On November 14, the European Banking Federation (EBF) published its response to the European Commission’s consultation on the EU banking sector structural reforms set out in the Liikanen report.
The EBF disagrees with the Liikanen report’s recommendation that the mandatory separation of proprietary trading activities would adequately address issues such as systemic risk. Instead, it states that such a move may harm the ability of banks to lend and negatively impact the competitiveness of the European financial sector. However, the EBF does agree that recovery and resolution plans need to be strengthened, suggesting that such measures should be an alternative to the mandatory separation of proprietary trading.
The European Commission’s consultation closed on November 13. Further responses will be published online in due course.
On November 15, the FSA issued a press release stating that Thomas Amman, formerly an investment banker at Mizuho International plc, has pleaded guilty to two counts of insider dealing and two counts of encouraging insider dealing. Mr. Amman will be sentenced at a later date. Two associates were acquitted of one count of insider dealing each, following a trial at Southwark Crown Court.
The offences related to trading in the shares of Océ, a Dutch company, which in late 2008 and 2009 was in the process of being acquired by Canon. Mr. Amman was part of a small team advising Canon on the acquisition and therefore had price sensitive information about Océ. Knowing that he could not trade in the shares himself, Mr. Amman encouraged his two associates to trade in the shares prior to the acquisition being announced.
The conviction is the 21st insider dealing conviction for the FSA. A further 5 prosecutions are currently ongoing, indicating the FSA’s increased focus on this area.
On November 14, the FSA published its first consultation paper regarding the transposition of the Alternative Investment Fund Managers Directive (AIFMD) into UK law.
The consultation paper sets out proposals on the following areas:
- the prudential regime applicable to all types of alternative investment fund managers (AIFMs);
- FSA Handbook amendments to reflect the main Level 1 requirements of the AIFMD, such as operating requirements for AIFMs, duties of AIFMs when managing funds, and transparency obligations towards both the Financial Conduct Authority and investors themselves; and
- the regime applying to firms which act as depositaries of alternative investment funds, such as eligibility requirements, capital requirements and an independence requirement.
The deadline for consultation responses is February 1, 2013. It is anticipated that a second consultation paper will be published in February 2013.
On November 13, Phoenix Light SF Limited and other investors filed a summons with notice in the Supreme Court for the State of New York against Bank of America and various Countrywide affiliates. Plaintiffs assert claims for common-law fraud, fraudulent inducement, negligent misrepresentation, and aiding and abetting fraud arising out of their alleged purchase of $261 million of RMBS. Plaintiffs allege misrepresentations in the offering documents regarding underwriting guidelines, loan characteristics, the securities’ credit ratings, and the validity of the trusts and the assignments of loans to the trusts. The case seeks over $122 million in damages. Summons with Notice.
In two separate orders issued on November 12, Judge Cote of the Southern District of New York granted in part and denied in part motions to dismiss claims brought by the FHFA against Goldman Sachs & Co. and Deutsche Bank AG. FHFA’s claims are based on alleged purchases by Fannie Mae and Freddie Mac of residential mortgage-backed securities from these banks. The court dismissed FHFA’s common-law fraud claims against both banks based on owner-occupancy and LTV ratio allegations for failure to sufficiently allege scienter. The court rejected the remaining arguments to dismiss other aspects of the claims. Judge Cote denied Deutsche Bank’s motion as to the FHFA’s pleading of reasonable reliance and held that New York’s Martin Act did not preclude FHFA from raising claims based on other states’ securities laws. The court also rejected Goldman’s argument that as an underwriter it lacked “ultimate authority” over the contents of certain offering documents. In both actions, FHFA asserts claims for violations of Sections 11, 12, and 15 of the Securities Act of 1933, for violations of the Virginia and District of Columbia securities laws, and for fraud.
Goldman Sachs Decision. Deutsche Bank Decision.
On November 15, the SEC released its Fiscal Year 2012 Annual Report on the Dodd-Frank Whistleblower Program, the first full-year report issued since the enactment of Dodd-Frank. The Report analyzes the 3,001 tips received over the last twelve months by the Commission’s Office of the Whistleblower and provides additional information on the whistleblower award evaluation process that resulted in its first (and only) award issuance in August 2012. Please click here to read the Alert prepared by Orrick partner Mike Delikat and associate Rachel Coe.
On November 14, S&P requested comments on its proposal to revise its hybrid capital criteria for corporate issuers. Comments must be submitted by December 16. S&P Release.
On November 14, DBRS published its CMBS North American surveillance methodology. DBRS Report.
On November 14, DBRS published its European CMBS rating methodology. DBRS Report.
On November 13, Fitch published a report summarizing feedback received on its updated covered bonds rating criteria. Fitch Report.
On November 13, Fitch updated its corporate recovery ratings criteria. Fitch Report.
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On November 15, the SEC issued its second annual staff report on the findings of examinations of NRSROs. The staff found that except for one smaller NRSRO, all NRSROs appropriately addressed the recommendations from the 2011 report. SEC Release. SEC Report.
On November 14, Treasury released a report which details the steps that Treasury and other federal agencies took to get the mortgage industry to improve customer service in the Making Home Affordable Program, including through single point of contact requirements. Treasury Release. Treasury Report.
On November 15, the FDIC and the Fed each released the economic scenarios that will be used by certain large financial institutions for the upcoming round of stress tests required under the Dodd-Frank Act. The scenarios include baseline, adverse, and severely adverse scenarios. FDIC Release. Fed Release.