Corporate & Financial Weekly Digest

Corporate & Financial Weekly Digest

CFTC Adopts Final Rules for Execution Facilities and Other Matters

By Kevin M. Foley on Posted in CFTC, Dodd-Frank Developments

Co-authored by Blake Brockway

During an open meeting on May 16, the Commodity Futures Trading Commission adopted a final rule establishing core principles and other requirements for swap execution facilities, which will become effective 60 days after publication in the Federal Register. We will issue a Client Advisory describing the core principles and other requirements for swap execution facilities following the publication of the final rule. The CFTC also adopted final rules related to procedures for establishing minimum block sizes, the process for making a swap available to trade and interpretive guidance on disruptive trading practices. 

FINRA Issues Interpretive Guidance on Use of Back Tested Index Data by ETPs

By Peter J. Shea on Posted in Investment Companies and Investment Advisers

Co-authored by Gregory E. Xethalis, Kathleen H. Moriarty and Marybeth Sorady.

On April 22, the Financial Industry Regulatory Authority, Inc. issued to ALPS Distributors, Inc. interpretive guidance with respect to FINRA Rule 2210(d) and the use of hypothetical back tested index performance information, which FINRA refers to as pre-inception index performance (PIP) data. While the FINRA staff emphasized that PIP data cannot be used in communications with retail investors under FINRA Rule 2210(d), distribution to institutional investors of marketing materials including PIP data would not be objectionable to FINRA under specified conditions and so long as the PIP data met certain criteria. The interpretive guidance applies only to rules-based indices used by passively managed exchange traded products, and the conditions of use and criteria for data are set forth in the letter.

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Mississippi District Court Defers to New York Court in Bond Action

By Bruce M. Sabados on Posted in Litigation

Co-authored by Allison Wuertz.

The United States District Court for the Northern District of Mississippi denied the motion of defendant ACA Financial Guaranty Corporation (ACA) to dismiss a class action complaint, finding that the issues were previously adjudicated adversely to ACA in the New York Supreme Court where a companion case, Oppenheimer v. ACA Financial Guaranty Corporation, is currently pending. Continue Reading

Involuntary Bankruptcy Petitions Dismissed Where Alter Ego Status Was Disputed

By Bruce M. Sabados on Posted in Litigation

Co-authored by Allison Wuertz.

The United States Bankruptcy Court for the Southern District of New York granted motions to dismiss involuntary Chapter 7 petitions filed against TPG Troy LLC and T3 Troy LLC (the Troy Entities). Petitioners filed numerous actions against the Troy Entities in the United States and Europe to recover money they alleged was owed in connection with the default of payment-in-kind and subordinated notes. Continue Reading

Federal Reserve Requires 18 Largest US Bank Holding Companies to Submit Stress Test Results

By Jeffrey M. Werthan on Posted in Banking, Dodd-Frank Developments

On May 13, the Board of Governors (Board) of the Federal Reserve System announced that stress test results from the largest 18 US bank holding companies must be submitted to the Federal Reserve no later than July 5. Under the Board’s rule implementing stress test requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act for bank holding companies (BHCs) with total consolidated assets of $50 billion or more and nonbank financial companies supervised by the Board, a BHC that participated in the 2009 Supervisory Capital Assessment Program is required to conduct a mid-cycle company-run stress test in 2013. The mid-cycle stress test must be conducted using data as of March 31, 2013, and be based on scenarios developed by the BHC. The BHC must report the stress test results to the Board no later than July 5, 2013. In addition, the BHC must publicly disclose a summary of the results in the period between September 15 and September 30, 2013. Companies should conduct their stress tests in accordance with the expectations and principles set forth in the “Supervisory Guidance on Stress Testing for Banking Organizations with More Than $10 Billion in Total Consolidated Assets,” 77 Fed. Reg. 29458 (May 17, 2012). BHCs must use the FR Y-14A Summary schedule to report the results of their company-run stress tests and the FR Y-14A Scenario schedule to report the scenarios used in the mid-cycle stress tests. BHCs must provide information supporting their projections. In addition to the quantitative projections collected on the FR Y-14A, each BHC is also required to submit qualitative information supporting its projections. 

