New York

JPMorgan Sued for $228 Million by Principal Life Insurance

On March 1, 2012, Principal Life Insurance Company filed a summons with notice in New York state court against JPMorgan Chase and related entities.  Principal alleges that it purchased $114 million in RMBS from JPMorgan, and that the offering documents in connection with the sales of those securities contained material misstatements and omissions.  The summons asserts claims for common-law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, and breach of contract.  Principal is seeking approximately $228 million in damages, including punitive damages, and alternatively seeks rescission.  Summons.

New York Fed Reverse Repo Transactions

On February 28, the New York Fed announced that it intends to conduct a series of small-scale reverse repurchase transactions using all eligible collateral types.  The first operations will be conducting with the newest expanded reverse repo counterparties (8 banks announced on December 1, 2011) and subsequent operations will be open to all eligible reverse repo counterparties.  NY Fed Release.  List of Expanded Reverse Repo Counterparties.

Delaware AG Joins New York AG In Challenging $8.5 Billion Bank Of America Settlement

Delaware Attorney General Joseph “Beau” Biden III moved on August 9 for leave to intervene in the court proceeding brought to approve Bank of America’s $8.5 billion settlement with holders of Countrywide Financial Corp.’s mortgage-backed securities. The Delaware AG challenges the fairness of the settlement, expressing concerns about the impact of the proposed settlement on the rights of the Delaware state pension funds. Motion.

AIG Sues Bank Of America Over Alleged Fraud In RMBS

On August 8, 2011, American International Group sued Bank of America Corp., Countrywide Financial Corp., and Merrill Lynch & Co. in New York state court, claiming that between 2005 and 2007 the defendants fraudulently induced AIG to invest in 350 residential mortgage-backed securities at a cost of $28 billion. AIG claims that the defendants did not engage in prudent underwriting practices, and ignored mischaracterizations made by borrowers about income and employment. The AIG complaint cited a forensic investigation done of the securitizations before the suit was filed, alleging that 40% of loans sampled were improperly evaluated on the risk metrics the defendants included in their offering materials. AIG alleges violations of Sections 11, 12(a)(2), and 15 of the ’33 Act, and state law claims of fraudulent inducement, aiding and abetting fraudulent inducement, negligent misrepresentation, and vicarious and successor liability. AIG seeks $10 billion in compensatory damages, among other remedies. Complaint.

SEC FAQ on Mid-Size Advisers

On June 28, the Division of Investment Management of the SEC issued FAQs regarding advisers with assets under management between $25 million to $100 million (Mid-Size Advisers). The FAQs remove Minnesota from the list of states in which a Mid-Size Adviser would not be subject to examination by a state securities authority. Mid-Size Advisers located in New York and Wyoming will still be required to register with the SEC. For a discussion of Mid-Size Advisers, see “Final Rules Affecting Private Fund Advisers Adopted Under the Dodd-Frank Act“. SEC FAQ.