Financial Industry Developments

Volcker Rule Exclusion for TruPS CDOs

On January 14, the Fed, CFTC, FDIC, OCC and SEC issued an interim final rule which will permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities (TruPS CDOs) if the following conditions are met: (i) the TruPS CDO was established and the interest was issued before May 19, 2010; (ii) the banking entity reasonably believes that the offering proceeds received by the TruPS CDO were invested primarily in Qualifying TruPS Collateral (as defined by the rule); and (iii) the banking entity's interest in the TruPS CDO was acquired on or before December 10, 2013, the date the agencies issued final rules implementing section 619 of the Dodd-Frank Act (the Volcker Rule).  The agencies also released a non-exclusive list of issuers which meet the requirements of the interim final rule.  Comments must be submitted within 30 days of publication in the Federal Register.  Joint ReleaseJoint Interim Final RuleList of Excluded CDO Issuers

Publication of Resolution Plans

On January 10, the Fed and the FDIC made available public portions of resolution plans for 116 institutions which are regulated by the Fed and the FDIC and required to submit resolution plans by the Dodd-Frank ActJoint ReleaseResolution Plans.

Municipal Advisor Registration Rules

On January 10, SEC announced that the Office of Municipal Securities has issued interpretive guidance relating to the implementation of final rules requiring municipal advisors to register with the SEC.  In addition, on January 13, SEC announced that compliance with the new final municipal advisor rules will not be required until July 1, 2014.  The effective date had been January 13, 2014.  Interpretive GuidanceMunicipal Advisor Registration FAQsSEC Release (Compliance Date)SEC Final Rule.
Rating Agency Developments

On January 15, DBRS released its methodology for rating asset management companies.  DBRS Report.    

On January 13, Fitch released its criteria for rating dealer floorplan ABSFitch Report.    

On January 13, Fitch released its criteria for rating global money market fundsFitch Report.

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

RMBS and Other Securities Litigation

Federal Court Dismisses RMBS Breach of Contract Action Against GreenPoint as Time-Barred

On January 10, Judge Shira A. Scheindlin of the United States District Court for the Southern District of New York dismissed a lawsuit brought by U.S. Bank National Association as trustee for Lehman XS Trust, Series 2006-4N against GreenPoint Mortgage Funding, Inc.  Judge Scheindlin held that the Trustee's claims for alleged breach of representations and warranties by GreenPoint were barred by the six-year statute of limitations governing contract claims.  Relying on recent authority from the Supreme Court of the State of New York Appellate Division, First Department, the court held that claims subject to cure or repurchase requirements accrue at the time of the breach and not at the time of the demand to cure or repurchase.  The Court held that the trustee's claims were untimely because they were filed more than six years from the agreement at issue.  Opinion

N.Y. Federal Court Allows RMBS Trustee Suit Against GE Mortgage to Proceed

On January 14, Judge Katherine B. Forrest of the United States District Court for the Southern District of New York denied a motion for judgment on the pleadings in an action brought by the Bank of New York Mellon as Trustee for GE-WMC Mortgage Securities Trust 2006-1 against GE Mortgage and WMC Mortgage.  Judge Forrest rejected the argument that, as a matter of law, the Pooling and Servicing Agreement (PSA) limited the Trustee's remedies for breaches of representations and warranties to WMC Mortgage only, because this interpretation conflicted with the contemporaneous agreements signed between the parties as well as the PSA itself.  Instead, the Court held that the PSA was ambiguous regarding which entities the Trustee could assert claims against, and accordingly the Trustee's action against GE Mortgage was not barred by the agreement.  Decision.

European Financial Industry Developments

Trialogue Agreement on MiFID II

On January 14, the Council of the EU and the European Parliament reached political agreement in trialogue on the MiFID II legislative proposals (the proposed MiFID II Directive and the proposed Markets in Financial Instruments Regulation (MiFIR)).

Key elements of the agreement are: 

    • The market structure framework;
    • Equity market transparency;
    • Strengthening supervisory powers;
    • Controls for algorithmic trading activities; and 
    • Access to EU markets for firms from third countries.

The MiFID II legislative proposals will replace and recast the Markets in Financial Instruments Directive (2004/39/EC) (MiFID).

The Parliament press release sets out the agreements that were reached.  Press Release.

ESMA Publishes New Version of "Prospectuses: Questions and Answers"

On January 15, ESMA published version 21 of its "Prospectuses: Questions and Answers."

Two new questions have been incorporated, addressing the following areas:

    • Format for the individual summary relating to several securities (question 91); and 
    • Applicable registration document schedule where a listed issuer proposes to issue convertible or exchangeable debt securities where the underlying securities are the issuer's shares (question 92).  Prospectuses.

BCBS Finalizes Risk Management Guidelines on AML and Terrorist Financing

On January 15, the Basel Committee on Banking Supervision (BCBS) issued risk management guidelines relating to anti-money laundering (AML) and terrorist financing.

The guidelines apply to all banks and are consistent with the international standards on combating money laundering and the financing of terrorism and proliferation issued by the Financial Action Task Force (FATF) in 2012, and supplement their goals and objectives.  Risk Management Guidelines.

 

Topics:  Anti-Money Laundering, Basel Committee, Breach of Contract, Collateralized Debt Obligations, Dodd-Frank, FATF, Municipal Advisers, Proprietary Trading, RMBS, Terrorism Funding, Trust Preferred Securities, Volcker Rule

Published In: Business Torts Updates, Civil Procedure Updates, Finance & Banking Updates, International Trade Updates, Securities Updates

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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