SEC Proposes Standards for Covered Clearing Agencies

On March 12, the SEC proposed to amend Rule 17Ad-22 and add Rule 17Ab2-2 pursuant to Section 17A of the Exchange Act and the Clearing Supervision Act, adopted in Title VIII of Dodd-Frank. The proposed rules would establish standards for the operation and governance of clearing agencies that meet the definition of a "covered clearing agency."  Comments may be submitted within 60 days of official publication.  Proposed Rule.   

CFTC and Financial Services Agency of Japan Sign Memorandum of Cooperation to Improve Cross-Border Supervision

On March 10, CFTC and the Financial Services Agency of Japan signed a Memorandum of Cooperation to, among other things, improve the exchange of information in overseeing regulated entities that operate on a cross-border basis in the United States and Japan.  Press Release.  Memorandum.   

SEC Launches Enforcement Cooperation Initiative for Issuers and Underwriters of Municipal Securities

On March 10, the SEC announced a new cooperation initiative to encourage issuers and underwriters of municipal securities to self-report certain violations of the federal securities laws.   Under the Municipalities Continuing Disclosure Cooperation Initiative, the Enforcement Division will recommend standardized, favorable settlement terms to municipal issuers and underwriters who self-report that they have made inaccurate statements in bond offerings about their prior compliance with continuing disclosure obligations specified in Rule 15c2-12 under the Securities Exchange Act of 1934.  Press Release.  Enforcement Division Announcement.  Self-Reporting Questionnaire. 

On March 13, DBRS released European RMBS rating methodology and jurisdictional addenda.  DBRS Report.

On March 12, Moody's released its updated methodology for rating covered bonds.  Moody's Report.

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

Supreme Court to Consider American Pipe Tolling in Securities Act Cases

On March 10, the U.S. Supreme Court granted a petition for a writ of certiorari to consider whether the American Pipe tolling doctrine applies to the statute of repose provided for in the Securities Act of 1933.  A putative intervenor in an RMBS class action against several RMBS underwriters, the Public Employees' Retirement System of Mississippi (MPERS), petitioned the Court to consider the case after the Second Circuit held that the American Pipe doctrine – which tolls the statute of limitations for all members of a proposed class when a putative class action complaint is filed – does not toll the Securities Act's statute of repose applicable in 1933 Act cases.  MPERS sought leave to intervene in the action after the lower courts held that the class plaintiffs lacked standing to represent purchasers of certain RMBS certificates.  The case is scheduled for argument in October of this year. Order.

Tourre Fined For Abacus Violations

On March 12, the Honorable Katharine B. Forrest of the United States District Court for the Southern District of New York ordered Fabrice Tourre, a former Goldman Sachs trader convicted of violation of federal securities laws, to pay US$650,000 in civil penalties and disgorge US$175,463 in bonus payments for his role in an alleged fraud.  In 2010, the SEC began an investigation into Goldman Sachs and Tourre because of allegations that they misled investors in a synthetic collateralized debt obligation, Abacus 2007-AC1, created in 2007. (Goldman Sachs reached a separate settlement in 2010.) Tourre allegedly failed to disclose to Abacus investors that Paulson & Co., which Tourre knew intended to short Abacus, was involved in selecting collateral for the CDO. In August 2013, a jury returned a verdict against Tourre on six out of seven alleged securities law violations. Judge Forrest assessed disgorgement and civil penalties for those violations and barred Tourre from seeking indemnification from Goldman Sachs for those amounts. Judge Forrest declined to enjoin Tourre from further work in the securities industry.  Order.

MassMutual Complaint Against Countrywide Officers Dismissed as Time Barred

On March 10, a California Superior Court dismissed as untimely claims brought by Massachusetts Mutual Life Insurance Company (MassMutual) against four former officers and directors of Countrywide Financial Corporation (Countrywide).  MassMutual initially sued both the four individual Defendants and Countrywide in Massachusetts federal district court on September 1, 2011.  That action was transferred to the In re Countrywide Financial Corp. Mortgage-Backed Securities Litigation multidistrict litigation pending before the Honorable Mariana Pfaelzer shortly after it was filed.  On April 16, 2012, Judge Pfalelzer dismissed MassMutual's claims against the four individual defendants for lack of personal jurisdiction; the action continued as to other defendants.  Shortly after Defendants were dismissed from the federal litigation, MassMutual brought the same claims against Defendants in California state court, where the individual Defendants reside.  MassMutual argued that their initial federal court action was timely filed, and that the statute of limitations should be equitably tolled during the period the federal action was ongoing, such that the filing of the California action in April of 2012 was timely. Without addressing the factual issues related to whether or not Plaintiff's federal action was timely, the court sustained Defendant's demurrer because MassMutual's arguments for equitable tolling failed. The court held that a plaintiff's mistaken decision to sue California defendants in a foreign forum that has no jurisdiction over them does not provide a basis for equitable tolling.  Orrick represents one of the former officers in this action.  Order.

The Bank of England Releases Details of Internal Investigation into Forex Rigging

The Bank of England released a memorandum this week setting out the parameters of its internal investigation in response to allegations that its employees were involved in the manipulation of forex markets.  Leading barrister Lord Grabiner QC will lead the investigation which, among other things, will seek to determine the extent to which Bank of England employees knowingly colluded with market participants to manipulate forex markets by sharing confidential client information. 

The results of the investigation will be published after the UK financial regulator, the FCA, concludes its own investigation into the forex market.  Memorandum.   

European Central Bank Releases Methodology Manual for Asset Quality Review

The European Central Bank (ECB) has published a manual as part of the second phase of its Asset Quality Review (AQR).  The AQR is being carried out on the 128 largest banks in the European Union, and the purpose of the manual is to provide procedural guidance to the relevant national authorities who will be reviewing banks within their respective jurisdictions.   

A third (and final) phase of the AQR will begin in August 2014 with completion and publication of the results due in October 2014.  Manual.  

Prudential Regulation Authority Publishes Statement of Strategy

The Prudential Regulation Authority (PRA), the UK regulator responsible for micro-prudential regulation of systemically important firms, has published its statement of strategy for 2014/15.

In addition to its statutory objective to promote the safety and soundness of the firms it regulates, the new strategy sets out the following aims:

• Continue to implement the forward-looking, judgement-based regulatory regime.
• Continue to implement changes to regulation, including the Financial Services (Banking Reform) Act 2013.
• Influence, devise and implement policy to advance structural reform in banking, resolution policy, the secondary competition objective, and other elements of post-crisis standard setting.
• Contribute towards delivering the Financial Policy Committee's (FPC) macro-prudential objectives.   Statement of Strategy.