Orrick's Financial Industry Week In Review


Financial Industry Developments

Stanley Fischer Sworn in to the Fed's Board of Governors

On May 28, Stanley Fischer took the oath of office as a member of the Board of Governors. His term expires on January 31, 2020Press ReleaseFischer's Bio.   

OCC Announces Changes to the Supervisory Process for the Largest Banks

On May 28, the OCC announced that it will expand the organization, functions and responsibilities of its large bank lead expert program to improve horizontal perspective and analysis, systemic risk identification and resource prioritization.  The OCC will establish a formal rotation program for all examiners to provide them with broader perspectives.  The OCC will also formalize an enterprise risk management framework.  These changes come in response to an international peer review of the OCC's supervision of large banks and thrifts.  Press ReleaseInternational Peer Review ReportSummary of OCC Responses.   

HUD Returns the Housing Authority of New Orleans to Local Control

On May 28, HUD announced that it is returning the Housing Authority of New Orleans (HANO) to local control from federal receivership effective June 30, 2014.  HUD took possession of HANO in February 2002 for substantial default of its obligations.  Press Release.  

Rating Agency Developments

On May 29, Fitch released its criteria for rating U.S. nonprofit institutionsFitch Report.

On May 28, Fitch released its criteria for rating caps and limitations on global structured finance transactions.  Fitch Report.

On May 28, Fitch released its Europe, Middle East and Africa (EMEA) residential mortgage loss criteria along with separate reports detailing its EMEA RMBS cash flow analysis criteria and its EMEA RMBS master rating criteria.  Mortgage Loss CriteriaCash Flow Analysis CriteriaMaster Rating Criteria.

On May 27, DBRS released its criteria for assessing U.S. RMBS pools under the ability-to-repay rules.  DBRS Report.

On May 26, DBRS released its methodology for Canadian structured finance surveillance.  DBRS Report.

Note: Free registration is required for rating agency releases and reports.
RMBS and Other Securities Litigation

New Plaintiffs' Claims Dismissed From Morgan Stanley MBS Class Action

On May 27, Judge Laura Taylor Swain of the Southern District of New York granted Morgan Stanley's motion for reconsideration and dismissed as time-barred claims brought by certain named plaintiffs (the New Plaintiffs) first added to the case more than a year after it was originally filed.  The New Plaintiffs, several banks and pension funds, asserted claims under Sections 11, 12 and 15 of the Securities Act of 1933 but did so after the expiration of the three-year statute of repose applicable to such claims.  In September 2011, Judge Swain originally held that the claims were nonetheless timely under the American Pipe tolling doctrine, which holds that the statute of limitations for an absent class member's individual claim is tolled during the pendency of a putative class action.  In 2013, however, the Second Circuit in In re IndyMac Mortgage-Backed Securities Litigation, 721 F.3d 95 (2d Cir. 2013), held that American Pipe tolling applies to statutes of limitations, but does not apply to statutes of repose.  (As discussed in the March 17, 2014, Week in Review, the Supreme Court granted a petition for a writ of certiorari in the IndyMac case to resolve the applicability of American Pipe to statutes of repose; the case remains pending).  Upon reconsideration in light of the Second Circuit's IndyMac decision, Judge Swain held that the New Plaintiffs' claims were barred by the applicable statute of repose.  She rejected the New Plaintiffs' attempt to rely on relation back under Rule 15 or joinder under Rule 17(a), finding those rules equally inapplicable to avoid statutes of repose as American Pipe tolling.  Order.. 

European Financial Industry Developments

ECB Publishes Draft Consultation on Charging a Supervisory Fee

On May 27, the European Central Bank (ECB) published a consultation paper and accompanying questions and answers on its website concerning its draft regulation on supervisory fees.  Under the draft regulation, the ECB would charge an annual fee to supervised banks and supervised banking groups to recover its cost of supervising Euro Area banks under the Single Supervisory Mechanism (SSM). The SSM Regulation (Regulation 1024/2013) requires the ECB to charge such a fee.

The draft regulation sets out the framework for calculating the fee, apportioning it between supervised entities and collecting the fee.  Comments on the draft regulation are invited and the consultation will close to comments on July 11, 2014.   The ECB will hold a public hearing on the consultation on June 24, 2014, where comments can be submitted.  Consultation PaperQ&AsPublic Hearing.   

FCA Publishes Regulation Round-Up

On May 27, the Financial Conduct Authority (FCA) published its May issue of regulation round-up, a newsletter providing details of the FCA's recent activity.

One issue identified in the regulation round-up is the weakness of many smaller banks' anti-money laundering safeguards, in particular with regard to the identification and management of high-risk customers and the monitoring of transactions.  Regulation Round-Up.   

Council of EU Publishes Compromise Proposal on ELTIF Regulation

On May 27, the Council of the EU published a compromise proposal (10215/14), dated May 23, 2014, in respect of the European Commission's proposed Regulation on European Long-Term Investment Funds (ELTIF Regulation).

The ELTIF Regulation seeks to create a new type of investment fund available for retail and professional investors (an ELTIF).  ELTIFS will be used as long term collective investment vehicles to invest in infrastructure projects and un-listed companies that issue equity or debt securities for which there is no readily identifiable buyer.  ELTIFS will be subject to various investment constraints, such as a prohibition on short selling of assets and a prohibition on taking exposure to commodities.  The ELTIF Regulation (2013/0214(COD)).  Compromise ProposalELTIF Regulation.


Orrick's Annual Financial Services Roundtable, June 11

Members of Orrick's Employment Law & Litigation Group invite you to join an interactive discussion of critical employment law issues impacting the financial services industry.  Roundtable discussion topics include wage-and-hour cases impacting the financial services industry, employee background checks, update on EEOC and OFCCP enforcement initiatives for 2014 and the latest whistleblower law developments under federal and new California state law.  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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