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Anthony M. Sharett
Partner, National Co-Chair
Financial Services Group
Baker Hostetler, LLP
Keesha N. Warmsby
Associate
Ba...
AUTHOR BIOGRAPHIES AND INFORMATION ABOUT THE FIRMS
Anthony Sharett is a partner and national co-leader of the
Financial Se...
Keesha’s experience includes counseling banks and other financial institutions,
including mortgage and auto lenders. She h...
Kristin Messerli is the President and Founder of Cultural Outreach
Solutions, specializing in helping companies in the mor...
COPYRIGHT ©2016 Baker Hostetler LLP. This book is being provided to you with a
limited license for use solely within your ...
Contents
INTRODUCTION........................................................................................................
HIRING AND RETENTION................................................................................. 18
Hiring .............
1
INTRODUCTION
One June 10, 2015, the Office of the Comptroller of the Currency (“OCC”), Board of
Governors of the Federal...
2
however, will be used by the Agencies to identify industry best practices where diversity
and inclusion practices are co...
3
In developing the Joint Standards, the OMWI Directors and staff sought industry feedback
from depository institutions, h...
4
Diversity. The Agencies define “minorities” as Black Americans, Native Americans,
Hispanic Americans, and Asian American...
5
$50,000 or more are required to file an Employer Information Report EEO-1 (“EEO-1
Report”) with the Equal Opportunity Co...
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MBA Compliance Essentials Diversity and Section 342 Resource Guide

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MBA Compliance Essentials Diversity and Section 342 Resource Guide

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MBA Compliance Essentials Diversity and Section 342 Resource Guide

  1. 1. Anthony M. Sharett Partner, National Co-Chair Financial Services Group Baker Hostetler, LLP Keesha N. Warmsby Associate Baker Hostetler, LLP Kristin Messerli President and Founder Cultural Outreach Solutions Diversity & Section 342 Resource Guide MBA COMPLIANCE ESSENTIALS℠ mba.org/compliance ONE VOICE. ONE VISION. ONE RESOURCE. 16716 m ba.org/com pliance
  2. 2. AUTHOR BIOGRAPHIES AND INFORMATION ABOUT THE FIRMS Anthony Sharett is a partner and national co-leader of the Financial Services Group as well as a member of the Complex Commercial Litigation Practice Group in BakerHostetler’s Columbus office. As an attorney, Sharett focuses his litigation practice on consumer financial services and litigation and regulatory enforcement. He has successfully defended lawsuits including class actions relating to FDCPA, FCRA, TILA, RESPA laws and state consumer statutes. Sharett also counsels clients through Consumer Financial Protection Bureau enforcement actions though resolution. He is lead counsel for the Ohio Mortgage Bankers Association. Sharett maintains a national commercial litigation practice, regularly defending financial institutions and insurance companies against regulatory actions and consumer-led litigation in individual and class action matters. He also advises financial services companies on compliance matters, identifying potential issues and preparing policies and procedures. As a former attorney with the Ohio Department of Commerce, Sharett has extensive knowledge of the banking, mortgage, credit union, and specialty finance industries. Utilizing a comprehensive approach to counseling, paired with this experience as a former regulator, he understands the key issues that arise within these sectors to proactively assist clients prior to or during litigation or enforcement. Sharett has been recognized by Best Lawyers in America for Commercial Litigation and received the National Diversity Council Multicultural Leadership Award and is the Diversity & Inclusion Director for the American Bar Association’s Consumer Financial Services Committee. Sharett is also a former fellow with the Leadership Counsel on Legal Diversity (LCLD) and currently serves in a leadership role with LCLD. Sharett holds a J.D. from The Ohio State University, Moritz College of Law and a B.S. from Ball State University. He speaks nationally on financial services issues, among other topics. Keesha Warmsby is an associate in the Financial Services Group at BakerHostetler’s Columbus office. She focuses her practice on complex commercial litigation and regulatory compliance, primarily representing financial services companies. Working in an industry that is constantly in flux, Keesha places high value on thorough comprehension of her clients’ needs and assists in navigation through the legal and regulatory environment in which her clients operate. m ba.org/com pliance
  3. 3. Keesha’s experience includes counseling banks and other financial institutions, including mortgage and auto lenders. She has assisted in compliance matters, class actions, regulatory proceedings, licensing issues, and complex litigation. She is a member of the Business Law Section and Consumer Financial Services Committee of the American Bar Association, and the Banking, Commercial and Bankruptcy Law Committee of the Ohio State Bar Association. She is a graduate of the Barrister Leadership Program of the Columbus Bar Association and served as co-chair of the Professional Development Committee of the John Mercer Langston Bar Association. Keesha earned her J.D. from Ohio Northern University, and she also holds a B.A. in Business Administration, summa cum laude, from Kennesaw State University. She is admitted to practice in U.S. District Court, Southern District of Ohio, and the State of Ohio. Is one of the nation's largest law firms, representing clients