FAST Act Amendment to Disclosure Requirements

The President of the United States, Barack Obama, signed into law the Fixing America’s Surface Transportation (“FAST”) Act on 4 December 2015. The FAST Act included an amendment of the consumer privacy provisions of the Gramm-Leach-Biley (“GLB”) Act revising the requirement for Financial Institutions to provide an annual privacy disclosure. Investment companies, registered and private fund advisors and broker-dealers, among others, are considered Financial Institutions for GLB Act purposes.

Under the GLB Act amendment, Financial Institutions will not need to provide an annual privacy disclosure if certain conditions are satisfied. Currently, Regulation S-P and Regulation P require Financial Institutions to provide an initial notice to consumers that describes the Financial Institutions’ privacy policy and practices, including a description of the circumstances in which the Financial Institution may disclose non-public personal information of a consumer to third parties. Regulation S-P and Regulation P further required Financial Institutions to provide an annual privacy disclosure describing a Financial Institution’s privacy policy and practices.

The GLB Act amendment eliminates a Financial Institution’s obligation to comply with the annual privacy disclosure requirement, as long as the Financial Institution satisfies two conditions:

  • The Financial Institution does not disclose non-public personal information of consumers to third parties, other than disclosure permitted by an exemption e.g. information-sharing that is necessary for processing or administering a financial transaction requested or authorized by a consumer or information-sharing, including disclosures for the purposes of preventing fraud, responding to judicial process or a subpoena, or complying with federal, state, or local laws; and
  • The Financial Institution has not changed its policies and practices with regard to disclosing non-public personal information from the policies and practices that were disclosed in the most recent disclosure sent to consumers.

The GLB Act amendment does not mean that Financial Institutions no longer need to provide any privacy notice. Financial Institutions are still required to provide an initial privacy notice to consumers (for example, an investment adviser would still be required to provide a privacy notice to individual separately managed account clients and private funds would still be required to provide a privacy notice to investors as part of its standard set of fund offering documents).

The amendments to the GLB Act became effective upon the President’s 4 December signing and therefore may have an impact on investment adviser’s and private fund’s disclosure practices for the fiscal year ending 31 December.

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