Squire Sanders Attorneys Coach Financial Service Companies in Privacy, Reporting Requirements of Modernization Act

Financial Privacy Is Top Concern for Banks and Their Customers



Apr 10, 2001, 01:00 ET from Squire, Sanders & Dempsey L.L.P.

    CLEVELAND, April 10 /PRNewswire/ -- The Internet and e-commerce have
 created widespread concern among financial companies and their customers about
 financial privacy.
     Squire, Sanders & Dempsey L.L.P., a global law firm, is conducting privacy
 training sessions for financial services clients.  It is doing so in advance
 of a June 30 deadline by which financial companies must have a program to
 protect the privacy of customers' and clients' financial data.
 
     Background
     The privacy requirement is part of the Financial Service Modernization Act
 (FSMA) of 1999.  The Act opened many doors for banks and other financial
 service firms by allowing them to expand into securities underwriting,
 insurance, equity investments and mutual funds.  The law permits banks to form
 financial holding companies (FHCs), which may acquire non-banking subsidiaries
 that can add significant non-interest fee income to a holding company's
 balance sheet.
     The opportunity to expand comes with a price:  By June 30, 2001, each
 financial services company, including FHCs, must have in place a program to
 protect the privacy of all of its clients' financial data.  It must also have
 in place a system for reporting to diverse regulatory agencies.  The American
 Banking Association's Banking Journal recently listed privacy and regulatory
 issues as banks' paramount concerns this year.
     Under Title V of the Act, financial service companies are required to
 notify their customers which other non-retail subsidiaries of their parent
 financial holding company will have access to customers' financial data and
 what kind of information will be shared.
     Financial service companies must disclose their privacy policies and
 practices in writing to their customers at the beginning of the banking
 relationship and annually thereafter. In addition, customers concerned about
 privacy must be able to instruct their bank not to share their financial
 information -- a so-called "opt out" provision.
     Privacy regulations have been issued by various regulators responsible for
 the different facets of an FHC's business:  banking regulators, the Securities
 and Exchange Commission (SEC), the Federal Trade Commission and the National
 Association of Insurance Commissioners.
     "Creating a financial holding company is a relatively simple process,"
 says M. Patricia Oliver, chair of the global financial services practice of
 Squire, Sanders & Dempsey L.L.P.  "But it does create additional compliance
 burdens, as evidenced by the need to comply in some cases with multiple sets
 of privacy regulators.
     "The stakes are high," Oliver continues.  "Done properly, information-
 sharing can quickly translate into cross-selling between and among
 subsidiaries, affiliates and partners in strategic alliances, which can expand
 a bank's customer base and increase its fee income.  But complying with the
 law will not be easy, and with consumer privacy such a hot issue nationwide,
 government regulators, as well as consumer advocacy groups, will be watching
 closely."
     Not only must financial holding companies allow their customers to block
 the sharing of information between subsidiaries, they must make sure that
 companies with which they do business will not share the data of any customer
 who doesn't want it shared.
     In addition, financial holding companies must understand that multiple
 government agencies will regulate different arms of the same company.  For
 example, the same company may have to report on its insurance activities to
 state insurance regulators, but to federal or state banking authorities on its
 banking activities.
     Squire Sanders offers comprehensive legal advice to financial service
 companies of all types.  The firm has a single, integrated financial services
 practice that works with banks, thrifts, insurance companies, investment banks
 and all other types of entities that are now considered part of the ever-
 expanding world of financial services.  While its oldest and largest office is
 in Cleveland, Squire Sanders is an international firm that offers effective
 local and regional service, within and outside the United States.
 
     About Squire Sanders
     The international law firm of Squire, Sanders & Dempsey L.L.P.,
 established in 1890, currently has more than 700 attorneys in 25 locations
 worldwide.  The firm's U.S. offices are located in Cincinnati, Cleveland,
 Columbus, Houston, Jacksonville, Los Angeles, Miami, New York, Palo Alto,
 Phoenix, San Francisco and Washington D.C.  In Europe, offices are located in
 Bratislava, Brussels, Budapest, Kyiv, London, Madrid, Moscow and Prague.
 Asian offices are located in Almaty, Beijing, Hong Kong, Taipei and Tokyo.
 The firm also has associated offices in Milan and Dublin.
 
