OCC Names First Ever Chief Risk Officer

On August 6, the OCC named Linda Cunningham as its first Chief Risk Officer.  Ms. Cunningham will lead the agency's newly created Office of Enterprise Risk management and will report directly to the Comptroller of the Currency.  Release.

Comptroller Discusses Efforts to Ease Regulatory Burden on Community Banks

On August 5, the Comptroller of the OCC addressed efforts to ease the burden of regulation on community national banks and federal savings associations.  Remarks.

SEC Adopts Registration Rules for Security-Based Swap Dealers and Major Security-Based Swap Participants

On August 5, the SEC proposed new rules to provide a comprehensive, efficient process for security-based swap dealers and major security-based swap participants to register with the SEC.  The new rules address all aspects of the registration regime for security-based swap dealers and major security-based swap participants, setting forth the extensive set of information required to be provided and kept up to date by a registrant.  Comments must be received on or before 60 days after publication in the Federal Register.  Release.  Proposed Rule.

SEC Adopts Rule for Pay Ratio Disclosure

On August 5, the SEC adopted a final rule that requires a public company to disclose the ratio of the compensation of its CEO to the median compensation of its employees. The new rule was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act and provides companies with flexibility in calculating this pay ratio.  Release.  Final Rule.

HUD Proposes Rule to Clarify Equal Participation of Religious Organizations in HUD Programs

On August 5, HUD announced that it would amend its existing regulations regarding the equal participation of faith based (religious) organizations in HUD programs.  The amendments are being undertaken to implement Executive Order "(EO) 13559".  EO 13559 sets forth principles clarifying that religious providers are welcome to compete for Federal funding without loss of their religious identity, and providing protections for program beneficiaries, including a referral process for beneficiaries who object to the religious character of an organization that operates a program with direct Federal funds.  Release.

CFPB Sues Offshore Payday Lender

On August 4, the CFPB announced the filing of a lawsuit against NDG Eneterprise, a complex web of commonly controlled companies, for collecting money consumers did not owe.  The CFPB alleges that the defendants illegally collected loan amounts and fees that were void or that consumers had no obligations to repay.  Release.  Complaint.

CFPB Study Finds Electronic Mortgage Closings Can Benefit Consumers

On August 4, the CFPB published a report on its "Know Before You Owe" eClosing project which found that borrowers can benefit from electronic closings when navigating the mortgage closing process.  Specifically, the results of the pilot indicate that those who closed their mortgage using an electronic platform are generally better off on measures of understanding, efficiency, and feeling empowered than borrowers who used just paper forms.  Release.  Report.

On August 5, Moody's released is approach to rating Railcar leasing ABS.  Report.

Solus v. Perry: Case Update

In May, we wrote about a number of recent cases addressing the enforceability of oral agreements in syndicated loan and bankruptcy claims trading. One of those cases, Solus v. Perry, is still active at the trial court level in New York. Last month, the court entered an order denying both parties' motions for summary judgment.

At issue in Solus v. Perry is whether the parties agreed to all of the material terms of a transaction in which Solus would purchase Perry's participation interests in claims against the bankruptcy estate of Ponzi schemester Bernie Madoff's investment firm. Although Solus and Perry never signed a written contract, Solus argues that the parties agreed to all of the material terms necessary to create a binding oral agreement under New York law (i.e., asset, quantity, and price) in recorded telephone conversations, emails, and Bloomberg messages.  Perry contends that no agreement was formed because certain other terms (which Perry characterizes as material) were left open, including how litigation risks and fees would be allocated and whether Perry would have to indemnify Solus for any potential damages resulting from Perry's bad acts.

In its decision and order, the court concluded that the evidence submitted failed to resolve all material factual issues in favor of either party.  Specifically, the following two issues must be determined before summary judgment can be entered—1) which terms were material to the trade, and 2) whether the parties agreed to all of those material terms.

A pretrial conference is scheduled for October 7, 2015. We will keep you posted.

No-Action Letter Guidance Under Rule 506(b) of Regulation D.

On August 6, the Staff of the Division of Corporation Finance of the Securities and Exchange Commission issued a no-action letter to Citizen VC, Inc. ("Citizen VC"), the manager of a venture capital investment platform through which it aggregates investments of prospective investors in special purpose vehicles ("SPVs") that invest in seed, early-stage, emerging growth and late-stage private companies.  The private placement offerings of the SPVs are made in reliance on Rule 506(b) of Regulation D which requires, among other things, that the issuer not "engage in any form of general solicitation or general advertising."

Citizen VC requested no-action letter confirmation that the policies and procedures described in its letter "will create a substantive, pre-existing relationship between Citizen VC and prospective investors such that the offering and sale on the [website] of Interests in the SPVs . . . will not constitute general solicitation or general advertising within the meaning of Rule 506(c) of Regulation D."

