Dodd-Frank

CFTC Wins Fund Registration Court Appeal

By James Kollar | Posted on

The U.S. Court of Appeals for the District of Columbia Circuit decided in favor of the Commodity Futures Trading Commission (CFTC) on June 25, upholding a 2012 rule that imposed new registration and reporting requirements on certain commodity pool operators and commodity trading advisers.

Under the rule, advisers to mutual funds and exchange-traded funds need to register with the CFTC if their commodity trades, including futures, swaps and options, exceed certain thresholds, with the exclusion of pure hedges.

(more…)

OCC Lending Limits Final Rule: Credit Exposures from Derivatives and Securities Financing Transactions

By Davis Polk & Wardwell LLP | Posted on

[Editor’s Note: The following post is authored by Davis Polk & Wardwell LLP]

The OCC has issued a final rule specifying the methods for calculating credit exposure arising from derivatives and securities financing transactions for purposes of the federal lending limits that apply to national banks, federal and state branches and agencies of foreign banks and federal and state savings associations. The final rule, like the June 2012 OCC interim final rule that it revises, implements Section 610 of the Dodd-Frank Act, which requires federal lending limits to take into account credit exposure arising from derivatives and securities financing transactions. (more…)

Swaps Pushout Rule: Federal Reserve Clarifies Treatment of U.S. Branches of Foreign Banks

By Davis Polk & Wardwell LLP | Posted on

[Editor’s Note: The following post is authored by Davis Polk & Wardwell LLP]

The Federal Reserve has issued an interim final rule clarifying the treatment of uninsured U.S. branches and agencies of foreign banks under Section 716 of the Dodd-Frank Act (“Swaps Pushout Rule”). The interim final rule clarifies that, for purposes of the Swaps Pushout Rule, all uninsured U.S. branches and agencies of foreign banks are treated as insured depository institutions. Accordingly, a foreign bank swap dealer’s uninsured U.S. branch or agency will benefit from the Swaps Pushout Rule’s exemptions, transition period and grandfathering provisions to the same extent as an insured depository institution. The interim final rule also establishes a process for uninsured state branches and agencies of foreign banks and state member banks to apply to the Federal Reserve for a transition period from the July 16, 2013 effective date of the Swaps Pushout Rule. The interim final rule became effective on June 5, 2013, and comments on the rule are due on August 4, 2013. (more…)

CFPB Finalizes Rule on Mortgage Loan Originator Compensation and Qualifications

By Arnold & Porter LLP | Posted on

[Editor’s Note: The following post is authored by Arnold & Porter LLP]

I. BACKGROUND

On January 20, 2013, the Consumer Financial Protection Bureau (CFPB) issued its final rule (the Final Rule) regarding mortgage loan originator compensation and qualification requirements1 under the Truth in Lending Act (TILA), as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). The Final Rule modifies existing compensation and qualification requirements under Regulation Z. It prohibits a creditor from compensating a loan originator based on a term of a transaction or a “proxy” for a term of a transaction. It also codifies the existing ban on “dual compensation,” in which a loan originator receives compensation from the consumer and an additional party other than the originator’s organization, but creates an exception allowing a loan originator organization to pay its employees or contractors a commission provided that the commission is not based on a term of a loan. The Final Rule provides a complete exemption from the statutory ban on the consumer payment of upfront points and fees. The Final Rule also includes requirements regarding loan originator qualifications, licensing, and recordkeeping, and implements statutory provisions regarding mandatory dispute resolution and the financing of credit insurance in connection with a residential mortgage loan. (more…)

CFTC Asked to Extend Cross-Border Exemption

By Sarah G. Nowland, J.D. Candidate 2014 | Posted on

Several trade groups, including the Futures Industry Association (FIA), have asked the Commodity Futures Trading Commission (CFTC) for a six month extension of an Exemptive Order from the Dodd-Frank cross-border derivatives rules.  The request points out three benefits of a possible extension.

