Financial Industry Week in Review

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Financial Industry Developments

 

Fed Orders for Mortgage Sanctions Against Five Banks

On February 13, the Fed released the orders for monetary sanctions against Ally, Bank of America, Citigroup, JPMorgan, and Wells Fargo relating to alleged unsafe and unsound practices in residential mortgage loan servicing and processing. Fed Release. Ally Order.  
BofA Order. Citi Order. JPM Order. Wells Order.

Extension of Deadline for Independent Foreclosure Review

On February 15, the Fed and OCC announced that the deadline for submitting requests for Independent Foreclosure Review has been extended to July 31. Borrowers are eligible to request an Independent Foreclosure Review if: (i) the mortgage loan was serviced by one of the participating mortgage servicers, which include the 14 large servicers subject to the April 2011 enforcement actions; (ii) the mortgage loan was active in the foreclosure process during 2009 or 2010; and (iii) the property securing the mortgage loan is the borrower's primary residence. Fed Release.

Tri-Party Repo Infrastructure Reform Report

On February 15, the Tri-Party Repo Infrastructure Reform Task Force released its final report addressing key infrastructure weaknesses of the U.S. tri-party repo market and including recommendations that will ensure the market can function effectively and efficiently.  
New York Fed Release. Final Report.

Rating Agency Developments

 

On February 15, Fitch updated its criteria for consumer ABS in Latin America. Fitch Report.

On February 10, S&P requested comments by April 6 on its proposed methodology for rating securities backed by imputed promises which do not have plainly stated promises for repayment of principal and/or interest within a specific time period. S&P Release.

Note: Free registration is required for Fitch and S&P releases and reports.

Asset Management

 

'40 Act Threshold Adjustment for Qualified Clients

On February 15, the SEC adopted amendments to the rule under the Investment Company Act of 1940 that permits investment advisers to charge performance based compensation to "qualified clients". The amendments (i) revise for inflation the dollar amount thresholds that are used to determine whether an individual or company is a qualified client and (ii) exclude the value of a person's primary residence and certain associated debt from the net worth calculation. The amendments will be effective 90 days after publication in the Federal Register. Final Rule.

Recent Orrick Alerts

 

Derivatives Month in Review

The Derivatives Month in Review highlights the month's important legal, regulatory and other newsworthy developments in the area of derivatives. Click here to read more.

RMBS Litigation

 

Syncora Sues JP Morgan For Losses From Insuring RMBS

On February 14, 2012, Syncora Guarantee filed a complaint in New York state court against JP Morgan, Bear Stearns, and EMC Mortgage alleging $52 million in losses incurred by the insurance company as a result of its insuring RMBS issued by the defendants. Syncora alleges that the defendants misrepresented not only the quality of the home-equity line of credit residential mortgages underlying the RMBS, but also the quality of their due diligence processes during the securitization. Syncora brings claims for breach of contract and common-law fraudulent inducement. Complaint.

Deutsche Bank Sued For RMBS Losses in New York State Court

On February 14, 2012, Phoenix Light and seven other plaintiffs sued Deutsche Bank, Ace Securities, and related entities in New York state court for $300 million in damages resulting from the purchase of allegedly overvalued RMBS. In their summons with notice, Plaintiffs allege that the offering materials for the RMBS contained material misrepresentations and omissions regarding the underwriting standards and quality of the loans underlying the RMBS. Plaintiffs allege claims for common-law fraud, fraudulent inducement, negligent misrepresentation, and aiding and abetting fraud. Summons.

European Financial Industry Developments

 

U.K. Regulator Fines Former Merrill Lynch Broker £350,000 for Market Abuse

On 15 February, the U.K. regulator, the Financial Services Authority (FSA), fined Mr. Andrew Osborne, a former Managing Director at Merrill Lynch, £350,000 for engaging in market abuse by improperly disclosing inside information to Greenlight Capital Inc. that Punch Tavern Plc, for whom he was acting, was in the advanced stages of an equity fundraising. The FSA considered that Mr. Osborne had failed in his duties not to disclose inside information and to consider the risk of market abuse, duties of which Mr. Osborne as an approved person with considerable experience was fully aware. The decision comes on the back of the FSA's decisions on 25 January to fine Mr. David Einhorn and Greenlight Capital Inc. in relation to the same matter.  Final Notice of Andrew Osborne.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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