On May 26, 2016, the FDIC reached a $190 million settlement of RMBS claims against eight financial institutions, including Barclays Capital Inc.; Deutsche Bank Securities Inc.; Goldman, Sachs & Co; RBS Securities Inc.; and UBS Securities LLC. The settlement resolves six separate suits brought in 2011 and 2012 in California and Alabama alleging misrepresentations within the defendant underwriters’ RMBS offering documents. The FDIC, as a receiver, will distribute the settlement funds among five failed bank receiverships. FDIC Settlement Agreement.
underwriters
Agencies Issue Final Rule Implementing Minimum Requirements for Appraisal Management Companies
On April 30, six federal regulatory agencies jointly issued a final rule establishing minimum requirements for state registration and supervision of appraisal management companies that provide appraisal management services to lenders, underwriters and other principals in the secondary mortgage markets, as required by Section 1473 of the Dodd-Frank Act. Press Release. Final Rule.
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.
SEC Approves MSRB Interpretive Notice on Duties of Underwriters to State and Local Government Issuers
On May 4, the SEC approved the MSRB’s proposed interpretive notice on the application of MSRB Rule G-17 to underwriters of municipal securities. According to the notice, underwriters of municipal securities will be required to make certain disclosures to their state and local government clients, including risks about complex financial transactions, potential conflicts of interest, and compensation received from third-party providers of derivatives and investments. The notice will become effective on August 2. MSRB Release. MSRB Notice. SEC Release.
MSRB Request for Comment on Underwriter Submission Requirements
On April 10, the MSRB requested comment on proposed changes to rules that would allow underwriters of municipality securities to satisfy certain of their obligations to submit information about new issues with their data submission to the New Issue Information Dissemination Service, which is operated by the DTCC. Comments must be submitted by May 8. MSRB Release.
Application of MSRB Rules to Underwriters of Municipal Securities
On August 2, pursuant to Section 975 of the Dodd-Frank Act, the MSRB requested approval from the SEC for an interpretive notice relating to the application of MSRB Rule G-17 to underwriters of municipal securities. The notice would set forth requirements for underwriters regarding representations and disclosure to issuers. The MSRB anticipates the proposed notice will be effective 90 days after approval by the SEC. MSRB Release. MSRB Notice.
In Nomura Action, First Circuit Affirms Dismissal on Standing Grounds and Reverses Dismissal for Inadequate Pleading
On January 20, 2011, the First Circuit Court of Appeals partially affirmed and partially reversed a District Court decision in a putative class action brought against eight RMBS trusts, their underwriters, the depositor and its officers. The court affirmed the dismissal of all claims related to those trusts whose certificates had not been purchased by any of the named plaintiffs, holding that plaintiffs thereby lacked standing to sue. The court affirmed the dismissal of claims relating to appraisal practices as inadequately pled. The court also affirmed the dismissal of claims relating to credit ratings, holding that such ratings were inactionable opinions. However, the court vacated the dismissal of claims relating to the lending banks’ underwriting practices, holding that plaintiffs’ allegation of defendants’ wholesale abandonment of underwriting standards was sufficient to defeat the motion to dismiss. Decision
SDNY Rules Rating Agencies Are Not Underwriters
On January 12, 2011, Federal District Judge Harold Baer, Jr. of the Southern District of New York (“SDNY”) dismissed all claims against several rating agencies (Moody’s, Fitch, S&P) in an RMBS securities class action. The putative class consists of all purchasers or acquirers of RMBS registered or traceable to a particular registration statement filed in either 2004 or 2005. Plaintiffs alleged that the rating agencies provided ratings based on insufficient information and faulty assumptions concerning the underlying mortgages and are liable as “underwriters” under Section 11 of the Securities Act. The court rejected this argument, finding that precedent clearly defined an underwriter as a party that serves as a conduit between the issuer and the public, and that the Rating Agencies’ significant role in the ability of Goldman Sachs to market the certificates at issue did not bring them within that definition. The Court also dismissed some, but not all, claims against Goldman Sachs. Decision.