Month: September 2013

ICAP Fined £14 Million by FCA

The FCA has fined broker ICAP Europe Ltd £14 million for misconduct regarding the London Interbank Offered Rate (LIBOR), according to the final notice published by the FCA on September 25.

ICAP was found to be in breach of Principle 3 (management and control) and Principle 5 (market conduct) of the FCA’s Principles for Businesses.  According to an FCA press release, ICAP is the first broking firm to be fined for LIBOR-related failings.  Final NoticePress Release.

EIOPA Publishes Concerns on Investment Insurance Products’ Inclusion under MiFID II

A letter sent on September 19 from Gabriel Bernardino, the Chairman of the European Insurance and Occupational Pensions Authority (EIOPA), to the European Commission Director General of Internal Market and Services, Jonathan Fowl, was published by EIOPA on September 20.  The letter sets out EIOPA’s concerns around the selling of investment insurance products covered by the MiFID II.

In the letter, EIOPA states that such an inclusion could lead to regulatory inconsistency and have a negative impact on consumer protection, with the consequential risk that the products could be sold in accordance with sub-optimal requirements.  The letter goes on to list three reasons why rules governing the sale of investment insurance products should instead be included under the Insurance Mediation Directive (IMD) regime:

  • To keep the rules of the sale of insurance packaged retail investment products within legislation designed for diverse forms of insurance distribution;
  • To avoid MiFID-style client categorization; and
  • To maintain the “demands and needs” test.  Letter.

FCA Updates AIFMD Information for Depositories

On September 23, the FCA provided updated information on its dedicated AIFMD webpage for firms applying for authorization (or variation of permission) to act as a depository or trustee of an alternative investment fund.

The guidance highlights rule 3.11.26 in the FCA’s Investment Funds sourcebook (FUND), which states that a depository cannot delegate its functions to a third party (except, in certain conditions, for the safekeeping of assets), which the FCA considers to be any party that is not part of the same legal entity as the applicant.  Webpage.

Orrick Alert: The New Electronic Payment Services Landscape: Developments in EU Legislation

On July 24, the European Commission issued legislative proposals to update and complement the current EU legal framework on payment services to develop further an EU-wide single market by promoting more competition, security and innovation in the field of electronic payments.  The Commission noted that this move may be worth billions in savings for the European economy in the coming years, which will result in new business opportunities for a fast growing market.  To read the entire Orrick Alert, please click here.

NCUA Sues Multiple Banks for $2.4 Billion

On September 23, the National Credit Union Administration (as liquidator for the Southwest Corporate Federal Credit Union and Members United Corporate Federal Credit Union), filed nine separate suits in the federal district court for the Southern District of New York against several investment banks for a total of $2.4 billion.  The NCUA alleges material misrepresentations and omissions of underwriting standards, LTV ratios, owner-occupancy rates, DTI ratios and credit ratings in connection with the credit unions’ alleged purchases of RMBS and brings causes of action under Sections 11 and 12(a)(2) of the Securities Act of 1933 as well as claims for violations of the Illinois and Texas securities laws.  Complaint Against Morgan Stanley.

Court Grants, in Large Part, Bank of America’s Motion to Dismiss Suit by CIFG

On September 23, Justice Charles E. Ramos of New York State Supreme Court granted in part defendant Bank of America NA’s motion to dismiss a suit brought by monoline insurer CIFG Assurance North America Inc.  CIFG claims $170 million in damages in connection with its insurance of two re-REMIC RMBS transactions.  The court dismissed CIFG’s fraudulent inducement claim for insufficient particularity, finding CIFG’s allegations were not tailored to the RMBS at issue.  The court also dismissed CIFG’s negligent misrepresentation claim based on the arm’s-length relationship between the parties, its claim for rescission or rescissory damages because it had continued to accept insurance premiums, and its contractual indemnity claim.  The court allowed CIFG’s breach of contract claim to proceed, but dismissed its breach of the covenant of good faith and fair dealing claim as duplicative.  Decision.

Orrick Alert: Following Chapter 9 Plan, Monoline Insurer Must Continue to Make Payments on Old Bonds

Earlier this month, Judge Judith J. Gische of the Appellate Division of the Supreme Court of New York, First Judicial Department found that ACA Financial Guaranty Corporation, as bond insurer, must make future, post-confirmation principal and interest payments on municipal bonds issued pre-bankruptcy.  The Court required these payments despite the fact that the bonds were exchanged for new bonds and cancelled under the municipality’s chapter 9 plan.  This decision is an unequivocal win for holders of distressed municipal bonds wrapped by monoline insurance policies and makes clear that insurers must continue to extend coverage to bondholders after a municipal issuer files for chapter 9 and obtains a discharge of the bond debt in bankruptcy.  This outcome may impact negotiations and potential resolutions in Detroit’s chapter 9 case and other recent municipal bankruptcies and distressed scenarios, such as Puerto Rico.  To read the entire Orrick Alert, please click here.