Orrick's Financial Industry Week in Review

Orrick, Herrington & Sutcliffe LLP

Financial Industry Developments

CFTC Approves Final Regulation Regarding Requirement to be a Member of a Registered Futures Association

On September 10, the U.S. Commodity Futures Trading Commission Division issued a final rule requiring that all registered introducing brokers and commodity pool operators, and certain commodity trading advisors become and remain members of a registered futures association.  All persons subject to the rule must comply by December 31, 2015.  Release.

CFTC Announces Proposal to Amend the Definition of "Material Terms"

On September 10, the U.S. Commodity Futures Trading Commission Division announced that it will publish in the Federal Register a proposed amendment to the definition of "material terms" for purposes of swap portfolio reconciliation under Commission Regulation 23.502.  The comment period for the proposed amendment will end 60 days after the proposal is published in the Federal Register.  Release.

FHFA Issues Update on the Common Securitization Platform

On September 15, the Federal Housing Finance Agency released An Update on the Common Securitization Platform.  The Update includes details on the organizational structure of Common Securitization Solutions, LLC, the joint venture company that was established by Fannie Mae and Freddie Mac and the various modules that comprise the Common Securitization Platform.  Release.

SEC Adopts Updated EDGAR Filer Manual

On September 15, the Securities and Exchange Commission adopted revisions to the EDGAR Filer Manual to add two new Security-based Swap Data Repository submission form types, as well as new Exhibits and new formatting updates.  Final Rule.

SEC Removes References to Credit Ratings in Money Market Fund Rule

On September 16, the Securities and Exchange Commission adopted amendments to remove credit rating references in Rule 2a-7 and the form that money market funds use to report to the SEC.  The SEC also adopted amendments that would subject additional securities to the issuer diversification provisions in Rule 2a-7.  ReleaseFinal Rule.

Rating Agency Developments

On September 15, DBRS released its Rating Public-Private Partnership MethodologyMethodology.

On September 16, Fitch released its New Closed-End Fund and Market Value-Structure CriteriaRelease.

Distressed Debt and Restructuring Developments

Orrick Launches Report on Restructuring European High Yield Bonds

Over the past few years the European high yield bond market has been on a roll. Issuance has increased, yields have come down and the default rate has been close to zero. Institutional demand for European high yield bonds has been exceptional. Yet a near zero default rate is an historic anomaly which cannot go on forever. What happens when liquidity dries up and issuers default? How should issuers protect themselves and manage creditors threatening to enforce security? What are the key issues for stakeholders to implement a high yield restructuring? How can conflicts of law be managed where the bond is New York law governed, the intercreditor agreement is English law and the guarantors and assets are spread throughout Europe? Drawing on our European and US restructuring experience we address these issues in our report on Restructuring European High Yield Bonds.

If you would like to receive a printed copy of this report, please let us know.

What You Need to Know About the Uniform Voidable Transactions Act

Last year, the National Conference of Commissioners on Uniform State Laws ("NCCUSL") rolled out one of its latest projects, the Uniform Voidable Transactions Act ("UVTA").[I]  According to NCCUSL's website,[ii] the model statute has already been enacted in eight states, including California (where it takes effect on January 1, 2016), and has been introduced in four others, including Massachusetts.

The first thing to know about the UVTA is that it is the Uniform Fraudulent Transfer Act ("UFTA")[iii] with a new name and the legal equivalent of a fresh coat of paint. In a lengthy article about the drafting of the model statute[iv], the reporter for the NCCUSL drafting committee, Professor Kenneth C. Kettering, describes the model statute as "the UFTA, renamed and lightly amended."  As light as the amendments may be, however, Kettering notes that they are "significant enough to warrant attention"[v]—significant enough, at least, to justify his publishing a 57-page law review article on the subject. The extensive "Official Comments" that were promulgated by NCCUSL along with the model statute also provide some insight into the thinking of the drafters, but Professor Kettering's article is far more forthcoming about the reasoning behind the proposed statutory changes. Anyone who wants the full story should, therefore, consult Professor Kettering's article.   We will try here instead simply to describe the most significant provisions in the new or, at least, improved model statute.  Read More.

European Financial Industry Developments

ECB Consultation on Regulation of Options and National Discretions November 2015

Danièle Nouy, Chair of the Supervisory Board of the European Central Bank (ECB), made a speech on September 15, 2015 at a Financial Markets Authority conference in Austria. She discussed the role of the Supervisory Board of the Single Supervisory Mechanism and stressed that "supervised banks should be subject to consistent prudential requirements based on their inner characteristics regardless of where their business is located".

For approximately eight months the board has been developing a policy package tackling options and national discretions. The resulting draft legislation will be subject to a public consultation from the beginning of November this year.

EPC Guidelines for Appearance of Mandates for SEPA Direct Debit Schemes

On September 15, 2015 the European Payments Council (ECP) published new guidelines for the appearance of mandates for the SEPA Direct Debit (SDD) Core and SDD Business-to-Business (B2B) Schemes. The guidelines aim to reduce the complexity of mandates without losing essential or mandatory content and remaining Rulebook-compliant.

The EPC also provides advice on the circumstances in which the delivery of the debtor bank's bank identifier code is mandatory in SDD transactions.

UK Financial Conduct Authority Regulation Round-Up

The FCA, in its September Regulation Round-up, outlined recent changes to its supervisory model. The new strategy aims to take a more holistic approach to the classification of firms, focusing increasingly on how markets work as a whole, with greater emphasis on sector and market-wide analysis. Firms will now be categorized as either 'fixed portfolio' or 'flexible portfolio' and will be approached differently, with flexible portfolio firms being more proactively supervised.

Coinciding with this regulatory change, the FCA has published a new Financial Services Register and re-designed FCA handbook. Both new products aim to be more user-friendly and easier to navigate.

IOSCO Publishes Final Report on Cross-Border Regulation

The International Organization of Securities Commissions (IOSCO) Task Force on cross-border regulation has this week published its final report.

Following a period of consultation launched in November 2014, the report presents a 'Toolkit' of cross-border regulatory tools commonly used by IOSCO members to regulate cross-border securities market activities. This includes the following 'tools':

  1. National Treatment - by which entities domiciled in or operating from foreign jurisdictions are generally treated in the same manner as domestic entities in terms of market access and ongoing regulatory requirements;
  2. Recognition – by which a host regulator is able to recognize a foreign regulatory regime, or parts thereof; and
  3. Passporting – by which a common set of rules may be applicable in multiple jurisdictions covered by the passporting arrangement.


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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