Orrick's Financial Industry Week In Review - August 13, 2012

by Orrick, Herrington & Sutcliffe LLP

Financial Industry Developments


Extended Comment Period for Basel III NPRs

On August 8, the Fed, the FDIC, and the OCC extended the comment period for the three notices of proposed rulemaking from June 7 to revise and replace current capital rules.  Comments originally due on September 7 are now due on October 22.  Fed Release. 
Basel III NPR.  Standardized Approach NPR.  Advanced Approaches and Market Risk NPR.

FHFA Notice on Use of Eminent Domain to Restructure Performing Loans

On August 6, the FHFA sent a notice to the Federal Registry indicating its concern with the proposed use of eminent domain to restructure performing home loans and to solicit public input.  Submissions must be received by September 7.  FHFA Release.  FHFA Notice.

Rating Agency Developments

On August 9, Fitch updated its UK mortgage loan assumptions.  Fitch Report. 

On August 9, Fitch updated its criteria for UK whole business securitizations.  Fitch Report.

On August 9, S&P updated its methodology for U.S. RMBS backed by pre-2009 collateral.  S&P Report. 

On August 8, Fitch updated its corporate rating methodology.  Fitch Report. 

On August 8, Fitch published its updated insurance-linked securities rating criteria.  Fitch Release.  Fitch Criteria.

On August 8, Fitch updated its criteria for automated valuation models in EMEA RMBS.  Fitch Release.  Fitch Report.

On August 8, Fitch updated its global rating criteria for corporate CDOs.   Fitch Release.  Fitch Report.

On August 8, Fitch updated its rating criteria for currency swap obligations of an SPV in structured finance transactions.  
Fitch Release.  Fitch Report.  

On August 8, Fitch updated its rating criteria for multiborrower U.S. CMBS.  Fitch Release.  Fitch Report.

On August 8, Fitch updated its global rating criteria for distressed debt exchanges.  Fitch Release.  Fitch Report.

On August 7, Fitch issued a special report on risk considerations for REO-to-Rental securitizations.   Fitch Release.  Fitch Report.

On August 7, Fitch updated its rating criteria for prepaid energy transactions.   Fitch Release.  Fitch Report.

On August 7, Fitch updated its mortgage loss assumptions for German RMBS and covered bonds.  Fitch Report.  

On August 3, Fitch updated its U.S. water and sewer revenue bond criteria.  Fitch Report.

On August 3, DBRS updated its methodology for capital call lending facilities.  DBRS Report. 

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


Recent Orrick Alerts


Regulation No. 383-P of the Russian Central Bank of June 19 on Money Transfer Rules

The new Regulation on Money Transfer Rules came into effect on July, 9.  It replaced Regulation No. 2-P of October 30, 2002 on the Cashless Money Transfers in the Russian Federation and Regulation No. 222-P of April 1, 2003 on the Cashless Money Transfers by Individuals in the Russian Federation.  Click here to read more.

RMBS Litigation


Goldman Sachs Discloses SEC Will Not File Action Over RMBS Sales 

On August 9, 2012, Goldman Sachs disclosed in its 10-Q that the Securities and Exchange Commission has decided not to recommend an enforcement action against Goldman for disclosures connected to $1.3 billion in residential mortgage-backed securities sold to investors in 2006.  Goldman had previously disclosed an investigation by the SEC and the February 24, 2012 receipt of a “Wells” Notice in its 2011 10-K.  The SEC informed Goldman of the decision not to proceed on August 6, 2012.  SEC Filing.

Federal Court Allows RMBS Case Against RBS Securities and Wachovia Capital Markets to Proceed

On July 25, Judge Richard D. Rogers of the United States District Court for the District of Kansas denied defendants’ motion to dismiss the National Credit Union Administration Board’s suits against RBS Securities and Wachovia Capital Markets.  The two consolidated actions allege violations of Sections 11 and 12(a)(2) of the federal Securities Act of 1933, as well as violations of the Kansas Uniform Securities Act, in connection with the sale of residential mortgage-backed securities.  The court concluded that plaintiffs’ claims were not barred by the applicable statutes of limitations or repose.  The court also denied in large part defendants’ motion to the extent that it was based on failure to state a claim, but granted defendants’ motion to dismiss as to plaintiffs’ allegations of systematic disregard of underwriting guidelines as to certain certificates for which plaintiffs failed to identify specific originators or underwriting practices, as well as plaintiffs’ allegations that defendants had misrepresented the benefits of the credit enhancement associated with the certificates at issue.  Decision.

