On February 15, the FHFA established a web link to post information for a joint initiative to consider alternatives for a new mortgage servicing compensation structure. FHFA Release. Servicing Initiative. FHFA Web Link.
Month: February 2011
MSRB Municipal Advisor Rules
On February 14, the MSRB (i) filed with the SEC a proposal to require municipal advisors to notify the MSRB when the advisor ceases to engage in municipal advisory activities and (ii) issued proposals to establish a new municipal advisor fiduciary rule, and provide further guidance to municipal advisors, broker-dealers and banks on fair dealing obligations. Proposed Notification Rule Release. Proposed Fiduciary Duty Rule and Fair Dealing Obligations Release.
Plaintiffs Ask Judge Crotty to Reconsider His Denial of Leave to File Amended Complaint in Barclays RMBS Litigation
On February 4, 2011, plaintiffs in In re Barclays Bank PLC Securities Litigation (S.D.N.Y.) filed a motion asking Judge Crotty to reconsider his January 5, 2011 order which rmbss’ claims against defendants without granting leave to amend. Plaintiffs assert claims under Sections 11, 12(a) and 15 of the Securities Act on behalf of a putative class of investors who acquired Barclays’s preferred securities between 2006 and 2008 pursuant or traceable to registration statements and prospectuses that plaintiffs allege did not properly account for or adequately disclose Barclay’s liabilities and risks related to RMBS and other CDOs. Judge Crotty previously granted the defendants’ motion to dismiss the relevant claims on the grounds that plaintiffs failed to adequately allege that the defendants did not honestly believe their estimates of the RMBS and CDO liabilities or that any of the lead plaintiffs had purchased the relevant securities prior to Barclays’s “adequate disclosure” of the risks in August 2008. In their motion to reconsider, plaintiffs seek leave to amend their consolidated complaint and reinstate certain claims by adding allegations that the defendants did not believe their disclosures on the value of the liabilities and adding two new plaintiffs who allegedly purchased the relevant securities prior to the August 2008 disclosures. Motion and Proposed Amended Complaint. Jan. 5 Decision.
CalPERS Sues Former Lehman Officers, Directors, and Underwriters for Misstatements and Omissions Related to Subprime and Alt-A Lending
On February 7, 2011, the California Public Employees’ Retirement System (“CalPERS”) filed suit in the Northern District of California against 12 former executive officers and directors of Lehman Brothers Holdings Inc. (“Lehman”) and Lehman’s underwriters, asserting claims under sections 10(b) and 20(a) of the Exchange Act and sections 11, 12(a) and 15 of the Securities Act for losses suffered in its June 2007 through September 2008 investments in Lehman common stock and bonds. The complaint alleges that during that period Lehman did not conduct proper due diligence when it securitized subprime and Alt-A loans and that Lehman failed to adequately disclose risks associated with subprime and Alt-A mortgages. CalPERS also alleges that Lehman failed to adequately disclose risks relating to increased leverage in its investments and that it manipulated its balance sheet by removing debt on a quarterly basis through the use of “Repo 105” transactions. Complaint.
SEC Adopts Dodd-Frank Implementing Regulations Covering Representations, Warranties and Repurchases and Pool Asset Reviews
UPDATED: On January 20, 2011, at an open meeting of the SEC, the SEC adopted final regulations implementing Sections 943 and 945 of the Dodd-Frank Act. Click here to read more.
Rating Agency Developments
On February 10, Fitch proposed to revise its treatment of hybrid instruments in the capital and leverage analysis of issuers. Comments must be submitted by March 15. Fitch Release. Fitch Report.
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MSRB Proposal to Prohibit Dealers from Acting as Financial Advisors and Underwriters
On February 9, the MSRB filed with the SEC a proposed rule change to prohibit a broker, dealer, or municipal securities dealer from acting both as a financial advisor to an issuer of municipal securities and as an underwriter for the same new issue of municipal securities. MSRB Release. MSRB Notice.
Housing Finance Reform: House Hearing and Administration Proposal
On February 9, the House Financial Services Committee held a hearing on GSE reform with a focus on immediate steps to protect taxpayers and end the bailout. On February 11, the Obama administration released a white paper on housing finance reform, outlining its plan to: (i) reduce government support for housing finance and wind down Fannie Mae and Freddie Mac on a responsible timeline; (ii) address fundamental flaws in the mortgage market to protect borrowers, ensure transparency, and increase the role of private capital; and (iii) target the government’s support for affordable housing in a more effective and transparent manner. The proposal also sets forth longer-term reform choices for structuring the government’s future role in the housing market. Congressional Hearing Link. Treasury Release. White Paper. HFS Testimony and Archived Webcast.
Proposed Amendment for Short-Form Eligibility
On February 9, the SEC proposed rule amendments, in connection with Section 939A of the Dodd-Frank Act, to remove the use of investment-grade ratings as a condition of “short-form” eligibility for public offerings of non-convertible securities, such as debt securities. A new test would be tied to the amount of debt and other non-convertible securities the company has sold in the prior three years. Comments must be submitted by March 28. SEC Release. Proposed Rule.
Fed Proposed Rule on Systemically Important Nonbank Financial Companies
On February 8, the Fed requested comment on a proposed rule to implement the provisions of the Dodd-Frank Act related to the designation of systemically important nonbank financial companies for consolidated supervision by the Fed. The proposed rule would: (i) establish the requirements for determining if a company is “predominantly engaged in financial activities” and (ii) define “significant nonbank financial company” and “significant bank holding company”. Comments must be submitted by March 30. Fed Release. Proposed Rule.