ESMA Update on Waivers From MiFID Pre-Trade Transparency Requirements: August 2015

On August 26, 2015, the European Securities and Markets Authority (ESMA) published an updated version (dated August 21, 2015) of the waiver document (ESMA/2011/241g) that sets out its assessment of applications for waivers from pre-trade transparency requirements under the Markets in Financial Instruments Directive (2004/39/EC) (MiFID).

The waiver document is aimed at competent authorities under MiFID to ensure that, in their supervisory activities, their actions converge with the opinions provided by ESMA. The examples are also intended to provide clarity on the MiFID requirements for pre-trade transparency.

In the updated waiver document there is one new ESMA opinion that relates to the submission of large-in-scale orders with two different price limits. The new opinion is written in red.

European Commission adopts Delegated Regulation on RTS on Risk Concentration and Intra-Group Transactions Under FICOD

On August 21, 2015, the European Commission published the text of the Delegated Regulation it has adopted on regulatory technical standards (RTS) on risk concentration and intra-group transactions under Article 21a(1a) of the Financial Conglomerates Directive (2002/87/EC) (FICOD).

The draft RTS aim clarify which risk concentration and intra-group transactions at the level of the financial conglomerate should be considered “significant” under Articles 7(2) and 8(2) of FICOD.

The next step will be for the Council of the EU and the European Parliament to consider the Delegated Regulation.

ESCB Reports on the Access of CCPs to Central Bank Liquidity Facilities under EMIR

On August 25, 2015, the European Central Bank (ECB) published a report by the European System of Central Banks (ESCB) on the need for any measure to facilitate the access of central counterparties (CCPs) to central bank liquidity facilities under EMIR (the Regulation on over the counter derivative transactions, CCPs and trade repositories) (Regulation 648/2012).

The ESCB considers that the current legal framework that allocates competence to define the conditions for access to central bank facilities to the ESCB under EU law is adequate for ensuring effective CCP access to central bank facilities where the affected central banks deem this appropriate in accordance with their mandates.

Seventh Circuit Reverses Summary Judgment Ruling in RMBS Case

On August 21, 2015, a three-judge panel of the United States Court of Appeals for the Seventh Circuit reversed a Wisconsin federal judge’s ruling granting summary judgment to RBS Securities Inc. (“RBS”)  dismissing all but one of CUNA Mutual Group’s (“CUNA”) claims alleging that RBS had made material misrepresentations regarding RMBS it had sold.  The Seventh Circuit held that because CUNA’s claims against RBS sound in fraud rather than contract they are not time-barred under Wisconsin law.  The court also held that a reasonable juror could find that CUNA had relied on representations in the offering documents notwithstanding that CUNA’s trader could not recall whether he had actually read the specific representations or deal documents at issue in the case.  Order.

FHFA’s $32 Billion RMBS Claims Are Not Time-Barred

On August 21, 2015, Judge Alvin Thompson of the United States District Court for the District of Connecticut denied Royal Bank of Scotland Group PLC’s (“RBS”) motion for summary judgment as to claims brought by the Federal Housing Finance Agency (“FHFA”) alleging that RBS made misleading statements in connection with $32.1 billion in RMBS that it had sold between 2005 and 2008.  The court concluded that FHFA’s claims against RBS are not time-barred because the extender statute in the Housing and Economic Recovery Act of 2008 preempts statutes of repose as well as statutes of limitations, pointing to the statutory language, congressional intent, and recent precedent in support of its holding.  Order.

FDIC Sues BNY Mellon For Alleged Failure As Trustee of RMBS

On August 19, 2015, the Federal Deposit Insurance Corp., acting as receiver for Guaranty Bank, filed suit against Bank of New York Mellon Corp. in New York federal court, alleging that BNY breached its duties as trustee of 12 RMBS trusts that issued approximately $2 billion in certificates.  The trusts were sponsored by Countrywide Home Loans and EMC Mortgage Corp.  The FDIC alleges that BNY breached its contractual obligations by failing to provide notice of representation and warranty violations and demand Countrywide and EMC to replace or buy back the noncompliant loans, provided false regulatory certifications and remittance reports, and failed to take possession of complete mortgage files.  The FDIC asserts claims for breach of contract, the federal Trust Indenture Act, and the New York Streit Act.  Complaint.

Union Pension Fund Requests Approval of Settlement With Goldman Sachs in RMBS Litigation

On August 13, 2015, union pension fund NECA-IBEW Health & Welfare (“NECA”) and the Police and Fire Retirement Systems of the City of Detroit (“PFRS”), acting on behalf of proposed classes of institutional and individual investors, requested preliminary approval for a $272 million settlement with Goldman Sachs Group Inc.  The proposed settlement would conclude lawsuits in which NECA and PFRS alleged that Goldman Sachs had made numerous misstatements about the loans underlying $6 billion in RMBS offerings.  Stipulation and Agreement of SettlementMemorandum ISO Preliminary Approval.

New York Appellate Court Upholds ACA’s Fraud Suit Against Goldman Sachs

On August 18, 2015, the New York Appellate Division’s First Department held that ACA Financial Guaranty Corp. adequately pled its fraud suit against Goldman Sachs Group Inc.  A four-judge panel held that ACA sufficiently alleged that Goldman Sachs’ allegedly false statements about hedge fund Paulson & Co.’s short position on the Abacus collateralized debt obligation transaction were material, that the statements were made with the requisite intent, and that ACA would not have provided the financial guaranty for the deal had it known the truth.  The case had been remanded from the New York Court of Appeals, which had overturned the First Department’s prior decision to grant Goldman Sachs’ motion to dismiss.  Order.

Rating Agency Developments

On August 18, Moody’s extended comment period on proposed clearing house global rating methodology to September 17, 2015.  Announcement.

On August 17, Fitch released its updated corporate rating methodology.  Methodology.

On August 13, DBRS published its updated methodology for rating project finance.  Methodology.

On August 13, DBRS published its updated methodology for rating companies in the independent power producer industry.  Methodology.