Orrick's Financial Industry Week in Review - November 14, 2011

by Orrick, Herrington & Sutcliffe LLP

Financial Industry Developments


Basel Committee Final Rules on G-SIBs

On November 4, the Basel Committee on Banking Supervision issued rules for global systemically important banks (G-SIBs), outlining: (i) the committee's framework to identify G-SIBs; (ii) the magnitude of additional loss absorbency G-SIBs should have; and (iii) procedures for phasing in the new requirement. Basel Committee Release. Final Rule

FHFA Response to Senators' Letter on Executive Compensation

On November 10, the FHFA responded to a letter from numerous Senators on executive compensation at Fannie Mae and Freddie Mac. FHFA Letter.  

MSRB Request for Comment on Definition of Sophisticated Municipal Market Professional

On November 8, the MSRB requested comment on updating its definition of sophisticated municipal market professional to reflect recent changes to both the availability of municipal market information and to FINRA's rules on suitability for institutional accounts. Comments to the proposed definition must be submitted by December 13. MSRB Release

SEC Listing Standard Rules for Reverse Merger Companies

On November 9, the SEC approved rules issued by the three major U.S. listing markets (Nasdaq, NYSE, and NYSE Amex) to prohibit a reverse merger company from applying to list until the company: (i) completes a one year "seasoning period" by trading in the U.S. OTC market or another regulated or foreign exchange, and (ii) maintains a minimum share price for a required period. Reverse mergers permit companies to access U.S. investors by merging with an existing public shell company. SEC Release.  

Rating Agency Developments

On November 10, Fitch updated its criteria for ABCP. Fitch Release

On November 9, Moody's released its methodology on rating U.S. public power electric utilities with generation ownership exposure. Moody's Methodology

On November 9, S&P released its group rating methodologies and assumptions. S&P Release

On November 9, S&P updated its methodologies and assumptions for rating banks. S&P Release

On November 9, S&P updated its methodology for determining a Banking Industry Country Risk Assessment (BICRA). S&P Release.

On November 8, S&P issued advance notice of proposed criteria changes for European CMBS. S&P Release

On November 7, S&P released its ratings methodology addendum for sovereigns with limited external data. S&P Release

On November 7, DBRS released its methodology on rating Canadian RMBS and European Master RMBS. Canadian RMBS. European RMBS

Note: Free registration is required for Fitch, Moody's and S&P releases and reports.  

RMBS Litigation


Insurance Company Files Mortgage-Backed Security Action Against Countrywide, Bank of America

On November 9, 2011, National Integrity Life Insurance Co. filed a complaint against Countrywide Financial Corporation, former Countrywide executives and Bank of America in the United States District Court for the Southern District of New York, accusing Countrywide of fraud and misstatements in connection with nearly $450 million in RMBS allegedly purchased by the insurer. National Integrity alleges Countrywide abandoned its underwriting standards and misled the insurer about the quality of loans underlying the securities. National Integrity asserts causes of action for common law fraud, civil conspiracy, and violations of the Ohio Securities Act, the Ohio Corrupt Activities Act and federal securities laws, including Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) and 20(a) of the Exchange Act of 1934. Complaint. 

German Bank Initiates Mortgage-Backed Security Action Against Credit Suisse

On November 10, 2011, IKB Deutsche Industriebank AG sued several Credit Suisse entities in the Supreme Court of New York, bringing claims for common law fraud, aiding and abetting fraud, and negligent misrepresentation, as well as claims under Sections 11, 12 and 15 of the Securities Act of 1933, in connection with nearly $215 million in RMBS allegedly purchased by IKB. To date, IKB has filed only a summons with notice.  Without making any factual allegations, IKB seeks rescission and damages. Summons.

Citigroup and SEC Defend Proposed Settlement

On November 7, 2011, Citigroup Global Markets Inc. and the Securities and Exchange Commission filed separate memorandums in support of their proposed settlement agreement in the United Stated District Court for the Southern District of New York. Citigroup and the SEC agreed to a settlement over allegations of wrongdoing by Citigroup's mortgage-backed securities group wherein Citigroup agreed to pay $285 million in exchange for a "no admit, no deny" settlement. Judge Jed S. Rakoff ordered both parties to defend the proposed settlement after questioning the SEC's decision to accept a non-admission of wrongdoing despite "alleg[ing] a serious securities fraud." Citigroup defended the settlement in part by arguing that the public interest is better served by allowing sophisticated parties to compromise complicated matters in a manner that avoids wasteful litigation and exposing both parties to extreme results. It also argued that current market conditions penalize corporate stock prices simply because of a company's involvement in litigation with a regulatory agency, and that a "no admit, no deny" result was necessary to minimize potential collateral consequences in the civil class actions and other litigations pending against Citigroup related to mortgage-backed securities and subprime mortgages. The SEC defended the settlement by stating that the outcome allowed for a quick resolution to the case while still "clearly conveying" that the alleged conduct by Citigroup occurred. Citigroup Submission. SEC Submission.

European Financial Industry Developments


Michael Barnier Reassures the City Over Euro Zone Integration

Michael Barnier, the European commissioner overseeing financial services, has used the opportunity of speaking before an audience in London on 4 November 2011 to highlight the commission's view on the key areas of progress in the development of European Financial Regulation and to address growing concerns that increased integration within the euro-zone will isolate or penalise EU member states who are not subscribed to the single currency. 

The key areas of regulatory development referred to in the speech included:

  • The proposed increase in capital and liquidity requirements in compliance with Basel III;
  • The measures designed to increase transparency within hedge funds;
  • The new rules regarding short selling and credit default swaps;
  • The increased transparency of over the counter derivatives;
  • The revision of the Markets in Financial Instruments Directive (MiFID 2) which will regulate technological developments such as high frequency trading; and
  • New proposals on how to target Market Abuse.

European Commission: Press release (SPEECH/11/721) (4 November 2011).


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.

© Orrick, Herrington & Sutcliffe LLP | Attorney Advertising

Written by:

Orrick, Herrington & Sutcliffe LLP

Orrick, Herrington & Sutcliffe LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.