Financial Services Update | Winston & Strawn
••••  Volume 9, no. 46 December 15, 2014
The Financial Services Update will be taking a three week break due to the holidays. We will resume our normal publication schedule on January 12, 2015.
Insights from Winston & Strawn
It seems that it is quite rare to be able to report an absolutely positive financial services regulatory development, but we can do so this week.

Last Wednesday, December 11, 2014, as Congress was rushing to finish business so that it could adjourn for the holidays, both the Senate and the House passed S. 2270, a bipartisan bill to amend the so-called “Collins Amendment” in the Dodd-Frank Act. The Collins Amendment (Section 171 of Dodd-Frank) requires the federal banking agencies to establish minimum capital requirements on a consolidated basis for depository institutions and their holding companies not less than generally applicable capital requirements.
While the activities of companies that own commercial banks are tightly proscribed by the Bank Holding Company Act, those activities in which companies that historically have owned savings banks are not similarly limited, and, thus, there exist savings and loan holding companies (“SLHCs”) engaged in a wide range of activities, including manufacturing, insurance, and even the ownership of retail grocery stores. Insurance companies, of course, are subject to stringent capital requirements imposed by state insurance regulators and are also subject to what is called Statutory Accounting Principles (“SAP”), instead of GAAP, which is generally applicable to commercial banks and their holding companies. It is said that SAP is more conservative than GAAP. Insurance companies that are publicly-held utilize GAAP to comply with requirements of the Securities and Exchange Commission, but many major insurance companies are not publicly-held, but are structured as mutual companies; thus, they do not follow GAAP, following SAP instead.

Even though the Collins Amendment merely provides that minimum capital requirements the Federal Reserve Board establishes for SLHCs must not be less than generally applicable requirements and even though it is widely believed that insurance capital requirements would not be less than bank holding company capital requirements, the Federal Reserve Board interprets the Collins Amendment as requiring it to impose bank-like capital requirements on insurance companies that are SLHCs. It originally formally proposed applying bank-like Basel III capital requirements to such SLHCs, but, in adopting the final rule, deferred doing so and recently commenced a so-called “Quantitative Impact Study” of doing so. Many insurance company SLHCs are voluntarily participating in that study.

Now, the good news.

The S. R. 2270 bill was sponsored by Senator Susan Collins, the “Collins” of “Collins Amendment” fame. Having passed both houses of Congress last week on a bipartisan basis, the bill, which now is on President Obama’s desk for signature, clarifies that the Federal Reserve Board may lawfully apply insurance capital standards to insurance company SLHCs. The bill also prohibits the Board from imposing GAAP on such insurance company SLHCs.

Thus, insurance companies that are SLHCs should continue to be subject to insurance-centric rather than bank-centric capital standards. A “sword of Damocles” that has hung over the heads of insurance company SLHCs for four and a half years has been sheathed, and common sense has returned, at least for a while to a narrow segment of financial services regulation.
Jerry Loeser
Feature: Anti-Money Laundering Developments
The Federal Financial Institutions Examination Council (“FFIEC”) recently released the revised “Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual.” The revised Manual provides current guidance on risk-based policies, procedures, and processes for banking organizations to comply with the BSA and safeguard operations from money laundering and terrorist financing. The 2014 Manual also clarifies supervisory expectations and regulatory changes since the last update of the manual in 2010. An Office of the Comptroller of the Currency (“OCC”) Bulletin notes the areas where the revised Manual contains significant revisions.

An interagency statement attached to the OCC Bulletin discusses the revisions, which include clarifications regarding the monitoring and reporting obligations under the BSA for international transportation of currency or monetary instruments; additional guidance in the section on risk mitigation for correspondent accounts; and an expanded discussion of risk factors and risk mitigation related to prepaid access.

