Fed and FDIC Rule on Resolution Plans

On October 17, the Fed and the FDIC adopted a final rule to implement the resolution plan requirement of Section 165(d)(1) of the Dodd-Frank Act. Companies with $250 billion or more in non-bank assets will be required to submit an initial plan by July 1, 2012; companies with non-bank assets ranging from $100-$250 billion must submit an initial plan by July 1, 2013; and companies subject to the rule with less than $100 billion in non-bank assets must submit an initial plan by December 31, 2013. The rule will be effective on November 30. Joint Release. Final Rule.

CFTC Rule on Derivatives Clearing Organization General Provisions

On October 18, pursuant to Section 725(c) of the Dodd-Frank Act, the CFTC adopted final rules establishing standards for compliance with certain core principals applicable to derivatives clearing organizations (DCOs). The CFTC also adopted rules requiring DCOs to designate a Chief Compliance Officer, and rules revising the DCO registration application. CFTC Fact Sheet.

CFTC Final Rules on Position Limits for Futures and Swaps

On October 18, pursuant to Section 737 of the Dodd-Frank Act, the CFTC adopted final rules requiring limits on speculative positions in 28 core physical commodity contracts and their economically equivalent futures, options, and swaps. The position limits established under the final rules will be effective 60 days after the term "swap" is further defined by CFTC rulemaking. CFTC Fact Sheet.

CFTC Proposed Extension of the Effective Date for Swap Regulation

On October 18, the CFTC proposed to amend a final order issued on July 14 granting temporary exemptive relief from certain provisions of the Commodity Exchange Act that would have taken effect on July 16. The proposed order would extend such exemptive relief from December 31 to July 16, 2012. The original order grants relief from: (i) provisions added or amended by Title VII of the Dodd-Frank Act that reference one or more terms regarding entities or instruments that Title VII requires to be further defined and (ii) provisions that may apply to certain agreements, contracts, and transactions in exempt or excluded commodities as a result of the repeal of various CEA exemptions and exclusions. CFTC Fact Sheet.

SEC Guidance on Legality and Tax Opinions in Registered Offerings

On October 14, the Division of Corporation Finance of the SEC issued guidance on preparing legality and tax opinions filed in connection with registered offerings of securities. The bulletin outlines: (i) the requirements for such opinions; (ii) the SEC's opinion review practices; and (iii) the nature of the written consent that must be filed by counsel with each registration statement. SEC Bulletin.

Federal Insurance Office Request for Comments on Insurance Regulation

On October 17, Treasury's Federal Insurance Office requested comments to assist it in conducting a study and preparing a report, as mandated by the Dodd-Frank Act, on how to modernize and improve insurance regulation.  Comments must be submitted by December 16. Treasury Release. Request for Comment.

Freddie and Fannie Foreclosure Attorney Networks

On October 18, the FHFA directed Fannie Mae and Freddie Mac to adopt a system for foreclosure attorneys where mortgage servicers select qualified law firms that meet certain minimum, uniform criteria. The changes will be implemented after a transition period during which input will be taken by the FHFA from servicers, regulators, lawyers, and other market participants. FHFA Release.

On October 18, Moody's published its approach to rating market value CLOs. Moody's Release.  

Note: Free registration is required for Moody's releases and reports. 

Implementation of the Volcker Rule Provisions Affecting Private Fund Sponsorship and Ownership

During the week of October 10, the Fed, the FDIC, the OCC, and the SEC proposed rules implementing Section 619 of the Dodd-Frank Act, otherwise known as the "Volcker Rule". The Volcker Rule generally prohibits a banking entity from engaging in proprietary trading or acquiring or retaining any ownership interest in, or sponsoring a private fund.  This Alert provides a summary of some of the most significant provisions of the rulemaking that directly impact the sponsorship of, and ownership of interests in, private funds by banking entities, including securitization transactions. Click here to read the full alert.

The MiFID II Proposals - 10 Key Points

On October 20, the European Commission tabled proposals to significantly revise the Markets in Financial Instruments Directive (MiFID). These proposals (known as MiFID II) are intended to: (i) make financial markets more efficient and resilient; (ii) take account of technological developments since MiFID was implemented in November 2007; (iii) increase transparency of both equity and non-equity markets and (iv) reinforce supervisory powers and introduce a stricter framework for commodity derivatives markets and strengthen investor protection. Click here to read more.

Amendments to the Market Abuse Directives - 10 Key Points

On October 20, the European Commission tabled proposals to revise the Market Abuse Directive (MAD). The proposals seek to address five broad problems with MAD identified by the European Commission: (i) gaps in the regulation of new markets, platforms and OTC trading in financial instruments; (ii) gaps in the regulation of commodities and commodity derivatives; (iii) a current inability on the part of Regulators to enforce MAD; (iv) a lack of legal certainty which is currently undermining the effectiveness of MAD and (v) current administrative burdens placed on small and medium sized companies by MAD. Click here to read more. 

SEC Settles CDO Suit Against Citigroup

On October 19, 2011, Citigroup agreed to pay $285 million to settle charges that it structured and marketed a $1 billion collateralized debt obligation without disclosing that it had taken a $500 million short position against the CDO. In particular, the complaint, filed as a settled action by the SEC in federal court in New York, alleges that Citigroup Global Markets, Inc. failed to disclose to investors that it influenced the selection of a large portion of the mortgage loans underlying the CDO and then retained a short position in the assets it had helped select. The SEC alleges that this conduct violated Sections 17(a)(2) and (3) of the Securities Act of 1933. The SEC's related claims against Brian Stoker, a former Citi employee who allegedly structured the CDO, are still pending. Press Release.

Monoline Insurer Assured Files Suit Against DLJ and Credit Suisse

On October 17, 2011, Assured Guaranty Municipal Corp. filed a lawsuit in the Supreme Court of New York against DLJ Mortgage Capital, Inc. and Credit Suisse Securities for breaches of mortgage representations and repurchase obligations in connection with six RMBS. Assured, which insured the securities, alleges that DLJ warranted and vouched for the quality of the loans and agreed to repurchase, substitute, or cure any loans that breached the warrantees. Assured also alleges that its forensic re-underwriting review revealed that 93% of the underlying loans did not meet the agreed-upon qualifications. Assured asserts claims for breach of contract and declaratory judgment. Complaint.

Bank of America $8.5 Billion RMBS Settlement Proceeding to Stay in Federal Court

Judge William H. Pauley III of the Southern District of New York ruled on October 19 that federal court is the proper forum for the proceeding brought by Bank of New York Mellon Corp., as Trustee, seeking court approval of the $8.5 billion settlement between Bank of America Corp. and holders of Countrywide mortgage-backed securities. BONY Mellon commenced the proceeding in state court in June 2011. A number of investor groups, and the attorneys general of two states, intervened to oppose the settlement, and one of the objecting investor groups – the "Walnut Place" investors – then removed the action to federal court. Judge Pauley denied BONY Mellon's motion to remand to state court, holding that the case was properly removed as a "mass action" under the Class Action Fairness Act. Order.