Michele Stocker Quoted by the Florida Record Regarding the case of Bartram v. U.S. Bank

Posted in Banks, Consumer Financial Services, Financial Services Litigation

Michele Stocker, Greenberg Traurig co-chair of the Consumer Financial Services Litigation Practice, was recently quoted by the Florida Record regarding  the ruling made in the case of Bartram v. U.S. Bank. She stated that “the Florida Supreme Court’s decision finally brings some clarity to the issue and will allow judges who have been reluctant to rule on foreclosure cases to move forward with ones that have been pending for years. Now everyone knows what is and isn’t permissible.”

She also indicated that she does not “think the increase will be that significant since the banks will continue to offer loss mitigation options to their customers. The bank’s efforts, coupled with the improving economy, will continue to limit the number of new filings.”

To learn more about this ruling, please read GT Alert “In Bartram, Florida Supreme Court Holds That Statute Of Limitations Does Not Bar The Filing Of A Second Mortgage Foreclosure Action” authored by Kimberly Mello, Michele Stocker and Jonathan Tannen.

The US Attorney, CFTC, and Navinder Sarao

Posted in CFTC, Investment Regulation, Litigation

We have previously provided updates1 on the Navinder Singh Sarao case, pending in the U.S. District Court for the Northern District of Illinois.  After being charged in February 2015 with fraud and spoofing related to the 2010 Flash Crash, Sarao, then resident in the United Kingdom, fought a yearlong, multiple-appeal battle against extradition, before he was extradited to the United States.  On Nov. 9, 2016, Sarao appeared in the District Court to plead guilty to one count of spoofing and one count of wire fraud.

In the plea agreement, Sarao admitted to participating in a scheme to defraud participants in the E-mini S&P 500 market using the CME Globex electronic trading platform.  He did so by placing large orders on one side of the market to give the false impression of interest, to the benefit of his smaller orders resting on the other side of the market.  This conduct – “spoofing” – enabled Sarao to profit by taking advantage of the price swing resulting from his “spoofed” orders, and the subsequent return of the price to its previous levels.

In connection with that plea, Sarao consented to a forfeiture of assets amounting to nearly $13 million. The sentencing guidelines for the crimes to which he pleaded guilty also carry with them a maximum sentence of thirty years’ imprisonment.

To read more on this topic, please see GT Alert “The US Attorney, CFTC, and Navinder.”

Derivatives Update: What You Should Know As We Enter 2017

Posted in EU's Bank Recovery and Resolution Directive, Financial Regulation, Securities, Tax

This year has been full of surprises in the global markets with Brexit, the Republicans’ win of the executive branch and continuing control of the legislative branch in the U.S. and the impact of the privatization of energy markets in Mexico. In this GT Alert, we are simply going to address two critical proposals and an update regarding Article 55 of the EU Bank Recovery and Resolution Directive (BRRD), which are material for the buy side and sell side. While there is a great deal of uncertainty surrounding EMIR and the UK, and the Dodd Frank Act and the President-elect Trump transition team, it is important to remain in compliance. The following will cover: The Proposed Modernization of Derivatives Act of 2016, the Proposed Regulation Automated Trading, and finally, Article 55 BRRD.

To read more about this timely topic, please view our GT AlertDerivatives Update: What You Should Know as We Enter 2017.”

In Bartram, Florida Supreme Court Holds That Statute Of Limitations Does Not Bar The Filing Of A Second Mortgage Foreclosure Action

Posted in Lending, U.S. Supreme Court

On Nov. 3, 2016, the Florida Supreme Court issued its long-awaited decision in Bartram v. U.S. Bank National Association, No. SC14-1265, 2016 WL 6538647 (Fla. Nov. 3, 2016), bringing much-needed clarity to the outstanding question of whether the dismissal of a mortgage foreclosure action more than five years after it was filed bars the lender from filing a new foreclosure action under Florida’s five-year statute of limitations for breach of contract claims.

To learn more, please read the GT Alert “In Bartram, Florida Supreme Court Holds That Statute Of Limitations Does Not Bar The Filing Of A Second Mortgage Foreclosure Action.”