Separately, the OCC issued a Bulletin on the Comptroller’s “Statement on Risk Management Associated With Money Services Businesses.” The Bulletin notes that money services businesses (“MSBs”) present varying degrees of risk to an institution. “Not all MSBs should be considered high risk…. [T]he agency expects OCC-regulated banks to assess the risks posed by each MSB customer on a case-by-case basis and to implement appropriate controls to manage the relationship commensurate with the risks associated with each customer.”

Last month, David S. Cohen, Treasury Department Under Secretary for Terrorism and Financial Intelligence, discussed recommendations for improving the AML regime. The existing statutory safe harbor from civil liability for filing a suspicious activity report (“SAR”) should be expanded so that financial institutions and their officers may enjoy the protection of the SAR safe harbor without having to demonstrate that a SAR was filed in good faith. He advocated that the Bank Secrecy Act should also be amended to clarify that financial institutions and their officers may enjoy the protection of the SAR safe harbor without having to demonstrate that a SAR was filed in good faith. Financial institutions should also be allowed to share information with one another on illicit activity. Cohen further noted the efforts being made to extend AML program and suspicious activity reporting requirements to investment advisors, retail foreign exchange dealers and commodity pool operators.
Banking Agency Developments
OCC Updates Accounting Guidance
On December 12th, the Office of the Comptroller of the Currency (“OCC”) released an update to the Bank Accounting Advisory Series (“BAAS”). The BAAS covers a variety of topics and promotes consistent application of accounting standards among national banks and federal savings associations. The update includes recent answers to frequently asked questions from the industry and examiners covering areas such as acquired loans, allowance for loan and lease losses, other real estate owned, and other borrowings. OCC Press Release.
 
 
Federal Reserve Board Proposes Capital Surcharge for Largest Banks
On December 9th, the Federal Reserve Board published a proposed rule that would establish a methodology to identify whether a U.S. bank holding company is a global systemically important banking organization (“GSIB”). A firm identified as a GSIB would be subject to a risk-based capital surcharge that is calibrated based on its systemic risk profile. Failure to maintain the capital surcharge would subject the GSIB to restrictions on capital distributions and discretionary bonus payments. The proposal would be phased in beginning on January 1, 2016, becoming fully effective on January 1, 2019. Comments should be submitted on or before February 28, 2015. Federal Reserve Board Press Release.
 
 
Federal Reserve Board Proposes Capital Surcharge for Largest Banks
On December 9th, the Federal Reserve Board published a proposed rule that would establish a methodology to identify whether a U.S. bank holding company is a global systemically important banking organization (“GSIB”). A firm identified as a GSIB would be subject to a risk-based capital surcharge that is calibrated based on its systemic risk profile. Failure to maintain the capital surcharge would subject the GSIB to restrictions on capital distributions and discretionary bonus payments. The proposal would be phased in beginning on January 1, 2016, becoming fully effective on January 1, 2019. Comments should be submitted on or before February 28, 2015. Federal Reserve Board Press Release.
Treasury Department Developments
FBAR Filing Requirement
On December 10th, the Financial Crimes Enforcement Network extended to June 30, 2016, the deadline for filing certain Report of Foreign Bank and Financial Accounts. The extension was made in light of the ongoing consideration of questions regarding the filing requirement and its application to individuals with signature authority over but no financial interest in certain types of accounts. The extension applies to the reporting of signature authority held during the 2014 calendar year, as well as all reporting deadlines extended by previous Notices. FinCEN Notice 2014-1.
Securities and Exchange Commission
Guidance
Regulation AB
On December 9th, the SEC’s Division of Corporation Finance published revised Regulation AB Compliance and Disclosure Interpretations (“C&DIs”). The revised C&DIs replace the interpretations published in the Regulation AB Manual of Publicly Available Telephone Interpretations. The revisions appear in Section 200, Exchange Act Rules; Section 211, Form 10-K; Section 212, Form 10-D; Section 300, Item 100 of Regulation AB; Section 301, Item 1101 of Regulation AB; Section 308, Item 1108 of Regulation AB; Section 311, Item 111 of Regulation AB; Section 314, Item 1114 of Regulation AB; Section 322, Item 1122 of Regulation AB; and Section 323, Item 1123 General Guidance. Regulation AB C&DIs.
 