around the globe. With offices coast to coast, our more than 900 lawyers litigate cases and resolve disputes that potentially threaten clients' competitiveness, navigate the laws and regulations that shape the global economy, and help clients develop and close deals that fuel their strategic growth. BakerHostetler has five core practice groups: Litigation, Business, Employment, Intellectual Property, and Tax. Within these groups are several large specialty practices, including antitrust, bankruptcy, healthcare, energy, middle market mergers and acquisitions, complex commercial litigation, data privacy and security, patent prosecution and international tax. BakerHostetler attorneys have broad knowledge and experience in many industries, including energy, media, manufacturing, healthcare, financial services and insurance, consumer products, and hospitality. BakerHostetler distinguishes itself through its commitment to the highest standard of client care. By emphasizing an approach to service delivery as exacting as its legal work, it is determined to surpass client expectations. The firm was founded on three core principles: to develop and sustain mutually beneficial, long-term relationships with each of its clients; to provide timely, responsive, and high quality legal services; and to be generous with both time and money to the communities where we work. The firm consistently nurtures a collegial approach among our lawyers, assuring effective teamwork in handling client work, while maintaining a culture of providing exceptional legal counsel with a clear focus on value. BakerHostetler is committed to the continuous development of our people and of the resources essential to delivering effective and distinctive legal services worldwide. m ba.org/com pliance
  4. 4. Kristin Messerli is the President and Founder of Cultural Outreach Solutions, specializing in helping companies in the mortgage industry better reach and serve multicultural homebuyers. Her expertise is in multicultural marketing, Millennial homeownership, and compliance with diversity regulations in the Dodd-Frank. She is also a consultant with the National Association of Hispanic Real Estate Professionals (NAHREP) Consulting Services. Kristin is a frequent speaker at national conferences in the industry and has written for numerous publications including Mortgage Banking and Mortgage Compliance Magazine. Kristin started her career in the mortgage industry and later worked as a social worker both locally and abroad and trained providers on culturally competent practice. Prior to starting her own business, she consulted with former McKinsey consultants at the Center for the Creation of Economic Wealth to develop social enterprises, including developing a business plan, financial model, and product design to support refugee women in Palestine. Kristin is fluent in Spanish and sits on the board for the Oklahoma Center for Community and Justice. She holds her Master’s in Public Administration from the University of Oklahoma. Provides comprehensive solutions to compliance and diversity & inclusion standards in the Dodd- Frank Act, section 342. With a specialized team of policy and legal experts, it performs compliance assessments and develops strategic plans with personalized recommendations. It also helps companies with implementations. Additionally, it helps companies improve their communication and service across cultures. It achieves this through training on reaching emerging market segments, improving company culture, recruitment and marketing strategy. The Cultural Outreach Solutions team consists of cross-cultural marketing experts and lifelong leaders in the mortgage industry. m ba.org/com pliance
  5. 5. COPYRIGHT ©2016 Baker Hostetler LLP. This book is being provided to you with a limited license for use solely within your organization. This book, its content and the link to it may be accessed by up to fifteen (15) members of your organization for each such person’s internal use of the materials. However, these materials may not be downloaded, reproduced, forwarded, or otherwise distributed in any form or by any means outside of your organization. Your organization will however, be entitled to comply with a subpoena or other validly issued administrative or judicial process that may request information from the book, to the extent required by law. Unauthorized reproduction, forwarding, distribution or display of this copyrighted work is subject to criminal and civil penalties under federal law. For information about extending this license to additional members of your organization, please contact: David Upbin Associate Vice President, Education Operations & Programming, & MBA Strategy Mortgage Bankers Association 1919 M Street, NW Washington, DC 20036 (202) 557-2931 www.mba.org If you would like to order additional copies of this publication or would like to inquire regarding discounts for quantity purchases, please contact MBA at education@mba.org. DISCLAIMER PLEASE TAKE NOTE: These materials have been produced by Baker Hostetler LLP. These materials provide an overview of some of Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. These materials are designed to provide the reader with a general overview and understanding of the Section 342. These materials are not intended to and do not provide legal advice, and does not create an attorney-client relationship between the firm of Baker Hostetler LLP and the recipient. The Section 342 provisions described herein are, in many instances, paraphrased, and a careful reading of the relevant laws, regulations or cases thereunder may reveal exceptions or different interpretations that might be applicable to a particular set of facts. These materials cover areas in which the proper interpretation of law and regulation can be highly dependent upon particular facts. Accordingly, taking action simply upon the basis of information provided in these materials is not advisable. The materials are not a substitute for consultation with qualified legal counsel regarding the manner in which the laws and regulations referenced herein may be interpreted and apply to particular facts or to particular business models. These materials are for informational and educational purposes only, and are not a solicitation and should not be construed as such. ©2016 Baker Hostetler LLP m ba.org/com pliance