Elaine Greenberg to Speak at PLI Hedge and Private Funds Seminar

Posted in Events, Financial Regulation

Elaine C. Greenberg, Greenberg Traurig shareholder, will speak at the Practising Law Institute (PLI) Program “Hedge and Private Fund Enforcement & Regulatory Developments 2016” in New York City on Dec. 1. Greenberg will be participating in the session titled “SEC Inspections and Examinations of Private Equity and Hedge Funds.” The seminar provides insights into current and anticipated enforcement, regulatory, legislative and compliance priorities, and how best to deal with them, according to PLI.

Greenberg Traurig Attorneys Viola Bensinger, Henrik Armah, Joey Shabot and Carsten Kociok to Present on Fintech, Nov. 23

Posted in Events, Fintech

Greenberg Traurig and Herzog Fox & Neeman LLP are pleased to co-host a program titled “Emerging Technology Briefing: Fintech Evolution in Germany and Israel” on Nov. 23, from 9:00 to 12:00 p.m. GT attorneys, Viola Bensinger, Henrik Armah, Joey Shabot and Carsten Kociok, will participate in this timely program. Information will be provided on the legal aspects of Fintech in Europe; insights on the tech scene in Germany and on successful work models and market differences between Germany and Israel.

Please contact Donna Chagal at 972.3.636.6011 or chagald@gtlaw.com for any inquiries.

Banking Regulators Release Advanced Notice of Proposed Rulemaking on Enhanced Cyber Risk Management Standards

Posted in Client Alert, Cybersecurity, FDIC, Financial Regulation, Risk Management

On Oct. 19, 2016, the Board of Governors of the Federal Reserve System (the Board), the Office of the Comptroller of the Currency (the OCC), and the Federal Deposit Insurance Corporation (the FDIC, and the three agencies collectively, the Agencies) jointly issued an advance notice of proposed rulemaking (the ANPR) soliciting public comment on enhanced cyber risk management standards. The Agencies are considering enhanced standards designed to increase the operational resilience of large and interconnected entities under their supervision and certain of their service providers and to reduce the potential impact of a cyber-attack or other cyber-related failure on the financial system. Once established, the enhanced standards would be integrated into the Agencies’ existing IT supervisory framework. The Agencies are considering implementing the enhanced standards in a tiered manner, imposing more stringent standards on the systems of entities that are critical to the functioning of the financial sector. The Agencies plan to use the information collected through the ANPR to develop a more detailed proposal and have pledged to invite public comment on such proposal before adopting any final rule.

Fore more information please see our GT Alert, “Banking Regulators Release Advanced Notice of Proposed Rulemaking on Enhanced Cyber Risk Management Standards.”


Hints about New 871(m) Withholding Guidance

Posted in Insurance, Securities

On Friday, Oct. 21, a senior official from the Internal Revenue Service said that new transition rules for the regulations for withholding on dividend equivalent payments on equity-linked derivatives under Section 871(m) will be issued in November.

At a symposium sponsored by the Securities Industry and Financial Markets Association (SIFMA) in New York, Peter Merkel, Branch 5 Senior Technical Reviewer, IRS Office of Associate Chief Counsel (International) announced that the IRS will issue transition rules for the implementation of regulations promulgated last year under Code section 871(m) shortly.  Merkel said that this guidance should contain the following rules:

  • The rules regarding withholding on dividend equivalent payments on delta one contracts will be effective as of Jan. 1, 2017, per the existing regulations.  However, withholding on dividend-equivalent payments on non-delta one contracts will be delayed until Jan. 1, 2018.  No guidance is expected regarding the distinction between a delta one contract and a non delta one contract;
  • A more relaxed “combination rule” is expected.  Under the current regulations, positions below the 0.8 delta threshold may be combined with each other to constitute a synthetic derivative position with a delta greater than 0.8 if the positions are entered into in connection with each other.  The current regulations include a set of presumptions to be used in determining whether positions should be combined that are rebuttable for the government and for the short party, but not for the long party.  Merkel acknowledged that the current rules may constitute a procrustean bed, and that some flexibility may be introduced in the new guidance.
  • The guidance is also expected to address certain issues regarding the treatment of qualified derivative dealers (QDDs) as qualified intermediaries (QIs).  Although practitioners gave comments regarding these issues, Merkel did not say what position the government expected to take thereon.

