FHFA Issues 2015 Scorecard for Fannie, Freddie and Common Securitization Solutions

On January 14, FHFA released the 2015 Scorecard​ outlining specific priorities for Fannie Mae, Freddie Mac and their joint venture, Common Securitization Solutions, LLC. The Scorecard assesses Fannie and Freddie's performance under FHFA's Strategic Plan for Fannie and Freddie and furthers the goals outlined thereunder, including building a new single-family securitization infrastructure for use by the Enterprises. Release. Scorecard. Strategic Plan.

SEC Adopts New Rules for Security-Based Swap Market

On January 14, the SEC adopted new rules that will require security-based swap data repositories (SDRs) to register with the SEC and prescribe reporting and public dissemination requirements for security-based swap transaction data. The SEC also proposed certain additional rules, rule amendments and guidance related to the reporting and public dissemination of security-based swap transaction data. The rules implement Title VII of the Dodd-Frank Act. The new rules will become effective 60 days after they are published in the Federal Register. Release.

Priorities Focus on Protecting Retail Investors, Assessing Market-Wide Risks and Using Data Analytics

On January 13, the Securities and Exchange Commission announced its Office of Compliance Inspections and Examinations' (OCIE) priorities for 2015 which focus on three areas: protecting retail investors, especially those saving for or in retirement; assessing market-wide risks; and using data analytics to identify signs of potential illegal activity.

The 2015 examination priorities address issues across a variety of financial institutions, including investment advisers, investment companies, broker-dealers, transfer agents, clearing agencies, and national securities exchanges. Of particular interest are the following areas of examination:

Retail Investors – Retail investors are being offered products and services that were formerly characterized as alternative or institutional, including private funds, illiquid investments, and structured products. Additionally, financial services firms are offering a broad array of information, advice, products, and services to help retail investors plan for and live in retirement.

Market-Wide Risks – OCIE will examine for structural risks and trends that involve multiple firms or entire industries, including: monitoring large broker-dealers and asset managers in coordination with the SEC's policy divisions, conducting annual examinations of clearing agencies as required by the Dodd-Frank Act, assessing cybersecurity controls across a range of industry participants, and examining broker-dealers' compliance with best execution duties in routing equity order flow.

Data Analytics – OCIE will use its enhanced analytic capabilities to focus on registrants and registered representatives that appear to be potentially engaged in illegal activity. Press Release. Full Report.

On January 12, DBRS released its methodology for operational risk assessment for European structured finance servicers. Methodology.

On January 8, Moody's revised its approach to rating single family rental securitizations. Approach.

Delaware Chancery Court Revives Repurchase Litigation

On January 12, 2015, Vice Chancellor Laster of the Delaware Chancery Court granted the plaintiff's motion for reargument and revived the breach of contract claims that the court had previously held to be untimely in Bear Stearns Mortgage Funding Trust 2006-SL1 v. EMC Mortgage Corp. and JPMorgan Chase Bank, N.A.. First, the court concluded that a controlling Delaware Supreme Court decision the parties had not previously identified required application of New York's six year statute of limitations, rather than Delaware's three-year limitation period. The lawsuit was commenced within six years of the alleged breach, rendering it timely under New York law. Second, the court alternatively reasoned (in dicta) that even assuming Delaware law applied, the action would be timely due to the contract's accrual provision, which stated that the repurchase claims would not accrue until the plaintiff's demands were refused. This constituted a "condition precedent" to the action that tolled accrual under Delaware law, a position New York courts have to date rejected. The Court further concluded that the accrual provision validly extended the statute of limitations as permitted by a recent Delaware statute, which permits parties to extend the period up to 20 years (under New York law, parties are not permitted to extend the limitations period by agreement). Order.

JP Morgan Reaches Agreement in Principle to Settle Dispute Over $17.6B in MBS

On January 8, 2015, plaintiffs in a class action lawsuit against JP Morgan Chase informed the court that the parties had an agreement in principle to settle the case. The suit was initially commenced against Bear Stearns in August of 2008, and alleged that the bank misrepresented the underwriting process and the quality of the underlying loans in connection with $17.6 billion in RMBS. The settlement will be subject to approval by Judge Swain of the United States District Court for the Southern District of New York. Preliminary papers seeking such approval are scheduled to be filed on February 2, 2015. Endorsed Status Report.

ECON Publishes Draft Reports on Regulation on Banking Structural Reforms and Regulation on Securities Financing Transactions

The European Parliament's Committee on Economic and Monetary Affairs (ECON) has published two draft reports on (i) the proposed Regulation on banking structural reforms and (ii) the proposed Regulation on securities financing transactions.

Each of the draft reports contains a European Parliament legislative resolution on each of the Regulations which set out suggested amendments to the European Commission's original proposals. The draft reports are to be considered by ECON during March 2015 and the European Parliament is scheduled to consider the Regulations at its plenary session on April 27 – 30, 2015. Report (i). Report (ii).

ESMA Publishes Final Technical advice on the MiFID II Directive and MiFIR

On December 19, 2014, the European Securities and Markets Authority (ESMA) published final technical advice (ESMA/2014/1569) to the European Commission and a consultation paper (ESMA/2014/1570) on the MiFID II Directive (2014/65/EU) and MiFIR (the Markets in Financial Instruments Regulation (Regulation 600/2014).

The consultation paper includes draft regulatory technical standards (RTS) and implementing technical standards (ITS) under the MiFID II Directive and MiFIR. The consultation paper invites responses to the draft RTS and ITS by March 2, 2015, and responses will be used to finalise the draft RTS which will be sent to the Commission for endorsement by the middle of 2015. Technical Advice. Consultation Paper.