SEC Adopts Rules to Improve Systems Compliance and Integrity Rules to Strengthen Technology Infrastructure of Securities Markets
On November 19, the Securities and Exchange Commission voted to adopt new rules designed to strengthen the technology infrastructure of the U.S. securities markets. The rules – together comprising Regulation Systems Compliance and Integrity (Regulation SCI) – impose requirements on certain key market participants intended to reduce the occurrence of systems issues and improve resiliency when systems problems do occur. Release. Rule. SEC Staff Guidance.
CFTC Launches National Campaign to Protect Consumers
On November 19, the CFTC launched CFTC SmartCheck, a new national campaign to help investors identify and protect themselves against financial fraud. The comprehensive campaign includes a new website, a national advertising campaign and interactive videos that will help investors spot investment offers that are potentially fraudulent. Release. Website.
Federal Reserve Board Announces Chairs and Deputy Chairs
On November 19, the Federal Reserve Board announced the designation of the chairs and deputy chairs of the 12 Federal Reserve Banks for 2015. Release.
FDIC Releases Technical Assistance Video on CFPB Mortgage Rules
November 19, the FDIC announced the release of the first in a series of three new technical assistance videos developed to assist bank employees in meeting regulatory requirements. The new videos will address compliance with certain mortgage rules issued by the Consumer Financial Protection Bureau. Release. Video Series.
SEC Releases Accounting Bulletin to Update Guidance on Pushdown Accounting
On November 18, the SEC released a Staff Accounting Bulletin (SAB) to rescind portions of the interpretive guidance included in its SAB Series for what is known as pushdown accounting. The new bulletin brings existing guidance into conformity with Accounting Standards Update No. 2014-17 – Business Combinations (Topic 805). Release. Bulletin.
Agencies Propose Technical Corrections and Clarifications to the Capital Rules Applicable to Advanced Approaches Banking Organizations
On November 18, the Federal Reserve Board, the FDIC and the OCC proposed clarifications to the revised regulatory capital rules adopted by the agencies in July 2013. The proposal applies to large internationally active banking organizations that currently determine their regulatory capital ratios under the advanced approaches rule. Release.
FINRA and MSRB Release Proposals to Provide Pricing Reference Information for Investors in Fixed Income Markets
On November 17, the Financial Industry Regulatory Authority (FINRA) and the Municipal Securities Rulemaking Board (MSRB) released companion proposals that would require disclosure of pricing reference information on customer confirmations for transactions in fixed income securities. The proposals are substantially similar, but seek input on factors unique to the corporate and municipal bond markets.
Under the two proposals, bond dealers in retail-sized fixed income transactions would be required to disclose on the customer's confirmation the price of certain same-day principal trades in the same security, as well as the difference between this reference price and the customer's price. News Release.
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Detroit Confirms Chapter 9 Plan of Adjustment
Approximately 16 months after filing the largest chapter 9 bankruptcy in history, Detroit received approval November 7 of its chapter 9 plan of adjustment. Bankruptcy Judge Stephen Rhodes of the Eastern District of Michigan Bankruptcy Court, confirmed the plan at a several-hour hearing where he read into the record an "oral opinion." Judge Rhodes held that the plan "meets the legal requirements for confirmation" and lauded the plan, describing it as an "extraordinary accomplishment in bankruptcy and an ideal model for future municipal restructurings." In re City of Detroit, Case No. 13-53846 (Bankr. E.D. Mich., November 7, 2014). Click here to read more.
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Court Finds FHFA Claims Against Nomura Are Not Time-Barred
On November 18, Judge Denise Cote of the United States District Court for the Southern District of New York granted the Federal Housing Finance Agency's motion for partial summary judgment on the statute of limitations defense asserted by Nomura and related entities. FHFA, as conservator for Fannie Mae and Freddie Mac, alleges that Nomura made materially false statements in offering documents for RMBS between 2005 and 2007 in violation of Sections 11 and 12(a)(2) of the Securities Act of 1933. Judge Cote found that Fannie and Freddie did not have sufficient information by September 2007 to determine whether the offering documents contained misstatements, and that a reasonably diligent investor in their position would not have investigated the offering documents or discovered the misstatements by that date. As a result, the Court held that FHFA's claims were not barred by the statute of limitations. Opinion & Order.
Bank of America and Merrill Lynch Settle RMBS Lawsuit with FDIC
On November 17, Bank of America and Merrill Lynch settled securities claims brought by the FDIC related to RMBS sold to United Western Bank. The FDIC, as the receiver for United Western Bank, alleged claims under the Securities Act of 1933 and the Colorado Securities Act against Bank of America, Merrill Lynch, Morgan Stanley, and RBS Securities related to $110 million in RMBS. The case against Morgan Stanley and RBS remains pending. Stipulation.
Assured Guaranty Discontinues Lawsuit Against DB Structured Products
On November 17, 2014, Justice Shirley Werner Kornreich of the Supreme Court for the State of New York, New York County approved the stipulation of voluntary discontinuance between Assured Guaranty Municipal Corp., DB Structured Products, Inc., and ACE Securities Corp. DB Structured Products's third-party claim against Greenpoint Mortgage Funding, Inc. was also voluntarily discontinued. Monoline insurer Assured filed the action in 2010, alleging breaches of representations and warranties in a 2006 RMBS transaction. Stipulation of Voluntary Discontinuance.
Court Dismisses U.S. Bank's RMBS Repurchase Claims Against Citigroup as Too Speculative
On November 14, Judge George B. Daniels of the United States District Court for the Southern District of New York dismissed several of U.S. Bank's repurchase claims against Citigroup Global Markets Realty Corp. U.S. Bank alleged that Citigroup breached representations and warranties with respect to loans underlying $832 million of RMBS. The Court dismissed the trustee's claim for breach of contract as to loans for which the trustee had not requested repurchase, holding that U.S. Bank did not sufficiently allege that Citigroup actually discovered any breaches of representations and warranties as to those loans. The Court also dismissed the trustee's claim for anticipatory breach of contract based on repurchase requests sent to Citigroup the same day as the complaint was filed. In addition, Judge Daniels dismissed claims against servicer CitiMortgage, Inc., holding the trustee's allegations suggesting CitiMortgage should have discovered breaches of representations and warranties in the course of servicing were conclusory and speculative. The case remains pending against Citigroup as to claims for breach of contract with respect to the failure to repurchase 466 loans identified in pre-suit repurchase demands. Order.
ResCap's Claims Against Mortgage Originators in Minnesota Will Proceed
On November 12, Judge Susan Richard Nelson of the United States District Court for the District of Minnesota declined to dismiss claims by the Residential Capital LLC (ResCap) bankruptcy trust against six mortgage originators. ResCap alleges that the six originators—Academy Mortgage Corp., First California Mortgage Corp., Provident Funding Associates, L.P., T.J. Financial, Inc., Universal American Mortgage Company, LLC, and Wells Fargo Financial Retail Credit, Inc.—breached representations and warranties in regard to almost $4 billion in RMBS. ResCap asserts claims for breach of representation and warranty and for indemnification. Judge Nelson held that ResCap's allegations stated a claim for breach of warranty without identifying specific allegedly breaching loans. The Court further held that ResCap had standing to bring these claims, and the claims were not time-barred because they were brought within the two-year period for debtor claims under the Bankruptcy Code. Order.
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