  6. 6. Contents INTRODUCTION............................................................................................................. 1 SCOPE............................................................................................................................ 2 STATUTORY AND REGULATORY BACKGROUND...................................................... 2 DEFINITIONS ................................................................................................................. 3 OVERVIEW AND SCOPE............................................................................................... 4 ENFORCEMENT ............................................................................................................ 5 JOINT STANDARDS IN DEPTH ..................................................................................... 6 1. Organizational Commitment to Diversity and Inclusion.............................. 6 2. Workforce Profile and Employment Practices............................................ 7 3. Procurement and Business Practices – Supplier Diversity ........................ 9 4. Practices to Promote Transparency of Organizational Diversity and Inclusion................................................................................................... 10 5. Entity’s Self-Assessment ......................................................................... 11 USE OF INFORMATION BY AGENCIES...................................................................... 12 APPENDIX A MODEL POLICIES AND PROCEDURES FOR MODEL ASSESSMENT................................................................................................... 13 INTRODUCTION................................................................................................ 13 SCOPE AND PURPOSE OF POLICIES AND PROCEDURES.......................... 13 Scope ...................................................................................................... 13 Purpose ................................................................................................... 14 ORGANIZATIONAL COMMITMENT TO DIVERSITY ........................................ 15 Leadership............................................................................................... 15 Strategies & Goals................................................................................... 15 Planning, Data Collection, and Self-Assessment..................................... 16 Implementation and Mid-Transitional Assessment ............................................. 17 m ba.org/com pliance
  7. 7. HIRING AND RETENTION................................................................................. 18 Hiring ...................................................................................................... 18 Retention ................................................................................................. 20 SUPPLIER DIVERSITY AND PROCUREMENT BUSINESS PRACTICES........ 22 Item 1 – Strategic Policy Creation And Board/Management Support ...... 22 Item 2 – Development Of A Supplier Diversity Action Plan...................... 24 Item 3 – Establish a Comprehensive Internal and External Communication Plan..................................................................... 25 Item 4 – Increasing Opportunities for Target Groups............................... 26 Item 5 – Establish Supplier Development Processes .............................. 26 Item 6 – Tracking and Measuring Success.............................................. 27 PRACTICES TO PROMOTE TRANSPARENCY OF ORGANIZATIONAL DIVERSITY AND INCLUSION................................................................. 28 Transparency Overview........................................................................... 28 Transparency Defined.............................................................................. 28 Information to be Disclosed ..................................................................... 28 Methods of Disclosure ............................................................................. 29 Self-Assessment................................................................................................. 30 APPENDIX B: SELF-ASSESSMENT ............................................................................ 31 Qualitative Self-Assessment............................................................................... 31 Self-Assessment: Quantitative Analysis ............................................................. 36 Self-Assessment Action Plan.............................................................................. 43 Publication of a Diversity and Inclusion Strategic Plan....................................... 56 Self-Assessment Disclosure to Agencies ........................................................... 59 m ba.org/com pliance
