Capital One 2010 Annual Report Download - page 27

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information. To date, at least California and Vermont have done so by statute, regulation or referendum, and other states may consider
proposals which impose additional requirements or restrictions on us or the Banks. If the federal or state regulators of the financial
subsidiaries establish further guidelines for addressing customer privacy issues, we or one or more of the Banks may need to amend
our privacy policies and adapt our internal procedures.
Under Section 501(b) of the GLBA, among other sources of statutory authority, including state law, the Banks and us are required to
observe various data security-related requirements, including establishing information security and data security breach response
programs and properly authenticating customers before processing or enabling certain types of transactions or interactions. The failure
to observe any one or more of these requirements could subject the Banks or us to enforcement action or litigation.
Like other lending institutions, the Banks utilize credit bureau data in their underwriting activities. Use of such data is regulated under
the FCRA on a uniform, nationwide basis, including credit reporting, prescreening, sharing of information between affiliates, and the
use of credit data. The Fair and Accurate Credit Transactions Act of 2003 (the “FACT Act”), which was enacted by Congress and
signed into law in December 2003, extends the federal preemption of the FCRA permanently, although the law authorizes states to
enact laws regulating certain subject matters so long as they are not inconsistent with the conduct required by the FCRA. If financial
institutions and credit bureaus fail to alleviate the costs and consumer frustration associated with the growing crime of identity theft,
financial institutions could face increased legislative/regulatory and litigation risks.
Investment in the Company and the Banks
Certain acquisitions of our capital stock may be subject to regulatory approval or notice under federal or state law. Investors are
responsible for ensuring that they do not, directly or indirectly, acquire shares of our capital stock in excess of the amount which can
be acquired without regulatory approval. Each of the Banks is an “insured depository institution” within the meaning of the Change in
Bank Control Act. Consequently, federal law and regulations prohibit any person or company from acquiring control of us without, in
most cases, prior written approval of the Federal Reserve or the OCC, as applicable. Control is conclusively presumed if, among other
things, a person or company acquires more than 25% of any class of our voting stock. A rebuttable presumption of control arises if a
person or company acquires more than 10% of any class of voting stock and is subject to any of a number of specified “control
factors” as set forth in the applicable regulations. Additionally, COBNA and CONA are “banks” within the meaning of Chapter 13 of
Title 6.1 of the Code of Virginia governing the acquisition of interests in Virginia financial institutions (the “Financial Institution
Holding Company Act”). The Financial Institution Holding Company Act prohibits any person or entity from acquiring, or making
any public offer to acquire, control of a Virginia financial institution or its holding company without making application to, and
receiving prior approval from, the Virginia Bureau of Financial Institutions.
Non-Bank Activities
Our non-bank subsidiaries are subject to supervision and regulation by various other federal and state authorities. Insurance agency
subsidiaries are regulated by state insurance regulatory agencies in the states in which we operate. Capital One Agency LLC is a
licensed insurance agency that is regulated by the New York State Insurance Department in its home state and by the state insurance
regulatory agencies in the states in which it operates. Capital One Agency LLC provides both personal and business insurance services
to retail and commercial clients.
Capital One Investment Services LLC and Capital One Southcoast Capital, Inc., are registered broker-dealers regulated by the
Securities and Exchange Commission and the Financial Industry Regulatory Authority. Our broker-dealer subsidiaries are subject to,
among other things, net capital rules designed to measure the general financial condition and liquidity of a broker-dealer. Under these
rules, broker-dealers are required to maintain the minimum net capital deemed necessary to meet their continuing commitments to
customers and others, and are required to keep a substantial portion of their assets in relatively liquid form. These rules also limit the
ability of broker-dealers to transfer capital to parent companies and other affiliates. Broker-dealers are also subject to other regulations
covering their business operations, including sales and trading practices, public offerings, publication of research reports, use and
safekeeping of client funds and securities, capital structure, record-keeping and the conduct of directors, officers and employees.
Capital One Asset Management LLC, which provides investment advice to institutions, foundations, endowments, and high net worth
individuals, is a registered investment adviser regulated under the Investment Advisers Act of 1940. Capital One Financial Advisors
LLC is a New York-state registered investment adviser.
USA PATRIOT Act of 2001
The USA PATRIOT Act of 2001 (the “Patriot Act”) contains sweeping anti-money laundering and financial transparency laws as well
as enhanced information collection tools and enforcement mechanisms for the U.S. government, including: due diligence requirements
for private banking and correspondent accounts; standards for verifying customer identification at account opening; rules to promote
cooperation among financial institutions, regulators, and law enforcement in identifying parties that may be involved in terrorism or