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Federal Reserve Division Director Michael S. Gibson Testifies on Cross-Border Resolution Plans

By Jeffrey M. Werthan on Posted in Banking, Dodd-Frank Developments

On May 15, Michael S. Gibson, Director, Division of Banking Supervision and Regulation of the Federal Reserve, testified before the Subcommittee on National Security and International Trade and Finance of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. In his concluding remarks, Director Gibson stated, “The financial regulatory architecture is stronger today than it was in the years leading up to the crisis, but considerable work remains to complete implementation of the Dodd-Frank Act and the post-crisis global financial reform program.” 

Click here to view  Director Gibson’s speech.

FDIC Division Director James R. Wigand Testifies on Cross-Border Resolution Plans

By Jeffrey M. Werthan on Posted in Banking, Dodd-Frank Developments

On May 15, James R. Wigand, Director, Office of Complex Financial Institutions of the Federal Deposit Insurance Corporation (FDIC) testified before the U.S. Senate Subcommittee on National Security and International Trade and Finance. In his concluding remarks, Director Wigand stated, “In conclusion, the FDIC, working with our foreign colleagues, has made substantial progress in one of the most challenging areas of the financial reforms adopted in the Dodd-Frank Act. The cross-border issues presented by the failure of a [global systemically important financial company] with international operations are complex and difficult. … While much work remains to be done, the FDIC is much better positioned today to address the failure of one of these institutions.” 

Click here to view Director Wigand’s speech.

OCC Issues Clarification of the Treatment of Certain Sovereign and Securitization Positions

By Jeffrey M. Werthan on Posted in Banking, Dodd-Frank Developments

On May 10, the Office of the Comptroller of the Currency (OCC) issued Bulletin OCC 2013-13, which is intended to clarify the treatment of sovereign and securitization provisions under the Market Risk Capital Rule. Specifically, for the purpose of determining standardized specific risk capital requirements for certain sovereign debt positions, “sovereign entities that are members of the Organization for Economic Cooperation and Development (OECD) but do not receive a Country Risk Classification (CRC) should be treated as having the functional equivalent of a CRC of zero.” Further, with respect to securitization positions,

the OCC is clarifying that exposures underlying the securitization position should not necessarily be considered to be in default solely because the borrower has deferred payments of principal or interest. In limited cases, such a deferral is not a result of a change in the borrower’s creditworthiness. Instead, payment deferrals might be a result of provisions in the contract at the time funds were disbursed. In such circumstances, the loan need not be classified as being in default.

Click here to read the Bulletin.

 

SEC Roundtable Discusses Current Securities Law Topics at 33rd Annual Ray Garrett Jr. Corporate and Securities Law Institute

By Mark D. Wood and Mark J. Reyes on Posted in SEC/Corporate

On May 2,  Lona Nallengara and  Shelley E. Parratt, the acting director and the deputy director, respectively, of the Securities and Exchange Commission’s Division of Corporation Finance, participated in a roundtable discussion of current securities law topics, including recent and pending SEC rulemaking, at the 33rd Annual Ray Garrett Jr. Corporate and Securities Law Institute. The following is a brief summary of some of the issues covered at the roundtable discussion. Continue Reading

SEC Reopening Comment Periods for Certain Rulemaking Releases and Policy Statement Applicable to Security-Based Swaps

By Janet M. Angstadt on Posted in Broker Dealer, Derivatives, Dodd-Frank Developments

Co-authored by Avi Badash.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, regulatory authority over derivatives is divided between the Securities and Exchange Commission and the Commodity Futures Trading Commission. The SEC has regulatory authority over security-based swaps, the CFTC has regulatory authority over swaps, and the SEC and the CFTC have joint regulatory authority over mixed swaps.  Continue Reading