The Offi ce of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Offi ce of Thrift Supervision, National Credit Union Administration, Federal Trade Commission, Commodity Futures Trading Commission, and the SEC (together, the “Agencies”) recently proposed amendments to their rules that provide for a safe harbor model privacy form that fi nancial institutions may use to provide disclosures under the privacy rules. Institutions that use the form will receive protection under the safe harbor for purposes of their applicable notice and opt-out requirements. While use of the form is not mandatory, it is expected that most fi nancial institutions will use the model form in order to stay within the safe harbor.
The proposed model form contains standardized information to be provided by fi nancial institutions and, except in limited situations as discussed below, does not allow for a fi nancial institution to customize or explain its own privacy practices to a consumer. The Regulatory Relief Act directs that the proposed model form should (1) be comprehensible to consumers, with a clear format and design; (2) provide for clear and conspicuous disclosures; (3) enable consumers easily to identify the sharing practices of a fi nancial institution and to compare privacy practices among fi nancial institutions; and (4) be succinct, and use an easily readable type font. The proposed model form has either two or three pages, depending on whether the fi nancial institution provides an opt-out form. Each of the pages of the proposed model form are on one side of an 8.5 by 11 inch piece of paper, and there are specifi c minimum font, spacing and stylistic requirements intended to make the model clear and conspicuous.
The SEC’s proposed model form is attached. Under the proposed rule, use of the proposed model form would not be mandatory, but would allow a fi nancial institution to rely on the safe harbor upon publication of the fi nal rule. The proposed rule provides for a one-year transition period after publication of the fi nal rule, during which time the safe harbor with respect to the Agencies’ sample clauses currently contained in the various privacy rules would continue to apply. After the one-year transition period, the safe harbor with respect to those older rules would no longer apply, and the sample clauses would likely be rescinded. The Investment Company Institute (“ICI”) has fi led a comment letter with the SEC on the proposed model form in which it has made several recommendations in connection with the form. Those recommendations include, among other things:
- clarifying that the form could be incorporated into a prospectus or Part II of a Form ADV on the front and back of a page rather than as a stand-alone two- or three-page document;
- developing a web-based model form as an alternative to a pdf version of a paper notice (the electronic version currently favored by the SEC);
- encouraging the Agencies to work together to develop a single joint form; and
- clarifying that a registrant can provide a model privacy form that covers fi nancial institutions other than the registrant’s affi liates as long as the form is accurate with regard to the registrant and the other fi nancial institutions. This recommendation is intended to facilitate the processing of mutual fund transactions by non-affi liated fi nancial institutions.
Comments on the proposal were due by May 29, 2007.