Finance

Private Equity Giant Blackstone Agrees to $85 Million Settlement

By Christopher Hammond, J.D. Candidate 2015 | Posted on

As the real estate market was turning sour in 2007, Blackstone Group LP was preparing to go public.  Timing was not quite perfect, however, as the world’s largest private equity firm happened to be heavily invested in property and other particularly vulnerable holdings.  While Blackstone’s IPO launched at $31 per share, market troubles and the firm’s exposure led to sharp declines within the next year–in 2008, its shares were trading at less than one-quarter of that price.  Litigation ensued, with some investors claiming that Blackstone’s executives had not properly disclosed the declining values of some of its assets during the IPO process.

After five years of litigation, the parties have reached a settlement.  A U.S. federal judge, sitting in Manhattan, must still approve of the $85 million agreement.  For more detailed coverage of the case and its developments, see Businessweek and Reuters.

SEC Adopts Tighter Regulations for Brokerage Firms

By James Kollar | Posted on

Recently, the SEC announced the adoption of new rules to protect clients with cash or securities at brokerage firms by requiring more disclosure and safeguards from securities brokers.

The new measures, which were approved in a split 3-2 vote by the commission, are part of regulators’ ongoing efforts to strengthen custody rules and prevent future fraud in the wake of Bernard Madoff’s long-running Ponzi scheme. (more…)

Problems With CFTC Cited at Re-Authorization Hearing

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

Yesterday a hearing was held to determine whether the House and Senate Agriculture committees will re-authorize the Commodity Futures Trading Commission (CFTC).  The hearing is one in a series of reauthorization hearings scheduled to occur every five years.  The biggest complaint is that the CFTC is behind schedule on implementing Dodd-Frank rules.  Specifically, commissioners cited problems with the issuance of no-action letters and the confusion surrounding swap dealer definitions.  (more…)

FDIC Approves Regulatory Capital Interim Final Rule

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

This month the FDIC Board of Directors approved the Regulatory Capital Interim Final Rule.  The final rule implements a revised definition of regulatory capital, a new common equity tier 1 minimum capital requirement, a higher minimum tier 1 capital requirement, and, for FDIC-supervised institutions subject to the advanced approaches risk-based capital rules, a supplementary leverage ratio that incorporates a broader set of exposures in the denominator.  It goes into effect January 1, 20104.  (more…)

SEC Announces New Enforcement Initiatives

By Arnold & Porter LLP | Posted on

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

On July 2, 2013, the Securities and Exchange Commission (SEC) announced three new enforcement initiatives: the Financial Reporting and Audit Task Force, the Microcap Fraud Task Force, and the Center for Risk and Quantitative Analytics. According to the SEC’s announcement, these initiatives are an effort to “build on its Division of Enforcement’s ongoing efforts to concentrate resources on high-risk areas of the market and bring cutting-edge technology and analytical capacity to bear in its investigations.” (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…)

Sallie Mae to Split into Two Companies

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

Sallie Mae recently announced that it will split into two companies: one to handle the servicing of federal student loans and the other to handle the origination of private student loans. Each company will be publicly traded and the split is expected to be complete within 12 months.

Currently, the company that will service federal student loans will control the majority of Sallie Mae’s pre-split assets. However, Sallie Mae’s split sends strong signals that the lending giant is most interested in the future market for private student loans. (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…)

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…)