Financial Industry Developments

Fee Rate Advisory #3 for Fiscal Year 2017 

On May 31, 2017, the Securities and Exchange Commission ("Commission") announced that starting July 4, 2017, the fee rates applicable to most securities transactions will be set at $23.10 per million dollars. Consequently, each self-regulatory organization will continue to pay the Commission a rate of $21.80 per million for covered sales occurring on charge dates through July 3, 2017, and a rate of $23.10 per million for covered sales occurring on charge dates on or after July 4, 2017. Release. Rule.

OCC to Provide Extended Notice for Scheduled CRA Evaluations

On May 31, 2017, the Office of the Comptroller of the Currency ("OCC") announced it will extend the notification timeline for upcoming Community Reinvestment Act ("CRA") evaluations. Beginning with the third quarter notification for 2017, the OCC will post the list of financial institutions for which CRA will be coming due over the next two quarters, to allow more time for interested parties to review and provide meaningful comments on a financial institution's performance before CRA examination. The current regulations require the OCC to publish the quarterly CRA evaluation schedule at least 30 days before the beginning of each quarter. Even though the OCC will publish two quarters of upcoming CRA evaluations, the schedule is subject to change. Release.

CFTC Extends No-Action Relief to SEFs and DCMs From Certain CFTC Regulations for Correction of Errors

On May 30, 2017, the U.S. Commodity Futures Trading Commission's ("CFTC") Division of Market Oversight and Division of Clearing and Risk issued a no-action letter extending the relief provided in CFTC Letter No. 16-58, which expires on June 15, 2017. That no-action letter provides relief from certain CFTC regulations to permit swap execution facilities ("SEFs") and designated contract markets ("DCMs") to correct clerical or operational errors that caused a swap to be rejected for clearing and thus become void. The no-action letter also permits SEFs and DCMs to correct clerical or operational errors discovered after a swap has been cleared. The letter extends the relief until the effective date of any revised CFTC regulations regarding methods of execution requirements and pre-arranged trading. Release. Full Letter.

Rating Agency Developments

On June 1, 2017, Kroll released a report entitled KBRA's Views on the State of the Solar Market. Report.

On May 31, 2017, Kroll released a report entitled Oil Price Increases Won't Plug CMBS Losses. Report.

On May 26, 2017, DBRS issued a report entitled Rating Canadian Airport Authorities. Report.

On May 26, 2017, DBRS issued a report entitled Rating Public Universities. Report.

On May 26, 2017, DBRS issued a report entitled Rating Companies in the Independent Power Producer Industry. Report.

On May 26, 2017, Moody's issued a report entitled Global Property and Casualty Insurers. Report.

On May 25, 2017, Fitch issued a report entitled Global Consumer ABS Rating Criteria. Report.

On May 25, 2017, Fitch issued a report entitled U.S. Public Finance Tax-Supported Rating Criteria. Report.

On May 25, 2017, Moody's issued a report entitled Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts. Report. 

Investment Management

Public Comments Solicited From Retail Investors and Other Interested Parties on Standards of Conduct for Investment Advisers and Broker-Dealers

On June 1, 2017, Securities and Exchange Commission ("SEC") Chairman Jay Clayton issued a statement (the "Statement") soliciting public comments from retail investors and other interested parties on standards of conduct for investment advisers and broker-dealers. The Statement was, in part, in response to the announcement by the Department of Labor that it intends to issue a Request for Information regarding various aspects of its fiduciary rule and its desire to engage with the SEC as each agency pursues its own ongoing analysis of these standards.

The Statement sets forth an extensive, detailed list of questions and issues on which comments are requested. To facilitate the SEC's assessment of the issues, the Statement announced that a webform and email box are now available for members of the public to make their views on these issues known in advance of any future SEC action.

