Spring, 2009 Business Law Section N E W S L E T T E R Chair: John B. Lampi Editors: Louis F. Del Duca and Paula A. Schmeck TABLE OF CONTENTS ... FROM THE CHAIR ... Table of Contents Greetings from the Business Law Section! Members of the Business Law Section are currently FROM THE CHAIR ........................................1 working with the legislative staff of the PBA as well as staff ANNOUNCEMENT .........................................3 from the General Assembly in Third Circuit Annual Judicial Conference — preparing a number of pieces of legislation for introduction in this Save the Date: May 4-6, 2009 – session of the General Assembly. Philadelphia, PA – Hyatt at Penn’s Landing .......................................................3 Some of this legislation will need to go through the review and approval BANKING ........................................................4 process of the PBA before formal introduction by members of the Pennsylvania Mortgage Legislative Package .4 General Assembly for enactment. New Federal Laws and Banking Programs ....4 However, the amendments to the Business Corporation Law and other CORPORATIONS ............................................5 laws governing business entities Increasing the Shareholders’ Voice in which did not get through the John B. Lampi Corporate Governance ...............................5 General Assembly last session will be reintroduced in this session. We Are Franchisees Independent Contractors? will keep all of our members informed on the progress of this Not Everyone Agrees ..................................7 business-law oriented legislation through the PBA’s legislative staff’s news e-mails to PBA members. SEC Proposes Interactive Data to Improve Your Business Law Section’s committees monitor other Financial Reporting .....................................9 bills that are introduced by members of the General Assembly EMPLOYMENT LAW ...................................12 to assist the PBA on whether or not to take a position on such Department of Labor Issues Final Rule on legislation. Our Business Law Section committees offer you Reporting Obligations for Federal experience in this aspect of “lawyering”. It is a great way to Contractors Who Employ Certain Military become knowledgeable about an area of the law in which you Veterans .....................................................12 may have an interest. Please contact any of the Business Law Section offi cers or committee chairs if you are interested in Genetic Information Nondiscrimination Act of participating in committee work. 2008...........................................................12 Our broader Business Law Section Council meets periodically through telephone conferences. Our Business U.S. Supreme Court Rules on How ERISA Law Section Council meetings for the fi rst half of 2009 are at Benefi t-Claim Fiduciaries Should Handle Confl ict of Interest ....................................14 continued on page 2 continued on next page
FROM THE CHAIR ... TABLE OF CONTENTS ... continued from page 1 Congress Enlarges the Protection of the ADA noon, on Wednesdays, February 11 and April 8. You, with Recently Enacted Amendments ...........15 as a member of the Business Law Section are invited to participate. We have a toll-free telephone conference IDENTITY THEFT REGULATION ...............17 system available to you or you can meet at the offi ces Red Flag Rules Require Companies to Take of one of our Council members to participate in person. Identity Theft Seriously ...............................17 We urge you to participate in our Council meetings. TAX LAW ...........................................................20 Finally, we will hold our annual meeting of the Bankruptcy Sales Prior to Plan Confi rmation Business Law Section in conjunction with the PBA Do Not Qualify for Tax Exemption .............20 Annual Meeting in Pittsburgh on June 3, 2009. If you are attending the PBA Annual Meeting, stop by and Pennsylvania Realty Transfer Tax: The attend the Business Law Section annual meeting. Department of Revenue Digs in its Heels on Please feel free to contact me if our Business Law Assignments of Contracts ............................22 Section can be of assistance in your practice. My telephone and e-mail information is (717) 243-6222 or UNIFORM COMMERCIAL CODE ................23 Agricultural Liens – Special Article 9 Status jlampi@sfl -law.com. – Attachment Requirements Not Applicable, Cordially, Perfection Requirements Applicable ............23 John B. Lampi, Chair Numismatic Coins Qualify As “Goods” Collateral; Super Generic Description of Collateral In Financing Statements And Security Agreements ....................................25 Disposition of Collateral – Insuffi cient Notice ...........................................................26 This article, published in the Spring 2009 Business Law Section Newsletter, appears here with permission from BUSINESS LAW SECTION OFFICERS & the Pennsylvania Bar Association. COMMITTEE CHAIRS ...................................29 2 2
