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News December 21, 2015 Issue

Annual Privacy Notices No Longer Required from Advisers in Most Situations

The holidays came a little early this year for some advisers and other financial institutions: A provision of the new highway funding law removes the requirement that financial institutions distribute annual privacy notices if certain conditions are met.

A highway funding bill may seem an odd place to contain such a provision, but you may have heard of Congress’ way of slipping unrelated items into bills. So when President Obama on December 4 signed into law the Fixing America’s Surface Transportation Act (H.R. 22), better known as the FAST Act, included in it were a number of unrelated provisions – including one removing the annual privacy notice requirement.

The provision, which can be found in Title LXXV of the FAST Act, amended Section 503 of the Gramm-Leach-Bliley Act, which governs the distribution of financial institutions’ privacy notices. The amendment, effective immediately, removes the requirement that financial institutions annually distribute notices of their privacy policies and practices if two conditions are met:

  • The financial institution shares non-public personal information with nonaffiliated third-parties in a manner that does not require customers to be provided with an opt-out right (as defined by Gramm-Leach-Bliley Sections 502 and 504), and
  • There have been no changes to the financial institution’s privacy disclosure policies and practices since the last time it provided a privacy notice.

"For those investment advisers who share NPI only in a manner that does not require opt out rights, for example, to facilitate client transactions or protect against fraud, the elimination of the annual privacy notice requirement is a nice holiday gift," said Day Pitney counsel Eliza Sporn Fromberg.

Secondary sales

The FAST Act also includes a provision that introduces a new exemption from registration of private secondary sales of securities. Title LXXVI amends the Securities Act of 1933 to "facilitate secondary sales in pre-IPO securities by providing certainty to sellers that transactions meeting the requirements will be exempt," said Fromberg. "Affiliates of an issuer will be able to sell the issuer’s securities in excess of the volume restrictions imposed by Rule 144."