Senators Introduce SAFE Lending Act

On April 7, 2016, several Democratic Senators introduced the Stopping Abuse and Fraud in Electronic (SAFE) Lending Act, SAFE 2016, which is designed to change the manner in which certain short-term unsecured consumer lending is conducted. The legislation would amend the Truth in Lending Act to establish additional requirements on lenders making certain "small-dollar consumer credit transactions," where small-dollar transactions are defined as loans of $5,000 or less.

Introduced in advance of forthcoming Consumer Finance Protection Bureau (CFPB) payday lending regulations, SAFE 2016 sets up an interesting legislative and regulatory dynamic.  There is the obvious issue of the extent to which the legislation will be inconsistent with the new CFPB's regulations. But there is also a fierce legislative fight brewing, as many members of Congress – including other Democrats – have already expressed support for the manner in which many payday lenders conduct business. 

The FDIC Rescinds De Novo Time Period Extension

On April 6, 2016, the Federal Deposit Insurance Corporation (the "FDIC") rescinded Financial Institution Letter (FIL) 50-2009, Enhanced Supervisory Procedures for Newly Insured FDIC-Supervised Depository Institutions.  The Financial Institution Letter extended the de novo period from three to seven years for newly organized, state nonmember institutions for examinations, capital maintenance and other requirements.  Release.

Treasury Issues Temporary Regulations to Address Inversion Problems

On April 4, 2016, the U.S. Treasury issued temporary regulations to make it increasingly difficult for companies to invert, i.e., to engage in a transaction in which a U.S.-parented multinational group acquires a small foreign company in order to change its tax residence to reduce or avoid paying U.S. taxes.  Release.

CFTC Approves Guidance Relating to Appropriate Treatment of Electric Power and Natural Gas Contracts

On April 4, 2016, the U.S. Commodity Futures Trading Commission (the "CFTC") approved guidance relating to the appropriate treatment of certain electric power and natural gas contracts.  The guidance provides that certain capacity contracts in electric power markets and certain natural gas contracts should not be considered "swaps" under the Commodity Exchange Act.  Release.

The Federal Reserve Board Finalizes Rule Regarding Investment-Grade General Obligation State and Municipal Securities

On April 1, 2016, the Federal Reserve Board finalized a rule to include certain U.S. general obligation state and municipal securities in the type of assets that financial institutions may use to satisfy requirements designed to ensure that such institutions have the capacity to meet liquidity needs during a period of financial stress.  The final rule allows investment-grade, U.S. general obligation state and municipal securities to be counted as high-quality liquid assets (HQLA) up to certain levels if such securities meet the same liquidity criteria that apply currently to corporate debt securities.  Release.  Final Rule. 

On April 6, 2016, DBRS published its methodology for rating European structured finance transactions. Report.

On April 6, 2016, DBRS published its methodology for ratings in the forest products industry. Report.

On April 6, 2016, DBRS published its methodology for ratings in the engineering and construction industry. Report.

On April 6, 2016, DBRS published its methodology for ratings in the industrial products industry. Report.

On April 5, 2016, Fitch updated its recovery ratings and notching criteria for non-financial corporate issuers. Release.

On April 5, 2016, Fitch published an updated report on rating criteria for letter of credit supported bonds and commercial paper. Report.

On April 5, 2016, Fitch published surveillance criteria for trust preferred CDOs. Report.

On April 1, 2016, Fitch updated its EMEA RMBS rating criteria. Release.

On March 31, 2016, S&P published its methodology and assumptions for rating North American single-tenant real estate triple-net lease-backed securitizations.  Report.

On March 31, 2016, Fitch updated its global criteria for rating wind power projects. Release. 

FinCEN Proposes Funding Portals Regulations under Bank Secrecy Act

On April 4, 2016, the Financial Crimes Enforcement Network, a bureau of the Department of the Treasury ("FinCEN"), proposed amendments to the definitions of ''broker or dealer in securities'' and ''broker-dealer'' under the regulations implementing the Bank Secrecy Act ("BSA"). This rulemaking would amend those definitions explicitly to include "funding portals" that are involved in the offering or selling of "crowdfunded securities" pursuant to Section 4(a)(6) of the Securities Act of 1933. The consequence of those amendments would be that funding portals would be required to implement policies and procedures reasonably designed to achieve compliance with the BSA Act requirements currently applicable to brokers or dealers in securities. FinCEN stated that:  "The proposal to specifically require funding portals to comply with the Bank Secrecy Act regulations is intended to help prevent money laundering, terrorist financing, and other financial crimes."  Written comments of this proposal must be submitted on or before June 3, 2016.

The Jumpstart Our Business Startups Act, enacted into law on April 5, 2012, established the foundation for a regulatory structure for startups and small businesses to raise funds by offering and selling securities through "crowdfunding" without having to register the securities with the Securities and Exchange Commission ("SEC") or state securities regulators.  In order to take advantage of this exemption for offerings of crowdfunded securities, an issuer must use the services of an intermediary that is either a broker registered with the SEC or a "funding portal" registered with the SEC.

New York Supreme Court Dismisses ACE Action Re-Asserting Repurchase Claims against DB Structured Products

On March 29, 2016, Justice Marcy Friedman of the New York Supreme Court rejected the trustee's attempt to renew previously dismissed claims in ACE Securities v. DB Structured Products, Inc.  As we previously reported, the trustee re-filed this action after the First Department dismissed the prior lawsuit related to the same trust, a dismissal that the Court of Appeals later affirmed. 

