Nomura Settles DOJ RMBS Claims for $480 Million

 

Nomura Holdings, Inc. (“Nomura”) and its U.S. affiliates agreed to pay $480 million to resolve claims brought by the United States Department of Justice (“DOJ“) for alleged misrepresentations in connection with RMBS offerings made prior to 2009. The DOJ alleged that Nomura violated the Financial Institutions Reform, Recovery and Enforcement Act by misleading investors about the risks associated with over $13 billion in RMBS securities that Nomura marketed, sold, and issued. Although Nomura reportedly represented its due diligence process as robust and extensive, the DOJ alleged that Nomura ignored those findings and securitized loans that did not meet underwriting guidelines and continually transacted with loan originators with questionable practices. Nomura disputes the DOJ’s characterization of its practices, and released a statement advising that it settled the dispute to avoid incurring additional legal expense related to the transactions at issue in the investigation. DOJ Press Release. Nomura Press Release. Settement Agreement.

New York High Court Affirms Dismissal of Repurchase Claims As Untimely

 

On October 16, the New York Court of Appeals affirmed the dismissal of the RMBS repurchase action brought by Deutsche Bank National Trust Company, in its capacity as Trustee of the Harborview Mortgage Loan Trust Series 2007-7, against Quicken Loans Inc., the originator of the loans at issue. Although the Court of Appeals’ earlier decision in ACE found that causes of action for breaches of representations and warranties contained in an RMBS contract accrue on the closing date, the Trustee here relied on language in the Mortgage Loan Purchase and Warranties Agreement (“MLPWA“) that it claimed extended the statute of limitations. Specifically, the Trustee cited language in the MLPWA stating that a cause of action arising from a breach of a representation or warranty shall accrue upon the discovery of a breach by the purchaser and the failure by the seller to repurchase the defective loan at issue. The Court of Appeals affirmed the First Department’s holding that the Trustee’s claims were time-barred, rejecting the Trustee’s argument that the MLPWA created a substantive condition precedent. The Court of Appeals held the provision at issue merely set forth a remedy for a preexisting wrong, the breach of representations and warranties at the time of sale. It further found that an agreement to postpone the accrual of the cause of action would be inconsistent with New York law and public policy, which does not allow for parties to enter into an agreement that would preemptively extend the statute of limitations in this manner.

Rating Agency Developments

 

On October 16, DBRS published an update to its ratings methodology for: Rating U.S. Rental Car Securitizations. Release.

On October 16, DBRS published an update to its ratings methodology for: Rating U.S. Property Assessed Clean Energy (“PACE”) Securitizations. Release.

On October 16, Fitch published an update to its rating criteria for: Trade Receivables Securitization Rating Criteria. Release.

On October 15, Fitch published an update to its rating criteria for: U.S. CREL CDO Surveillance Criteria. Release.

On October 12, DBRS published an updated report entitled: Rating Canadian Auto Retail Loan and Lease Securitizations. Release.

On October 12, DBRS published an updated report entitled: Rating Canadian Auto Fleet Lease Transactions. Release.

On October 12, DBRS published an updated report entitled: Rating Canadian Rental Car Fleet Securitizations. Release.

On October 12, DBRS published an updated report entitled: Rating Canadian Equipment Finance Securitization Transactions. Release.

On October 12, DBRS published an updated report entitled: Rating Canadian Wholesale Securitizations. Release.

Political Agreement Reached on Relocation of EBA

 

On October 17, the Council of the EU published a press release announcing that it and the European Parliament have reached political agreement on the proposed Regulation on the relocation of the European Banking Authority (“EBA“) (2017/0326 (COD)). The press release can be found here.

The Regulation amends Article 7 of the EBA Regulation (Regulation 1093/2010) to state that the EBA will have its seat in Paris. The European Commission adopted the legislative proposal for the Regulation in November 2017.

The Council and the Parliament presumably reached agreement on the version of the text of the Regulation (13175/18) published by the Council on October 16 that was stated to be the confirmation of the final compromise text.

The next steps will be for the Regulation to be submitted to the Parliament for a vote at first reading and to the Council for final adoption. The Regulation will apply from March 30, 2019.

