Maryland Legal Alert for Financial Services
Maryland Legal Alert - March 2010
In This Issue:
• HEADS UP IF YOU ADVERTISE “FREE CREDIT REPORTS”
• IGNORE RESPA: UNIQUE MARYLAND FORMS HAVE NOT CHANGED
• SECURITIES LAW – ELECTION OF DIRECTORS IS NO LONGER A ROUTINE MATTER
• PEOPLE ARE CALLING ABOUT . . . ESCROW ACCOUNTS
HEADS UP IF YOU ADVERTISE “FREE CREDIT REPORTS"
The Federal Trade Commissioner issued a final rule, published in the March 3, 2010. Federal Register, imposing new requirements, including a specific new disclosure, for advertisements of “free credit reports.” The requirements are effective beginning April 2, 2010 (except for advertising on television or radio, which is delayed until September 1, 2010). For more information, please contact Chris Rahl.
IGNORE RESPA: UNIQUE MARYLAND FORMS HAVE NOT CHANGED
Question: Under what circumstances would a compliance lawyer say “ignore RESPA”? Answer: When completing the Maryland Broker Agreement, Financing Agreement, and Commitment. Maryland has very specific requirements regarding a written form Broker Agreement and written forms of Financing Agreement and Commitment. We have had numerous calls about how to change the information in these unique Maryland forms in light of the new RESPA Good Faith Estimate and HUD-1/1A Settlement Statement requirements. NO CHANGES should be made at this time regarding the information contained in these unique Maryland forms. Maryland law has not changed, and even though RESPA requires certain disclosures to be made a particular way, the fact is that Maryland law still requires disclosures to be made a different way. Until the Maryland legislature or the Maryland Commissioner of Financial Regulation changes the law or adopts a new policy, the disclosures in the Maryland Broker Agreement, Financing Agreement, and Commitment must continue to be made as required by Maryland law. For more information, please contact Chris Rahl.
SECURITIES LAW – ELECTION OF DIRECTORS IS NO LONGER A ROUTINE MATTER
The SEC recently approved amendments to rules governing discretionary voting by brokers. Prior to these amendments, the uncontested election of directors was a "routine matter," so a broker could vote its customer's shares in the election of directors even though the broker received no voting instructions from that customer. These amendments made the election of directors a "non-routine matter," which means that a broker now cannot vote its customer's shares on the election without specific voting instructions. The result of the change is that directors will lose this broker discretionary vote, which, for some companies, has represented a large percentage of the votes for election. These votes will now be reported to companies as "non-votes." As a general matter, a broker non-vote is not cast, i.e., it is neither a vote "for" nor a vote "against" the matter (or, in the case of elections, "withheld"), so it has no impact on the outcome of the vote. If you have any questions concerning the impact of these changes to your director elections please contact Andy Bulgin.
PEOPLE ARE CALLING ABOUT . . . ESCROW ACCOUNTS
We have received numerous calls in recent weeks about Maryland law applicable to escrow accounts established in connection with residential mortgage loans. Due to changes in regulations implementing the federal Truth in Lending Act, lenders must establish escrow accounts in connection with “higher-priced mortgage loans” that are applied for on or after April 1, 2010. Maryland law imposes certain requirements on escrow accounts established by depository institutions, including a requirement to pay (what is at this time) a very high interest rate of 3% on funds held in escrow. We have considered and worked with these escrow account laws over many years. For more information, please contact Chris Rahl.