Earlier this summer, the NMLS Policy Committee invited industry members to comment on proposed changes to the disclosure questions that NMLS asks of companies and individuals as part of the license application process. Comments are due by close of business on Aug. 22, 2022.
The proposal comes almost two years after the Conference of State Bank Supervisors issued its Core Requirements Proposal that asked about the need to update the questions and incorporates regulator comments received during a regulator comment period earlier this year.
A key goal of the changes proposed is to bring greater consistency in language, form, and order among the company and individual questions. Among the most important changes are revisions that would:
- Add questions to account for the Money Transmission Modernization Act (“the model law”), including questions about material litigation for companies
- Add terms and definitions to the glossary, most notably “Third Party Service Provider,” “Key Individual,” and “Material Litigation”
- Amend current definitions in the glossary, most notably “Financial Services” and “Found”
- Create a section to be answered only by those who exercise control over an organization
- Create a section pertaining to a company’s or the individual’s authorization to act as a contractor, accountant, or attorney
The proposed changes would generally streamline questions, and those that seem broad have been narrowed or broken down to allow for more direct answers. The recategorization also ensures that a company or individual is not responsible for responding to questions that are not applicable (i.e., inquiries that should only be answered by key individuals identified in the company record).
The proposal includes a redlined version of the questions so that industry members can easily ascertain the proposed revisions, as well as a document providing detail and rationale for the proposed revisions. Additionally, CSBS held a town hall on July 28 so that industry members could learn more about the proposal and ask questions prior to comment submission. A recording of the town hall can be found here.
Once the questions are finalized, companies and individuals will need to update their NMLS Company Form (MU1) and NMLS Individual Forms (MU2/MU4), respectively. This will require careful and swift coordination on the part of companies and their key individuals (e.g., directors, senior officers, qualifying individuals) in particular, in order to avoid holding up the submission of an MU1 for purposes of an application, renewal, license item response, etc. During the town hall, CSBS stated that they are aware of these implications and plan to avoid implementing the new questions until after Q4 2022.
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