On June 4, pursuant to Section 1025 of the Dodd-Frank Act, the Fed, the CFPB, the FDIC, the NCUA and the OCC released a memorandum of understanding clarifying how the agencies will coordinate their supervision of insured depository institutions with over $10 billion in assets and their affiliates. Joint Release. Memorandum of Understanding.
Month: June 2012
Global ABS 2012 Conference
Orrick is an exhibitor sponsor of Global ABS 2012 Conference, which will be hosted by Information Management Network (IMN) at Square Brussels Meeting Center in Brussels, Belgium on June 12-14. More than 3,500 structured finance professionals are expected to attend. The agenda will include, among others, topics such as global regulatory changes that impact securitization; restoring confidence in the ABS markets; and CMBS, RMBS, and real estate and market fundamentals. For more information, please click here.
FSA Publishes Consolidated Policy Statement Setting Out the Regulatory Fees and Levies for 2012/13
On 29 May 2012, the FSA published its consolidated policy statement, which provides an overview of the FSA’s fee-raising arrangements and sets out the regulatory fees and levies for 2012/13. Consolidated Policy Statement: PS12/11.
Highlights include:
– The FSA’s annual funding requirement (AFR) of £559.8 million is 3.2% lower than the estimate consulted on in CP12/3.
– The final Solvency II special project fee (SPF) rates recovery for 2012/13 is £15 million, compared with the £25.9 million estimated in CP12/3.
– The minimum fee for authorised firms will remain at £1,000 for the third year running.
EU Commission to Publish Proposals for a European Bank Recovery and Resolution Framework on 6 June 2012
The European Commission has published an agenda which, inter alia, states that it will present its legislative initiative for a new European framework for bank recovery and resolution on 6 June 2012. Agenda.
According to the agenda, key elements of the proposal are:
– The framework will primarily be based on preventing and reducing the risk of failure. The powers of the European supervisory authorities (ESAs) will be expanded so that they can intervene at an early stage before problems in a bank become critical and its financial situation deteriorates irreparably.
– The proposal will ensure that national authorities and the European Banking Authority (EBA) have the appropriate co-ordination tools to ensure coherent procedures. This is particularly important in the context of cross-border banking groups.
– The framework will provide for credible resolution tools when a bank is no longer viable and allowing it to go bankrupt would be disruptive for essential financial services and overall stability. These tools will include bail-in measures (the power to convert or write down the debt of failing banks).
– To be effective, sufficient funds should be available to finance resolution, for example to issue guarantees or provide short term loans to help a newly set up bridge bank to operate. Such funds would only serve to ensure the continuity of critical functions and not to bail out troubled institutions.
FSA Fines IFA for Advising Clients to Invest in Unsuitable Products
On 30 May 2012, the FSA announced that it had fined independent financial adviser (IFA) Patrick Francis O’Donnell of P3 Wealth Management Limited, £60,000 for advising his clients to invest in unsuitable non-mainstream investments and Unregulated Collective Investment Schemes (UCIS). Non-mainstream investments include, amongst other things, traded life policy investments and unlisted shares. Mr. O’Donnell has also been banned from performing any function in relation to any regulated activity in the financial services industry.
The FSA found that around two thirds of Mr. O’Donnell’s clients invested over 75% of their available funds into UCIS and other non-mainstream investments. Many of his customers received advice that was unsuitable for them. UCIS cannot be promoted to the general public in the UK, and should be marketed to limited people such as sophisticated investors and high net worth individuals. The FSA has previously taken action against a number of firms and individuals in relation to UCIS, including Rockingham Independent Limited, Moneywise IFA Limited and Specialist Solutions Plc. Final Notice for Mr. O’Donnell.
FSA Levies Record Fine of £3 Million on Hedge Fund Manager Micalizzi
On 29 May 2012, the FSA published a decision notice indicating that it had decided to fine Alberto Micalizzi, CEO of Dynamic Decisions Capital Management Ltd (DDCM), a hedge fund management company based in London, £3 million and ban him from performing any role in regulated financial services for not being fit and proper. The FSA also decided to cancel the permission of DDCM to conduct regulated business.
Between 1 October 2008 and 31 December 2008, the master fund (the Fund) managed by DDCM suffered catastrophic losses of over USD390 million, approximately 85% of its value. In the FSA’s opinion, in late 2008, to conceal the losses, Mr. Micalizzi lied to investors about the true position of the Fund and entered into a number of contracts, on behalf of the Fund, for the purchase and resale of a bond (the Bond contracts). The FSA believes that the bond was not a genuine financial instrument and that Mr. Micalizzi was aware of this when he entered into the Bond contracts. This is the biggest ever penalty for an individual in the case of non market abuse imposed by the FSA. Decision Notice for Mr. Micalizzi. Decision Notice for DDCM.
Blue Index Trio Plead Guilty to Insider Dealing
On 28 May 2012, the FSA announced that three defendants with links to Blue Index Ltd, a contract for difference brokerage, pleaded guilty to charges of insider dealing. These are James Sanders, a director of Blue Index, Miranda Sanders, his wife, and James Swallow, another director of Blue Index. Two further defendants were acquitted.
The prosecution alleged that inside information was leaked by Arnold McClellan, a senior partner in Deloitte Tax LLP, who was an insider to a number of mergers and acquisitions in US securities listed on the NYSE and NASDAQ exchanges, or by his wife, Annabel McClellan, who is the sister of Miranda Sanders. The information was used by James and Miranda Sanders to commit insider dealing. James Sanders disclosed the information to other people including James Swallow, who also used the information to commit insider dealing. The three defendants will be sentenced on 19 June 2012. FSA Announcement.
Rating Agency Developments
On June 1, Fitch published its updated global rating criteria for CLOs backed by loans to medium-sized enterprises. Fitch Report.
On May 31, S&P updated its methodology and assumptions for assessing counterparty risk in covered bond programs. S&P Report.
On May 30, Moody’s released its approach to rating Australian RMBS. Moody’s Report.
On May 30, Fitch updated its structured finance counterparty criteria. Fitch Release.
On May 30, Fitch updated is structured finance SPV criteria. Fitch Report.
On May 29, DBRS released its methodology for U.S. structured finance transactions backed by direct pay letters of credit. DBRS Report.
Note: Free registration is required for rating agency releases and reports
MSRB Concept Release on Disclosure of Financial Incentives
On May 31, the MSRB published a concept release seeking comment on a possible proposal to require underwriters and municipal advisors to disclose whether they have made or received certain payments in connection with new issues of municipal securities. Comments must be submitted no later than July 31, 2012. MSRB Concept Release.
MSRB Request for Comment on Trade Size Information
On June 1, 2012, the MSRB published a request for comment on a proposal to provide for more rapid public dissemination of trade size information for large municipal securities transactions through the MSRB Real-Time Transaction Reporting System. Comments must be submitted no later than July 2, 2012. MSRB Request for Comment.