On January 17, 2012, RBS Securities removed to the Western District of Wisconsin an action brought by credit union insurance companies against RBS involving the sale of RMBS. The bases for RBS’s removal petition include diversity jurisdiction and related to bankruptcy jurisdiction. The case originally was filed on December 14, 2011, in the State of Wisconsin Circuit Court by Credit Union National Association Mutual Insurance Society, CUMIS Insurance Society, and Member Life Insurance Company. The insurance companies seek rescission of $72 million in RMBS securities, alleging that RBS inflated the value of the mortgages and knowingly made material misrepresentations about underwriting standards and the collateral backing the loans. Notice of Removal. Complaint.
Month: January 2012
FDIC Proposed Stress Testing for Large Banks
On January 17, the FDIC approved a notice of proposed rulemaking to implement Section 165(i)(2) of the Dodd-Frank Act, which would require FDIC-insured state nonmember banks and FDIC-insured state-chartered savings associations with consolidated assets of more than $10 billion to conduct annual capacity-adequacy stress tests. Comments must be submitted within 60 days of publication in the Federal Register. FDIC Release. Proposed Rule.
FDIC Final Rule on Resolution Plans
On January 17, the FDIC approved a final rule which requires insured depository institutions with $50 billion or more in total assets to submit periodic contingency plans to the FDIC for resolution in the event of the institution’s failure. The resolution plans will ensure that: (i) depositors receive access to insured deposits within one business day of the institution’s failure (or within two business days if the failure occurs on a day other than a Friday); (ii) the net-present-value return from the sale or disposition of its assets is maximized; and (iii) the amount of any loss to be realized by the institution’s creditors is minimized. The final rule will be effective on April 1. FDIC Release. FDIC Final Rule.
Rating Agency Developments – Week of January 17, 2012
On January 11, Fitch updated its U.S. equipment lease and loan rating criteria. Fitch Release.
On January 11, Moody’s updated its approach for monitoring CPDO transactions. Moody’s Release.
On January 9, DBRS proposed methodology for CLOs and CDOs of large corporate credit and requested comments by January 27. DBRS Release.
On January 9, DBRS proposed cash flow assumptions for corporate CLOs and CDOs backed by other corporate debt and requested comments by January 27. DBRS Release.
On January 9, DBRS released its unified interest rate model for U.S. and European structured credit. DBRS Release.
On January 9, DBRS proposed methodology for surveillance Canadian CLOs and CDOs backed by debt of large corporations and requested comments by January 27. DBRS Release.
*Note: Free registration is required for Moody’s reports.
CFTC Final Rules on Business Conduct Standards for Swap Dealers and Major Swap Participants
On January 11, the CFTC adopted final business conduct standards rules for swap dealers and major swap participants dealing with counterparties, which: (i) prohibit certain abusive practices; (ii) require disclosure of material information; and (iii) require due diligence relating to dealings with counterparties. CFTC Release.
CFTC Final Rule on Protection of Cleared Swaps Customer Contracts and Collateral
On January 11, pursuant to Section 724(a) of the Dodd-Frank Act, the CFTC adopted a final rule regarding the protection of cleared swaps and collateral belonging to cleared swaps customers of futures commission merchants (FCMs). The CFTC adopted the Legally Segregated Operationally Commingled Model (LSOC Model, or Complete Legal Segregation Model), which provides that: (i) pre-bankruptcy, cleared swaps collateral of all FCM cleared swaps customers may be kept together in one account, but the FCM’s own property must be kept segregated and (ii) post-bankruptcy, the collateral of one cleared swaps customer may not be used to cover the obligations of another cleared swaps customer or the FCM. CFTC Release. CFTC Final Rule.
CFTC Final Rules on Registration of Swap Dealers and Major Swap Participants
On January 11, pursuant to Section 731 of the Dodd-Frank Act, the CFTC adopted final regulations which, among other things: (i) establish a registration process for swap dealers and major swap participants; (ii) require swap dealers and major swap participants to be members of a registered futures association; and (iii) subject “Push-Out Affiliates” to the same requirements. CFTC Release. CFTC Final Rule.
CFTC Proposed Regulations on Volcker Rule
On January 11, the CFTC approved proposed rules implementing the requirements of Section 619 of the Dodd-Frank Act, otherwise known as the “Volcker Rule”. The proposed rulemaking is substantively similar to the rulemaking jointly proposed by the Fed, the OCC, the FDIC, and the SEC in October 2011. However, the proposed rulemaking includes fourteen new questions relating to certain matters under the CFTC’s jurisdiction, including the scope of the definition of “commodity pool” which is categorized as a “covered fund”. Comments must be submitted within 60 days after publication in the Federal Register, which deadline will be at least 30 days after the deadline for submitting comments on the joint-agency proposed rulemaking. CFTC Release. CFTC Proposed Rule.
European Financial Transaction Tax Developments
On 3 January 2012, Denmark, who assumed the rotating EU presidency on 1 January 2012, initiated a technical review of the European Commission’s proposal for a European financial transaction tax (FTT). Meanwhile, on 23 January France and Germany are expected to present a joint FTT proposal with a view of moving towards implementation across Europe in 2013. The proposed FTT is also on the agenda for the January 30 EU Summit. European Commission Proposal COM(2011) 594 final.
ESMA Launches Two New MiFID I Consultations
On 22 December 2011, ESMA published two new Consultation papers: one on the MiFID I suitability requirements (ESMA Consultation Paper 2011/445), the other on the MiFID I compliance function requirements (ESMA Consultation paper 2011/446). The draft guidelines on stability requirements focus on firm policies and procedures in relation to recommending suitable investment choices. The draft guidelines on the compliance function addresses the MiFID I organisational requirements and are also aimed at reinforcing the importance of the compliance function. Responses to the two consultation papers may be submitted for consideration by ESMA in Q1 2012. The final report and guidelines are expected in Q2 2012.