 
Other Developments
Agenda for Advisory Committee on Small and Emerging Companies
The SEC published the agenda for the December 17, 2014 meeting of its Advisory Committee on Small and Emerging Companies. The meeting will focus on the definition of “accredited investor”. SEC Press Release.
 
Whistleblower Amicus Brief
On December 11th, the SEC made available its amicus brief in Safarian v. American DG Energy, Inc., where the Third Circuit is considering whether the Dodd-Frank Act’s whistleblower protection provisions covers employees who do not report information to the Commission. Amicus Brief.
 
Chair White Outlines Asset Management Initiatives
On December 11th, SEC Chair Mary Jo White discussed the regulatory issues presented by the asset management industry and the Commission’s planned response. At her direction, the SEC staff has developed recommendations for three core initiatives. The first involves enhanced data reporting by both funds and advisors. The reporting and disclosure of fund investments in derivatives, the liquidity and valuation of their holdings, and securities lending practices should all be significantly enhanced.  Collecting more data on separately managed accounts is also needed. The second involves enhancing controls on risks related to portfolio composition. Liquidity management and the use of derivatives in mutual funds and ETFs are two key areas of focus by the staff. The staff is considering whether broad risk management programs should be required for mutual funds and ETFs to address the risks related to their liquidity and derivatives use, as well as measures to ensure the Commission’s comprehensive oversight of those programs.  The staff is also reviewing options for specific requirements, such as updated liquidity standards, disclosures of liquidity risks, or measures to appropriately limit the leverage created by a fund’s use of derivatives. A third focus of regulatory enhancements is on the impact on investors of a market stress event or when an investment adviser is no longer able to serve its clients. The staff is therefore developing a recommendation to require investment advisers to create transition plans to prepare for a major disruption in their business. The staff is also considering ways to implement the new requirements for annual stress testing by large investment advisers and large funds, as required by the Dodd-Frank Act. White Remarks.
 
Investment Management Director’s Top 10
On December 10th, Norm Champ, Director of the SEC’s Investment Management Division, listed the top 10 lessons learned and points to remember from 2014. Among the top 10 are the importance of risk monitoring, data collection and analysis, and that requests for exemptive relief can provide the Division with the opportunity to monitor industry trends and developments. Champ further highlighted the 2014 enforcement action against a portfolio manager who was banned for five years after misleading and obstructing his firm’s CCO. Champ Remarks.
 
Accounting Staff Speak at Annual Conference
On December 8th, 10 members from the SEC’s Office of the Chief Accountant spoke at the 2014 AICPA National Conference on Current SEC and PCAOB Developments. Chief Accountant James Schnurr discussed the convergence of GAAP and IFRS accounting standards. He hopes to commence discussions with the SEC Chair and the Commissioners in the near future about alternative ways in which IFRS might be made available for use by U.S. issuers. Schnurr Remarks. Julie A. Erhardt, Deputy Chief Accountant, described how the issues surrounding convergence differ from those being considered in 2004, when convergence was first discussed. She highlighted those differences with respect to investors, issuers, and securities regulators. Erhardt Remarks

