Orrick's Financial Industry Week in Review - August 19, 2013

by Orrick, Herrington & Sutcliffe LLP
Contact

Financial Industry Developments

CFPB Update on Mortgage Regulation Exam Procedures

On August 15, the CFPB released a second update to its exam procedures in connection with mortgage regulations to cover: (i) ability-to-repay; (ii) qualified mortgages; (iii) high-cost mortgages; (iv) appraisals for higher-priced loans; and (v) amendments related to the escrows rule.  CFPB ReleaseRESPA Exam ProceduresTILA Exam Procedures.   

CFTC Swap Regulations

On August 13, the CFTC issued a final rule to exempt swaps entered into by qualified cooperatives from certain clearing requirements.  The rule will be effective 30 days after publication in the Federal Register; however, the CFTC granted no-action relief to cover the interim period.  CFTC ReleaseCFTC Final RuleCFTC No-Action Letter.   

Fed Assessments on Large Financial Companies

On August 16, the Fed issued a final rule establishing annual assessment fees for its supervision and regulation of large financial companies (with $50 billion or more in total consolidated assets).  Beginning with the 2013 assessment period, the Federal Reserve will notify each company of the amount of its assessment fee no later than June 30 of the year following the assessment period.  Payments will be due by September 15.  The final rule is effective on October 25.  Fed ReleaseFed Final Rule

Rating Agency Developments

On August 15, Fitch released its rating criteria hierarchyFitch Report

On August 14, Fitch released its criteria for rating market value structures.  Fitch Report

On August 14, Fitch released its criteria for rating closed-end fund debt and preferred stockFitch Report

On August 13, Fitch released its global bond fund rating criteria.  Fitch Report

On August 12, DBRS updated its methodology for rating Canadian structured finance transactions.  DBRS Report

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

Asset Management

Disclosure and Compliance Matters for Investment Companies that Invest in Commodity Interests  

The Staff of the Division of Investment Management of the SEC has published a Guidance Update with respect to Disclosure and Compliance Matters for Investment Company Registrants that Invest in Commodity Interests.  Although this Guidance is directed primarily to investment companies registered under the Investment Company Act of 1940, it sets forth principles of general applicability to all investment fund and investment advisers.  Among other things, the Guidance discusses the need: (i) to disclose the risks associated with investing in commodities; (ii) to ensure that performance presentations that are included in marketing materials are not materially misleading; and (iii) for an effective compliance and risk management function.  It concludes by emphasizing that a Risk and Examinations Office has recently been created within the Division of Investment Management, and this office, in coordination with the SEC's Office of Compliance Inspections and Examinations, will focus on risk management activities related to commodity interests and other derivatives.  Guidance.

RMBS and Other Securities Litigation

New York Appellate Court Dismisses Syncora's $320M RMBS Suit Against J.P. Morgan

On August 13, the First Department of the Appellate Division of the Supreme Court of New York reversed a trial court decision denying Syncora Guarantee Inc.'s motion for summary judgment in an action against J.P. Morgan Securities LLC.  Syncora's suit alleged $320 million in losses resulting from its insurance of an RMBS transaction underwritten by Bear Stearns and sponsored by EMC Mortgage, entities that J.P. Morgan acquired in 2008.  In this action, Syncora asserted claims for fraudulent inducement and tortious interference against J.P. Morgan, similar to the claims that it had been denied leave to assert against Bear Sterns in an earlier-filed federal court action.  J.P. Morgan moved for summary judgment and dismissal on the basis of res judicata, but the trial court denied the motion, finding that J.P. Morgan and EMC had no pre-existing substantive legal relationship, and therefore no privity existed between them.  The First Department reversed, finding sufficient privity existed between J.P. Morgan and EMC based on Syncora's own allegations that the companies acted in concert in the alleged scheme.  Decision

Court Denies S&P's Motion to Dismiss State of California's $600M Suit

On August 14, Judge Curtis E.A. Karnow of the Superior Court of California, County of San Francisco, denied Standard & Poor's motion to dismiss a suit by the State of California.  The Attorney General's claims under the False Claim Acts and other statutes allege over $600 million in losses to investors, including state pension funds, due to S&P's allegedly knowingly faulty ratings of RMBS.  S&P argued that any injury to the state pension funds was not to "money" of the State, which it maintained is a requirement for a claim under the False Claim Act, and also that the suit was time-barred.  The court denied the motion, concluding that S&P had not established that the lost money in the case did not constitute a potential or actual injury to the public treasury, and that the complaint sufficiently alleges discovery of the alleged wrongdoing within three years of the 2011 tolling agreement between the parties.  Decision

