Orrick's Financial Industry Week in Review - March 3, 2014

by Orrick, Herrington & Sutcliffe LLP
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Financial Industry Developments

Fed Extends Comment Period for Rulemaking Regarding Physical Commodity Activities

On February 27, the Fed provided an additional 30 days to comment on an advance notice of proposed rulemaking regarding physical commodity activities conducted by financial holding companies . Public comment period is extended to April 16, 2014.  Notice of Extension.

CFTC Issues a Staff Advisory on Complying with the Gramm-Leach-Bliley Act Security Safeguards

On February 26, CFTC issued advisory that outlines recommended best practices for covered financial institutions to comply with Title V and Part 160 of CFTC's regulations concerning security safeguards of the Gramm-Leach-Bliley Act.  Staff Advisory.

FHFA Appoints New Chairman of Fannie Mae Board of Directors

On February 25, FHFA announced that Philip A. Laskawy will step down from the chairmanship of Fannie Mae effective March 31, 2014 , and will be succeeded by the current board member Egbert L. J. Perry.  Press Release.

SEC Re-Opens Portions of Reg AB II for Comment

On February 25, the SEC re-opened the comment period for two releases (Release No. 33-9117 (Apr. 7, 2010) and Release No. 33 - 9244 (July 26, 2011)) to permit comments with respect to privacy concerns raised by potential dissemination of sensitive asset-level data . Orrick covered this topic extensively in a recent client alert.  Release.  Staff Memorandum.

Rating Agency Developments

On February 27, Moody's released its global approach to rating collateralized loan obligationsMoody's Report.

On February 26, Moody's released its approach to rating auto lease securitizations exposed to residual value riskMoody's Report.

On February 24, Moody's released its approach to rating the global shipping industryMoody's Report.

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

RMBS and Other Securities Litigation

Morgan Stanley to Settle RMBS Securities Claims by the SEC for $275 Million

On February 25, Morgan Stanley disclosed that it had reached an agreement in principle with the SEC staff to pay $275 million in disgorgement and penalties in settlement of an investigation into subprime RMBS sponsored and underwritten by Morgan Stanley in 2007.  The settlement would cover alleged violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act, and Morgan Stanley would neither admit nor deny the allegations.  The settlement remains subject to final approval by the Commission.  SEC Filing.

JPMorgan Settles RMBS Litigation Brought by Syncora

On February 24, monoline insurer Syncora Guarantee, Inc. announced that it had reached a settlement of RMBS litigation against JP Morgan Chase for an undisclosed sum.  Syncora had alleged that J.P. Morgan and its affiliates misrepresented the quality of loans underlying RMBS securitizations insured by Syncora.  Press Release

Société Générale Agrees to $122M Settlement in RMBS Suit 

On February 27, the Federal Housing Finance Agency (FHFA) announced that it reached a settlement with French bank Société Générale of an RMBS suit in the U.S. District Court for the Southern District of New York.  FHFA alleged violations of federal and state securities law in connection with RMBS purchased by Fannie Mae and Freddie Mac in 2006.  The settlement agreement contains no admission of liability or wrongdoing.  Société Générale and four of its subsidiaries will pay $122 million dollars to the agency.   Press Release.

European Financial Industry Developments

ESMA Publishes MiFID II Implementation Speech

On February 25, ESMA published a speech by ESMA Executive Director Verena Ross on the issues surrounding the implementation of MiFID II.

The issues include the following:

  • ESMA will publish a discussion paper on MiFID II technical standards once the European Parliament has approved the final text of MiFID II.
  • More frequent processing of requests and issuance of opinions on pre-trade waivers by ESMA.
  • ESMA expects to be involved in the decisions on the compatibility of national competent authorities' proposed position limits for commodity derivatives.
  • Information on the transparency and micro-structural regimes provided for in Level 2 will be maintained and published by ESMA, together with ensuring consistent implementation and monitoring their effects on the EU markets, with periodic recalibration of these parameters where required.
  • Q&As will be issued by ESMA when the MiFID II Level 2 measures enter into force.  Speech.

UCITS 5 Political Agreement Reached

On February 25, the European Parliament published a press release announcing that political agreement has been reached with the Council of the EU on the proposed UCITS V Directive.

The press release notes the following areas of agreement:

  • Payment of fund managers.
  • The appointment of a depository by UCITS or UCITS management companies.
  • Provision of penalties by EU member states for funds failing to comply with national UCITS authorization and reporting rules.  Press Release.

FCA Bans Former Derivatives Trader

On February 25, the FCA published the final notice it issued to David Hobbs, a former derivatives trader, banning him from performing any regulatory function.

The final notice follows the decision of the Upper Tribunal (Tax and Chancery Chamber), which found that in putting forward a false defense to the FSA (the FCA's predecessor) and in maintaining that defense in evidence before the tribunal, he had exhibited a lack of integrity. It held that he was not a fit and proper person to perform regulatory functions.  Final Notice.

Events

Orrick's Annual Financial Services Employment Law Roundtable

On March 4, please join us in the New York Office for Orrick's Annual Financial Services Employment Law Roundtable, which will include a special presentation by EEOC General Counsel, David Lopez, on EEOC Enforcement Initiatives for 2014.  Roundtable discussion topics include wage-and-hour cases impacting the financial services industry and NLRB regulation of the non-union environment, among other topics.  For more information and to register for this event, please click here.

 

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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