Orrick's Financial Industry Week in Review

by Orrick, Herrington & Sutcliffe LLP
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Distressed Debt and Restructuring Developments

Supreme Court Rules Against Fees For Fee Application Defense

Issuing its third bankruptcy ruling in a month, the Supreme Court held, by a 6-3 margin, that the Bankruptcy Code does not permit awarding fees to debtor's counsel, when counsel incurred those fees defending its own fee application. The Court held that services defending fee applications were not rendered to the debtor's estate, and therefore the fees did not constitute "actual, necessary services" payable under section 330(a)(1) of the Bankruptcy Code as reasonable compensation. This decision could increase leverage on parties seeking to rein in bankruptcy litigation by threatening to challenge attorney's fees. Baker Botts L.L.P. et al. v. ASARCO LLC, No. 14-103, 2015 WL 2473336 (S. Ct. June 15, 2015) (hereinafter, the "Opinion").  Read More.

Investment Management

Responses to Frequently Asked Questions Regarding the Commission's Rule under Section 13 of the Bank Holding Company Act (the "Volcker Rule")

The Staff of the SEC Division of Trading and Markets, Investment Management, and Corporate Finance provided updated guidance on June 12, 2015 in response to frequently asked questions ("FAQs") regarding the SEC's final rule implementing section 13 of the Bank Holding Company Act of 1956, commonly referred to as the "Volcker Rule."  The responses to these FAQ's address a broad range of issues arising under the restrictions imposed by the Volcker Rule on banking entities proprietary trading activities and the ownership, sponsorship and management of "covered funds."  FAQ Responses.

European Financial Industry Developments

ESMA Comments on MiFID II Implementing Measures

On June 16, 2015, the European Securities and Markets Authority (ESMA) published a statement by on its work on implementing measures under MiFID II (Directive 2014/65/EU) and MiFIR (Regulation 600/2014).

The statement explains that the following three areas are receiving the most attention from stakeholders:

  • Non-equity transparency.  ESMA acknowledges that it will not be able to find the ideal system that perfectly balances transparency and liquidity and that will satisfy the preferences of all market participants. However, ESMA is trying to find reasonable and workable compromises and it is ready to look at the non-equity rules again, once they are in operation, to react to potential deficiencies. ESMA is also thinking about a more flexible system that better reflects market developments and that can be based on better quality data. ESMA's approach on bond market transparency is likely to look different to the position consulted on.
  • Position limits. The range of contracts captured varies from highly liquid to completely illiquid. This wide variation implies that ESMA has to be cautious and that a one-size-fits-all approach cannot be the solution.
  • Ancillary activity. There will be "major refinements" in ESMA's proposal compared to the text that was consulted on in relation to the test of whether non-investment firms perform investment services as an ancillary activity to their main business.

ECON Adopts Resolution on CMU

On June 16, 2015, the European Parliament published a press release announcing that its Economic and Monetary Affairs Committee (ECON) has adopted a resolution on the capital markets union (CMU).

The adopted resolution has not yet been published, although the press release highlights:

  • ECON wants to see a balanced approach towards the CMU, with non-bank sources of finance being developed.
  • The need for effective cross-border insolvency rules needs to be addressed.
  • Possible changes and additions to the existing regulatory regime should aim at removing entry barriers for small and medium-sized enterprises (SMEs).

EBA 2014 Annual Report

On June 15, 2015, the European Banking Authority (EBA) published its annual report for 2014.

The report provides an overview of the EBA's activities and achievements in 2014, including the development of the single rulebook in banking, the continued promotion of supervisory convergence and the assessment of risks, as well as continued work to increase transparency within the EU banking sector.

ISDA Publishes EMIR Frontloading Additional Termination Event Amendment Agreement

On June 12, 2015, ISDA published its EMIR Frontloading Additional Termination Event Amendment Agreement and an accompanying explanatory memorandum. The amendment agreement allows parties to an ISDA Master Agreement to amend the agreement to incorporate a new additional termination event covering frontloading.

Frontloading refers to the requirement for certain derivative transactions to be cleared in accordance with the clearing obligation under EMIR where the transactions are entered into during a given period before the clearing obligation takes effect. According to ISDA, in such cases, if clearing is not possible by the time the clearing obligation takes effect, the only way the parties can avoid breach of the frontloading requirement (or stop a breach that has occurred from continuing) is to terminate the problem contract. The amendment agreement provides the required termination right, thereby reducing the risk of regulatory breach faced by market participants subject to frontloading.

ISDA Launches BRRD Implementation Monitor

The implementation of the European Bank Recovery and Resolution Directive (BRRD) is currently ongoing in all EU member states, and is at different stages of the respective legislative process. In order to keep track of the status of implementation, ISDA has launched the BRRD Implementation Monitor that covers all EU/EFTA/EEA member states. The BRRD Implementation Monitor has a particular focus on the derivatives-specific provisions, and will be updated on a regular basis to reflect the progress made in each jurisdiction.

Events

Orrick Breakfast Briefing: BitLicense and the Virtual Currency Regulatory Landscape

What does the BitLicense require and how will the newly finalized New York State BitLicense regulations affect participants in the virtual currency space?  In addition to BitLicense, what regulatory requirements are being developed or imposed in other jurisdictions?  This program is meant to inform businesses, investors, entrepreneurs, lawyers and others on the state of virtual currency regulation. New York CLE credit will be offered.

Date: Monday, July 20
Location: Orrick's New York Office

For more information on this event, please click here​​.​​

 

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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