Rating Agency Developments

 

On October 10, DBRS published a rating methodology regarding Derivative Criteria for European Structured Finance Transactions. Release.

On October 9, Moody’s published a rating methodology for the Paper and Forest Products Industry. Release.

On October 9, S&P published a table of contents for its Structured Finance Global Ratings Criteria. Release.

On October 8, Fitch published its rating criteria for U.S. RMBSRelease.

On October 8, Fitch published its rating criteria for U.S. Covered BondsRelease.

On October 5, Fitch published its rating criteria for European RMBS. Release.

On October 5, DBRS published an Operational Risk Assessment for European Structured Finance Servicers. Release.

On October 5, DBRS published an Operational Risk Assessment for European Structured Finance OriginatorsRelease.

Council of EU Confirms the Ten Delegated Regulations on RTS under BMR

 

On October 9, The Council of the EU published the minutes of a meeting held in its configuration as the Environment Council (12898/18).

Page 11 of the minutes confirms that the Council has decided not to object to ten Delegated Regulations setting out regulatory technical standards (“RTS“) under the Benchmarks Regulation ((EU) 2016/1011) (“BMR“) that were adopted by the European Commission in July 2018.

The European Parliament’s next step is to consider the Delegated Regulations and decide whether to object to them. If the Parliament does not object, the Delegated Regulations will be published in the Official Journal of the EU (“OJ“). The Regulations will enter into force 20 days after their publication in the OJ and apply two months after the date of publication.

ESMA Publishes two Decisions on MiFID II Assessments of Third Country Trading Venues

 

ESMA published the two decisions of its board of supervisors on October 11 (both dated September 26, 2018). The following decisions were made on the delegation to the ESMA chair of assessments of third-country trading venues and related to:

  • A decision on the assessment for the purposes of Articles 20 and 21 of the Markets in Financial Instruments Regulation (Regulation 600/2014) (“MiFIR“) (ESMA70-155-5775).
  • A decision on the assessment for the purposes of Article 57(4) of the MiFID II Directive (2014/65/EU) (ESMA70-155-5905).

The decisions were regarding the treatment of transactions executed by EU investment firms on third-country trading venues, for post-trade transparency under MiFIR, and the treatment of positions held in contracts traded on those venues for the position limit regime under the MiFID II Directive. ESMA published opinions in December 2017 specifying that, subject to third-country trading venues meeting a set of criteria, investment firms trading on those trading venues are not required to make transactions public in the EU via an approved publication arrangement (“APA“).

In the decisions, the board of supervisors delegates responsibility for non-controversial assessments of third-country trading venues for these purposes to the ESMA chair. The decisions specify the criteria that the chair will use when assessing whether to consider a third-country entity as a trading venue for the purposes of Articles 20 and 21 of MiFIR or Article 57(4) of the MiFID II Directive. The board of supervisors retains its powers to perform controversial assessments of third-country trading venues.

UK Finance Publishes Brexit Quick Brief

 

On October 11, UK Finance published a Brexit quick brief on equivalence in a future EU-UK trade framework for financial services (“BQB12“). This was developed in collaboration with Clifford Chance LLP and Global Counsel LLP.

The Brexit quick brief analyses the EU’s use of equivalence in financial services. Potential problems arising from the current equivalence regimes in the context of the UK’s relationship with the EU following Brexit were highlighted. The Brexit quick brief also summarizes potential reforms to equivalence proposed at an EU level. The Brexit quick brief also analyses the UK government’s initial proposals for a future trading relationship with the EU in financial services, which contemplated an enhanced form of the EU’s equivalence regime. READ MORE

CFTC Proposes to Streamline Regulations for Commodity Pool Operators and Commodity Trading Advisors

 

On October 9, the Commodity Futures Trading Commission (“CFTC“) unanimously approved proposed rules as a part of its KISS initiative to simplify regulations for commodity pool operators (“CPOs“) and commodity trading advisors (“CTAs“). The KISS initiative “requested public input on simplifying and modernizing the agency’s regulations to make them less burdensome and costly, while maintaining their regulatory benefits.” READ MORE