On June 13, S&P released its insurance criteria for U.S. and Canadian CMBS transactions.  S&P Report.

On June 13, Fitch released its criteria for assigning short-term ratings for variable-rate demand obligations (VRDOs) or maturing commercial paper (CP) notes based on internal liquidity.  Fitch Report. 

On June 12, Fitch released its criteria for rating caps and limitations in global structured finance transactions.  Fitch Report. 

On June 12, DBRS released its methodology for European structured finance transactions.  DBRS Report. 

On June 11, DBRS released its methodology for CDOs of large corporate credit.  DBRS Report. 

On June 11, DBRS released its methodology for Canadian structured finance surveillance.  DBRS Report. 

On June 10, Fitch released its criteria for rating U.S. timeshare loan ABS.  Fitch Report. 

Note: Free registration is required for rating agency releases and reports.

Second Circuit Rules that Payments Made to Purchase Notes are Exempt from Avoidance Under Section 546(e) of the Bankruptcy Code

On June 10, the Second Circuit Court of Appeals held in the Quebecor World (USA) Inc. bankruptcy that payments made by a company in purchasing notes issued by an affiliate constituted transfers made in connection with a securities contract.  Therefore, the payments were protected from avoidance by a "safe harbor" under section 546(e) of the Bankruptcy Code.  Orrick covered the Quebecor decision in depth in the linked client memo.  Quebecor Case.

Lehman Derivative Litigation Still Looms Large

The market's attention is fixed firmly on the future of derivatives.  Questions about the implementation and impact of the Dodd Frank requirements, and to what extent the use of swaps in structured finance and other transactions will return, are front and center.  And yet, there are also lessons to be learned from the past use of these somewhat esoteric financial instruments, which continue to be questioned and tested in litigation — with more to come.  Orrick covered this topic in an article recently published in Law360.

Derivatives in Review

The Derivatives in Review highlights important legal, regulatory and other newsworthy developments in the area of derivatives.  Please visit Orrick's Derivatives in Review blog to see what was featured in the June edition.

SEC Proposes Legislation to Reform Money Market Funds

Since the 2008 financial crisis, reforming money market funds has been the subject of high drama and intense scrutiny on Capitol Hill.  Advocates for reform finally got their long awaited breakthrough last Wednesday, June 5, when the Securities and Exchange Commission voted unanimously to propose legislation that would reform money market funds.  For more information and to visit our Securities Litigation blog, please click here.

Judge Denies Dexia's Bid to Dismiss MBS Claims as Time-Barred

On June 6, Judge Shira A. Scheindlin of the U.S. District Court for the Southern District of New York denied Dexia Real Estate Capital Markets' (Dexia) motion to dismiss breach of contract claims brought by U.S. Bank National Association (U.S. Bank), in its capacity as trustee for a CMBS trust.  U.S. Bank alleges that Dexia breached a representation concerning the enforceability of all agreements related to a particular loan and then refused to repurchase the loan when notified of the breach.  Moving to dismiss, Dexia argued that U.S. Bank's claim was untimely because it was filed more than 6 years after the governing agreements were entered into and the representation at issue was made.  Rejecting Dexia's argument, Judge Scheindlin concluded that under the terms of the governing agreements, U.S. Bank was only entitled to make a repurchase demand upon Dexia once a breach had "materially and adversely" affected a loan.  She further found that U.S. Bank's complaint pled facts sufficient to suggest, in connection with the particular representation breach alleged by U.S. Bank, that there was no material and adverse effect until a 2011 Minnesota state court decision holding that a guaranty securing the loan was unenforceable.  Order.

BBA Announces Changes to LIBOR

On June 12, the British Bankers' Association (BBA) published a press release announcing changes to the London Interbank Offered Rate (LIBOR).  The reforms follow the publication of the Wheatley Review in September 2012, and include:

• From July 1, the publication of BBA LIBOR individual panel banks' daily submissions for USD, EUR, GBP, CHF and JPY will be embargoed for three months.  The daily calculation and publication of BBA LIBOR fixing rates will continue unaffected.  The rates for a whole month at a time will be published at the beginning of the fourth month; the first delayed release of individual bank submissions will be provided on the first business day of November 2013.
• The publication of "same day" EURO LIBOR rates for one week and one month will cease from July 31.  These two rates were supplemental to the "spot" EUR LIBOR rates for all seven LIBOR tenors, which will continue as usual.  Press Release. 

Draft Alternative Investment Fund Manages Regulations 2013 Published

On June 12, the Draft Investment Fund Managers Regulations 2013, together with an explanatory memorandum, were published. The Regulations come into force on July 22.  

The Regulations implement the majority of the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD).  The AIFMD aims to introduce a harmonised regulatory framework across the EU for EU-established managers (AIFMs) of alternative investment funds (AIFs).

The Regulations implement the AIFMD by amending the Financial Services and Markets Act 2000 (FSMA) and other relevant legislation (in the schedules to the Regulations) so that managing an AIF, which is required to be authorised under the AIFMD, is regulated under the FSMA.  Stand-alone provisions in the main body of the Regulations (and further amendments in the schedules) also apply requirements of the AIFMD both to persons regulated under that regime and to other persons who are not required to be authorised under the AIFMD but whom the AIFMD imposes requirements on.

The UK Government will review the Regulations and publish a report setting out the conclusions of the review by July 22.  Draft Investment Fund Managers Regulations 2013.  Explanatory Memorandum. 

ESMA Finalises Guidelines on Remuneration Policies and Practices Under MiFID

On June 11, the European Securities and Markets Authority (ESMA) published a final report on the guidelines on remuneration policies and practices under the Markets in Financial Instruments Directive (2004/39/EC) (MiFID) (ESMA/2013/606).  Remuneration policies should be aligned with effective conflicts of interest management duties and conduct of business risk management obligations, in order to ensure that clients' interests are not impaired by the remuneration policies and practices adopted by the firm in the short, medium and long term.

The final report also contains feedback received from ESMA's September 2012 consultation on the draft guidelines and sets out material changes to the guidelines made by ESMA following consultation.  Competent authorities to which these guidelines apply must notify ESMA whether they comply or intend to comply with the guidelines, stating their reasons for non-compliance where they do not comply or do not intend to comply, within two months of the date of publication of the translated versions by ESMA.  Final Report.

IMN's Global ABS 2013 Conference

More than 3,000 participants will attend this gathering of the global structured products market from June 18-20 in Brussels, Belgium.  Participants will engage with the regulatory community, network with clients and partake in key policy discussions on ways to rebuild the European securitization market.  Orrick is an Associate Level Sponsor.  For more information, please click here. 

Impact Finance CLE Panel

Financing that creates significant social change requires a broad range of factors in order to be successful.  In an effort to help those in social sector finance better understand these factors, Orrick has partnered with three leading organizations in this space – ACCION International, Calvert Foundation and the Nonprofit Finance Fund – to offer a special CLE session on June 24 to discuss important considerations related to Impact Finance (also referred to as impact investing).  For more information and to register for this event, please click here.