New Exception to Annual Privacy Notice Requirement

December 11, 2015

On December 4, 2015, President Obama signed into law a bill that, among other things, amends the Gramm-Leach-Bliley Act (“GLBA”) to create an exception to the annual privacy notice requirement.

Section 503 of GLBA, Regulation S-P1 and FTC regulations require certain financial institutions – including investment advisers, investment companies and broker-dealers that are registered with the SEC, and private funds – to notify consumers of their policies and practices regarding disclosure of nonpublic personal information (a) at the time of establishing a customer relationship and (b) at least annually during the continuation of the relationship (the “annual privacy notice”).

The new law amends Section 503 to create an exception from the annual privacy notice requirement for any financial institution that (1) provides nonpublic personal information only in accordance with certain permitted disclosure provisions2 of GLBA and the rules thereunder and (2) has not changed its policies and practices regarding disclosure of nonpublic personal information since the most recent privacy notice provided to its customers.

This amendment is effective immediately. As a result of this amendment, registered advisers, registered investment companies, registered broker-dealers, private funds and other financial institutions may cease sending annual privacy notices to their customers provided the institution only discloses nonpublic personal information in accordance with the permitted disclosure provisions and the institution has not changed its privacy policies or practices previously disclosed to its customers.

Lawmakers intend for the exception to reduce costs for financial institutions and make privacy notices more significant to consumers.

Investment advisers, investment companies, broker-dealers and private funds seeking to take advantage of the new exception should revise their privacy policies and procedures.


1 Regulation S-P is a set of rules adopted by the SEC in 2000 that implements GLBA’s privacy provisions with respect to registered investment advisers, registered investment companies and registered broker-dealers.

2 Under these provisions, a financial institution is permitted to disclose nonpublic personnel information, without providing notice of an opt-out right to the customer, (A) as necessary to effect, administer, or enforce a transaction requested or authorized by the customer or in connection with (i) servicing or processing a financial product or service requested or authorized by the customer or (ii) maintaining or servicing the customer’s account with the financial institution; or (B) in certain other limited circumstances.


If you have any questions regarding the matters covered in this memo, please contact any of the partners and counsel listed below or your primary attorney in Seward & Kissel’s Investment Management Group.