Financial Industry Developments

Delay of Fannie and Freddie Guarantee Fee Changes

On January 8, the FHFA announced that it has directed Fannie Mae and Freddie Mac to delay the implementation of the increases to the guarantee fees that were originally to be effective in March and April 2014.  FHFA Release.

New CFPB Mortgage Resources

On January 7, the CFPB released additional resources for consumers in anticipation of the January 10 effective date for its mortgage rules, including sample letters and mortgage tips.  CFPB Release.   CFPB Guide.

The Financial Product Tax Reform Proposals

This article, by Orrick tax partner Peter Connors, reviews the ambitious proposal from House Ways and Means Committee Chair Dave Camp to reform the taxation of financial products.  To read the complete article, please click here.

Rating Agency Developments

On January 6, Fitch released its methodology for rating derivative product companiesFitch Report.

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

 
Asset Management

SEC Announces Examination Priorities for 2014

On January 9, the SEC announced its examination priorities for 2014, which cover a wide range of issues at financial institutions, including investment advisers and investment companies, broker-dealers, clearing agencies, exchanges and other self-regulatory organizations, hedge funds, private equity funds and transfer agents.

The market-wide priorities include fraud detection and prevention, corporate governance and enterprise risk management, technology controls, issues posed by the convergence of broker-dealer and investment adviser businesses and by new rules and regulations, and retirement investments and rollovers.  Program Priorities

SEC Issues Interpretive Guidance on New Municipal Advisors Registration Rule

On January 10, the SEC announced that its Office of Municipal Securities has issued interpretive guidance to address questions from market participants regarding the implementation of new final SEC rules requiring municipal advisors to register with the SEC.

State and local governments frequently use paid advisors to help them decide how and when to issue municipal securities and how to invest proceeds from the sales.  The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act required these advisors to register with the SEC like other market intermediaries.  The SEC's final rule was adopted in September 2013 and becomes effective on January 13, 2014.  Among the issues addressed in the guidance are:  (i) the advice standard, including the general information exclusion and the treatment of business promotional materials used by underwriters; (ii) the exemption for independent municipal advisors; (iii) the exclusion for registered investment advisers; (iv) the underwriter exclusion, including engagements as underwriters; and (v) the effective date of the final rules and the compliance period for using the final registration forms.  Interpretative Guidance.

RMBS and Other Securities Litigation

Goldman Sachs and Prudential Settle RMBS Action

On January 6, Judge Susan D. Wigenton of the United States District Court for the District of New Jersey "so ordered" the parties' stipulation of voluntary dismissal with prejudice of Prudential's claims against Goldman Sachs after the parties reached an undisclosed settlement.  Prudential and its affiliates had sued Goldman Sachs and its affiliates for alleged material misrepresentations and omissions in the offering materials for more than $375 million in RMBS.  Prudential asserted claims for common law fraud and fraudulent inducement, negligent misrepresentation, equitable fraud and New Jersey civil RICO violations.  Order.

District Judge Reaffirms Denial of Motion to Dismiss RMBS Repurchase Suit

On January 7, Judge Alvin K. Hellerstein of the United States District Court for the Southern District of New York denied WMC's motion to reconsider the denial of its motion to dismiss in light of the intervening New York state appellate decision in ACE Securities v. DB Structured Products (covered in the January 6, 2014 edition of the Week in Review).  Judge Hellerstein had relied on the trial court decision in ACE as support for his original ruling that the plaintiff trustee's claims accrued when WMC refused to repurchase loans that allegedly breached certain representations, not when the representations first were made.  WMC moved to reconsider after the First Department; Appellate Division reversed the trial court in ACE and held that breach of contract claims accrue when the representations are made.  Judge Hellerstein denied the motion, stating that while he had read the ACE appellate decision, it did not change his view that "the contract was breached not at the time of closing but at the time of failure to cure."  Order Denying Motion to DismissOrder Denying Reconsideration.

European Financial Industry Developments

Co-Op Bank Subject to Enforcement Investigation by the UK PRA and FCA 

On January 6, The UK Regulator, the Prudential Regulation Authority (PRA) published a press release confirming its intention to undertake an enforcement investigation into the Co-Op Bank.  The UK's other regulator, the Financial Conduct Authority (FCA), has confirmed in a press release that it will also be investigating the bank and events up to June 2013.  The PRA will be considering the role of senior managers at the bank.  Press ReleaseFCA Press Release

European Parliament Committee Publishes Opinion on Money Laundering Directive 4

On January 7, the European Parliament published an opinion, written by its Committee on Legal Affairs (or JURI) relating to the Directive that is proposed to amend and replace the Third Money Laundering Directive (2005/60/EC) (or MLD3).

JURI's opinion on the new Directive or the Fourth Money Laundering Directive (MLD4) is addressed to the European Parliament's Economic and Monetary Affairs Committee (ECON) and its Civil Liberties, Justice and Home Affairs Committee (LIBE), who are expected to vote on a draft report on January 22.  The opinion sets out detailed amendments that JURI believes should be made to MLD4 on a range of matters, including whistleblowing, personal data and beneficial ownership information.

MLD4 is expected to come before the European Parliament in March 2014, with the new regime likely to come into force some time in 2016.  Opinion.