  8. 8. 1 INTRODUCTION One June 10, 2015, the Office of the Comptroller of the Currency (“OCC”), Board of Governors of the Federal Reserve System (“Board”), Federal Deposit Insurance Corporation (“FDIC”), National Credit Union Administration (“NCUA”), Consumer Financial Protection Bureau (“CFPB”), and Securities and Exchange Commission (“SEC”) (each an “Agency” and collectively, the “Agencies”) issued a Final Interagency Policy Statement Establishing Joint Standards For Assessing The Diversity Policies And Practices of the entities they regulate (“Joint Standards”) as required by Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”).1 Specifically, the Joint Standards was created by the Agencies’ respective Office of Minority and Women Inclusion (“OMWI Office”). Section 342 directs each Agency to establish an OMWI Office.2 Each OMWI Office is headed by a Director and is responsible for all Agency matters relating to diversity in management, employment, and business activities. Section 342(b)(2)(C) directs each Agency’s OMWI Director to develop standards for assessing the diversity policies and practices of entities regulated by that Agency. The Joint Standards sets-forth five areas that a regulated entity may review in developing its diversity policies and practices: 1. Organizational Commitment to Diversity and Inclusion; 2. Workplace Profile and Employment Practices; 3. Procurement and Business Practices; 4 Practices to Promote Transparency and Organizational Diversity and Inclusion; and 5. Self-Assessment.3 These standards may be tailored to take into consideration a regulated entity’s size and other characteristics (for example, total assets, number of employees, governance structure, revenues, number of members and/or customers, contract volume, geographic location, and community characteristics). Neither Section 342 nor the Joint Standards requires regulated entities to disclose specific information about its diversity policies and practices.4 Information that is disclosed, 1 80 Federal Register 33016 (June 10, 2015). 2 12 U.S.C. § 5452. 3 Federal Register at 33023. 4 Federal Register at 33024. m ba.org/com pliance
  9. 9. 2 however, will be used by the Agencies to identify industry best practices where diversity and inclusion practices are concerned.5 Unlike other Dodd-Frank provisions, Section 342 lacks any enforcement mechanism. Indeed, the Joint Standards relies on: 1) a voluntary self-assessment by regulated entities; 2) a voluntary disclosure of the self-assessment to the Joint Agencies; and 3) a voluntary display of diversity information on the public websites. Critically, the Agencies may not utilize their examination and supervisory authority in connection with these standards. SCOPE This Guide sets forth a framework for regulated entities to use in creating a diversity and inclusion program. Alternatively, this Guide may be used to alter a diversity and inclusion program already in place. Ideally, regulated entities will establish a diversity and inclusion program based on the Joint Standards and incorporate the program with other diversity related requirements such as those listed above. This Guide only addresses the Joint Standards as regulated by the Agencies. Notably, there are other laws pertaining to equal opportunity, government contracting standards, and anti-discrimination laws that some regulated entities must also consider depending on their size and other factors. Regulated entities must also consider the policies of business partners and third party vendors as they complete the assessment and disclose the results of those assessments. Many of the requirements that are outlined in Section 342 deal with standards and procedures that each Joint Agency must establish regarding the evaluation of contract proposals for hiring service providers for the Joint Agencies.6 This Guide does not address that aspect of Section 342. STATUTORY AND REGULATORY BACKGROUND Section 342 of the Dodd-Frank Act directed the establishment of an OMWI Office in each Agency. Each OMWI Office is headed by a Director and is responsible for all Agency matters relating to diversity in management, employment, and business activities. Section 342 also directed each Agency’s OMWI Director to develop standards for assessing the diversity policies and practices of entities regulated by that Agency.7 Accordingly, the Joint Standards is derived from this directive. 5 Id. 6 Id. at (e)-(f). 7 12 U.S.C. § 5452(c). m ba.org/com pliance
  10. 10. 3 In developing the Joint Standards, the OMWI Directors and staff sought industry feedback from depository institutions, holding companies, credit unions, and industry trade groups regarding the challenges and successes of current diversity programs and policies.8 Additionally, the OMWI Directors held roundtable discussions with members of groups representing financial services professionals, communities and consumer advocates.9 These meetings provided the Agencies with a greater understanding of the issues facing minorities and women with respect to employment and business contracting opportunities in the financial services industry.10 The resulting Joint Standards focuses primarily on institutions with more than 100 employees11 and applies only to an entity’s U.S. operations.12 However, this does not preclude a multinational entity from also using the standards to more broadly assess their organization. The “Agencies encourage each entity to use the standards in a manner appropriate to its unique characteristics.”13 DEFINITIONS The Joint Standards defines several key terms: Minority. The term 'minority' means any Black American, Native American, Hispanic American, or Asian American.14 Minority-owned Business.15 The term ‘minority-owned business’ means a business in which more than 50% of the ownership or control of which is held by 1 or more minority individuals and more than 50% of the net profit or loss of which accrues to 1 or more minority individuals. Women-owned Business.16 The term ‘women-owned business’ means a business in which more than 50% of the ownership or control of which is held by 1 or more women, more than 50% of the net profit or loss which accrues to 1 or more women, and a significant percentage of senior management positions of which are held by women. Inclusion. The Agencies define “inclusion” as a process to create and maintain a positive work environment that values individual similarities and differences, so that all can reach their potential and maximize their contributions to an organization.17 8 78 Federal Register at pg. 64054. 