On 22 December 2011, the European Securities and Markets Authority (ESMA) published its Final Report on Guidelines on systems and controls in an automated trading environment for trading platforms, investment firms and competent authorities. The guidelines will become effective one month after the publication by the relevant national competent authority. According to this schedule, market participants should ensure that they are compliant with the guidelines from 1 May 2012. ESMA Final Report 2011/465.
Month: January 2012
Comment Period Extension for Volcker Rule
On December 23, the Fed, FDIC, OCC, and SEC extended the comment period on proposed regulations implementing the Volcker Rule to February 13. The Volcker Rule requires regulators to implement restrictions on the ability of banks and nonbank financial companies to engage in proprietary trading and to have certain interests in, or relationships with, hedge funds or private equity funds. Interagency Release.
Rating Agency Developments – Week of January 9, 2012
On December 28, S&P updated its methodology for analyzing corporate profitability when determining issuer credit ratings for global corporate issuers. S&P Release.
On December 27, S&P issued an advance notice of criteria change for its methodology for rating second-lien U.S. RMBS transactions. S&P Release.
On December 22, S&P released its outlook assumptions for the U.S. residential mortgage market. S&P Release.
On December 20, S&P updated its project finance construction and operations counterparty methodology. S&P Release.
On December 19, DBRS released its methodology for rating global structured finance CDO restructurings. DBRS Release.
On December 19, DBRS released its unified interest rate model for global structured finance CDO restructurings. DBRS Release.
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SEC Guidance on European Sovereign Debt Exposure
On January 6, the SEC Division of Corporation Finance Staff issued guidance on disclosures relating to SEC registrants’ exposures to European sovereign debt. The SEC Staff issued this guidance to correct inconsistencies in disclosures from registrant to registrant, requesting in part that a registrant: (i) disclose the basis for the countries selected for disclosure; (ii) provide disclosures separately by country, segregated between sovereign and non-sovereign exposures, and by financial statement category; and (iii) provide information regarding hedges in order to detail net funded exposure. SEC Guidance.
Fed Housing Market White Paper
On January 4, the Fed released a white paper entitled “The U.S. Housing Market: Current Conditions and Policy Considerations” which discusses proposals for housing market and mortgage servicing practices, including a pending federal agency proposal for an REO to Rental program, servicer modification and foreclosure practices, loan underwriting standards and issues related to loan put backs by the GSEs. Fed White Paper.
European Financial Transaction Tax Developments
On January 3 2012, Denmark, who assumed the rotating EU presidency on January 1 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.
New York State Court Holds MBS Insurers Need Not Prove Causal Link Between Misstatements and Losses
On January 3, 2012, Justice Eileen Bransten of the Supreme Court of the State of New York granted partial summary judgment to two insurers suing Countrywide Financial Corporation concerning the insurance of securitizations of mortgages underwritten by Countrywide. In the two cases, the insurers, MBIA and Syncora Guarantee, have brought claims for fraud and breach of the insurance agreements at issue. The Court found that to establish a claim of fraud the insurers must show that representations by Countrywide induced the insurers to issue insurance policies on terms to which they otherwise would not have agreed and that they are not required to establish a direct causal link between Countrywide’s misrepresentations and the insurers’ claims payments made pursuant to the insurers’ policies at issue. The Court further held that the insurers may seek rescissory damages upon proving all elements of its claims for fraud and breach of representation and/or warranty. MBIA Decision. Syncora Decision.
Fannie Mae Loan-Level Disclosure
On January 3, Fannie Mae announced that it will start to disclose loan-level data for its newly-issued Single-Family MBS in the first quarter of 2012. The initial release will provide at issuance loan-level data and subsequent releases will aim to include additional data elements and monthly updates to loan-level data. Fannie Mae Release.