Month: February 2012

New York Fed Reverse Repo Transactions

On February 28, the New York Fed announced that it intends to conduct a series of small-scale reverse repurchase transactions using all eligible collateral types.  The first operations will be conducting with the newest expanded reverse repo counterparties (8 banks announced on December 1, 2011) and subsequent operations will be open to all eligible reverse repo counterparties.  NY Fed Release.  List of Expanded Reverse Repo Counterparties.

Second Circuit Orders Bank of America Settlement Remanded to New York Supreme Court

On February 27, 2012, the United States Court of Appeals for the Second Circuit reversed the decision of the United States District Court for the Southern District of New York and ordered the district court to remand to New York State Supreme Court the proceeding seeking court approval of the $8.5 billion Bank of America settlement of claims based on alleged breaches of representations and warranties in connection with RMBS securitizations.  The district court had determined that it had subject matter jurisdiction pursuant to the Class Action Fairness Act, reasoning that the settlement approval proceeding constituted a “mass action.”  In reversing, the Second Circuit concluded that the “securities exception” to the Act applied, and that the federal court therefore lacked jurisdiction.  Decision.

MSRB Proposed Rules on Subscription Services

On February 27, the MSRB filed with the SEC two proposed rule changes that would establish subscription access to historical information and documents submitted to: (i) the MSRB Short-Term Obligation Rate Transparency (SHORT) system (which provides information and documents for municipal auction rate securities and variable rate demand obligations) and (ii) the MSRB Electronic Municipal Market Access (EMMA) system (which provides access to primary market disclosure documents and information for the municipal securities market).  The proposed rule changes will be effective upon approval by the SEC.  MSRB Release (SHORT).  MSRB Release (EMMA).

FHFA Pilot REO Sale Program

On February 27, the FHFA announced the first pilot program transaction under the Real Estate-Owned (REO) Initiative, targeted to hardest-hit metropolitan areas (Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix, and parts of Florida).  Prequalified investors will be able to submit applications to demonstrate their financial capacity, experience, and specific plans for purchasing pools of Fannie Mae foreclosed properties with the requirement to rent the properties for a specified number of years.  FHFA Release.

Rating Agency Developments – Week of February 21, 2012

On February 15, Fitch updated its criteria for consumer ABS in Latin America. Fitch Report.

On February 10, S&P requested comments by April 6 on its proposed methodology for rating securities backed by imputed promises which do not have plainly stated promises for repayment of principal and/or interest within a specific time period. S&P Release.

Note: Free registration is required for Fitch and S&P releases and reports.

Extension of Deadline for Independent Foreclosure Review

On February 15, the Fed and OCC announced that the deadline for submitting requests for Independent Foreclosure Review has been extended to July 31. Borrowers are eligible to request an Independent Foreclosure Review if: (i) the mortgage loan was serviced by one of the participating mortgage servicers, which include the 14 large servicers subject to the April 2011 enforcement actions; (ii) the mortgage loan was active in the foreclosure process during 2009 or 2010; and (iii) the property securing the mortgage loan is the borrower’s primary residence. Fed Release.

’40 Act Threshold Adjustment for Qualified Clients

On February 15, the SEC adopted amendments to the rule under the Investment Company Act of 1940 that permits investment advisers to charge performance based compensation to “qualified clients”. The amendments (i) revise for inflation the dollar amount thresholds that are used to determine whether an individual or company is a qualified client and (ii) exclude the value of a person’s primary residence and certain associated debt from the net worth calculation. The amendments will be effective 90 days after publication in the Federal Register. Final Rule.

U.K. Regulator Fines Former Merrill Lynch Broker £350,000 for Market Abuse

On 15 February, the U.K. regulator, the Financial Services Authority (FSA), fined Mr. Andrew Osborne, a former Managing Director at Merrill Lynch, £350,000 for engaging in market abuse by improperly disclosing inside information to Greenlight Capital Inc. that Punch Tavern Plc, for whom he was acting, was in the advanced stages of an equity fundraising. The FSA considered that Mr. Osborne had failed in his duties not to disclose inside information and to consider the risk of market abuse, duties of which Mr. Osborne as an approved person with considerable experience was fully aware. The decision comes on the back of the FSA’s decisions on 25 January to fine Mr. David Einhorn and Greenlight Capital Inc. in relation to the same matter. Final Notice of Andrew Osborne.

Fed Approves Capital One Acquisition of ING

On February 14, pursuant to Section 4(j) of the Bank Holding Company Act (BHCA), the Fed issued an order approving the acquisition by Capital One Financial Corporation of ING Bank, fsb.  Of particular significance is the manner in which the Fed implemented the new requirement added to Section 4(j) of the BHCA by Section 604(d) of the Dodd-Frank Act.  It requires the Fed to consider “risk to the stability of the United States banking or financial system” to the list of possible adverse effects that the Fed must weigh against any expected public benefits in considering proposals under Section 4(j).  The February 14 order provides guidance as to certain types of transactions that would not likely present financial stability concerns because they likely would have only a de minimis impact on an institution’s “systemic footprint.”  The order provides three examples of such transactions: (i) an acquisition of less than $2 billion in total assets; (ii) a transaction resulting in a firm with less than $25 billion in total assets; and (iii) a corporate reorganization, absent evidence that the transaction would result in a significant increase in interconnectedness, complexity, cross-border activities, or other risk.  Fed Order.