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Financial Services Law Insights and Observations


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  • Oregon amends money transmission law with respect to a required security device

    On January 9, the State of Oregon enacted a new bill on money transmission licensing, specifically stating that “each license application shall be accompanied by a security device in the amount of $25,000.” A security device is defined by Oregon law as a surety bond or an irrevocable letter of credit. If an applicant engages in business at more than one location, the security device will increase by $5,000 per location, with a maximum of $150,000. The bill further states that in place of security devices, an applicant could deposit securities such as interest-bearing stocks, bonds, notes, etc., and be held under the same obligations as the security device. The bill concludes that the security device will remain in effect until its cancellation and remain in place no longer than five years following a licensee ceasing its money transmission operations in Oregon. In the event of the bankruptcy of the licensee, the security device will be held in trust for the benefit of purchasers and holders of the licensee’s outstanding payment instruments.

    Licensing Oregon Bond Securities

  • European banks resolve Mozambican bond offerings matter

    Financial Crimes

    On October 19, multiple agencies—the DOJ, SEC and UK’s FCA—announced a coordinated resolution with a European bank related to debt offerings for entities in Mozambique. (See here and here.) In total, fines to U.S. and U.K. authorities reached almost $475 million, and the institution also agreed to forgive $200 million of the debt.

    In a related action, a London-based subsidiary of a Russian bank (bank) separately agreed to pay over $6 million to settle SEC charges related to its role in a second 2016 bond offering. According to the SEC’s order, the second offering as structured by the bank and reespondent permitted investors “to exchange their loan participation notes (LPNs) for a direct sovereign bond issued by the Republic of Mozambique” in an earlier bond offering. However, the SEC alleged that the offering materials distributed and marketed by the respondent and bank “failed to disclose the full nature of Mozambique’s indebtedness and, relatedly, its risk of default on the notes.” Furthermore, the SEC alleged that proceeds from the financing from the respondent and bank were supposed to be used exclusively for maritime projects, but in reality, without the bank’s knowledge, only a portion of the loan proceeds was applied towards maritime projects while the rest was diverted to pay kickbacks and make improper payments to Mozambican government officials. Mozambique later defaulted on the financings after the full extent of “secret” debt was revealed.

    Financial Crimes Securities DOJ SEC Of Interest to Non-US Persons Bond Fraud FCPA UK Enforcement

  • Fed winding down Secondary Market Corporate Credit Facility

    Federal Issues

    On June 2, the Federal Reserve Board announced plans to wind down the portfolio of the Secondary Market Corporate Credit Facility (SMCCF), a temporary emergency lending facility that was established and provided by the Treasury Department under the CARES Act, which closed in December 2020. The SMCCF (covered by InfoBytes here) played a role in restoring market functioning, supported the availability of credit for certain employers, and assisted employment numbers during the Covid-19 pandemic. According to the announcement, sales from the SMCCF portfolio will be “gradual and orderly,” aiming to decrease the likelihood of  “any adverse impact on market functioning by taking into account daily liquidity and trading conditions for exchange traded funds and corporate bonds.” The announcement also indicates that the Federal Reserve Bank of New York, which manages the operations of the SMCCF, will release more details before sales begin.

    Federal Issues Covid-19 Federal Reserve Liquidity Bond Department of Treasury CARES Act Bank Regulatory

  • Federal Reserve Board’s Secondary Market Corporate Credit Facility to purchase corporate bonds

    Federal Issues

    On June 15, the Federal Reserve Board announced that the Secondary Market Corporate Credit Facility (SMCCF) (previously covered here) will begin buying a diversified portfolio of corporate bonds to support market liquidity and the availability of credit for large employers. The intent is to create a bond portfolio that tracks the composition of the broad, diverse universe of secondary market bonds that are eligible for the program. The announcement included a revised term sheet and updated FAQs for the SMCCF.   

