Orrick's Financial Industry Week in Review - October 10, 2011


Financial Industry Developments


Agency Consideration of NPR on Volcker Rule

The FDIC announced that, at its open meeting on October 11, it will consider a Notice of Proposed Rulemaking on "Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds" pursuant to Section 619 of the Dodd-Frank Act, commonly known as the "Volcker Rule".  A live webcast of the open meeting will be available on the FDIC website. FDIC Meeting Discussion Agenda. FDIC Website for Meeting Webcast.

The SEC also announced that it will consider proposed rulemaking with respect to the Volcker Rule at its open meeting on October 12. SEC Open Meeting Notice.  


Geithner Testimony on FSOC Report

On October 6, on behalf of the Financial Stability Oversight Council, Treasury Secretary Geithner testified before the Senate Banking Committee and the House Financial Services Committee, outlining the conclusions and recommendations made by FSOC in its first annual report, which was released in July. Geithner Testimony.


Rating Agency Developments


On October 6, Fitch updated is structured finance CDO rating criteria. Fitch Release.

On October 4, Fitch outlined its structured finance rating process. Fitch Release.

On September 30, Fitch updated its guidelines on managing criteria and models. Fitch Release.

Note: Free registration is required for Fitch releases and reports.


Asset Management


FINRA to Require Electronic Submission of Annual Audit Reports

On October 30, FINRA announced the revision of the process by which member firms submit annual audited financial statements pursuant to Rule 17a-5(d) under the Exchange Act. Member firms, for which FINRA is the designated examining authority, will be required, pursuant to NASD Rule 3170, to submit their annual audit reports in electronic form. The new requirements will be effective November 8 and will be applicable to annual audit reports with a fiscal year end on or after September 30. FINRA Notice.


Recent Orrick Alerts


Life Settlements Alert

On September 20, 2011, the Delaware Supreme Court answered three certified questions directly impacting life settlement investments. The questions were presented to the Supreme Court in two companion cases pending in the federal district court of Delaware, PHL Variable Ins. Co. v. Price Dawe 2006 Insurance Trust and Lincoln Nat'l Life Ins. Co. v. Joseph Schlanger 2006 Insurance Trust. Click here to read more.


RMBS Litigation


German Banks Sue Bank of America, JP Morgan and Others for Over $4.5 Billion

On September 29, 2011 two German banks, Landesbank Sachsen AG and Landesbank Baden-Wurttemberg, and the banks' Irish asset manager, Sealink, filed three suits in New York state court. Plaintiffs name Bank of America Corp., JP Morgan, Countrywide Financial Corp., Bear Stearns, Washington Mutual, and certain Countrywide executives in claims for fraudulent and negligent misrepresentation, aiding and abetting, and vicarious and successor liability. Plaintiffs allege that the defendants concealed the risks of the underlying mortgages through alleged misstatements as to originator underwriting practices and allegedly overstated appraisals. Plaintiffs seek compensatory, rescissory, and punitive damages. Index No. 652680/2011. Index No. 652681/2011. Index No. 652679/2011.


New Jersey Federal District Judge Dismisses Claims Against UBS as Untimely

On September 29, 2011, Judge Cavanaugh of the New Jersey federal district court dismissed a class action securities suit brought against UBS by RMBS investors. Judge Cavanaugh granted the motion to dismiss on statute of limitations grounds, finding that the lead plaintiff, Pension Trust Fund for Operating Engineers, did not adequately plead compliance with the statute of limitations by simply stating the complaint was timely. However, Judge Cavanaugh granted plaintiffs leave to amend.  Plaintiffs allege claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933. Decision.   


CDO Suit Against Morgan Stanley Dismissed With Leave to Amend

On September 30, 2011, Judge Barbara Jones of the Southern District of New York dismissed a class action suit against Morgan Stanley with leave to amend. The action alleged that Morgan Stanley deliberately concealed the risks of the assets underlying a collateralized debt obligation referencing mortgage-backed securities in which plaintiffs invested $1.2 billion, and then bet against the offering. Morgan Stanley had acted as an underwriter of the CDO. Plaintiff alleges common law claims for fraud and unjust enrichment. Judge Jones found plaintiff failed to allege with particularity that Morgan Stanley itself made a materially false statement to the plaintiff. The court held that Morgan Stanley was not responsible for third-party statements by the issuer and rating agencies, and dismissed with leave to amend. Decision.




Orrick's Financial Services Roundtable on Complex Employment Law Issues

Please join members of our Global Employment Law Group in San Francisco for an interactive roundtable focused on the latest complex employment issues in the financial services industry. This is an invitation-only event, and we are limiting attendance to encourage an interactive peer-to-peer discussion. Click here for more info and to RSVP.


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.

© Orrick, Herrington & Sutcliffe LLP | Attorney Advertising

Written by:


Orrick, Herrington & Sutcliffe LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.