Supreme Court Finds Bankruptcy Code Abrogates Tribal Sovereign Immunity
Sheppard Mullin | Finance & Bankruptcy Law Blog
by Christine Swanick
1y ago
The U.S. Supreme Court ruled on Thursday that because Indian tribes are indisputably governments, the Bankruptcy Code unmistakably abrogates their sovereign immunity to bankruptcy court proceedings. In an 8-1 decision, the Court found that when Congress abrogates tribal sovereign immunity, it must do so through a clear statement of congressional intent. Lac du Flambeau Band of Lake Superior Chippewa Indians, et al. v. Coughlin, Case No. 22-227, slip op. at 4 (June 15, 2023) (“Coughlin”). While this is a demanding standard, the Court held that the rule is not a “magic-words” requirement. I ..read more
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SEC Off-Channel Communications Sweep
Sheppard Mullin | Finance & Bankruptcy Law Blog
by Kate Rumsey, Christopher Bosch and Michael Gilbert
1y ago
Over the last several years, the Securities and Exchange Commission (the “SEC”) and the Commodities Futures Trading Commission (“CFTC”) have been laser-focused on the use of so called “off-channel communications” in the financial services industry. On the theory that employees’ use of personal devices to communicate about business matters violates the “books and records” rules as these communications are not saved in company systems, regulators have conducted intrusive and extensive investigations requiring employees to turn over their personal devices for review. SEC Chairperson Gary Gensler ..read more
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Proposed “Made Available to Trade” Determination for SOFR and SONIA Swaps
Sheppard Mullin | Finance & Bankruptcy Law Blog
by Aaron Levy
1y ago
On April 12, 2023, Tradeweb’s Swap Execution Facility, TW SEF LLC, filed a self-certification[1] for certain overnight index swaps (OIS)[2] referencing USD Secured Overnight Financing Rate (“SOFR”) or GBP Sterling Overnight Index Average (“SONIA”) to be “made available to trade” (“MAT”) on exchange. If the CFTC approves (or declines to reject) Tradeweb’s MAT determination, effective June 1, 2023, certain OIS referencing SOFR and SONIA will be deemed “made available to trade” and, beginning on June 26, 2023 (i.e., the compliance date), will be required to be executed on a swap execution fa ..read more
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SEC’s Proposed Conflicts of Interest Rule May Impede Hedging
Sheppard Mullin | Finance & Bankruptcy Law Blog
by Aaron Levy
1y ago
Critics are warning that the SEC’s recently proposed rule (the “Proposed Rule”) prohibiting conflicts of interest in asset-backed securities (ABS) transactions may impede the ability of financial institutions, broker-dealers and others to enter into interest rate hedges and other risk-mitigating transactions. The Proposed Rule, issued in January, resurrects a prior 2011 SEC proposal that lay dormant for over a decade after facing substantial pushback from industry participants. The re-proposal has revived this controversy, with critics arguing it is overly broad in scope and may create uninten ..read more
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Synthetic USD LIBOR
Sheppard Mullin | Finance & Bankruptcy Law Blog
by Aaron Levy, Kevin Ryan and Michael O'Brien
1y ago
As market participants prepare to submit comments on the recent proposal of the UK’s Financial Conduct Authority (the “FCA”) (available here) to require the temporary publication of a “synthetic” 1-, 3- and 6-month USD LIBOR, some have voiced concern that such a compelled publication of a synthetic USD LIBOR could precipitate a wave of litigation over whether certain U.S. law-governed contracts will be able to fall back to contractually agreed alternative rates in June 2023. Although the Federal Reserve Board’s recent regulations implementing the LIBOR Act (available here) (the “FRB regulation ..read more
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More Trouble Ahead for the Mortgage Industry If Ginnie Mae’s Risk-Based Capital Requirements Take Effect
Sheppard Mullin | Finance & Bankruptcy Law Blog
by Colleen McDonald
1y ago
The new Ginnie Mae issuer financial requirements, first published on August 17, 2022 in APM 22-09 by joint announcement with the Federal Housing Finance Agency[1], are scheduled to take effect in two parts beginning September 30, 2023*. See All Participant Memorandum (APM) (ginniemae.gov) and All Participant Memorandum (APM) (ginniemae.gov). Critics of the new financial requirements say they are badly flawed and ill-advised. 1. Revised Net Worth Requirements Effective September 30, 2023, the minimum Net Worth requirement for all institutions seeking approval as Ginnie Mae single-family Is ..read more
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CFTC Amends Clearing Requirements
Sheppard Mullin | Finance & Bankruptcy Law Blog
by Aaron Levy
1y ago
On August 12, 2022, the CFTC issued a final rule modifying its clearing requirement for interest rate swaps (“IRS”). The final rule updates the types of IRS required to be submitted to a registered derivatives clearing organization (“DCO”) for mandatory clearing by: eliminating the requirements to clear IRS referencing LIBOR and certain other interbank offered rates (“IBORs”); and introducing, in their place, new requirements to clear IRS referencing the relevant replacement risk-free rates, such as the Secured Overnight Financing Rate (“SOFR”) in the case of USD LIBOR. CFTC Chairman Rostin ..read more
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California Approves Commercial Financing Disclosure Regulations
Sheppard Mullin | Finance & Bankruptcy Law Blog
by Moorari Shah and A.J. Dhaliwal
2y ago
On June 9, the California Office of Administrative Law (OAL) approved the Department of Financial Protection and Innovation’s (DFPI) proposed commercial financing disclosure regulations issued pursuant to SB 1235. The regulations will become effective on December 9, 2022, and the final regulatory text can be found here.  Putting it Into Practice: Impacted companies offering should note that the final regulations do not provide a model disclosure form but provide fairly prescriptive rules regarding the content and format of the required disclosures. While similar regulations in New York ar ..read more
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FTC Captures $2.7 Million in Restitution from Small Business Financer
Sheppard Mullin | Finance & Bankruptcy Law Blog
by Moorari Shah, A.J. Dhaliwal and Katie Daw
2y ago
On June 2, the FTC was granted a federal court order permanently barring a merchant cash advance operation and its owner from engaging in further deceptive practices and granting restitution to the customers the company harmed. The defendants offered alternative small business financing by purportedly providing funds to businesses in exchange for a percentage of future revenue. According to the FTC, however, the defendants frequently deceived small businesses and their owners, lying about terms and fees for their financing. The websites falsely claimed that cash advanced required no ..read more
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The Role of the Independent Director in a Restructuring
Sheppard Mullin | Finance & Bankruptcy Law Blog
by Justin Bernbrock and Bryan Uelk
2y ago
The practice of appointing one or more independent directors to the boards of distressed companies has not only proliferated in recent years, but has become the subject of increasing controversy. In this episode of the Restructure THIS! podcast, John Dubel discusses, among other things, the proper role of an independent director in a restructuring and weighs in on whether he believes the current independent director framework in chapter 11 is broken. In doing so, John addresses some of the most significant criticisms that have been levied against independent directors, including that independe ..read more
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