Motion to compel CID for testimony of the former Merrill CEO regarding receipt of bonuses denied despite assertion that the information was confidential University of Virginia v. Cuccinelli: CIDs set aside - Virginias Fraud Against Taxpayers Act requires AG to have reason to believe that the University had relevant information to the investigation, and AG failed to sufficiently allege nature of conduct believed to violate the act A Key Best Practice – Responding to CIDs

15 15 Understand what the CID tells you – Insight into concerns and investigative focus – Use ongoing discussions about compliance to understand AGs concerns and to educate AG on issues Understanding what is and is not available from client – Document Hold memorandum – Hard copy documents – – Electronic documents A Key Best Practice – Responding to CIDs

16 16 Document your cooperation efforts – Document collection efforts – Document efforts to narrow requests based on burden and availability of materials – Document provision of information, documents, and data – Understand ability to resist in court and arguments needed to succeed Interrogatory type requests – Time and effort to respond thoroughly is critical – it is an opportunity to be an advocate A Key Best Practice – Responding to CIDs

17 17 A Key Best Practice – Responding to CIDs Understand what you are providing to AG – Review documents – Analyze data – Beware of Respond to CID but tell your story – Telling your story is not a substitute for, but a supplement to, CID response – Various ways to be effective, but likely will need written submission – Engage on the merits

18 18 Webinar wrap-up; some final thoughts from todays SMEs Conclusion


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