RMBS and Other Securities Litigation

Wells Fargo Seeks Contribution from Investment Advisors in RMBS Suit

On May 26, 2017, defendant-trustee Wells Fargo Bank N.A. ("Wells Fargo") filed four third-party complaints against BlackRock Advisors, LLC, Pacific Investment Management Company, LLC, Teachers Advisors, LLC, TIAA-CREF Investment Management, LLC, and PGIM, Inc. (together, the "Third-Party Defendants") in the BlackRock Allocation Target Shares: Series S Portfolio, et al. v. Wells Fargo Bank, N.A., No. 1:14-cv-9371 (S.D.N.Y.) action. Wells Fargo's complaints seek contribution from each Third-Party Defendant in the event that Wells Fargo is found liable on the investor-plaintiffs' underlying claims. Read more here.

European Financial Industry Developments

ESMA Consults on Guidelines on CCP Conflicts of Interest Management Under EMIR

On June 1, 2017, ESMA published a consultation paper (ESMA70-151-291) on guidelines relating to central counterparties ("CCPs") management of conflicts of interest.

ESMA explains that the European Market Infrastructure Regulation ("EMIR") only contains generic provisions relating to CCPs' conflict of interest management. It requires CCPs to act in the best interests of their clearing members and the clients. Therefore, CCPs need to have in place robust organizational arrangements and policies to prevent potential conflicts of interest and to solve them if they occur. ESMA believes that further guidance would be beneficial and further facilitate supervisory convergence on this area.

The purpose of the guidelines is to set out the criteria CCPs should apply to avoid or mitigate the risks of conflicts of interest and to ensure a consistent implementation across CCPs. Areas addressed by the guidelines include:

• written arrangements to identify and manage any potential conflicts of interest between CCPs, clearing members and clients;
• where written arrangements are not sufficient, disclosure of conflicts of interest to the clearing member or clients before entering into any new transactions; and
• possible conflicts with a CCP's parent undertaking or subsidiary.

The consultation will close on August 24, 2017, upon which ESMA will consider the feedback received to the consultation. ESMA expects to publish a final report on the guidelines by the end of 2017.

Council of EU Presidency Compromise Proposal on Proposed Regulation Amending CCR

The Council of the EU has published the final Presidency compromise proposal on the proposed Regulation amending the Capital Requirements Regulation (Regulation 575/2013) ("CRR") as regards the transitional period for mitigating the impact on its own funds of the introduction of International Financial Reporting Standard 9 ("IFRS 9") and the large exposures treatment of certain public sector exposures denominated in nondomestic currencies of member states.

The European Parliament issued a resolution for the adoption of IFRS 9 in September 2016, and in November 2016 the European Commission, as part of its legislative proposals to revise the CRR and the CRD IV Directive (2013/36/EU), suggested transitional arrangements to mitigate the effect of the introduction of IFRS 9 on Common Equity Tier 1 capital resulting from the impairment requirements of IFRS 9. The EBA published an opinion on transitional arrangements and credit risk adjustments due to the introduction of IFRS 9 in March 2017.

European Commission's Review of Consumer Rights Directive

The European Commission has published the results of its evaluation of the Consumer Rights Directive (2011/83/EU) ("CRD").

The evaluation found that the CRD had positively contributed to the functioning of the business-to-consumer internal market and had ensured a high common level of consumer protection across member states of the EU. Areas for improvement were also highlighted. Read more here.

EIOPA Publishes Guidance on Authorization and Supervision in Light of Brexit

On May 25, 2017, it was reported on Reuters that the European Insurance and Occupational Pensions Authority ("EIOPA") is to publish guidance directed to national regulators on the principles for authorization and supervision to ensure that they do not undercut one another in their attempts to attract firms moving from London due to Brexit. EIOPA is monitoring developments in this area and will publish guidance in due course.

According to Reuters, the European Securities and Markets Authority ("ESMA") is also to publish guidelines on this issue before the summer. ESMA's chairman has said it has discussed the potential risks of new "letter box" companies being set up in the EU, which would delegate key operations to group companies in London. ESMA warns that these arrangements could undermine stability.