FDIC’s Countrywide RMBS Action Transferred to MDL in Central District of California

On August 3, Judge John G. Heyburn II of the Judicial Panel on Multi-District Litigation denied plaintiff Federal Deposit Insurance Corporation’s motion to vacate the court’s order transferring the FDIC’s action to the Countrywide RMBS MDL in the Central District of California.  The FDIC’s claims relate to RMBS purchased by Security Savings Bank and are brought under Sections 11 and 12(a)(2) of the Securities Act and Section 90.570 of the Nevada Securities Act.  The court found that the transfer to one judge provided consistency, prevented conflicting rulings, and reduced duplicative expenditure of judicial and party resources.  Decision.

European Financial Industry Developments


FSA Censures Intermediary Firm for Financial Promotions

On August 6, the FSA issued a final notice censuring City Gate Money Managers Ltd (City Gate), an intermediary firm, and banning its director and compliance officer, Stewart Domke, for financial promotion and other compliance failings.  Final Notice.

The FSA found that City Gate breached s.20(1)(a) FSMA as it had advised on pension transfer and income drawdown business when it did not have permission to do so. City Gate was also found to have produced a financial promotion which failed to explain in offer letters the risks of investing in the offer being promoted. Mr. Domke failed to ensure that the financial promotion issued by City Gate complied with FSA rules. The FSA withdrew his approval to perform significant influence functions and banned him from performing any significant influence function in relation to any regulated activity.

The final notice states that the FSA would have fined City Gate £180,000 had it not been in liquidation, but issued a public censure instead.

Germany Toughens its Take on AIFMD

On July 20, the Federal Ministry of Finance and the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published its draft for the implementation of the Alternative Investment Fund Managers Directive (AIFMD).

Highlights of the new ‘Capital Investment Code’ (Kapitalanlagegesetzbuch) include:

Distinction between AIF whose shares/units may be held by professional investors only (so called ‘specialised-AIF’) and AIFs whose shares may be held by non-professional investors.

  • Real estate (RE) and infrastructure funds can only be established as closed-ended funds. Existing open-ended RE/infrastructure funds would benefit from a grandfathering rule and could continue to exist in the same form as before.
  • Non-professional investors will only be permitted to invest in certain fund types, e.g. they are prohibited from directly investing into certain fund types such as hedge funds or private equity funds. Investment into these vehicles will only be allowed via fund of funds or master-feeder structures.
  • Private placements for third country funds should be abolished. Third country funds would only be allowed to market their funds in Germany if certain (extensive) requirements are met.

Interested parties have until August 17 to comment on the 500-page document.

OFT Fines Payday Lender for Breach of Money Laundering Regulations

On August 9, the OFT published a press release stating that it had imposed a £544,505 fine on MCO Capital Ltd (MCO), an online payday lender, for breaching the Money Laundering Regulations 2007 (MLRs) and had also revoked MCO's consumer credit licence. 
Press Release.

MCO had failed to adequately verify the identities of loan applicants, which led to it being targeted by fraudsters who used the details of over 7,000 individuals to apply for loans.  MCO was also found to be engaged in unfair business practices by writing to people who they were aware may not have taken out loans, asking unequivocally for repayment.  MCO's licence was revoked as the OFT found it lacked the necessary skills, knowledge and experience to run a consumer credit business.

MCO has a right to appeal the OFT's decision.

Tracey McDermott Appointed as FSA's Permanent Director of Enforcement

The FSA has confirmed that Tracey McDermott, the FSA's acting head of enforcement, will become the permanent director of enforcement and financial crime.

McDermott joined the FSA as an associate in enforcement 2001, and has been acting as director since April 2011.  During her time as acting head of enforcement, she has secured 10 convictions for insider dealing and imposed the largest FSA fine to date of £59.5 million on Barclays Bank plc for attempting to manipulate the LIBOR rate.

The FSA will divide into the Prudential Regulation Authority and the Financial Conduct Authority in 2013.  McDermott's role will transfer over to the Financial Conduct Authority.


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.
Custom Email Digest
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.