First, the extension would give swap market participants more time to consider the SEC’s “recent proposals relating to its regulation of cross-border security-based swap activities.”  Second, “failing to extend the Exemptive Order in the absence of final cross-border guidance could increase uncertainty for international market participants.”  Third, an earlier expiration of the Exemptive Order “could jeopardize the productive and cooperative efforts underway towards meeting G20 commitments on an international basis.”  (more…)

Robert P. Bartlett’s Credit Risk Models

By Sarah G. Nowland, J.D. Candidate 2014 | Posted on

Recently, Robert P.  Bartlett’s article Making Banks Transparent, 65 Vand. L. Rev. 293-386 (2012), was included in this year’s list of the Ten Best Corporate and Securities Articles.  The article is a self-proclaimed “thought experiment” that uses two case studies to suggest that more specific, limited credit risk models can be used to increase bank transparency.  According to Bartlett, increased bank transparency will help financial institutions avoid crises like the subprime mortgage crisis, by allowing market participants to “more effectively monitor and price the risks embedded in particular institutions.”*

(more…)

The “Franken Amendment” Receives New Life; Plan Calls for SEC to Promulgate New Rules for Credit Rating Agencies

By Luke Burton, J.D. Candidate 2015 | Posted on

Senators Al Franken (D-MN) and Roger Wicker (R-MS) have renewed the call for the SEC to regulate how credit-rating agencies generate revenue. Eight of the nine registered credit-rating agencies employ what is known as the “issuer-pays” model in which ratings agencies receive “their principal revenue stream from issuers whose products they rate.” This model has been blamed for inflating the value of financial products, particularly mortgage-backed securities, and thus misleading investors and contributing to the 2007-2009 financial crisis. The senators want to prevent future manipulation by empowering the SEC to better regulate these credit-rating agencies’ revenue generating systems.

(more…)

BHCs Instructed to Conduct First Round of Mid-Cycle Stress Tests

By Sarah G. Nowland, J.D. Candidate 2014 | Posted on

This month the Federal Reserve instructed 18 Bank Holding Companies (BHCs) to conduct their first biannual Mid-Cycle Stress Test in compliance with the Dodd-Frank Act.  While the Federal Reserve has conducted its own stress tests since 2009, this is the first time firms will conduct the test based on their “own processes and analyses.” (more…)

Firm Advice: Implementing Dodd-Frank

By Joseph Santiesteban, J.D. Candidate 2014 | Posted on

The comment period recently expired on the Federal Reserve’s proposal to require foreign banking organizations with at least $50 billion in global assets and $10 billion in U.S assets to form an intermediate holding company for most of their U.S. assets.  The proposal is part of the Board’s implementation of Sections 165 and 166 of the Dodd-Frank Act. In a recent Client Alert, Gibson Dunn advises that “the IHC requirement likely exceeds the Board’s legal authority in implementing Sections 165 and 166 of Dodd-Frank, has the tendency to increase, rather than reduce, financial instability in the United States and globally, threatens other adverse effects, and does not effectively respond to the developments that the Board perceives in the U.S. operations of FBOs and in international banking regulation generally.” Gibson Dunn explains why here.

On April 10th, the White House released its proposed budget, which contained significant new tax proposals. While often general, the budget laid out specific proposals for: 1) the Buffet Rule, 2) marking to market of derivatives, and 3) alternative treatment for debt purchased on the secondary market. Skadden’s recent Client Alert explains the various proposals and both their foreign and domestic tax implications.

Federal Reserve FBO Proposal: Will Comments on the Intermediate Holding Company Requirement Be Heeded?

By Gibson, Dunn & Crutcher LLP | Posted on

[Editor’s Note:  The following post is a Gibson, Dunn & Crutcher LLP Publication, authored by its Financial Institutions Practice Group.]

The comment period has now closed on the controversial proposed rule (FBO Proposal) of the Board of Governors of the Federal Reserve System (Board) implementing Sections 165 and 166 of the Dodd-Frank Act (Dodd-Frank) for foreign banking organizations (FBOs) and foreign nonbank financial companies supervised by the Board.  If the FBO Proposal becomes final in the manner proposed, it will mark a sea change in the regulation of the U.S. operations of FBOs, by requiring FBOs with $50 billion or more in total global consolidated assets and $10 billion or more in total U.S. nonbranch assets to form an intermediate holding company (IHC) for almost all of their U.S. subsidiaries.  In our view, the IHC requirement likely exceeds the Board’s legal authority in implementing Sections 165 and 166 of Dodd-Frank, has the tendency to increase, rather than reduce, financial instability in the United States and globally, threatens other adverse effects, and does not effectively respond to the developments that the Board perceives in the U.S. operations of FBOs and in international banking regulation generally.

(more…)