Treasury Department's State Small Business Credit Initiative Releases Quarterly Report

On March 19, the U.S. Treasury Department's State Small Business Credit Initiative (SSBCI) released a new Quarterly Report detailing how the program continues to help small businesses grow and create jobs. More than $1.1 billion is now at work across the country to spur small business lending and investments.  Release.  Report.

Comptroller of the Currency Discusses Tailoring Supervisory Expectations to the Size and Complexity of Regulated Institutions

On March 19, the Comptroller of the Currency, Thomas Curry, discussed the Office of the Comptroller of the Currency's approach to tailoring regulatory and supervisory expectations to the size and complexity of supervised institutions. His remarks were part of testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs.  Release.  Written Testimony.

HUD and Census Bureau Announce New Residential Construction Activity in February

On March 19, the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau jointly announced the following new residential construction statistics for February 2015: (i) BUILDING PERMITS: Privately owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,092,000. This is 3.0 percent (±1.7%) above the revised January rate of 1,060,000, but is 7.7 percent (±2.0%) above the February 2014 estimate of 1,014,000.  Release.

CFTC Approves Final Rule on Residual Interest Deadline for Futures Commission Merchants

On March 17, the U.S. Commodity Futures Trading Commission (Commission) unanimously approved a final rule removing the December 31, 2018 automatic termination of the phased-in compliance period for the Residual Interest Deadline for futures commission merchants (FCMs).  Release.

CFPB Launches Public Inquiry to Inform Agency Review of the Credit Card Market

On March 17, the Consumer Financial Protection Bureau (CFPB) announced it is seeking public comment on how the credit card market is functioning and the impact of credit card protections on consumers and issuers. This public inquiry will focus on issues including credit card terms, the use of consumer disclosures, credit card debt collection practices, and rewards programs, among others.  Release.

FHFA Report Details Progress on the 2014 Strategic Plan for Fannie Mae and Freddie Mac Conservatorships

On March 16, the FHFA issued a Progress Report on the initiatives outlined in the 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac and the 2014 Conservatorship Scorecard. The Progress Report describes activities Fannie Mae and Freddie Mac undertook in 2014 to further FHFA's conservatorship goals: Maintain, Reduce, and Build.  Release.  Report.

Moody's released its approach to rating securities backed by wireless towers.  Approach. 

SEC Issues Guidance Regarding Standards Applicable to Waivers of Disqualification under Regulation A and Rules 505 and 506 of Regulation D

The disqualification provisions of Rules 262 and 505 under the Securities Act make the exemptions from registration under Regulation A and Rule 505 of Regulation D unavailable for an offering if, among other things, an issuer, any of its predecessors, or any affiliated issuer is subject to certain administrative orders, industry bars, an injunction involving certain securities law violations or specified criminal convictions. Disqualification also occurs if any of the issuer's directors, officers, general partners, 10 percent beneficial owners of any class of the issuer's equity securities, or promoters, underwriters, persons compensated for soliciting purchasers, or any of the underwriters' or paid solicitors' partners, directors, or officers, is subject to administrative orders, injunctions, associational bars or specified convictions.

On March 13, the SEC clarified that it may waive Regulation A or Regulation D disqualifications upon a showing of good cause that it is not necessary under the circumstances that the exemptions be denied. A waiver could include conditions or limitations. The SEC has delegated authority to grant these waivers to the Director of its Division of Corporation Finance.

District Court Allows NCUA's RMBS Suit to Proceed Against RBS

Nat'l Credit Union Admin. Bd. v. RBS Sec. Inc. et al., No. 2:11-cv-05887 (C.D. Cal. July 18, 2011)

On March 16, 2015, Judge George Wu of the United States District Court for the Central District of California denied RBS Securities Inc.'s motion to dismiss the National Credit Union Administration's second amended complaint. In July 2011, NCUA sued RBS on behalf of WesCorp, a federal credit union, in order to recover billions of dollars for failed wholesale credit unions claiming investment banks misled them about the nature and quality of offered RMBS. NCUA alleges that RBS' underwriters downplayed investment risks and made misrepresentations in offering documents by underestimating the likelihood that borrowers would default on their mortgages. Judge Wu said that the court would not consider a motion to dismiss parts of claims under F.R.C.P. 12(b)(6). He noted that his approach differed from that of Judge John W. Lungstrum of the District of Kansas, who agreed to hear motions to dismiss portions of a claim in NCUA v. RBS Secs., Inc., No. 11-2340-JWL (D. Kan. June 20, 2011), denying and granting those motions in part.  Order.