The request letter also stated the understanding that "issuers and/or their agents relying on Rule 506(b) will have to take additional steps beyond the circulation of a brief accreditation questionnaire in order to create a substantive relationship with their prospective investors."

The Staff agreed that the "quality of the relationship between an issuer (or its agent) and an investor is the most important factor in determining whether a 'substantive' relationship exists."  The Staff also stated that it agrees that "there is no specific duration of time or particular short form accreditation questionnaire that can be relied upon solely to create such a relationship." 

This Citizen VC no-action letter emphasizes the need for issuers relying on Rule 506(b) to perform a substantive evaluation of the status of prospective investors as "accredited investors" and their financial sophistication.  Guidance.

GE Mortgage Holding, LLC Motion for Summary Judgment Denied

On July 30, 2015, District Judge Denise Cote of the Southern District of New York denied GE Mortgage Holding LLC's ("GEMH") motion for summary judgment in a repurchase action brought by the RMBS Trustee for the GE-WMC 2006-1 Trust.  GEMH moved for summary judgment arguing that unambiguous language in the Pooling and Service Agreement barred the Trustee from pressing loan repurchase claims against GEMH, claiming that it provided only for such claims against the originator, an affiliate of GEMH's.  Judge Cote denied summary judgment finding that reasonable people could disagree with GEMH's read of the agreement, pointing to other relevant contract provisions and the title of the section at issue as potentially supporting an alternate interpretation.  Opinion and Order.

IOSCO Report on Post-Trade Transparency in Credit Default Swaps Market

On August 10, 2015, the International Organization of Securities Commissions (IOSCO) published its final report on "post-trade transparency" in the credit default swaps (CDS) market (FR17/2015).

The term post-trade transparency refers to a regulatory system that mandates disclosure of information, widely accessible to the public, about the price and volume of each relevant transaction. The term does not refer to regulatory structures that allow for voluntary or selective disclosure of data.

The report analyses the potential impact of mandatory post-trade transparency in the CDS market. The analysis is based on a review of relevant works of international bodies and academic literature, an examination of publicly available transaction-level post-trade data about CDS, a survey of market participants and other market observers regarding their use of certain publicly available post-trade data and its perceived impact on the market.

IOSCO concludes that the data does not suggest that the introduction of mandatory post-trade transparency had a substantial effect on market risk exposure or market activity in the CDS market. In addition, IOSCO has identified certain potential benefits and costs to mandatory post-trade transparency, as set out in part VI of the report.

In the light of the potential costs and benefits, IOSCO believes that greater post-trade transparency in the CDS market, including making the price and volume of individual transactions publicly available, would be valuable to market participants and other market observers. Member jurisdictions are encouraged to take steps towards enhancing post-trade transparency in the CDS market in its jurisdiction. To assist, part VII of the report includes recommendations that IOSCO jurisdictions may wish to consider.

In an accompanying press release IOSCO notes that additional data from jurisdictions with mandatory post-trade transparency will enable further studies of the impact of post-trade transparency in the CDS market and other OTC derivatives markets.

ESMA Final Report on Technical Advice on Delegated Acts Required Under the CSDR

On August 5, 2015, the European Securities and Markets Authority (ESMA) published its final report (ESMA/2015/1219) setting out technical advice to the European Commission on delegated acts required by the Regulation on improving securities settlement and regulating central securities depositories (CSDs) (Regulation 909/2014) (CSDR).

The final report sets out ESMA's technical advice on the content of the delegated acts required by two CSDR provisions:

• Penalties for settlement failure.
• The substantial importance of a CSD.

Penalties for settlement failures. ESMA's advice covers:

1. The parameters for calculating the cash penalty that a CSD will normally charge for settlement fails (that is, the basic amount of a cash penalty).
2. The circumstances that may justify an increase of the basic amount of the cash penalty and the parameters for the calculation of such an increase, where applicable under an automated system.
3. The circumstances that may justify a reduction of the basic amount of the cash penalty and the parameters for the calculation of such a reduction where applicable under an automated system.
4. How to adapt the parameters for the calculation of cash penalties in the context of a chain of interdependent transactions and whether there are cases where this would not be possible (for example, the chain would not be visible).

The substantial importance of a CSD. ESMA addresses:

1. Initial recording of securities in a book-entry system (notary service).
2. Providing and maintaining securities accounts at the top tier level (central maintenance service).
3. Operating a securities settlement system (settlement service).
4. The above three core services in the cases of market consolidation affecting host member states and branching into host member states.

ESMA believes that it may be necessary to establish a mechanism for the collection, processing and aggregation of the data necessary for the calculation of the indicators for determining substantial importance, given the importance of the use of consistent data, and is looking at the most appropriate way to establish such a mechanism.