The other speakers were:
  • Kevin M. Stout, Senior Associate Chief Accountant, who addressed internal control over financial reporting issues;
  • Hillary H. Salo, Professional Accounting Fellow, who addressed financial instrument accounting, particularly the impact of derivatives novation on hedge accounting and the allocation of proceeds when the fair value of a liability required to be measured at fair value exceeds the net proceeds for a hybrid instrument;
  • Dan Murdock, Deputy Chief Accountant, who addressed segment reporting;
  • Steve Mack, Professional Accounting Fellow, who addressed two revenue recognition issues: current accounting for presenting revenues on a gross or net basis and the new revenue recognition standard and what some consider to be a significant increase in the use of estimates and management judgments;
  • Carlton E. Tartar, Associate Chief Accountant, who addressed spinoff accounting, goodwill impairment testing dates, and the presentation of expenses that are contingent upon a business combination when pushdown financial statements are presented.;
  • Brian T. Croteau, Deputy Chief Accountant for the Professional Practice Group, who addressed auditor independence, the PCAOB, and internal control matters;
  • Christopher F. Rogers, Professional Accounting Fellow, who addressed consolidation; and
  • T. Kirk Crews, Professional Accounting Fellow, who addressed the statement of cash flows.
 
Staff Announcement
The SEC announced that Karol L.K. Pollock has been named the new leader of the examination program in the Los Angeles Regional Office.
Commodity Futures Trading Commission
CFTC Chair Discusses Cyber Security
On December 10th, Reuters summarized the expected testimony of CFTC Chair Timothy Massad before the Senate Agriculture Committee. In his prepared remarks, Massad said the agency’s inspections of exchanges and clearinghouses will include an examination of their cyber security measures. Cyber Testimony.
 
 
Agricultural Advisory Committee Meeting
On December 9th, the CFTC’s Agricultural Advisory Committee met. An archived webcast of the meeting along with the prepared text of opening statements and presentations are available on the meeting’s webpage.
 
 
Recently Published No-Action Letters
Last week, the CFTC published two no-action letters issued in November 2014. In CFTC Letter No. 14-145, the Division of Swap Dealer and Intermediary Oversight granted exemptive relief from the financial statement requirements of Commission regulations 4.22 and the disclosure requirements of Commission regulation 4.24(s) to the commodity pool operator (“CPO”) of an insurance-linked securitization vehicle (“ILS Vehicle”) with respect to the ILS Vehicle provided that the CPO satisfies certain conditions for relief relating to the management of the ILS Vehicle, the disclosure of additional information concerning the ILS Vehicle, and the calculation of the net asset value of the ILS Vehicle. In CFTC Letter No. 14-146, DSIO granted no action relief with respect to registration as a CPO for an entity acting as a directed trustee with respect to a commodity pool.
Federal Rules Effective Dates
December 2014 - February 2015
Consumer Financial Protection Bureau
Consumer Leasing (Regulation M). 79 FR 56482.
Truth in Lending (Regulation Z). 79 FR 56483.
Truth in Lending (Regulation Z) Annual Threshold Adjustments (CARD ACT, HOEPA and ATR/QM). 79 FR 48015.
Defining Larger Participants of the International Money Transfer Market. 79 FR 56631.
 
 
Federal Deposit Insurance Corporation
Assessments. 79 FR 70427.
Annual Stress Test. 79 FR 69365.
Regulatory Capital Rules: Regulatory Capital, Revisions to the Supplementary Leverage Ratio. 79 FR 57725.
 
 
Federal Housing Finance Agency
Procedures and General Definitions. 79 FR 64661.
 
 
Federal Housing Finance Board
Procedures and General Definitions. 79 FR 64661.
 
 
Federal Reserve System
Concentration Limits on Large Financial Companies. 79 FR 68095.
Truth in Lending (Regulation Z). 79 FR 56483.
Consumer Leasing (Regulation M). 79 FR 56482.
Regulatory Capital Rules: Regulatory Capital, Revisions to the Supplementary Leverage Ratio. 79 FR 57725.
Financial Market Utilities. 79 FR 65543.
Reserve Requirements of Depository Institutions. 79 FR 68349.
 
 
Office of the Comptroller of the Currency
Annual Stress Test-Schedule Shift and Adjustments to Regulatory Capital Projections. 79 FR 71630.
Regulatory Capital Rules: Regulatory Capital, Revisions to the Supplementary Leverage Ratio. 79 FR 57725.
 