US Bank Cannot Revive Majority of MBS Suit Against Citigroup

U.S. Bank NA v. Citigroup Global Markets Realty Corp., No. 1:13-cv-06989 (S.D.N.Y. Oct. 1, 2013)

On March 16, 2015, Judge George B. Daniels of the United States District Court for the Southern District of New York denied the majority of claims in U.S. Bank's attempt to refile an amended complaint against Citigroup Global Markets Realty Corp. and CitiMortgage, Inc. U.S. Bank, as RMBS trustee, had sued Citigroup in October 2013, alleging that it breached representations and warranties in a $832 million RMBS deal. In November 2014, Judge Daniels dismissed most of the claims, but permitted leave to amend. In addressing U.S. Bank's proposed amendments, Judge Daniels first held that the cause of action for breach of representations and warranties was untimely as to certain loans under the six-year statute of limitations. Next, it dismissed U.S. Bank's second claim that Citigroup independently discovered defects in the loan pool through due diligence or government investigations, because U.S. Bank failed to allege non-speculative facts plausibly showing such discovery. These rulings were substantially similar to those set forth in the November 2014 order. Finally, Judge Daniels permitted U.S. Bank's third cause of action to proceed, holding that the plaintiff sufficiently pleaded that CitiMortgage discovered breaches of representations and warranties during its servicing of the securitized loans, and did not fulfill its contractual duties to notify the parties of the breaches and to enforce Citigroup's cure or repurchase obligation.  Order.

The Impact of New Financial Regulation on Investment Banks

The results of a study into the impact of EU regulation in the wake of the financial crisis have been published. New rules introduced since the 2007/09 financial crisis required banks to hold more capital for trading activities, making these areas less profitable and prompting cuts to trading desks. This has led investment banks' balance sheets supporting trading markets to decrease by 20% since 2010, and by 40% in risk-weighted asset teams. It is estimated that European investment banks will shrink by another 14% on aggregate in the next two years.

The report also said that "for banks, the diminishing returns on capital from market-making call for more and fast structural change," and estimated that for banks to improve their return on equity to above 10%, they would need to deliver 2 to 3 percentage points of return on equity improvement from restructuring.

European Commission Plans to Vet Gas and Energy Contracts and Its Approach to Russian Suppliers

A proposal to grant the European Commission a role in vetting gas supply contracts across the EU has been met with fierce resistance from the member states. The current proposal is another element of the EU's broader initiative to create an "energy union," as recommended by the Commission in its framework strategy in late February this year and initially approved on Thursday, March 19, 2015 to lower prices and improve the security of its gas and electricity supplies. The latest draft proposal suggests involving the Commission in all agreements with external suppliers that may affect EU energy security.

FCA Publishes Structured Products Review

The UK Financial Conduct Authority ("FCA") has published a review of structured product governance, in which it has criticized the ways in which instruments are developed and sold. The review contained six key points:

1. Retail consumers generally struggle to understand the relative merits of structured products and the factors driving potential returns, finding it difficult to compare alternatives and to make full use of analytical information. The FCA has claimed that it is up to firms to remedy this.
2. Firms' senior management must do more to put customers at the forefront of their approach to product performance, identifying a key target market during product design, which should then inform each subsequent part of product development and distribution.
3. Structured products should have a reasonable prospect of delivering economic value to customers in the target market, to be determined and evidenced by robust stress testing as part of product approval.
4. Firms need to provide customers with clear and balanced information on each product and any risks.
5. Manufacturers need to strengthen the monitoring of their products, including ensuring distributors have enough information about the manufacturer's product to sell it appropriately.
6. Firms need to do more to ensure fair treatment of customers throughout the lifecycle of a structured product.

While these points are quite broad, the FCA has warned that failure by firms to improve in respect of the above may lead to new binding rules.

European Commission Unveils Tax Transparency Package

The European Commission has laid out its plans in a new Tax Transparency Package to clamp down on tax deals made between EU governments and multi-national corporations. As of next year, EU members would have to declare their cross border tax rulings every three months, as well as divulging information on existing deals. The Package comes during ongoing investigations into a number of member states' tax regimes, and concerns that tax rulings which give a low level of taxation in one member state can entice companies to shift profits there artificially, leading to serious erosion of possible tax revenues for other member states.

In particular, the Commission is investigating deals between multinationals and governments in Luxembourg, Ireland, the Netherlands, and Belgium, and whether some of these agreements amounted to state aid. Last year, allegations emerged that around 340 multinational companies had tax avoidance deals with Luxembourg.