FINANCIAL INDUSTRY DEVELOPMENTS

CFTC and EC Statement on Regulatory Framework

On February 12, the CFTC and the European Commission announced jointly that the two agencies have made significant progress in their collaboration on the regulatory frameworks for CFTC-regulated swap execution facilities (SEFs) and EU-regulated multilateral trading facilities (MTFs). Joint Release.

RATING AGENCY DEVELOPMENTS

On February 14, Fitch released its criteria for rating U.S. commercial mortgage servicers. Fitch Report.

On February 13, Fitch released its criteria for rating RMBS in Latin America. Fitch Report.

On February 11, Moody's released its criteria for rating resecuritizations backed by RMBS and CMBS. Moody's Report.

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

RMBS AND OTHER SECURITIES LITIGATION

Federal Jury Holds Radius CEO Liable for MBS Fraud

On February 6, a jury in the United States District Court for the Middle District of Florida found the CEO of the now-defunct Radius Capital Corp., Robert A. DiGiorgio, knowingly or recklessly made false or misleading statements to Ginnie Mae and the investing public in connection with US$23 million in MBS Radius issued in 2005 and 2006. The Securities and Exchange Commission, which brought the case, alleged that Radius and DiGiorgio violated federal securities laws and fraudulently induced Ginnie Mae to guarantee the bonds by representing that the underlying loans were or would be insured by the Federal Housing Administration (FHA), when in fact the majority of the loans were ineligible. The suit alleged Radius employees routinely ignored FHA underwriting standards at DiGiorgio's direction. In its verdict, the jury determined that Mr. DiGiorgio violated Sections 17(a)(1), (2), and (3) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rules 10b-5(a), (b), and (c) promulgated thereunder. Verdict.

Nonprofit Seeks to Enjoin DOJ Settlement with JP Morgan

On February 10, non-profit corporation Better Markets, Inc., filed a complaint in the United States District Court for the District of Columbia against the United States Department of Justice and the Attorney General of the United States. The complaint seeks injunctive and declaratory relief in connection with the recent US$13 billion settlement between DOJ and JPMorgan Chase & Co. The settlement covers allegedly misleading conduct in RMBS securitizations. Better Markets alleges that the DOJ did not have the authority to confidentially negotiate the settlement and then enter into the deal without court approval. Better Markets asks the court to enjoin the DOJ from enforcing the agreement unless it is reviewed by a court, and to declare that the DOJ violated the Administrative Procedures Act and 28 U.S.C. Section 2201(a). Complaint.

EUROPEAN FINANCIAL INDUSTRY DEVELOPMENTS

ESMA Publishes 2014 Work Program

On February 12, the European Securities and Markets Authority (ESMA) published its 2014 regulatory work program, setting out a detailed account of the various areas and initiatives for which each unit or division is responsible. These include:

  • MiFID II
  • CSD Regulation
  • Market Abuse Regulation
  • CRA III
  • Omnibus II

Work Program.

ESMA Publishes CRA III Regulation Implementation Consultation Paper

On February 11, ESMA published a consultation paper on the implementation of the CRA III Regulation containing draft regulatory technical standards (RTS) on the following:

  • The content and format of fees charged by Credit Rating Agencies (CRAs) to their clients for the ongoing supervision provided by ESMA, together with pricing policy.
  • The requirements for adequate information that must be published by issuers, originators and sponsors in relation to structured finance instruments and their underlying assets, together with updating requirements. A standard disclosure template is also provided.
  • Up-to-date information on the outlooks and ratings issued by CRAs will be provided on the European Rating Platform (ERP) website. In order to integrate them into the ERP, the draft RTS includes changes to ESMA's regulatory reporting system and its database on performance statistics and rating activity.

The consultation closes on April 11, 2014, with a public hearing to be held on March 14, 2014. The draft RTS must be submitted for endorsement to the European Commission by June 21, 2014. Consultation Paper.

FCA Publishes EMIR Reporting and Non-Financial Counterparties Factsheets

On February 10, the FCA published two factsheets, both dated February 7, 2014, concerning EMIR.

  • A factsheet for EMIR compliant counterparties. Reporting started for such entities on February 12, 2014, following an FCA review on reporting obligations and subsequent discussions with counterparties. Reporting Factsheet.
  • A factsheet for EMIR compliant non-financial counterparties calculating the clearing threshold and which are part of a group containing entities that are financial counterparties. The factsheet details the results of an additional FCA review on how such entities define their hedging activities and monitor their statuses in relation to the clearing threshold. Non-financial Counterparties Factsheet.

The Italy Regulatory Update

The Italy Regulatory Update is a quarterly newsletter which summarizes the main Italian and EC/EU law developments in the area of corporate, banking and financial services. To view the latest edition, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.