 
Securities and Exchange Commission
Nationally Recognized Statistical Rating Organizations. 79 FR 55077.
[This rule is effective November 14, 2014; except the amendments to Sec. 240.17g-3(a)(7) and (b)(2) and Form NRSRO, which are effective on January 1, 2015; and the amendments to Sec. 240.17g-2(a)(9), (b)(13) through (15), Sec. 240.17g-5(a)(3)(iii)(E), (c)(6) through (8), Sec. 240.17g-7(a) and (b), and Form ABS-15G, which are effective June 15, 2015. The addition of Sec. Sec. 240.15Ga-2, 240.17g-8, 240.17g-9, 240.17g-10, and Form ABS Due Diligence-15E are effective June 15, 2015.]
Exchanges and Self-Regulatory Organizations
Financial Industry Regulatory Authority
T FINRA Rule Review
On December 9th, the Financial Industry Regulatory Authority issued two rule reviews which assessed the effectiveness and efficiency of FINRA's rules governing communications with the public and FINRA's rules governing gifts, gratuities and non-cash compensation. FINRA Press Release. On December 10th, Reuters described the reviews’ findings. Recommendations include revising the rules on gifts and non-cash compensation brokerages may give to employees and the rules on the use of social media. Recommendations
 
RACE Amendments Proposed
On December 5th, the SEC provided notice of the Financial Industry Regulatory Authority’s filing of a proposed amendment to the FINRA Rule 6700 Series (Trade Reporting and Compliance Engine (TRACE)) that would require members to identify transactions with non-member affiliates, and to change how FINRA disseminates a specific subset of these transactions. Comments should be submitted on or before January 2, 2015. SEC Release No. 34-73762.
 
 
Fixed Income Clearing Corporation
Change in Novation Time Proposed
On December 11th, the SEC provided notice of the Fixed Income Clearing Corporation’s filing of a proposal to move the time of novation applicable to certain transactions submitted to the Government Securities Division and Mortgage-Backed Securities Division to earlier in the clearing process in order to provide members with additional legal certainty that FICC will be their legal counterparty with respect to their guaranteed trades for purposes of members’ regulatory capital requirements. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of December 15. SEC Release No. 34-73805.
 
Amendments to Rules on Insolvency and Ceasing to Act Proposed
On December 8th, the SEC provided notice of the Fixed Income Clearing Corporation’s filing of proposed amendments to the rules of its the Government Securities Division and the rules of its Mortgage-Backed Securities Division concerning insolvency and ceasing to act. The amendments would simplify in certain respects FICC’s process in a cease to act situation and provide greater legal certainty for FICC and its members, particularly in an intra-day cease to act situation. Comments should be submitted on or before January 2, 2015. SEC Release No. 34-73787.
 
 
ICE
End-of-Day Revisions Approved
On December 8th, the SEC approved ICE Clear Credit’s proposed revisions to the ICC End-of-Day Price Discovery Policies and Procedures that incorporate enhancements to the price discovery process. SEC Release No. 34-73790.
 
 
International Swaps and Derivatives Association
ISDA derivatiViews
On December 10th, the International Swaps and Derivatives Association discussed its November, 2014 paper entitled “Principles on CCP Recovery”, which makes recommendations concerning the adequacy and structure of central counterparty (“CCP”) loss-absorbing resources and on CCP recovery and resolution. ISDA highlights the paper’s findings on the need for: more transparency regarding the risk management standards and methodologies used to size CCP loss-absorbing resources; standardized, mandatory stress tests; CCP “skin-in-the-game”; a plan in the event a CCP’s loss-absorbing resources are inadequate; and an effective default management process. derivatiViews.
 