    Federal Issues Covid-19 Federal Reserve Liquidity Bond

  • Louisiana Office of Financial Institutions updates non-depository emergency declarations

    State Issues

    On June 5, the Louisiana Office of Financial Institutions updated its non-depository 2020 Covid-19 emergency declarations to extend earlier guidance regarding closure of licensed locations and temporary location changes for residential mortgage lenders, brokers and originatorscheck casherslenders or brokers licensed pursuant to the Louisiana Consumer Credit Law and the Louisiana Deferred Presentment and Small Loan Act, pawnbrokers, and repossession agents and bond for deed escrow agents. The original emergency declarations were previously covered here, here, here, here, here, here, and here. The declarations extend the guidance until June 26, 2020, unless terminated sooner.

    State Issues Covid-19 Mortgage Lenders Mortgages Broker-Dealer Mortgage Origination Check Cashing Lending Repossession Bond Escrow

  • California Department of Business Oversight issues guidance to permit licensees to work from home

    State Issues

    On March 22, the California Department of Business Oversight (Department) issued guidance to escrow agents, finance lenders and servicers, student loan servicers, residential mortgage lenders and servicers, and mortgage loan originators in light of Covid-19 permitting employees of licensees to conduct activities from home that normally would require a branch license, provided that appropriate measures are taken to protect consumers and their data. Further, the Department will not criticize student loan servicers or licensees sponsoring MLOs who permit their respective employees to work from home, provided that certain data security and other conditions are met. Escrow Law licensees may also follow this guidance, however the licensees must still comply with the Fidelity Corporation or the licensee’s surety bond. Additionally, licensees are encouraged to assist consumers including through, among other things, offering payment accommodations.

    State Issues California Licensing Escrow Student Loan Servicer Mortgage Lenders Covid-19 MLO Bond

  • Louisiana Commissioner of Financial Institutions advises non-depository institutions on temporary closures

    State Issues

    On March 18, Louisiana’s Commissioner of Financial Institutions released emergency advisories for non-depository institutions, specifically repossession agents and bond for deed escrow agents, check cashers, pawnbrokers, licensed consumer lenders/brokers, and residential mortgage lenders. The advisories authorized the temporary closure or relocations of licensed locations and waived the standard 30-day notice requirement for such closures. Licensees should notify the Office of Financial Institutions as soon as possible regarding any temporary closures or relocations and may submit requests for waiver of the standard change of location fee by email. Unless otherwise instructed, temporary location changes should not be submitted through NMLS.  In addition, the advisory for residential mortgage lenders confirms that licensed MLOs may work from their homes.

    State Issues Louisiana Non-Depository Institution Check Cashing Repossession Bond Covid-19

  • International bank must maintain $500 million bond securing $806 million RMBS judgment


    On July 5, the U.S. District Court for the Southern District of New York issued a memorandum opinion and order stating that an international bank must maintain the $500 million bond it had filed in 2015 to secure $806 million in damages owed to the Federal Housing Finance Agency for selling allegedly faulty residential mortgage-backed securities to Fannie Mae and Freddie Mac. The court had stayed execution of the judgment pending appeal, and the stay expired on July 5, following the Supreme Court’s denial without comment of the bank’s petition for writ of certiorari. (See previous InfoBytes coverage here.) According to the district court opinion and order, the bank maintained that the stay order required the bond to remain in effect only through July 5, even though the bank was not required to pay the final judgment until July 20. The court disagreed, explaining that a “more natural reading of the [s]tay [o]rder and the [b]ond together is that the [b]ond must remain in place until two conditions are met: (1) the stay of execution ends and (2) the [f]inal [j]udgment is satisfied. Condition 1 has now been met, but not condition 2.” The court added that the bank is free to satisfy the final judgment prior to its July 20 due date, at which point the bond could be dissolved prematurely.

    Courts FHFA RMBS Bond U.S. Supreme Court Fannie Mae Freddie Mac

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