New York Federal Court Denies Motion to Dismiss Repurchase Suit Against UBS

On August 15, Judge Harold Baer, Jr. of the District Court for the Southern District of New York denied UBS Real Estate Securities Inc.'s motion to dismiss a suit by several RMBS mortgage trusts in connection with the repurchase of $1.6 billion of mortgage loans.  The trusts allege that UBS failed to repurchase mortgage loans that violated representations and warranties in the underlying agreements.  UBS moved to dismiss the trusts' request for monetary damages based on the contractual clause limiting the "sole remedy" for breaches of representations and warranties to repurchase.  In denying the motion to dismiss, the court rejected the trusts' argument, holding that monetary damages could be available in lieu of specific performance of the sole remedies if specific performance was unavailable.  However, the court held that plaintiff would be limited to the "Purchase Price" as the contractual measure of damages and could not obtain damages beyond that amount.  Decision.

European Financial Industry Developments

Final ESMA Guidelines on Key Concepts of the AIFMD Published

On August 13, the European Securities and Markets Authority (ESMA) published the final version of its guidelines on key concepts of the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD) (ESMA/2013/611).

 The purpose of the guidelines is to ensure common, uniform and consistent application of the concepts that comprise the definition of "AIF" (the Alternative Investment Fund) in Article 4(1)(a) of the AIFMD by clarifying each of these concepts. 

Competent authorities to which the guidelines apply must notify ESMA within two months of the date of publication whether they comply or intend to comply with the guidelines, with reasons for non-compliance.  In the absence of a response by this deadline, competent authorities will be considered as non-compliant.  Guidelines

FCA Updates AIFMD Webpage with Information on Passporting Arrangements

On August 15, the Financial Conduct Authority (FCA) updated the "latest news" webpage on the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD) with information on passporting arrangements under the AIFMD.

The update notes that ESMA recently published an opinion that recognizes the right of firms to be able to exercise passport rights in Member States that have not yet transposed the directive, assuming the firms' own home Member State has transposed the AIFMD. 

As the UK has transposed the AIFMD, UK firms should be able to exercise passporting rights in all EEA states, with the exception of Norway, Liechtenstein and Iceland.  UK firms will be able to exercise AIFMD passporting rights in these jurisdictions when the EEA Agreement (to which Norway, Liechtenstein and Iceland are signatories) has been updated to include the AIFMD within its scope.  Similarly, UK firms will be able to exercise passport rights in Norway, Liechtenstein and Iceland pursuant to the European Social Entrepreneurship Funds Regulation (Regulation 346/2013) (EuSEF Regulation) and the European Venture Capital Funds Regulation (Regulation 345/2013) (EuVECA Regulation), when the EEA Agreement has been updated to include these regulations within its scope.  "Latest News" WebpageOpinion.

SFO Brings First Charges Under the Bribery Act 2010

On August 14, the Serious Fraud Office (SFO) published a press release announcing that it has charged four men with offenses of conspiracy to commit fraud by false representation and conspiracy to furnish false information, contrary to section 1 of the Criminal Law Act 1977, in connection with the investigation by the SFO into the promotion and selling of "bio fuel" investment products to UK investors.  The value of the alleged fraud is approximately £23 million, and the offenses are said to have taken place between April 2011 and February 2012.  The SFO has also charged three of those four men with offenses of making and accepting a financial advantage, contrary to sections 1(1) and 2(1) of the Bribery Act 2010.  These are the first charges to be brought by the SFO under the Bribery Act.  Press ReleaseInvestigation.

Events

Financial Industry Breakfast Briefing: Derivatives Market Update – Where Things Stand

On September 10, Orrick will host a Financial Industry Breakfast Briefing in our New York office.  The briefing will cover the current state of the derivatives market with specific updates on the implementation of Dodd-Frank and recent litigation involving derivatives.  Speakers include partners Nikiforos Mathews, Steven Fink and Thomas Mitchell.  This course has been approved in accordance with the requirements of the Continuing Legal Education Board for a maximum of 1.0 credit hour.  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.

© Orrick, Herrington & Sutcliffe LLP | Attorney Advertising

Written by:

Orrick, Herrington & Sutcliffe LLP
Contact
more
less

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 using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*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.