Banking & Finance Law Report

Tag Archives: Act

Lending License Required for Real Estate Commission Financing

In a triumph of substance over form, on August 22, 2013, the Tenth Appellate District Court of Appeals disregarding self-serving labels and further clarified the distinction between a loan and a sale of accounts receivable in Fenway Financial, LLC dba Commission Express v. Greater Columbus Realty, LLC dba Keller Williams Greater Columbus Realty, LLC, No. 12AP-291.┬áTo cut to the chase, the Court found that regardless of the buzz words used, leaving the seller of an account receivable with the risk of collectability is a key factor in characterizing a transaction as a loan, not as a sale, and may implicate state loan licensing requirements and other statutes, including provisions dealing with the scope of UCC Article 9.…

SEC Whistleblower Rules

In mid-August the SEC’s new whistleblower rules will take effect (click here for the Final Rule).  The new rules explain and further define the requirements of a whistleblower program that has been in place since the Dodd-Frank Act took effect on July 21, 2010. In general, anyone who provides information to the SEC relating to a possible violation of the securities laws is entitled to an award if the following requirements are met:

  • The information must be provided voluntarily, before the SEC asks for it;
  • The information must be based on the whistleblower’s independent knowledge and not already known to the SEC or derived from public filings;
  • Providing the information must lead to successful enforcement by the SEC or a federal court or administrative action; and
  • The SEC must obtain monetary sanctions above $1 million.

Successful whistleblowers can receive an award of between 10 and 30% of the total monetary sanctions collected. The whistleblower program is a significant expansion of previous SEC whistleblower rules that only applied to insider-trading cases and were capped at 10% of the penalties collected (click here for the SEC press release). 

The whistleblower rules do not require the whistleblower to comply with the …

Why You Should Care About FATCA

The Foreign Account Tax Compliance Act (FATCA) [Sections 1471-1474 of the Internal Revenue Code] was enacted to prevent U.S. taxpayers from evading U.S. tax obligations by parking funds in foreign accounts or with foreign investors. FATCA requires each U.S. entity to withhold 30% of certain payments made after 2012 to foreign investors or foreign lenders unless such foreign entities satisfy certain new disclosure and reporting requirements. 

Failure to comply with FATCA will subject the U.S. entity to penalties and fines. Domestic lenders and domestic borrowers alike should ensure that foreign entities are FATCA compliant by adding language to the parties’ credit agreement that obligates each existing and future foreign entity to provide tax documents, certificates and other tax information upon demand. An example of such language follows:

Promptly upon receipt of written request, each Foreign Lender shall deliver to the Borrower and the Agent any information, document, or certificate, properly completed and in a manner prescribed by law or satisfactory to the Borrower or the Agent, as the case may be, in order to permit the Borrower or the Agent to make a payment under this Agreement or the Loan Documents without any withholding on account of any tax otherwise required to …