On March 7, KIRP, LLC sued Texas-based mortgage servicer Nationstar Mortgage LLC in the Supreme Court of the State of New York in connection with Nationstar’s alleged improper conduct in servicing mortgage loans that are collateral for RMBS certificates owned by KIRP. Specifically, KIRP alleges that Nationstar auctioned off defaulted mortgages loans at prices far below the loans’ value in breach of Nationstar’s obligations under its master servicing contract. KIRP further alleges that Nationstar conducted these auctions to recoup advances Nationstar made to troubled borrowers, in breach of its duties to place the interests of certificate holders above its own interests. KIRP purports to sue on behalf of all certificate holders in the six RMBS trusts at issue. KIRP asserts claims for breach of contract, conversion, unjust enrichment and declaratory judgment, and seeks a temporary restraining order, disgorgement of profits, damages, interest and reimbursement of costs and expenses. Complaint.
Month: March 2013
Washington State Court Strikes Jury Demands in RMBS Case
On March 7, Judge Laura Inveen of the King County Superior Court in Washington State granted the motion to strike jury demands filed by defendants in 11 RMBS actions brought by the Federal Home Loan Bank of Seattle. Judge Inveen ruled that claims for rescission or rescissionary damages under the Washington State Securities Act are equitable in nature and thus not eligible to be tried to a jury. Orrick successfully briefed and argued the motion. Order.
SEC Proposes Rules to Improve Systems Compliance and Integrity
On March 7, the SEC proposed Regulation SCI to require certain SROs, alternative trading systems, disseminators of market data under certain National Market Systems plans and clearing agencies exempt from SEC regulation to have comprehensive policies and procedures in place surrounding their technological systems. The proposed Regulation SCI would replace the current voluntary compliance program with enforceable rules designed to better insulate securities markets from vulnerabilities posed by systems technology issues. Comments must be submitted within 60 days after publication in the Federal Register. SEC Release. SEC Proposed Rules.
Rating Agency Developments
On March 8, Fitch updated its report on dual-party criteria for long-term ratings on letter of credit-supported U.S. public finance bonds. Fitch Report.
On March 7, Moody’s released its approach to quantifying set-off risk for Belgian structured finance and covered bond transactions. Moody’s Report.
On March 5, Moody’s released its methodology for rating transactions based on credit substitution through financial guaranty assistance, letters of credit, and third party guarantees. Moody’s Report.
On March 4, Fitch released its Canadian residential mortgage loss model criteria. Fitch Report.
On March 4, Fitch updated its non-U.S. public sector entities criteria. Fitch Report.
Note: Free registration is required for rating agency releases and reports.
FHFA Outlines 2013 Goals for Fannie and Freddie
On March 4, the FHFA released the 2013 Conservatorship Scorecard for Fannie Mae and Freddie Mac. The Scorecard details specific priorities for the GSEs in 2013 that build upon the strategic goals announced in 2012, including: (i) build a new securitization infrastructure; (ii) contract the GSEs’ dominant presence in the marketplace; and (iii) maintain foreclosure prevention activities and credit availability. FHFA Release.
SEC Risk Alert and Investor Bulletin on Investment Adviser Custody Rule
On March 4, the SEC issued a Risk Alert on compliance with its custody rule for investment advisers and an Investor Bulletin on the rule which is designed to protect advisory clients from theft or misuse of their funds and securities. The alert comes after a review which identified significant deficiencies in about one-third of firms examined, including: (i) failure to recognize that they have custody; (ii) failure to meet surprise examination requirements; and (iii) failure to satisfy the rule’s qualified custodian requirements. SEC Release.
Solar Power Finance & Investments Summit 2013
March 18-21, 2013 — The major gathering place for the solar power industry’s decision makers, the summit attracts key dealmakers in the solar development and financial communities to network and conduct business in San Diego, CA. Orrick is a Platinum Level Sponsor. On March 18, Howard Altarescu will present Structural & Legal Considerations in Solar Securitizations. Eric Stephens and Michael Meyers will also moderate panels. Click here to view the current agenda.
Orrick’s Annual Financial Services Roundtable
On March 5, Orrick’s Global Employment Law and Litigation Group will host an interactive discussion of critical employment law issues impacting the financial services industry. The keynote lunch speaker will be EEOC Commissioner Chai Feldblum, who will speak and answer questions about the EEOC’s recently announced Strategic Enforcement Plan. Click here to RSVP.
EMIR Regulatory Technical Standards: Delegated Regulations Published
On February 23, six delegated regulations containing regulatory technical standards relating to EMIR (Regulation 648/2012) were published in the Official Journal of the European Union. The regulatory technical standards provide detailed information of requirements relating to OTC derivatives, central counterparties and trade repositories in the following areas:
- clearing obligation;
- reporting obligation;
- risk mitigation requirements; and
- registration requirements for central counterparties and trade repositories.
The regulatory technical standards will enter into force on March 15, 2013, (being 20 days from their publication in the Official Journal) and trigger the effective date of several key EMIR obligations, such as the requirement for financial and non-financial entities to confirm their non-centrally-cleared OTC derivative transactions on a timely basis.
ESMA has not yet released draft technical standards relating to the margin and capital requirements for non-centrally cleared trades.
FSA Temporary Prohibition on Short-Selling of Certain Italian Shares
On February 27, the FSA published a statement announcing an immediate temporary ban on the short selling of shares in four Italian companies – Banco Popolare, Mediolanum, Intesa and Banca Carige. The prohibition was announced in light of a similar measure introduced by CONSOB, the Italian regulator, and following significant drops in the share price of the affected companies. In explaining its decision to impose the ban, the FSA noted that the move was justified in order to prevent disorderly falls in the share price.
Leading up to the prohibition, the price movements in all four companies’ shares crossed one of the thresholds set out in the Short Selling Regulation (Regulation 919/2012), which sets out criteria for determining a significant fall in price.