In granting the motion to dismiss, the court rejected the trustee's reliance on CPLR 205(a) as grounds for reviving the previously dismissed lawsuit.  The Court held that CPLR 205(a) allows only the same plaintiff that commenced the prior action to re-commence a second action under the terms of that rule.  Because the prior action had been commenced by the certificateholders, not the trustee, the trustee was not the same plaintiff and could not take advantage of CPLR 205(a).  The Court rejected the trustee's argument that it and the certificateholders were attempting to litigate identical interests, holding that the certificateholders in the prior action did not possess a cause of action to which the trustee succeeded.  The court also considered the defendant's alternative argument that CPLR 205(a) was not available because the prior lawsuit was untimely.  The prior lawsuit was filed on the six-year anniversary of the allegedly breached representations and warranties, but neither the trustee nor the certificateholders had complied with the contract's notice and cure "repurchase protocol" at the time of filing, a failing that both the First Department and Court of Appeals relied upon in dismissing the prior case.  The Court held that to the extent the dismissal was based on the non-compliance with the repurchase protocol, it should properly be characterized as a dismissal for failure to comply with a condition precedent, not a dismissal on timeliness grounds.  However, the First Department also held that the trustee's complaint in the prior lawsuit had been untimely because it did not relate back to the certificateholders' summons with notice.  Therefore, the trustee's failure to file a timely complaint in the first lawsuit provided a second basis for why the trustee could not rely on CPLR 205(a) to re-file the previously dismissed lawsuit. Order. 

European Commission Adopts Delegated Directive Supplementing MiFID II

On April 7, 2016 the European Commission adopted a Delegated Directive supplementing MiFID II regarding the safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision of reception of fees, commissions or any monetary or non-monetary benefits (i.e. inducements).

The aim of the draft Delegated Directive is to specify further the following MiFID II rules and details for their implementation:

• The safeguarding of clients' financial instruments and funds;
• Product governance obligations for investment firms manufacturing or distributing financial instruments (or both);
• The provision or reception of inducements.

The draft Delegated Directive is based on the final technical advice on MiFID II and MiFIR provided to the Commission by ESMA in December 2014. The Council of the EU and the European Parliament will now consider the Delegated Directive. If neither of them object, it will enter into force twenty days after publication in the Official Journal.

ESMA Publishes New Q&A on CFDs and other Speculative Products

The European Securities and Markets Authority (ESMA) has published new question and answer document (ESMA/2016/590) on the application of MiFID to the marketing and sale of financial contracts for difference (CFDs) and other speculative products to retail clients.

ESMA explains that, although CFDs and other speculative products (such as binary options and rolling spot forex) are complex products, they are widely advertised to the retail mass market by a number of firms, often through online platforms. The Q&A document is designed to promote common supervisory approaches and practices in the application of MiFID and its implementing measures to key aspects that are relevant when CFDs and other speculative products are sold to retail clients. Although they are targeted at competent authorities, the answers are also intended to help firms by providing clarity on MiFID requirements.

ESMA has also added that, while the Q&A refer to MiFID, the principles and requirements underpinning the content of the document will remain unchanged once MiFID II enters into application.

Joint Committee of ESAs Final RTS on Key Information Documents for PRIIPs

The Joint Committee of the European Supervisory Authorities (ESAs) published its final draft regulatory technical standards (RTS) on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs). The draft RTS include a mandatory template, which includes certain mandatory texts and details of the layout to use, a methodology for the assignment of each PRIIP to one of the seven classes in the summary risk indicator, and the requirements relating to the presentation of costs.

An accompanying press release states that the proposed KIDs provide retail investors, for the first time across the EU, with simple and comparable information on PRIIPs. It is intended that the three page document will increase the transparency and comparability of information about the risks, performance and costs of PRIIPs.

The draft RTS have been submitted to the European Commission for endorsement and will enter into force on December 31, 2016.

Delegated Regulation under MAR Covering Indicators of Market Manipulation, Disclosure Thresholds, Trading During Closed Periods and Notifiable Managers' Transactions

The European Commission's Delegated Regulation supplementing the Market Abuse Regulation (Regulation 596/2014) (MAR) as regards an exemption for certain third countries' public bodies and central banks, the indicators of market manipulation, the disclosure thresholds, the competent authority for notifications of delays, the permission for trading during closed periods and types of notifiable managers' transactions, was published in the Official Journal of the EU on April 5, 2016.

The Delegated Regulation specifies:

• The public bodies and central banks of third countries benefitting from the exemption under Article 6(1) of MAR.
• The indicators of market manipulation set out in Annex I of MAR.
• The minimum thresholds for the exemption of certain participants in the emission allowance market from the requirement to publicly disclose inside information.
• The competent authority that should be notified concerning delays in the public disclosure of inside information.
• The circumstances under which trading in a closed period may be permitted by an issuer.
• The types of transactions that would trigger the notification requirement under Article 19 of MAR.

The Delegated Regulation enters into force on April 24, 2016 and will apply from July 3, 2016. 

Distressed Oil & Gas: The Houston Perspective

Long considered the "Energy Capital of the World," Houston is at the epicenter of current developments in oil & gas. We're please to have our new Houston partners join us in New York to share their perspective on:

• The current state of private equity investing in the oil & gas industry,
• How to minimize counterparty risk and structure deals in the current environment,
• Midstream oil & gas – structuring challenges and other concerns facing this side of the business,
• Recent developments in oil & gas bankruptcies and restructurings.

The discussion will be led by Jonathan Ayre, Joe Roger and David Ronn, partners in Orrick's Houston office, Doug Mintz, partner in Orrick's Washington, D.C., office, and Laura Metzger, partner in Orrick's New York office. To register, please click here.