As Chair of the Brooklyn Bar Association's Banking Committee, Financial Institutions Co-Chair Pinchus D. Raice sent a letter to the Board of Governors of the Federal Reserve System ("Board") in August 2019 commenting on the Board's proposed amendments to its regulations concerning confidential supervisory information ("CSI"). CSI, as defined by the Board, includes matters contained in or related to examination reports, including but not limited to examination ratings and matters requiring attention and immediate attention.
While Mr. Raice applauded the Board for proposing to allow supervised financial institutions to disclose CSI to their outside legal counsel without seeking the Board's prior written authorization, he questioned the necessity and wisdom of requiring financial institutions to obtain a multi-part written agreement from outside counsel concerning the use of CSI prior to disclosing CSI to outside counsel. As Mr. Raice explained: "Upon receiving a report of examination . . . a supervised financial institution should be able to disclose that report to counsel immediately in order to obtain counsel's timely and informed advice." Mr. Raice also noted that the Office of the Comptroller of the Currency ("OCC"), the National Credit Union Administration ("NCUA"), and the Bureau of Consumer Financial Protection ("CFPB") currently permit supervised financial institutions to disclose CSI to outside legal counsel without requiring written agreements from counsel, and suggested that the "Board should solicit input from the OCC, the NCUA, and the CFPB as to those agencies' experiences with their more streamlined and less burdensome regulations pertaining to the disclosure of confidential supervisory information to legal counsel."
The Board's final rule adopts the OCC standard for the disclosure of CSI to outside legal counsel. It permits disclosures to a supervised financial institution's outside legal counsel when the disclosures are "necessary or appropriate in connection with the provision of legal . . . services," and removes – as recommended by Mr. Raice – the proposed provision that would have conditioned disclosures to outside legal counsel on counsel executing specific written agreements with respect to counsel's use of CSI.
The Board's final rule is effective 30 days after publication in the Federal Register.
Mr. Raice commented: "The Board's final rule sensibly allows supervised financial institutions to share confidential supervisory information with their outside legal counsel when necessary and appropriate in connection with the provision of legal services. The New York State Department of Financial Services ("DFS"), which has proposed to require a written agreement from counsel before allowing a supervised financial institution to disclose DFS confidential supervisory information to counsel, should take note of the Board's determination that such a requirement is unwarranted."
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