
Robert A. Marsico
Partner
201-896-7165 rmarsico@sh-law.comFirm Insights
Author: Robert A. Marsico
Date: October 16, 2018
Partner
201-896-7165 rmarsico@sh-law.comWhen it comes to regulatory compliance, businesses have to contend with local, federal, and state laws. There are also guidance, advisories, policy statements, and directives from agencies ranging from the Internal Revenue Service to the New Jersey Department of Labor.
On the federal level, agency “guidance” has come under fire for supplanting the regulatory rulemaking process and essentially taking on a life of its own. In practice, guidance is intended to clarify an existing regulation. Therefore, it is not subject to the notice and comment requirements of the Administrative Procedures Act. However, critics contend that agencies sometimes use guidance to extend or amend regulations without going through the formal process.
In response to criticism, several federal financial regulators recently issued a statement “clarifying the role of supervisory guidance and to describe the agencies’ approach to supervisory guidance.” The agencies include the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency. Such supervisory guidance often takes the form of interagency statements, advisories, bulletins, policy statements, and questions and answers to the supervised institutions.
In their Interagency Statement Clarifying the Role of Supervisory Guidance, the agencies aim to explain the role of supervisory guidance and distinguish it from laws and regulations. Most notably, they confirm that supervisory guidance does not have the force and effect of law.
“Unlike a law or regulation, the supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance,” the agencies state. “Rather, supervisory guidance outlines the agencies’ supervisory expectations or priorities and articulates the agencies’ general views regarding appropriate practices for a given subject area.”
At the same time, the agencies also highlight that guidance can boost compliance efforts. “Supervisory guidance often provides examples of practices that the agencies generally consider consistent with safety-and-soundness standards or other applicable laws and regulations, including those designed to protect consumers,” the statement reads. “Supervised institutions at times request supervisory guidance, and such guidance is important to provide insight to industry, as well as supervisory staff, in a transparent way that helps to ensure consistency in the supervisory approach.”
To implement this concept, the agencies plan to adopt the following policies and practices with respect to supervisory guidance:
For businesses under the oversight of the five agencies, the statement is good news as it suggests that supervisory guidance will be used as a compliance tool rather than as a sword to bring enforcement actions. To discuss how your business’ compliance efforts may be impacted, we encourage you to contact one of Scarinci Hollenbeck’s experienced business attorneys.
If you have any questions or if you would like to discuss the matter further, please contact me, Robert A. Marsico, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.
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