 

SOURCE Squire, Sanders & Dempsey L.L.P.
    CLEVELAND, April 10 /PRNewswire/ -- The Internet and e-commerce have
 created widespread concern among financial companies and their customers about
 financial privacy.
     Squire, Sanders & Dempsey L.L.P., a global law firm, is conducting privacy
 training sessions for financial services clients.  It is doing so in advance
 of a June 30 deadline by which financial companies must have a program to
 protect the privacy of customers' and clients' financial data.
 
     Background
     The privacy requirement is part of the Financial Service Modernization Act
 (FSMA) of 1999.  The Act opened many doors for banks and other financial
 service firms by allowing them to expand into securities underwriting,
 insurance, equity investments and mutual funds.  The law permits banks to form
 financial holding companies (FHCs), which may acquire non-banking subsidiaries
 that can add significant non-interest fee income to a holding company's
 balance sheet.
     The opportunity to expand comes with a price:  By June 30, 2001, each
 financial services company, including FHCs, must have in place a program to
 protect the privacy of all of its clients' financial data.  It must also have
 in place a system for reporting to diverse regulatory agencies.  The American
 Banking Association's Banking Journal recently listed privacy and regulatory
 issues as banks' paramount concerns this year.
     Under Title V of the Act, financial service companies are required to
 notify their customers which other non-retail subsidiaries of their parent
 financial holding company will have access to customers' financial data and
 what kind of information will be shared.
     Financial service companies must disclose their privacy policies and
 practices in writing to their customers at the beginning of the banking
 relationship and annually thereafter. In addition, customers concerned about
 privacy must be able to instruct their bank not to share their financial
 information -- a so-called "opt out" provision.
     Privacy regulations have been issued by various regulators responsible for
 the different facets of an FHC's business:  banking regulators, the Securities
 and Exchange Commission (SEC), the Federal Trade Commission and the National
 Association of Insurance Commissioners.
     "Creating a financial holding company is a relatively simple process,"
 says M. Patricia Oliver, chair of the global financial services practice of
 Squire, Sanders & Dempsey L.L.P.  "But it does create additional compliance
 burdens, as evidenced by the need to comply in some cases with multiple sets
 of privacy regulators.
     "The stakes are high," Oliver continues.  "Done properly, information-
 sharing can quickly translate into cross-selling between and among
 subsidiaries, affiliates and partners in strategic alliances, which can expand
 a bank's customer base and increase its fee income.  But complying with the
 law will not be easy, and with consumer privacy such a hot issue nationwide,
 government regulators, as well as consumer advocacy groups, will be watching
 closely."
     Not only must financial holding companies allow their customers to block
 the sharing of information between subsidiaries, they must make sure that
 companies with which they do business will not share the data of any customer
 who doesn't want it shared.
     In addition, financial holding companies must understand that multiple
 government agencies will regulate different arms of the same company.  For
 example, the same company may have to report on its insurance activities to
 state insurance regulators, but to federal or state banking authorities on its
 banking activities.
     Squire Sanders offers comprehensive legal advice to financial service
 companies of all types.  The firm has a single, integrated financial services
 practice that works with banks, thrifts, insurance companies, investment banks
 and all other types of entities that are now considered part of the ever-
 expanding world of financial services.  While its oldest and largest office is
 in Cleveland, Squire Sanders is an international firm that offers effective
 local and regional service, within and outside the United States.
 
     About Squire Sanders
     The international law firm of Squire, Sanders & Dempsey L.L.P.,
 established in 1890, currently has more than 700 attorneys in 25 locations
 worldwide.  The firm's U.S. offices are located in Cincinnati, Cleveland,
 Columbus, Houston, Jacksonville, Los Angeles, Miami, New York, Palo Alto,
 Phoenix, San Francisco and Washington D.C.  In Europe, offices are located in
 Bratislava, Brussels, Budapest, Kyiv, London, Madrid, Moscow and Prague.
 Asian offices are located in Almaty, Beijing, Hong Kong, Taipei and Tokyo.
 The firm also has associated offices in Milan and Dublin.
 
 SOURCE  Squire, Sanders & Dempsey L.L.P.