9 Id. 10 Id. 11 Id. at 33018. 12 Id. 13 Federal Register at pg. 33023. 14 12 U.S.C.S. § 5452(g)(3); 12 U.S.C.S. § 1811. Note, an entity may certainly broaden the definition of “minority” as provided under the Joint Statement and FAQs to include persons from additional backgrounds and communities. 15 12 U.S.C.S. § 5452(g)(4); 12 U.S.C.S. §1441A(r)(4)(A). 16 12 U.S.C.S. § 5452(g)(6); 12 U.S.C.S. §1441A(r)(4)(B). 17 80 Federal Register at 33022. m ba.org/com pliance
  11. 11. 4 Diversity. The Agencies define “minorities” as Black Americans, Native Americans, Hispanic Americans, and Asian Americans which is the same definition section 342(g) of the Dodd-Frank Act.18 Regulated entities are permitted to use a broader definition of “minorities” within their respective organizations.19 OVERVIEW AND SCOPE The Agencies’ Joint Standards comprises the following five factors which can be used to assess an entity’s commitment to diversity and inclusion: 1. Organizational Commitment to Diversity and Inclusion; 2. Workforce Profile and Employment Practices; 3. Procurement and Business Practices – Supplier Diversity; 4. Practices to Promote Transparency of Organizational Diversity and Inclusion; and 5. The Entity’s Self-Assessment.20 The goal of the Joint Standards is to provide a framework for regulated entities and to promote transparency and awareness of diversity policies and practices within the entities regulated by the Agencies.21 The purpose of the Joint Standards is to provide guidance for assessing the diversity policies and practices of regulated entities.22 Moreover, the Joint Standards is intended to facilitate transparence and awareness of the regulated entities’ diversity policies and procedures for the public.23 According to the Agencies, a robust diversity and inclusion program promotes stronger, more effective, and more innovative businesses so that the company can serve a wider range of customers.24 The Agencies developed the Joint Standards by focusing on regulated entities with at least 100 employees. 25 Smaller entities and/or those located in remote areas face unique challenges and the Agencies encourage these entities to develop a Section 342 policy that is tailored to their unique needs.26 Regulated entities with more than 100 employees or who are federal contractors with 50 or more employees and are prime contractors or first-tier subcontractors with contracts of 18 Id. 19 There is no definition of “Diversity” in the Joint Standards Policy. The Policy Statement states that diversity refers to “minorities… and women” and that it “does not preclude an entity from using a broader definition with regard to these standards.” Id. 20 Id. at 33023. 21 Id. 22 78 Federal Register at pg. 64054 23 Id. 24 Id. 25 80 Federal Register at pg. 33023. 26 Id. m ba.org/com pliance
  12. 12. 5 $50,000 or more are required to file an Employer Information Report EEO-1 (“EEO-1 Report”) with the Equal Opportunity Commission.27 These reports are already helpful to the extent that they contain data on employment diversity and can be of assistance in assessing diversity policies and procedures.28 The Joint Standards only applies to a regulated entity’s U.S. operations.29 Notably, a regulated entity may apply the Joint Standards more broadly for assessment purposes.30 ENFORCEMENT Perhaps the most striking aspect of Section 342 is that it lacks any enforcement mechanism.31 At the most, the Joint Standards provides an approach relying on voluntary self-assessment by regulated entities, voluntary disclosure of these self-assessments to the Agencies, and voluntary display of diversity information on public websites.32 Indeed, they expressly provide that the “Agencies will not use their examination or supervisory processes in connection with” the Joint Standards.33 Section 342 does not, however, prohibit the OMWIs from creating stronger assessment standards than currently presented. Section 342(c)(1) states that “the Director of each Office shall develop and implement standards and procedures to ensure, to the maximum extent possible, the fair inclusion and utilization of minorities, women, and minority-owned and woman-owned businesses in all business and activities of the agency…”34 The OMWI Directors will also continue to reach out to regulated entities and other interested parties to discuss diversity and inclusion practices and methods of assessment.35 Further, the Agencies will periodically review disclosed information to determine industry best practices regarding diversity and inclusion.36 What the Joint Standards lacks in enforcement, they attempt to make up for by emphasizing public accountability.37 Indeed, the fourth standard concerns transparency of organizational diversity and inclusion efforts.38 The idea here appears to be that the institutions that fail to incorporate diversity and inclusion policies and procedures will be held accountable by the public which could result in individual consumers electing to take their business elsewhere. 27 Id. 28 Id. 29 Id. 30 Id. at pg. 33018. 31 See gen. id. at 33016-24. 32 See id. at 33024. 33 (emphasis added.) Id. at 33022. 34 12 U.S.C. § 5452(c)(1). 35 80 Federal Register at 33024. 36 Id. 37 See gen. id. 38 Id. m ba.org/com pliance

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