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Fed Ends QE3
On October 29, the FOMC released its policy statement announcing an end to the Fed’s mortgage and treasury bond purchase program used to boost the economy. Quantitative Easing 3 (QE3) was the third in a series of subsequent monetary policy tools used to spur investing and spending in part by keeping long-term interest rates low. The end of QE3 marks a significant milestone in the post-crisis era. Regarding the end of QE3, the FOMC noted that it had seen “a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program. Moreover, the Committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability. Accordingly, the Committee decided to conclude its asset purchase program this month.”
CFTC Holds Open Meeting to "Fine-Tune" Derivatives Rules
On October 27, the CFTC announced that it will hold an open meeting on November 3 to clarify: (i) when residual interest must be posted by futures merchants; (ii) record keeping requirements of commodity interest and related cash or forward transactions; and (iii) the interpretation of when an agreement, contract, or transaction that contains embedded volumetric optionality falls outside the exception of being considered a swap. The November 3 meeting will be held at the CFTC headquarters in Washington, DC and will be available via webcast or conference call.
Fed Issues Final Rule Affecting Financial Market Utilities, Updates Policy on Payment System Risk
On October 28, the Federal Reserve announced its final rule to amend Regulation HH, standards for financial market utilities (FMUs) that have been designated as systemically important by the FSOC. The new rule will implement a common set of risk-management standards for all designated FMUs and revise certain definitions. Further, the Fed also announced final revisions to part 1 of its Federal Reserve Policy on Payment System Risk. The final rule and revisions to the policy are based on the Principles for Financial Market Infrastructures, which were developed jointly by the Committee on Payment and Settlement Systems and the International Organization of Securities Commissions. Specifically, the amendments and revisions will establish (i) separate standards to address credit risk and liquidity risk; (ii) new plans for recovery and orderly wind-down; (iii) new standards on general business risk and on tiered participation arrangements; and (iv) increased requirements on transparency and disclosure. The final rule will be effective on December 31, 2014. FMUs have until December 31, 2015 to comply with specific additional requirements set forth in the rule.
FINRA Announces Director Of Dispute Resolution
On October 30, FINRA announced that, effective December 1, Richard Berry will assume the positions of Executive Vice President and Director of Dispute Resolution. FINRA Dispute Resolution is the arbitration and mediation process between two or more parties, most notably investors. Currently, Mr. Berry is the Senior Vice President and oversees four regional Dispute Resolution offices in New York, Boca Raton, Chicago, and Los Angeles. Mr. Berry will replace Linda Fienberg, who is scheduled to retire on November 1. Mr. Berry will report directly to FINRA’s chairman and CEO, Richard Ketchum.
SEC Promotes Agency Official to Lead Regional Office Investment Adviser/Investment Company Exam Program
On October 28, the SEC announced Steven Levine as the Associate Director for the Investment Adviser/Investment Company examination program in its Chicago office. Levine, who joined the agency in 2010, had served as one of its two acting Associate Directors since March 2013. Levine will oversee the IA/IC exam program spanning nine Midwestern states, including a staff of approximately 65 examiner, accountants, and attorneys.
FCC Joins Global Privacy Enforcement Network
On October 28, amid growing threats to consumer privacy, the FCC announced that it has joined the Global Privacy Enforcement Network (GPEN), an international group of privacy regulators and enforcers. The move will allow the FCC to more easily collect and share data among approximately 50 privacy and data protection authorities from around the world. The FCC joins the FTC as the only two agencies representing the United States in cross-border GPEN proceedings.
Ohio Appeals Court Rules Documents Flawed, Reverses Previous Foreclosure Judgment
On October 22, the Ninth District Court of Appeals reversed a summary judgment decision allowing a trust unit of a bank to foreclose on a home. In this case, the loan servicers were unable to prove who held the promissory note when the trust unit requested a foreclosure order from the trial court. Employees at both servicers failed to attach records relied upon in their respective affidavits, but rather provided copies of the promissory note, mortgage, and the assignment of the mortgage. The Court held that the copies “do not establish when or if the Bank came into possession of the Note or that the Bank was in possession of the Note at the time of the filing of the complaint.” Deutsche Bank Natl. Trust Co. v. Dvorak, 2014-Ohio-4652 29, Ohio. Ct. App., 27120 (Oct.22, 2014)
Court Orders Company to Comply with Rule 34
On October 16, a California district court issued a declaratory judgment ordering a company to comply with Rule 34 as cited in the Federal Rules of Civil Procedure. Rule 34 has two specific and separate requirements: (i) “[a] party must produce documents as they are kept in the ordinary course of business or must organize and label them to correspond to the categories in the request;” and (ii) [if] a request does not specify a form for producing electronically stored information (ESI), a party must produce it in a form in which it is ordinarily maintained or in a reasonably usable forms.” In this case, the defendant served initial document requests to the company. The parties agreed to meet and discussed about how the company would produce the requested documents. Thereafter, the company produced 41,000 pages of ESI consisting of flash drive and email. The drive and email contained no custodial index, table, or categories – just all folders of files. The Court ruled that, although the company satisfied with the first requirement of Rule 34, the company failed to adhere to the second requirement because the company must (i) either organize and label each document it has produced or it shall provide custodial and other organizational information along the lines outlined above and (2) produce load files for its production containing searchable text and metadata. Venture Corp. v. Barrett, 5:13-cv-03384-PSG, WL 5305575 (N.D. Cal. Oct.16, 2014)
New York Appeals Court Clarifies Law on Out-of-State Affidavits
Recently, the New York Appellate Division held an affidavit supporting an Oklahoma bank’s motion to foreclose a New York mortgage conformed to New York statutory requirements. An affidavit acknowledged out of state must be accompanied by a certificate of conformity under N.Y. Civil Practice Law and Rules §2309(c), providing that an oath taken outside New York is treated as if taken in New York if accompanied by a certificate required to entitle a deed to be recorded in New York. Oaths acknowledged outside New York by non-New York notaries require a certificate of conformity in substantially the form set out in Real Property Law §309-b. Here, an affidavit of the holder’s senior foreclosure litigation specialist established the mortgage, the default and assignment of the mortgage. It was accompanied by a “Uniform, All Purpose Certificate of Acknowledgment” which substantially conformed to Real Property Law §309-b. The borrowers did not oppose the motion to foreclose; the holder was therefore entitled to judgment. Midfirst Bank v. Agho, 991 N.Y.S.2d 623 (Aug. 13, 2014).
Eleventh Circuit Vacates Dismissal, Rules Bank Officers Subject To Negligence Claims Under Georgia Law
On October 24, based on the Georgia Supreme Court’s response to the federal appellate court’s certified questions, the United States Court of Appeals for the Eleventh Circuit issued a per curiam opinion overturning a district court’s order to dismiss a lawsuit under Georgia’s business judgment rule. In this case, the court addressed whether bank directors and officers of failed banking institutions could be held liable under the state’s law for claims of ordinary negligence and breach of fiduciary duty based on ordinary negligence. In light of the responses from the Georgia Supreme Court, the Eleventh Circuit noted, “a bank director or officer may violate the standard of care established by O.C.G.A. § 7–1–490, even where he acts in good faith, where, with respect to the process by which he makes decisions, he fails to exercise the diligence, care, and skill of ‘ordinarily prudent men [acting] under similar circumstances in like positions.’” The case was remanded back to the district court for further proceedings. FDIC v. Skow, No. 12-15878, WL 5394321 (11th Cir. Oct. 24, 2014)