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

by Orrick, Herrington & Sutcliffe LLP
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Financial Industry Developments

Fed Final Rule on Supervision and Regulation of Bank Holding Companies and Foreign Banks

On February 18, the Fed issued a final rule which establishes enhanced supervision standards for large U.S. bank holding companies and foreign banking organizations, as required by the Dodd-Frank Act.  The final rule will be effective for U.S. entities on January 1, 2015, and for foreign entities in either 2016 or 2018, depending on the type of entity.  Fed Release.   Fed Final Rule.

FDIC Extends Comment Period for Resolution Strategy

On February 18, the FDIC extended the comment period to March 20 for the Single Point of Entry (SPOE) strategy for the resolution of Systemically Important Financial Institutions.   FDIC Release.   FDIC Extension Notice.

Rating Agency Developments

On February 20, Moody's released its approach to rating tobacco settlement revenue securitizationsMoody's Report.

On February 19, Fitch released its criteria for rating single- and multi-name credit-linked notes (CLNs).  Fitch Report.

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

Distressed Debt and Restructuring Developments

City of Detroit Files Proposed Plan of Adjustment in Bankruptcy Proceedings

On February 21, the City of Detroit filed a proposed plan of adjustment and disclosure statement in its Chapter 9 bankruptcy proceedings.  The proposed plan would provide general obligation bond claims with a 20 percent recovery.  It proposes to settle pending litigation with each holder of certificates of participation with a claim for 40 percent of face value.  Those reduced claims would then receive a 20 percent recovery.  Pension beneficiaries would receive a range of recoveries generally greater than 20 percent of their claim amount.  The plan also proposes to spin off the Detroit Water and Sewerage Department.  This proposed plan is likely the beginning of a highly controversial process.  Disclosure StatementPlan of Adjustment.  

RMBS and Other Securities Litigation

Royal Bank of Scotland Reaches Settlement in Class Action

On February 14, the Royal Bank of Scotland and a plaintiff class, led by New Jersey Carpenters Health Fund and the Boilermaker Blacksmith Pension trust, reported to the court that the parties had reached a settlement in principle in an RMBS case in the United States District Court for the Southern District of New York.  Plaintiffs brought claims under the federal securities laws in connection with fourteen RMBS securitizations.  According to a statement made by plaintiffs' lead counsel, the settlement amount is $275 million.  Joint LetterStatement.

Homeward Residential's RMBS Claims Against Sand Canyon Dismissed in Part

On February 14, Judge Analisa Torres of the United States District Court for the Southern District of New York granted in part defendant Sand Canyon Corporation's motion to dismiss the amended complaint of plaintiff Homeward Residential related to Option One Mortgage Loan Trust 2006-3.  The court dismissed plaintiff's claim for alleged breach of representations and warranties to the extent based on the representation that there is no material default existing under the mortgage note for each loan.  The court also dismissed the plaintiff's claims for breach of the duty to repurchase and for indemnification.  Plaintiff's claim for breach of contract related to appraisals and income, employment and debt verification will proceed.  Order.

Court Denies BofA's Motion to Reconsider Use of FHFA Documents Produced in Other RMBS Litigation

On February 14, Judge Denise Cote of the United States District Court for the Southern District of New York denied Bank of America's request to reconsider the court's earlier order disallowing use of documents produced by plaintiff Federal Housing Finance Agency in a case against Countrywide pending in California.  The court found that the parties had obtained sufficient documents to litigate the claims and defenses at issue and that allowing a party to use documents from other litigation in motion practice or at trial would undermine the discovery procedures established by the Court.  Order.

Motion to Dismiss Granted in Part in Repurchase Suit Against BofA, Countrywide

On February 13, Justice Eileen Bransten of the Supreme Court of the State of New York dismissed in part a second amended complaint filed by U.S. Bank as trustee for HarborView Mortgage Loan Trust, Series 2005-10.  As in its prior decision on a similar claim , the court held that U.S. Bank could not, under the relevant contracts, seek repurchase of all loans in the trust on the basis of alleged "pervasive breaches" of representations and warranties related to mortgage loans.  Plaintiff's breach of contract claims related to 495 loans will proceed.  Order.

European Financial Industry Developments

European Commission Endorses EMIR RTS Relating to Non-EU Counterparties

On February 13, the European Commission updated its webpage on EMIR (the Regulation on OTC derivative transactions, central counterparties (CCPs) and trade repositories) (Regulation 648/2012) to announce that it has adopted regulatory technical standards (RTS) specifying the contracts that are considered to have a direct, substantial and foreseeable effect within the EU, and to prevent the evasion of rules and obligations. Webpage.

EBA Updates Single Rulebook Q&As

On February 14, the European Banking Authority (EBA) updated its questions and answers (Q&As) on the single rulebook with the publication of over 70 answers on the issue of supervisory reporting including common reporting (COREP), financial reporting (FINREP), leverage, liquidity and large exposures.

The Q&As relate to the CRD IV package of reforms: the CRD IV Directive (2013/36/EU) and the Capital Requirements Regulation (Regulation 575/2013) (CRR), and the related technical standards and guidelines developed by the EBA. Q&A.

ESMA Q&A on Application of AIFMD

On February 17, the European Securities and Markets Authority (ESMA) published a questions and answers paper (Q&A) on the application of the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFM Directive or AIFMD) (2014/ESMA/163).

The aim of the Q&A is to promote common supervisory approaches and practices in the application of the AIFMD and its implementing measures. The answers are also intended to help alternative investment fund managers (AIFMs) by providing clarity as to the content of the AIFMD rules. The questions relate to the following matters: first application of the remuneration rules, remuneration rules in the case of delegation of portfolio management or risk management activities, annex IV of the AIFMD, notification of alternative investment funds (AIFs) and reporting under Article 42 of the AIFMD. Q&A. 

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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