Orrick's Financial Industry Week in Review - March 24, 2014

by Orrick, Herrington & Sutcliffe LLP
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Rating Agency Developments

On March 19, S&P released its methodology for rating CDOs of project finance debtS&P Report

On March 17, Fitch released its criteria for analyzing RMBS under the Ability-to-Repay and Qualified Mortgage rules.  Fitch report


Note: Free registration is required for rating agency releases and reports.

Asset Management

FINRA Proposes Lighter Regulatory Regime For Limited Corporate Financing Brokers

The Financial Industry Regulatory Authority (FINRA) recently issued a Regulatory Notice requesting comment on a Proposed Rule Set for Limited Corporate Financing Brokers (LCFBs). The comment period expires on April 28, 2014. Please click here for Orrick's Alert which provides an overview and analysis of the Rule Set and its merits. 

RMBS and Other Securities Litigation

New York Appellate Court Denies Motion for Reargument of ACE Ruling

On March 20, the Appellate Division, First Department denied an RMBS trustee's motion for reargument of or, alternatively, leave to appeal to the Court of Appeals (New York's highest court) from the First Department's December 19, 2013 Decision and Order dismissing the trustee's mortgage loan repurchase action against DB Structured Products as time barred.  As described in the January 6 edition of the Week in Review, the First Department's order held that repurchase claims arising from alleged breaches of representations and warranties concerning mortgage loans accrue when the representations and warranties allegedly were breached, and not on the later date when a defendant refuses to repurchase a loan.  The trustee's complaint was untimely because it was not filed within six years of the alleged breach and did not relate back to an earlier complaint filed by certificate holders that lacked standing to sue.  The trustee now has thirty days to seek leave directly from the Court of Appeals to appeal to that court.  Order.

European Financial Industry Developments

Responses to ESMA and EBA Consultation on Guidelines for Complaints Handling in the Securities and Banking Sectors

On March 19, the European Securities and Markets Authority (ESMA) published a list of the responses it received to its November 2013 consultation on draft guidelines for complaints handling in the securities and banking sectors.  The list includes responses from the following bodies:

    • Association for Financial Markets in Europe;
    • British Bankers' Association;
    • European Banking Federation;
    • European Fund and Asset Management Association.

ESMA and the European Banking Authority (EBA), who carried out the consultation jointly with ESMA, intend to publish a final report and guidelines in the first quarter of 2014.  Competent authorities will be expected to incorporate the guidelines into their supervisory practices as appropriate.  ESMA List of Responses.

ESMA Updates Q&A on EMIR Implementation

On March 20, ESMA published an updated version of its questions and answers document (Q&A) on the implementation of EMIR (the Regulation on over-the-counter (OTC) derivatives, central counterparties (CCPs) and trade repositories (TRs)) (Regulation 648/2012).  The updated Q&A includes a table of questions on pages 6 and 7, setting out which questions have been updated as of March 20, 2014, and to which article(s) in EMIR the updated questions relate.  They include:\Intragroup transactions;

    • Notional amounts;
    • Risk mitigation techniques for OTC derivative contracts not cleared by a CCP;
    • Reporting of outstanding positions following the entry into force of EMIR (backloading); and
    • Various issues relating to TR reporting requirements.  ESMA Q&A

FCA and Bank of England Agree on Memorandum of Understanding

The Financial Conduct Authority (FCA) and the Bank of England, including the Prudential Regulation Authority (PRA), have agreed on a Memorandum of Understanding (MoU) that sets out how they cooperate with one another in relation to the supervision of markets and market infrastructure, which includes financial markets infrastructures (FMIs).  The FCA and the Bank concluded that the MoU's arrangements for cooperation over the first 11 months of the authorities' new responsibilities have worked well.  The FCA and the Bank continue to refine their cooperative working arrangements and welcome the industry's suggestions for some areas of consideration.  Memorandum of Understanding.

FCA Fines Besso Limited for Anti-Bribery and Corruption Systems Failings

The Financial Conduct Authority (FCA) has fined Besso Limited, an independent management owned general insurance broker in the Lloyd's Broking group, £315,000 for a failure to take reasonable care to establish and maintain effective systems and controls for countering the risks of bribery and corruption.  Press Release.

 

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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