Financial Industry Developments

SEC Adopts Jobs Act Amendments

On April 5, the Securities and Exchange Commission ("SEC") announced that it has adopted amendments to increase the amount of money companies can raise through crowdfunding to adjust for inflation. It also approved amendments that adjust for inflation a threshold used to determine eligibility for benefits offered to "emerging growth companies" ("EGCs") under the Jumpstart Our Business Startups (JOBS) Act. 

The SEC is required to make inflation adjustments to certain JOBS Act rules at least once every five years after it was enacted on April 5, 2012. In addition to the inflation adjustments, the SEC adopted technical amendments to conform several rules and forms to amendments made to the Securities Act of 1933 ("Securities Act") and the Securities Exchange Act of 1934 ("Exchange Act") by Title I of the JOBS Act. The Commission approved the new thresholds on March 31. They will become effective when they are published in the Federal Register.

The Commission provided a helpful chart that sets out the inflation-adjusted amounts for the maximum amount of offerings and investment limits, specifically: (i) the maximum aggregate amount an issuer can sell in a 12-month period; (ii) the threshold for assessing an investor's annual income or net worth to determine investment limits; (iii) the lower threshold of Regulation Crowdfunding securities permitted to be sold to an investor if annual income or net worth is less than the adjusted thresholds; (iv) the maximum amount that can be sold to an investor under Regulation Crowdfunding in a 12-month period; and (v) the inflation-adjusted amounts for determining financial statement requirements.

Also, pursuant to sections of the Securities Act and the Exchange Act added by the JOBS Act, which define the term "emerging growth company," every five years the Commission is directed to index the annual gross revenue amount used to determine EGC status to inflation. To carry out this statutory directive, the SEC has adopted amendments to Securities Act Rule 405 and Exchange Act Rule 12b-2 to include a definition for EGC that reflects an inflation-adjusted annual gross revenue threshold. Press Release.

Rating Agency Developments

On April 4, 2017, DBRS updated its methodology for rating U.S. residential mortgage-backed securities (RMBS). Report.

On April 4, 2017, DBRS published its methodology for rating U.S. Property Assessed Clean Energy (PACE) securitizations. Report.

On April 4, 2017, DBRS published its methodology for rating structured finance CDO restructurings. Report.

On April 4, 2017, Moody's published its ratings methodology for assessing companies in the equipment and transportation rental industry. Report.

On March 31, 2017, DBRS published its master methodology for assessing European structured finance. Report.

On March 30, 2017, Fitch updated its rating criteria for U.S. public finance tender option bonds. Report.

On March 30, 2017, Moody's updated its ratings methodology for market value collateralized loan obligations (MV CLOs). Report.

European Financial Industry Developments

European Commission Publishes Speech on Reducing Uncertainty in the Financial Services

On April 6, 2017, the European Commission published a speech that considered a number of areas in the financial services sector where action can be taken to reduce uncertainty and strengthen recovery. The speech, given by Vice President Valdis Dombrovskis, touched on a number of interesting points, including nonperforming loans, the Capital Markets Union and the effect of Brexit on the central clearing of derivatives. The full speech is available here.

European Banking Authority Publishes Final Guidelines on Bail-in

On April 5, 2017, the European Banking Authority published three sets of guidelines in relation to the Bank Recovery and Resolution Directive, and in particular, bail-in. The guidelines looked at: a) the interrelationship between the Bank Recovery and Resolution Directive sequence of write-down and conversion and the Capital Requirements Regulation; b) the rate of conversion of debt to equity in bail-in; and c) the treatment of shareholders in bail-in or the write-down and conversion of capital instruments. The guidelines give greater clarification on the area of bail-in and are intended to complement existing regulation and guidance. The guidelines and related press release, are available here.

Money Market Funds Regulation Adopted by the European Parliament

On April 5, 2017, it was announced that the European Parliament voted to adopt the Money Market Funds Regulation ("MMFR"). The MMFR focuses on increasing regulation on shadow banking and investment funds and creates new rules that regulate money market funds. The MMFR intends to enhance the liquidity profile and stability of the funds it regulates. Now that the MMFR has been through the European Parliament, the next step is for the regulation to be formally adopted by the Council before being published in the Official Journal of the EU. It would then come into force shortly thereafter.