On December 20, pursuant to Section 727 of the Dodd-Frank Act, the CFTC adopted final rules to implement a new framework for the real-time public reporting of swap transaction and pricing data for all swap transactions. The final rules will be effective 60 days after publication in the Federal Register. CFTC Fact Sheet. CFTC Final Rules.
Month: December 2011
RMBS Claims Against JP Morgan Dismissed for Lack of Standing
On December 13, 2011, Judge Korman of the Eastern District of New York granted in part a motion to dismiss a putative class action accusing JP Morgan affiliates of misrepresentations and omissions in connection with $36.8 billion worth of mortgage-backed securities. Judge Korman ruled that the lead plaintiff lacked Article III standing to assert claims in connection with any certificates other than those in the specific tranches of the specific securitizations in which the lead plaintiff had purchased certificates. As to certain of those offerings, the Court further dismissed plaintiffs’ claims as to those certificates for which the lead plaintiff failed to allege that the certificates had been either bought directly from a defendant or purchased in initial public offerings. As to those certificates for which plaintiffs were permitted to proceed, the Court further dismissed without prejudice plaintiffs’ claims insofar as they related to alleged misstatements concerning credit enhancements and credit ratings. However, the Court allowed plaintiffs’ claims related to alleged misstatements concerning appraisal practices and the underwriting guidelines of certain originators to proceed. As to all issues on which the Court granted defendants’ motion other than Article III standing, the Court granted plaintiffs leave to replead. Order.
Stichting Pensioenfonds Sues WaMu, Bear Stearns For RMBS Losses
On December 7, 2011, Stichting Pensioenfonds, a Dutch pension firm, filed a complaint against JP Morgan Chase & Co., and related entities and individuals, in the Supreme Court of the State of New York. Stichting seeks to recover losses incurred on 26 RMBS certificates purchased from JP Morgan, Bear Stearns & Co., and Washington Mutual Bank. Stichting alleges that the defendants made false or misleading statements regarding the quality of the mortgages underlying the securities. Stichting is pursuing claims based on Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as well as common law claims of negligent misrepresentation, fraud, and aiding and abetting fraud. Complaint.
Federal District Court Signals Intention to Dismiss National Credit Union Authority Suit
On December 19, 2011, Judge George H. Wu of the Central District of California issued a tentative ruling that the National Credit Union Authority has failed to sufficiently allege that defendants, which include RBS, Wachovia and Nomura, systematically disregarded underwriting standards in connection with the offering and sale of RMBS. The complaint includes claims for violations of Sections 11 and 12(1)(2) of the Securities Act of 1933 and Sections 25401 and 25501 of the California Corporations Code. The court explained that the NCUA’s reliance on post-purchase statistics and other public information is “conclusory” and, without additional information, would fail to satisfy the pleading standards. Judge Wu requested additional supplemental briefing and stated that he will review the additional information before making a final decision. Decision.
GSE Implementation of Uniform Loan Delivery Dataset Delayed
On December 14, the FHFA extended implementation dates for the Uniform Loan Delivery Dataset, a component of the Uniform Mortgage Data Program initiative by Fannie Mae and Freddie Mac. The voluntary implementation date is delayed to April 23, 2012, and required implementation is delayed from March 2012 to July 23, 2012. FHFA Release.
SEC Extension of Comment Period for ABS Conflict Proposal
On December 13, the SEC extended the comment period for proposed Rule 127(b) that, pursuant to Section 621 of the Dodd-Frank Act, would prohibit material conflicts of interest in securitizations. Comments on the proposed rule must now be submitted by January 13, 2012. SEC Release. Proposed Rule.
CFTC Final Order on Effective Date for Swap Regulation
On December 19, the CFTC issued a Final Order on swap regulation extending the potential latest expiration date of exemptive relief from certain provisions of the Commodity Exchange Act to July 16. CFTC Release.
Rating Agency Developments
On December 15, Fitch updated its bank regulatory capital criteria. Fitch Release.
On December 15, Fitch updated its hybrid equity rating criteria for the non-financial corporate and REIT sectors. Fitch Release.
On December 15, DBRS published its master European RMBS rating methodology and jurisdictional addenda. DBRS Release.
On December 14, S&P requested comment on its proposed methodology for rating obligations secured by future U.S. federal cash flows. Comments must be submitted by January 17, 2012. S&P Release.
On December 14, Fitch updated its criteria for rating prerefunded U.S. municipal bonds. Fitch Release.
On December 13, Fitch updated its corporate governance criteria. Fitch Release.
On December 12, Fitch updated its insurance broker rating criteria report. Fitch Release.
On December 12, Fitch updated its criteria for finance and leasing companies. Fitch Release. Fitch Report.
On December 9, Moody’s released its approach to rating transactions backed by structured settlements. Moody’s Methodology.
Note: Free registration is required for Moody’s, S&P and Fitch releases and reports.
German Bank Sues Ally Financial, Bank of America, RBS Securities, and Financial Guaranty Insurance Co. for RMBS losses
On December 13, 2011, DZ Bank AG, a German lender, filed a summons with notice in the Supreme Court of the State of New York against Ally Financial, Bank of America, RBS Securities, and Financial Guaranty Insurance Company, and related entities. DZ Bank seeks to recover losses incurred on 11 RMBS certificates sold between 2005-2007, purchased for approximately $289.8 million. DZ Bank alleges that the defendants made misrepresentations and omissions in the offering materials regarding underwriting standards, key statistical characteristics of the mortgage loans underlying the certificates, and credit ratings. DZ Bank is pursuing claims based on common-law fraud, fraudulent inducement, negligent misrepresentation, and aiding and abetting fraud. Summons.
Eurozone Crisis: Will Europe Win the Battle? – Practical Advice to Address Your Redenomination Risks
On 9 December 2011, a new fiscal EU group was effectively formed as the Eurozone members and the other EU members (excluding the United Kingdom) agreed to a new multilateral agreement at a critical EU Summit in Brussels. The new agreement – the final provisions of which are to be agreed by March 2012 – will include measures for closer fiscal union. In addition to the new agreement, there were various financial measures agreed at the summit to strengthen the Eurozone’s ability to bail-out troubled members. Notwithstanding this new intergovernmental agreement, a change in Eurozone membership, at some time in the future, is no longer out of the question. It is timely for banks and other financial institutions and corporates to focus on their financial and legal redenomination risks. Our briefing note “Eurozone Crisis: Will Europe Win the Battle? – Practical Advice to Address Your Redenomination Risks” sets out a number of practical steps that will assist you in responding to a changing Eurozone landscape. Click here to read the briefing.