Month: August 2012

FSA Approach to Implementation of Aspects of the EU Short Selling Regulation

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On August 15, the FSA published a short selling edition of its Market Watch newsletter. Newsletter No. 42, August 2012. 

Although the EU Short Selling Regulation (the ‘Regulation’) will have direct effect in the UK from November 1, certain aspects of it afford discretion to, or impose obligations on, member states to introduce operational procedures to ensure compliance by market participants.

The newsletter, which does not constitute formal FSA guidance, sets out the FSA’s proposed approach to how it will exercise that discretion in six areas of the Regulation including:

  • removing the existing UK rules on short selling by November 1, through amendments to the FSA Handbook;
  • whether it is appropriate to apply the FSA’s existing penalties policy to breaches of the short selling regime;
  • a framework for determining whether or not the FSA will exercise its powers to suspend, prohibit or limit trading in financial instruments following a significant fall in price; and
  • developing web-based solutions for the public disclosure of significant short positions.

The FSA will issue a formal consultation on proposed changes to the FSA Handbook shortly.  

Wheatley Review Discussion Paper Outlines Initial Thoughts on LIBOR Reform

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On August 10, HM Treasury published a discussion paper outlining initial thinking on the review of the London Interbank Offered Rate (LIBOR) being undertaken by Martin Wheatley, Chief Executive-designate of the Financial Conduct Authority (FCA). Discussion Paper. 

The Discussion Paper states that the review of LIBOR will consider and consult on two options:

  • Strengthening LIBOR. The issues identified could be tackled through significant reform of the existing system. Preserving the LIBOR system would limit the costs of transferring existing contracts, whilst reforms could address failings in the system.
  • Finding an alternative to LIBOR. If the problems with LIBOR cannot be resolved, new benchmarks could be recommended to replace some or all of LIBOR’s role in financial markets.

Comments on the discussion paper are requested by September 7 with Mr. Wheatley aiming to present his findings and recommendations by the end of September. 

Three Convicted for £10 Million Ponzi Scheme

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On August 13, the Serious Fraud Office (SFO) published a press release announcing that three people involved in a £10 million ponzi scheme have been convicted at Bradford Crown Court.  Two other defendants were acquitted of charges of money laundering.  Press Release. 

The three people were trading as Gilher Inc. and targeted UK investors and ex-pats in Majorca.  Mr. John Hirst had pleaded guilty to conspiracy to defraud and two counts of money laundering.  Mr. Richard Pollett was found guilty of conspiracy to defraud, and Ms. Linda Hirst was found guilty of three counts of money laundering and evading a liability by deception.  All individuals (excluding Mr. Pollett) had been charged in 2011.

Sentencing will take place on August 31, with confiscation and compensation proceedings to follow later. 

Letter Published Detailing How OFAC’s Iran Sanctions Regulations Apply to Foreign Banks Operating in the U.S.

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On August 13, HM Treasury published a letter that it received from the U.S. Department of the Treasury relating to the Office of Foreign Assets Control’s (OFAC) Iran sanctions regulations.  Letter. 

The letter was sent in response to a request by HM Treasury for clarification about the sanctions regulations and how they apply to international payments, specifically the obligations of foreign banks operating in the US before and after 2008 in respect of transactions involving Iranian counterparties.

Extended Comment Period for Basel III NPRs

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On August 8, the Fed, the FDIC, and the OCC extended the comment period for the three notices of proposed rulemaking from June 7 to revise and replace current capital rules.  Comments originally due on September 7 are now due on October 22.  Fed Release. 
Basel III NPR.  Standardized Approach NPR.  Advanced Approaches and Market Risk NPR.

Rating Agency Developments

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On August 9, Fitch updated its UK mortgage loan assumptions.  Fitch Report. 

On August 9, Fitch updated its criteria for UK whole business securitizations.  Fitch Report.

On August 9, S&P updated its methodology for U.S. RMBS backed by pre-2009 collateral.  S&P Report. 

On August 8, Fitch updated its corporate rating methodology.  Fitch Report. 

On August 8, Fitch published its updated insurance-linked securities rating criteria.  Fitch Release.  Fitch Criteria.

On August 8, Fitch updated its criteria for automated valuation models in EMEA RMBS.  Fitch Release.  Fitch Report.

On August 8, Fitch updated its global rating criteria for corporate CDOs.   Fitch Release.  Fitch Report.

On August 8, Fitch updated its rating criteria for currency swap obligations of an SPV in structured finance transactions.  
Fitch Release.  Fitch Report.  

On August 8, Fitch updated its rating criteria for multiborrower U.S. CMBS.  Fitch Release.  Fitch Report.

On August 8, Fitch updated its global rating criteria for distressed debt exchanges.  Fitch Release.  Fitch Report.

On August 7, Fitch issued a special report on risk considerations for REO-to-Rental securitizations.   Fitch Release.  Fitch Report.

On August 7, Fitch updated its rating criteria for prepaid energy transactions.   Fitch Release.  Fitch Report.

On August 7, Fitch updated its mortgage loss assumptions for German RMBS and covered bonds.  Fitch Report.  

On August 3, Fitch updated its U.S. water and sewer revenue bond criteria.  Fitch Report.

On August 3, DBRS updated its methodology for capital call lending facilities.  DBRS Report. 

Note:  Free registration is required for rating agency releases and reports.

Regulation No. 383-P of the Russian Central Bank of June 19 on Money Transfer Rules

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The new Regulation on Money Transfer Rules came into effect on July, 9.  It replaced Regulation No. 2-P of October 30, 2002 on the Cashless Money Transfers in the Russian Federation and Regulation No. 222-P of April 1, 2003 on the Cashless Money Transfers by Individuals in the Russian Federation.  Click here to read more.

Goldman Sachs Discloses SEC Will Not File Action Over RMBS Sales

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On August 9, Goldman Sachs disclosed in its 10-Q that the Securities and Exchange Commission has decided not to recommend an enforcement action against Goldman for disclosures connected to $1.3 billion in residential mortgage-backed securities sold to investors in 2006.  Goldman had previously disclosed an investigation by the SEC and the February 24, 2012 receipt of a “Wells” Notice in its 2011 10-K.  The SEC informed Goldman of the decision not to proceed on August 6, 2012.  SEC Filing.

Federal Court Allows RMBS Case Against RBS Securities and Wachovia Capital Markets to Proceed

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On July 25, Judge Richard D. Rogers of the United States District Court for the District of Kansas denied defendants’ motion to dismiss the National Credit Union Administration Board’s suits against RBS Securities and Wachovia Capital Markets.  The two consolidated actions allege violations of Sections 11 and 12(a)(2) of the federal Securities Act of 1933, as well as violations of the Kansas Uniform Securities Act, in connection with the sale of residential mortgage-backed securities.  The court concluded that plaintiffs’ claims were not barred by the applicable statutes of limitations or repose.  The court also denied in large part defendants’ motion to the extent that it was based on failure to state a claim, but granted defendants’ motion to dismiss as to plaintiffs’ allegations of systematic disregard of underwriting guidelines as to certain certificates for which plaintiffs failed to identify specific originators or underwriting practices, as well as plaintiffs’ allegations that defendants had misrepresented the benefits of the credit enhancement associated with the certificates at issue.  Decision.