The proposed guidance is being drafted in response to industry comments to the existing regulations.  Because of the significant burden involved in operationalizing the existing regulations, banks, securities dealers, and other “sell-side” participants should welcome the push-back of the effective date for non-delta one contracts to 2018, as well as increased flexibility in the combination rules.  Banks and broker-dealers who have signed up as QIs should also welcome any rules disambiguating QDD compliance.  Buy-side participants, such as funds, insurance companies and high net worth individuals, should welcome the deferral of withholding on non-delta one contracts prior to 2018, and they should also welcome increased flexibility in the combination rule.

SEC Continues Enforcement Push as Outlined in its Announcement of FY 2016 Statistics

Posted in SEC

In an announcement this week related to FY 2016 enforcement statistics, the SEC reported another increase and outlined its continued robust efforts.  In 2016, the SEC filed 868 enforcement actions besting its 2015 total by 61 actions and 2014 by 113 actions.  Although enforcement actions were up, the SEC announced that it had obtained judgments and orders totaling more than $4 billion, a sum consistent with amounts obtained in 2014 and 2015 ($4.16 billion and $4.19 billion respectively).  Enforcement actions for FY 2016 included the most cases ever initiated against or involving investment advisors or investment companies totaling 258, approximately 30% of the total enforcement actions filed.  FCPA related enforcement actions also rose to an all-time high of 21 and whistleblowers were paid distributions of $57 million in 2016.   Based on the last three years, it seems safe to say that SEC enforcement is continuing to ramp up with no signs of slowing down.


U.S. Court of Appeals for the District of Columbia Circuit Declared CFPB’s Single-director Structure Unconstitutional

Posted in CFPB, Dodd-Frank, U.S. Supreme Court

In a 110-page decision issued on Oct. 11, 2016, the United States Court of Appeals for the District of Columbia Circuit declared the Consumer Financial Protection Bureau’s (CFPB) single-director structure unconstitutional and vacated a $103 million fine against PHH.  The Court found that the current structure allows the Commissioner to wield too much power that is unchecked by any other part of government.  To remedy this concern, the Court severed the “for cause” provision from the statute, placing the agency under the direct supervision of the president.  The Court also vacated the Order against PHH, finding that the CFPB’s interpretation of RESPA violated PHH’s due process rights in several respects. First, the Commissioner erred in disregarding long-standing guidance from the Department of Housing and Urban Development (HUD) recognizing that Section 8 of RESPA allows captive reinsurance arrangements so long as the amount paid by the mortgage insurer for the reinsurance does not exceed the reasonable market value of the reinsurance.  The Court declared that Section 8 shall continue to have the meaning ascribed to it by HUD.  Secondly, in calculating the penalty against PHH, the Commissioner had improperly included loans that had closed more than three years prior to the action.  The Court rejected the CFPB argument that it was not subject to any statute of limitations, and ruled that the agency was subject to the three-year limitations period that has traditionally applied to agency actions to enforce RESPA.

As we wrote about previously, this case stems back to a June 2015 CFPB order in which CFPB Director Richard Cordray singlehandedly increased a $6 million fine levied by an administrative law judge against PHH for allegedly referring consumers to mortgage insurers in exchange for kickbacks in violation of the Real Estate Procedures Act (RESPA).  The ALJ’s fine was based upon loans closed on or after July 21, 2008..  PHH appealed that ruling to the Director.  Cordray issued a final order that required PHH to disgorge $109 million – all the reinsurance premiums it received on or after July 21, 2008.On appeal, PHH challenged Cordray’s authority to levy the additional fine and challenged the constitutionality of the CFPB itself.

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