 
Municipal Securities Rulemaking Board
MSRB Best Execution Proposal Approved
On December 5th, the SEC approved the Municipal Securities Rulemaking Board’s proposed rule changes which establish a requirement that brokers, dealers, and municipal securities dealers seek best execution of retail customer transactions in municipal securities. SEC Release No. 34-73764. See also MSRB Press Release (announcing SEC approval and setting a December 7, 2015 effective date)
 
 
NASDAQ OMX Group
Longer Period Designated to Consider New Solicitation Mechanism
On December 8th, the SEC designated January 29, 2015 as the date by which it will approve, disapprove, or institute disapproval proceedings regarding NASDAQ OMX PHLX’s proposed adoption of new Exchange Rule 1081, Solicitation Mechanism, that would introduce a new electronic solicitation mechanism pursuant to which a member could electronically submit all-or-none orders of 500 contracts or more (or, in the case of mini options, 5000 contracts or more). SEC Release No. 34-73791.
 
Directed Order Additions Proposed
On December 8th, the SEC provided notice of NASDAQ OMX BX’s filing of a proposal that would add definitions of “Directed Order” and “Directed Market Maker”, as well as provisions concerning the designation of an order as a Directed Order and DMM market making obligations. The proposal also revises priority rules to provide for a DMM participation entitlement. Finally, the rule makes certain clarifications to the text of rules governing Lead Market Makers. Comments should be submitted on or before January 2, 2015. SEC Release No. 34-73784.
 
 
NYSE
Amendment to Continued Listing Requirements Proposed
On December 11th, the SEC provided notice of the New York Stock Exchange’s filing of proposed amendments to its continued listing requirements in relation to the late filing of a company’s annual report with the SEC as set forth in Section 802.01E of the Exchange’s Listed Company Manual. As amended, the Late Filer Rule would (i) expand the rule to impose a maximum period within which a company must file a late quarterly report on Form 10-Q in order to maintain its listing and (ii) clarify the Exchange’s treatment of companies whose annual or quarterly reports are defective at the time of filing or become defective at some subsequent date. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of December 15. SEC Release No. 34-73821.
Judicial Developments
Swiss Investigating Magistrate Entitled to U.S. Documents
On December 12th, the Second Circuit addressed an issue of first impression for that court, whether 28 U.S.C. Section 1782, which authorizes federal courts to order document production for use in certain foreign proceedings, permits discovery for use in a criminal investigation conducted by a foreign investigating magistrate. A Swiss criminal complainant seeks the deposition transcript of the former chief risk officer of a fund which invested with Bernard Madoff. Although conducted in London, the deposition was part of a U.S. Madoff feeder fund case. Because the Court concluded that the Swiss investigating magistrate is a “foreign or international tribunal” for purposes of the statute, it affirms the district court’s discovery order. In re Application for an Order.
 
 
Second Circuit Adopts New Insider Trading Standard
On December 10th, the Second Circuit reversed the insider trading convictions of Todd Newman and Anthony Chiasson, portfolio managers at two different firms. Prosecutors alleged that Newman and Chiasson were downstream tippees in an insider trading scheme. A jury agreed and convicted the two men. But the Second Circuit did not, reversing the convictions and ordering the dismissal of the indictment. To sustain an insider trading conviction against a tippee, the Court held, the Government must prove beyond a reasonable doubt that:  (1) the corporate insider was entrusted with a fiduciary duty; (2) the corporate insider breached his fiduciary duty by (a) disclosing confidential information to a tippee (b) in exchange for a personal benefit; (3) the tippee knew of the tipper’s breach, that is, he knew the information was confidential and divulged for personal benefit; and (4) the tippee still used that information to trade in a security or tip another individual for personal benefit. Here, however, prosecutors presented no evidence that defendants knew they were trading on information obtained from insiders or knew that those insiders received a benefit in exchange for the disclosures. U.S. v. Newman and Chiasson.
 
