Orrick's Financial Industry Week in Review

by Orrick, Herrington & Sutcliffe LLP
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Financial Industry Developments

Treasury Department Announces Effort to Revive Private Label Securities Market

On June 26, the Department of the Treasury announced an effort to revive the residential mortgage-backed private label securities market to improve the overall efficiency of the U.S. housing finance system.  In connection with this effort, the Treasury Department published a request for comment soliciting input from investors, securitizers and other market participants and plans to host a series of upcoming meetings to further explore ways to increase private lending.  Comments are due on August 8, 2014.  Press Release.

OCC Examines Risks Facing National Banks and Federal Savings Associations

On June 25, the OCC released a report presenting its findings on the risks facing national banks and federal savings associations.  Competitive pressures and strategic and operational risks top the semiannual list of supervisory concerns.  Press ReleaseReport.

SEC Adopts Cross-Border Security-Based Swap Rules

On June 25, the SEC adopted the first of a series of rules and guidance on cross-border security-based swap activities for market participants.  The rules and guidance explain when a cross-border transaction must be counted toward the requirement to register as a security-based swap dealer or major security-based swap participant.  The rules also address the scope of the SEC's cross-border anti-fraud authority.  Press ReleaseFinal Rules.

Rating Agency Developments

On June 26, Moody's released its methodology for monitoring and rating collateralized debt obligations backed by trust preferred securities (TruPS CDOs). Moody's Report.

Note: Free registration is required for rating agency releases and reports.

Asset Management

SEC Announces Order for Tick Size Pilot Plan to Assess Impact on Market Quality for Small Cap Companies

On June 25, the SEC announced that it has ordered the national securities exchanges and the Financial Industry Regulatory Authority (FINRA) to act jointly to develop and file with the Commission a national market system plan to implement a targeted 12 month pilot program that will widen minimum quoting and trading increments (tick sizes) for certain small capitalization stocks.  The Commission plans to use the program to assess whether these changes would enhance market quality to the benefit of U.S. investors, issuers and other market participants.  Press Release.

RMBS and Other Securities Litigation

Royal Park Investments Sues RMBS Trustee Deutsche Bank Over $3.1 Billion in Alleged Losses

On June 18, Royal Park Investments filed a putative class action in the Southern District of New York against Deutsche Bank National Trust Company.  This action is similar to a series of lawsuits filed by a group of institutional investors against Deutsche Bank and other RMBS trustees, which was covered in last week's issue.   Royal Park alleges that Deutsche Bank, as trustee, breached its contractual obligations and fiduciary duties in connection with 10 RMBS trusts for which it served as trustee by failing to provide notice that many loans in the trusts were defective, to provide that events of defaults resulting from servicer conduct had occurred, and to take appropriate remedial action in light of those occurrences.  The complaint asserts three causes of action:  (1) violation of the Trust Indenture Act; (2) breach of contract; and (3) breach of trust.  The plaintiff seeks damages, equitable relief and costs.  Complaint

Parallel Government Actions Against Bank of America May Proceed

On June 19, Judge Max O. Cogburn, Jr. of the Western District of North Carolina issued Orders in two parallel actions by the DOJ and SEC against Bank of America, previously covered in the August 12, 2013 and April 7, 2014 issues.  In the action brought by the DOJ, Defendants moved to dismiss on the ground that the government failed to adequately plead that Defendants violated Sections 1001 and 1014 of the Financial Institutions Reform, Recovery and Investment Act of 1989 (FIRREA).  Declining to follow the Magistrate Judge's recommendation that the case be dismissed, Judge Cogburn granted the government's motion for leave to amend both of its claims, rendering the motion to dismiss moot.  Among other things, the court held that a Section 1014 claim may be adequately pleaded by alleging false statements that influenced a covered institution's decision to purchase RMBS securities, in addition to loans.  In the action brought by the SEC, Judge Cogburn denied Defendants' motion to dismiss without prejudice, adopting the Magistrate Judge's finding that the violations of sections 17(a)(2), 17(a)(3) and 5(b)(1) of the Securities Act of 1933 were pleaded with sufficient particularity.  However, the Order made clear that Defendants were not precluded from moving for summary judgment on the sufficiency of the evidence against them.  DOJ v. BofA OrderSEC v. BofA Order.

European Financial Industry Developments

Square Peg Round Hole: Reforms Needed to Revive Italian Project Finance

The recent placement of project bonds to finance Belgium's A11 motorway made Italian lawyers wonder when it will be possible to structure a similar transaction under Italy's national project bond laws. The asset class was introduced in Italy two years ago, with the aim of financing infrastructures and public interest services through bond markets rather relying solely on bank lending. Please click here for the full article released by IFLR.

Council of the EU Agrees General Approach on Long-Term Investment Funds Regulation

On June 25, the Council of the EU published a press release announcing that it has agreed to a general approach on the proposed Regulation on European Long-Term Investment Funds (ELTIF Regulation). The incoming Italian Presidency of the Council has been invited to start negotiating with the European Parliament, on the basis of the general approach, to enable adoption of the ELTIF Regulation at first reading.  Press release

European Trade Associations Call for Urgent Action to Incorporate ESA Regulations in EEA Agreement

The European Banking Federation (EBF) has published joint letters (dated June 6, 2014) to be sent to the European Commission and to the European Free Trade Association (EFTA) signed by the EBF, the European Fund Management Association (EFAMA), the European Savings and Retail Banking Group (ESBG), the Federation of European Securities Exchanges (FESE) and Insurance Europe.

The trade associations call on the Commission and EFTA to find an urgent solution to ensure that the ESA Regulations are included in the EEA Agreement and warn of potential disruption to the single market in financial services.  The trade associations suggest that there is a risk that EEA member states will be transformed into third countries for the purpose of EU financial services legislation, which will impose new regulatory and organizational requirements for companies that have established branches in EEA member states.

The letter summarizes concerns that were raised in a position paper published in April 2014 by Finance Norway, which analyzed the potential risks of delaying the inclusion of the ESA Regulation in the EEA Agreement.  Position Paper

ESMA Updates Q&A on EMIR Implementation

On June 23, the European Securities and Markets Authority (ESMA) published an updated version of its Q&A on the implementation of EMIR. The updated Q&A includes updates on the reporting of collateral, reporting of valuations and OTC derivatives novations.  Q&A

ESMA Publishes Table Showing Compliance with its Guidelines Relating to Global Supervisory Co-Operation on AIFs

On June 20, ESMA published a table showing which competent authorities comply or intend to comply with its guidelines on the model MoU concerning consultation, cooperation and the exchange of information related to the supervision of the Alternative Investment Fund Managers Directive (AIFMD).

The table indicates that all member states have complied or intend to comply with the guidelines, with the exception of Slovenia (the guidelines are not applicable to Slovenia).  Table.

 

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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Updated: May 25, 2018:

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Privacy Officer
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Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

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Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

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