IDENTITY THEFT REGULATION RED FLAG RULES REQUIRE COMPANIES TO Covered Entities TAKE IDENTITY THEFT SERIOUSLY The Red Flag Rules cover "fi nancial institutions" You may be surprised to that learn your business and "creditors" that offer or maintain "covered ac- must comply with the new identity theft Red Flag counts." The breadth of the Rules comes from the broad Rules. Not only are credit card companies and fi nancial defi nition of creditors. The term "creditor" means "any institutions subject to these rules, but any company that person who regularly extends, renews, or continues regularly extends or merely arranges for the extension credit; any person who regularly arranges for the exten- of credit is also subject to the rules. Thus, fi nance com- sion, renewal, or continuation of credit; or any assignee panies, mortgage brokers, automobile dealers, telecom- of an original creditor who participates in the decision munications companies, and utility companies, among to extend, renew, or continue credit." 4 Consequently, others, will have to comply with the Red Flag Rules. If many entities involved in the process of extending your company extends or arranges for the extension of or maintaining credit must comply with the Red Flag credit, it had only until November 1, 2008, to become Rules despite the fact that they do not extend credit compliant with the Red Flag Rules. themselves. For example, a retailer that takes applica- tions for a third-party credit card or the car dealer that partners with a local bank branch to facilitate car loans Background will likely be subject to the Rules. Similarly, where On December 4, 2003, the President signed into law nonprofi t and government entities, such as many hospi- the Fair and Accurate Credit Transactions Act ("FAC- tals, defer payment for goods and services, they too will TA"). FACTA was enacted by Congress to provide con- be considered creditors. sumers with increased protection from identity theft. The regulations directed six agencies to jointly "estab- In addition to creditors, fi nancial institutions are lish and maintain guidelines…[that] identify patterns, also required to comply with the Red Flag Rules. For practices, and specifi c forms of activity that indicate the purposes of the Rules, "fi nancial institution" means possible existence of identity theft." 1 Accordingly, the banks, savings and loan associations, mutual savings six agencies published the fi nal regulations on Novem- banks, credit unions, or any other person who, directly ber 9, 2007, and those regulations was effective Janu- or indirectly, holds a transaction account belonging to a ary 1, 2008. 2 However, compliance with the regulations consumer. 5 is not mandatory until November 1, 2008. 3 Under the Red Flag Rules, only those creditors and The fi nal regulations contain three parts. First, they fi nancial institutions that offer or maintain covered ac- require covered entities to create a written identity theft counts are required to develop and implement an iden- program designed to detect, prevent, and mitigate iden- tity theft prevention program. A "covered account" is tity theft in connection with certain covered accounts "(i) [a]n account that a fi nancial institution or creditor (the "Red Flag Rules" or the "Rules"). Second, the reg- offers or maintains, primarily for personal, family, or ulations impose requirements on consumer reporting household purposes, that involves or is designed to agencies related to discrepancies between an address permit multiple payments or transactions…and (ii) any contained in a request for a consumer report and the other account…for which there is a reasonably foresee- able risk to customers…from identity theft…." 6 Cov- address in the consumer reporting agency's fi le. Third, the regulations impose requirements on debit and credit ered accounts include credit card accounts, mortgage card issuers to implement procedures to assess the va- loans, automobile loans, margin accounts, cell phone lidity of address changes under certain circumstances. accounts, utility accounts, and checking and savings This Commentary focuses on only the Red Flag Rules accounts. In determining whether the Red Flag Rules portion of the regulations. apply, a company should consider the types of accounts it offers, the methods it provides to open its accounts, the methods it provides to access its accounts, and its continued on next page 17
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