 
Dodd-Frank Whistleblower Suit Must Be Arbitrated
On December 8th, the Third Circuit affirmed, on different grounds, the district court’s order dismissing plaintiff’s Dodd-Frank whistleblower retaliation lawsuit and compelling arbitration. Plaintiff alleged his employer violated the Dodd-Frank Act’s whistleblower protection provisions when it allegedly fired him for having reported a securities law violation. The employer sought to compel arbitration based on an arbitration provision present in the employment contract. Plaintiff claimed that an anti-arbitration provision present in the Dodd-Frank Act negated the employment contract’s arbitration requirement. The Third Circuit held that the Dodd-Frank Act’s anti-arbitration provision applied only to whistleblowers asserting claims under the Sarbanes-Oxley Act, the Commodity Exchange Act and the Consumer Financial Protection Act. The anti-arbitration provision did not apply to whistleblower claims brought under the Dodd-Frank Act. Khazin v. TD Ameritrade Holding Corp.
 
 
Stockbrokerage’s Ponzi Scheme Payments Protected by Bankruptcy Code
On December 8th, the Second Circuit affirmed the district court’s order dismissing the claims brought by the trustee for debtor Bernard L. Madoff Investment Securities (“BLMIS”) which sought to avoid fictitious profits paid by BLMIS to hundreds of customers over the life of the Madoff Ponzi scheme. The defendant customers moved to dismiss the trustee’s claims citing Section 546(e) of the Bankruptcy Code, which shields securities‐related payments made by a stockbroker. The trustee argued that Bankruptcy Code provision did not apply here because BLMIS never bought or sold securities and because the account documents between BLMIS and its customers did not describe a securities transaction. Rejecting that argument, the Second Circuit held whether BLMIS actually transacted in securities is not determinative of whether Section 546(e) applied. Section 546(e) only requires that a covered transfer from a stockbroker be broadly related to a “securities contract”, not that it be connected to an actual securities transaction. In re: Bernard L. Madoff Investment Securities, LLC.
Industry News
Dodd-Frank Expectations
On December 12th, Reuters discussed whether significant changes to the Dodd-Frank Act were likely in 2015. Expectations.
 
 
Securitization Framework
On December 11th, the Basel Committee on Banking Supervision issued revisions to the securitization framework to address a number of shortcomings in the Basel II securitization framework and to strengthen the capital standards for securitization exposures. The updated framework reduces reliance on external ratings and simplifies and limits the number of ratings approaches which may be used; adds risk drivers to each approach, particularly an explicit adjustment to take account of the maturity of a securitization's tranche; and changes the amount of regulatory capital banks must hold for exposures to securitizations. BIS Securitization Framework Press Release. The Basel Committee, jointly with the International Organization of Securities Commissions, also published a consultative document entitled “Criteria for identifying simple, transparent and comparable securitisations”. The criteria help identify securitization structures as well as assist in the due diligence evaluation of a securitization. Comments should be submitted on or before February 13, 2015. BIS Securitization Criteria Press Release.
 
 
Study Groups
On December 9th, Reuters described how banks have met, both formally and informally, in order to discuss how to present their stress test reports in light of the Federal Reserve Board’s failure to clarify its expectations for the reports. Study Groups.
 
 
Global Regulatory Approach
On December 9th, Reuters summarized the remarks of David Wright, Secretary General of the International Organization of Securities Commissions (“IOSCO”). According to Wright, the Financial Stability Board, of which the IOSCO is a member, is adopting a new approach to the regulation of investment funds. Instead of seeking to impose capital requirements or redemption limitations, global regulators are examining whether to base oversight on the possible risks posed by the funds’ activities. Asset Approach. In a related article, Reuters reported Wright also voiced the concern that limits on banks’ market-making activities may cause liquidity problems during times of market stress. Market Stress.
 
 
Banker Bonus Caps
On December 8th, Bloombergreported Thomas Hoenig, Vice Chair of the FDIC, said that regulators may seek to restrict the compensation paid to bank executives if other efforts to reform the industry are not adopted. Last Resort.
Winston & Strawn Publications
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