On October 12, the SEC proposed rules, pursuant to Title VII of the Dodd-Frank Act, setting out the process security-based swap dealers and major security-based swap participants must follow to register with the SEC. Comments must be submitted within 60 days after publication in the Federal Register. SEC Release. SEC Proposed Rule.
Month: October 2011
Proposed Regulations on Volcker Rule
On October 11, the SEC, Fed, FDIC and OCC each issued a request for comment on proposed regulations implementing the requirements of Section 619 of the Dodd-Frank Act, otherwise known as the Volcker Rule. The Volcker Rule generally prohibits: (i) insured depository institutions, bank holding companies, and their subsidiaries or affiliates from engaging in short-term proprietary trading of any security, derivative, or certain other financial instruments for a banking entity’s own account; (ii) owning, sponsoring, or having certain relationships with, a hedge fund or private equity fund; and (iii) banking entities from engaging in an exempted transaction or activity if it would involve a material conflict of interest between the banking entity and its clients or counterparties or would result in a material exposure to high-risk assets. Comments must be submitted by January 13. Proposed Rule. Fed Release. FDIC Release. OCC Release.
Orrick’s Financial Services Roundtable on Complex Employment Law Issues
Please join members of our Global Employment Law Group in San Francisco for an interactive roundtable focused on the latest complex employment issues in the financial services industry. This is an invitation-only event, and we are limiting attendance to encourage an interactive peer-to-peer discussion. Click here for more info and to RSVP.
CDO Suit Against Morgan Stanley Dismissed With Leave to Amend
On September 30, 2011, Judge Barbara Jones of the Southern District of New York dismissed a class action suit against Morgan Stanley with leave to amend. The action alleged that Morgan Stanley deliberately concealed the risks of the assets underlying a collateralized debt obligation referencing mortgage-backed securities in which plaintiffs invested $1.2 billion, and then bet against the offering. Morgan Stanley had acted as an underwriter of the CDO. Plaintiff alleges common law claims for fraud and unjust enrichment. Judge Jones found plaintiff failed to allege with particularity that Morgan Stanley itself made a materially false statement to the plaintiff. The court held that Morgan Stanley was not responsible for third-party statements by the issuer and rating agencies, and dismissed with leave to amend. Decision.
New Jersey Federal District Judge Dismisses Claims Against UBS as Untimely
On September 29, 2011, Judge Cavanaugh of the New Jersey federal district court dismissed a class action securities suit brought against UBS by RMBS investors. Judge Cavanaugh granted the motion to dismiss on statute of limitations grounds, finding that the lead plaintiff, Pension Trust Fund for Operating Engineers, did not adequately plead compliance with the statute of limitations by simply stating the complaint was timely. However, Judge Cavanaugh granted plaintiffs leave to amend. Plaintiffs allege claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933. Decision.
German Banks Sue Bank of America, JP Morgan and Others for Over $4.5 Billion
On September 29, 2011 two German banks, Landesbank Sachsen AG and Landesbank Baden-Wurttemberg, and the banks’ Irish asset manager, Sealink, filed three suits in New York state court. Plaintiffs name Bank of America Corp., JP Morgan, Countrywide Financial Corp., Bear Stearns, Washington Mutual, and certain Countrywide executives in claims for fraudulent and negligent misrepresentation, aiding and abetting, and vicarious and successor liability. Plaintiffs allege that the defendants concealed the risks of the underlying mortgages through alleged misstatements as to originator underwriting practices and allegedly overstated appraisals. Plaintiffs seek compensatory, rescissory, and punitive damages. Index No. 652680/2011. Index No. 652681/2011. Index No. 652679/2011.
Life Settlements Alert
On September 20, 2011, the Delaware Supreme Court answered three certified questions directly impacting life settlement investments. The questions were presented to the Supreme Court in two companion cases pending in the federal district court of Delaware, PHL Variable Ins. Co. v. Price Dawe 2006 Insurance Trust and Lincoln Nat’l Life Ins. Co. v. Joseph Schlanger 2006 Insurance Trust. Click here to read more.
FINRA to Require Electronic Submission of Annual Audit Reports
On October 30, FINRA announced the revision of the process by which member firms submit annual audited financial statements pursuant to Rule 17a-5(d) under the Exchange Act. Member firms, for which FINRA is the designated examining authority, will be required, pursuant to NASD Rule 3170, to submit their annual audit reports in electronic form. The new requirements will be effective November 8 and will be applicable to annual audit reports with a fiscal year end on or after September 30. FINRA Notice.
Rating Agency Developments
On October 6, Fitch updated is structured finance CDO rating criteria. Fitch Release.
On October 4, Fitch outlined its structured finance rating process. Fitch Release.
On September 30, Fitch updated its guidelines on managing criteria and models. Fitch Release.
Note: Free registration is required for Fitch releases and reports.
Geithner Testimony on FSOC Report
On October 6, on behalf of the Financial Stability Oversight Council, Treasury Secretary Geithner testified before the Senate Banking Committee and the House Financial Services Committee, outlining the conclusions and recommendations made by FSOC in its first annual report, which was released in July. Geithner Testimony.