Joint Federal Regulators Approve Final Risk Retention Rules
On October 21 and 22, the Fed, HUD, FDIC, FHFA, OCC, and SEC jointly approved final risk retention rules. The final rules, which implement Section 941 of Dodd Frank, generally follow the re-proposed rules issued in August 2013, mandating that sponsors retain at least 5% of the credit risk in asset-backed securities transactions. Generally, risk may be retained by holding either a horizontal or a vertical slice of issued securities, while additional options are available for specific types of securitizations. The rules will apply to residential mortgage-backed securities one year after publication in the Federal Register, and will apply to all other asset classes two years after publication. Final Rules. Joint Release.
MSRB Creates Supervision and Compliance Requirements for Municipal Advisors
On October 23, the Municipal Securities Rulemaking Board received approval from the SEC to create the first new rule for municipal advisors since the SEC released its final registration rule for these professionals in September 2013.
The new supervision requirements take effect April 23, 2015, providing firms six months to implement the required policies and procedures. By April 23, 2016, the chief executive officers (or the equivalent) of municipal advisor firms must make the first of their annual certifications in writing that the municipal advisor has in place processes to establish, maintain, review, test and modify written compliance procedures and written supervisory procedures reasonably designed to achieve compliance with applicable rules. MSRB Rule.
Agencies Release Economic Scenarios for 2015 Stress Testing
On October 23, regulators released the economic scenarios that will be used by financial institutions with total assets of over $10 billion for stress tests required under Dodd-Frank. The baseline, adverse, and severely adverse scenarios include 28 variables that reflect economic activity, including unemployment, exchange rates, prices, income, interest rates, and other relevant parameters of the economy. Regulatory review will cover 31 companies that will have to submit their capital plans on or before January 5, 2015. Fed Release. FDIC Release.
SEC's Office of Investor Education and Advocacy Provides an Overview of How the Division of Enforcement Conducts Investigations
On October 22, SEC's Office of Investor Education and Advocacy issued an Investor Bulletin to provide investors with a general overview of how the SEC's Division of Enforcement conducts investigations. The Bulletin states that the Division of Enforcement may be more likely to initiate an investigation if the matter:
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Requires immediate action to protect investors;
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Relates to conduct that may threaten the fairness or liquidity of the securities markets;
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Involves individuals with a history of misconduct;
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Involves a subject matter the SEC or Enforcement has designated as a priority;
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Fulfills a programmatic goal of the SEC and Enforcement; or
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Concerns an industry practice that may be widespread and should be addressed. Bulletin.
SEC Adopts Updated EDGAR Filer Manual
On October 20, the SEC revised EDGAR filer manual to reflect certain changes related to asset-backed security filings. Release. EDGAR Filer Manual.
CFPB Finalizes Rules on Privacy Disclosures
On October 20, the CFPB adopted the rule, previously proposed in May, allowing financial institutions that limit sharing of consumer data to post annual privacy notices online instead of delivering such notices individually, as prescribed by the Gramm-Leach-Bliley Act. Release. Rule.
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IBA Publishes Position Paper on LIBOR
On October 20, ICE Benchmark Administration Limited (IBA) published a position paper on the evolution of the London Interbank Offered Rate (LIBOR) (also known as ICE LIBOR).
The paper sets out: IBA's findings since it became the administrator of LIBOR in February 2014; proposed enhancements following the Financial Stability Board's publication on Reforming Major Interest Rate Benchmarks; and an invitation for views on the proposals from all stakeholders in LIBOR. Position Paper.
ESMA Publishes Responses to Consultations on MAR
On October 17, the European Securities and Markets Authority (ESMA) published responses that it received to consultations published in July 2014 relating to the Market Abuse Regulation (Regulation 596/2014) (MAR) on: (i) draft technical advice on possible delegated acts concerning MAR; and (ii) draft regulatory technical standards (RTS) and implementing technical standards (ITS) on MAR. Response.
PRA Publishes Speech on Solvency II Models, Bonus Caps and Governance
On October 16, the Bank of England (BoE) published a speech given by Andrew Bailey, BoE Deputy Governor, Prudential Regulation and Chief Executive Officer, Prudential Regulation Authority, that considered, among other things, the use of models under the Solvency II Directive, the merits of the CRD IV Directive bonus caps for bankers and reforms to the governance of banks and insurers. Speech.
EBA Updates Single Rulebook Q&As
On October 17, the European Banking Authority (EBA) updated its Q&As on the single rulebook, publishing two new answers to questions relating to supervisory reporting and credit risk. The question IDs and topics for the new answers published are: (i) question ID: 2013_433: scope of application of FINREP; and (ii) question ID: 2013_374: definition of investments in private equity.
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&As.
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