On July 12, pursuant to Section 418 of the Dodd-Frank Act, the SEC issued an order that raises two of the thresholds that determine whether an investment adviser can charge its clients performance fees pursuant to Rule 205-3 under the Investment Advisers Act. The order increases the dollar amount tests for: (i) assets under management from $750,000 to $1 million; and (ii) net worth from $1.5 million to $2 million. The order will be effective on September 16. SEC Release. SEC Order.
Month: July 2011
Publication of Final Alternative Investment Fund Managers Directive
On July 1, the Official Journal of the European Union published the final agreed text of the Alternative Investment Fund Managers Directive (AIFM Directive). The AIFM Directive creates a framework for subsequent rulemaking measures, which will be proposed by ESMA no later than November 16 and published in early 2012. The AIFM Directive will be effective on July 22 and EU member states will be required to transpose the AIFM Directive and such subsequent rulemaking provisions into national law by July 22, 2013. AIFM Directive.
S.D.N.Y. Trims Assured’s Claims Against Flagstar
On July 7, 2011, Southern District of New York Federal Judge Jed Rakoff partially granted Flagstar Bank’s (“Flagstar”) motion to dismiss claims brought by Assured Guaranty (“Assured”). The Court sustained two claims for breach of contract, but limited Assured’s remedy to Flagstar’s “cure or repurchase” obligations and dismissed two additional claims for reimbursement and indemnification. Assured had alleged that Flagstar misled it about the characteristics of the loans, mortgagors, and the underlying properties and that, when Assured did its own investigation, it found that the majority of the sampled loans violated Flagstar’s underwriting guidelines. The court issued the ruling without a full opinion, which will be issued later. Order
GAO Report on Forming SRO for Private Fund Advisers
On July 11, pursuant to Section 416 of the Dodd-Frank Act, the GAO issued a report on the feasibility of forming a self-regulatory organization (SRO) to oversee advisers to private funds. GAO Summary. GAO Report.
FTC and DOJ Final Rules on Premerger Notification
On July 7, the FTC and DOJ adopted final amendments to the Premerger Notification Rules and the Premerger Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act. The final amendments, in addition to other changes, require an acquiring company to submit information about “Associates“, the operations or investment decisions of which are commonly managed by the acquiring company. Acquiring companies will be required to report: (i) an Associate with voting securities and non-corporate interests greater than or equal to 5% but less than 50% of (a) the acquired entity and (b) entities having a six-digit NAICS industry code overlapping with the acquired entity; and (ii) the geographic information of any entity controlled by an Associate having a six-digit NAICS industry code overlapping with the acquired entity. The final amendments will be effective 30 days after publication in the Federal Register. FTC Release. FTC Final Rule.
Rating Agency Developments
On July 14, Fitch updated its EMEA Consumer ABS Rating Criteria and the Auto Residual Value Addendum, and published a report outlining the basic legal assumptions on which the EMEA ABS rating criteria are predicated. Fitch EMEA Consumer ABS Criteria. Fitch Auto Residual Value Addendum. Fitch EMEA ABS Legal Assumptions.
On July 12, Fitch updated its global surveillance criteria for Trust Preferred CDOs. Fitch Release. Fitch Report.
On July 11, Fitch updated its criteria for Recovery Ratings U.S. RMBS. Fitch Release. Fitch Report.
On July 11, Fitch published new criteria for the treatment of hybrid equity in the Corporate and REIT Sectors, and for Banks. Fitch Corporate and REIT Sector Release. Fitch Corporate and REIT Report. Fitch Bank Release. Fitch Bank Report.
Note: Free registration is required for Fitch releases and reports.
HFSC Subcommittee Approval of GSE Reform Legislation
On July 12, members of the HFSC Capital Markets and Government Sponsored Enterprises Subcommittee approved six of seven bills relating to GSE Reform that had been introduced in May. HFSC Release.
ISDA Equity Derivatives Definitions
On July 11, ISDA announced the publication of the 2011 ISDA Equity Derivatives Definitions in an effort to increase standardization and automation and further reduce risk across over-the-counter derivatives markets. ISDA Release.
GAO Report on Proprietary Trading and the Volcker Rule
On July 11, pursuant to Section 989 of the Dodd-Frank Act, the GAO issued a report on: (i) known risks and conflicts of interests associated with proprietary trading and the potential effects of the Volcker Rule; and (ii) how regulators have overseen such trading in the past and what challenges they will face implementing the Volcker Rule. GAO Summary. GAO Report.
CFPB Approach to Bank Supervision
On July 12, the CFPB outlined its approach to supervising large depository institutions to ensure compliance with federal consumer financial protection laws. This bank supervision program will oversee the 111 depository institutions that have total assets over $10 billion. CFPB Release.