Financial Industry Developments

FHFA Updates Progress on Fannie Mae and Freddie Mac Credit Risk Transfer Programs

On July 26, 2017, the Federal Housing Finance Agency released an update on the credit risk transfer programs of Freddie Mac and Fannie Mae through the first quarter of 2017. Press Release.

SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities

On July 25, 2017, the Securities and Exchange Commission (the "SEC") released a report indicating that many offerings of "digital assets[,]" such as those using "distributed ledger or blockchain technology," could be subject to federal securities laws. In this specific instance, the SEC chose not to bring charges or find violations but to go further into the SEC's positions on this emerging sector. Press Release.

CFTC Staff Extends Time-Limited No-Action Relief on the Applicability of Transaction-Level Requirements in Certain Cross-Border Situations

On July 25, 2017, the U.S. Commodity Futures Trading Commission (the "CFTC") "issued a time-limited no-action letter that extends relief to swap dealers [] registered with the CFTC that are established under the laws of jurisdictions other than the United States [] from certain transaction-level requirements under the Commodity Exchange Act." Press Release.

Federal Reserve Board Announces Guidelines for Banking Entities Seeking an Extension to Conform Certain "Seeding" Investments in Hedge Funds or Private Equity Funds to Requirements of Volcker Rule

On July 24, 2017, the Federal Reserve Board "announced guidelines for banking entities seeking an extension to conform certain 'seeding' investments in hedge funds or private equity funds ('covered funds') to the requirements of … the Volcker Rule." In part, the new guidelines require further detail regarding "the reasons for the extension and an explanation of the entity's plan to conform the investment to the requirements of" the Volcker Rule. Press Release.

Federal Regulatory Agencies Announce Coordination of Reviews for Certain Foreign Funds Under "Volcker Rule"

On July 21, 2017, the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of Comptroller of the Currency and the Securities and Exchange Commission announced they would work together as they reviewed the impact of the Volcker Rule on specific types of foreign funds. Federal Reserve Press Release. FDIC Press Release. OCC Press Release. SEC Press Release.

Rating Agency Developments

On July 26, 2017, Moody's issued the following reports:

• Moody's Approach to Rating Credit Card Receivables-Backed Securities
• Moody's Approach to Rating Asset-Backed Commercial Paper
• Moody's Proposes Limited Changes to Its Approach to Rating Credit Card Receivables-Backed Securities
• Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS
• Approach to Rating US and Canadian Conduit/Fusion CMBS
• Moody's Proposes Changes to Its Approach to Rating Asset-Backed Commercial Paper
• Moody's Proposes Limited Updates to its Approach to Rating US and Canadian Conduit/Fusion CMBS
• Moody's Proposes Revisions to Its Approach to Assessing Counterparty Risks in Structured Finance
• Moody's Approach to Assessing Counterparty Risks in Structured Finance

On July 21, 2017, Fitch issued a report entitled Fitch Revises Sovereign Rating Criteria. Report.

On July 21, 2017, Fitch issued a report entitled Fitch Updates Country Ceilings Criteria. Report.

On July 20, 2017, Fitch issued a report entitled Fitch Updates Availability-Based Projects Rating Criteria. Report.

European Financial Industry Developments

European Commission Launches Inception Impact Assessment and Publishes Roadmap on Interpretative Communication

On July 25, 2017, the European Commission, launched an Inception Impact Assessment, which aims to develop a tool that would improve the investment climate in the EU. On the same date, it published a Roadmap that announces the adoption of an Interpretative Communication on the existing EU standards for the treatment of cross-border intra-EU investments..

The Inception Impact Assessment and Roadmap consider a variety of options to create a stable and clear regulatory environment to incentivize investments in the EU, including creating an interpretative Communication, establishing an EU network of "Investment Contact Points" and creating an EU legal framework for mediation.

Inception Impact Assessment

The Inception Impact Assessment considers the following options to create a more predictable, stable and clear regulatory environment to incentivize investments:

• Baseline scenario: No EU action. The Commission is nevertheless working on an interpretative communication to provide guidance on existing EU rules for the treatment of cross-border EU investments. This would be without prejudice to any other possible future actions by the Commission in the context of the implementation of single-market rules or in the context of the third pillar of the investment plan.
• Establishing an EU network of "Investment Contact Points" within the national administrations that could assist investors. In particular, such contact points could be used by investors before a formal dispute when a national public authority arises in order to see how to prevent the escalation of any issues and to inform the investors about their rights and existing remedies. In assessing this option, the Commission will ensure complementarity with other ongoing or planned workstreams in the context of the third pillar of the Investment Plan.
• Creating an EU legal framework for mediation, enabling mediation between investors and the relevant national authorities and ensuring minimum standards of quality and transparency for the mediation process.
• In addition to an EU legal framework regulating the procedure of mediation, creating permanent agencies in each member state that could administer the mediation services (for example, by establishing a registration system of mediators) or act as mediators.
• In addition to an EU legal framework, creating one EU-wide mediation agency, which could administer the mediation services or act as a mediator.

Roadmap

The Roadmap document notes that it currently may not always be clear to investors what their rights are when they invest within the EU, and legal practitioners might find it difficult to interpret EU law and the existing jurisprudence of the Court of Justice correctly. Greater clarity on investors' EU rights (called substantive EU standards of protection) would be useful for EU investors, national administrations and stakeholders, as well as for legal practitioners. This would provide greater transparency on the effective protection of EU investor rights in the single market and create a more positive environment to attract investments.

To meet those objectives, priority action 8 of the CMU Mid-term Review Communication states that the Commission will adopt an interpretative Communication to provide guidance on existing EU rules for the treatment of cross-border EU investments. The Interpretative Communication will bring together and explain the existing substantive EU standards for the lawful treatment of cross-border EU investments. The Communication could also highlight general principles of EU law, often invoked in the case-law of the Court of Justice, such as the principle of proportionality, legal certainty and the protection of legitimate expectations.

EBA Consults on Draft RTS and ITS on EBA Electronic Central Register Under PSD2

On July 24, 2017, the EBA published a consultation paper on the draft regulatory technical standards ("RTS") and implementing technical standards ("ITS") on the EBA electronic central register under the revised Payment Services Directive ("PSD2") ((EU) 2015/2366) (EBA/CP/2017/12).

Under Article 15(1) of PSD2, the EBA is required to develop, operate and maintain an electronic central register that contains information as notified by competent authorities ("CAs"). PSD2 also mandates the EBA to develop RTS and ITS relating to the register.

The draft RTS set out requirements relating to:

• Access to the register by the various users of the register.
• The provision of information by CAs to the EBA, and validation of that information.
• Safety, availability and performance of the register.
• Responsibilities of the EBA concerning the management and maintenance of the register.
• The search of information in the register and the display of search results.

The EBA's proposed approach is a technological solution that will support both manual insertion and automated transmission of information by CAs to the EBA.

Having assessed the existing national practices related to the operation and maintenance of the national public registers under the current Payment Services Directive ("PSD") (2007/64/EC), the EBA has concluded that the ITS should specify the type, and format, of information that will be contained in the register for:

• Payment and electronic money institutions and their agents.
• Exempted payment and electronic money institutions and their agents.
• Branches of payment institutions, electronic money institutions and account information service providers ("AISPs") providing services in a host member state.
• AISPs and their agents.
• Providers of services based on specific payment instruments that can be used only in a limited way.
• Providers of electronic communication networks executing payment transactions or providing services in addition to electronic communications services.

The EBA is holding a public hearing on September 4, 2017. The consultation closes to responses on September 18, 2017.