The Dodd-Frank Wall Street Reform and Consumer Protection Act
(the "Act") was signed into law by President Obama on
July 21. The Act includes a number of important provisions of
interest that we will address in a series of Alerts to our banking
clients. The Act makes significant changes to the ability of bank
and thrift holding companies to issue trust preferred securities
("TRUPS") and continue to count them as Tier 1
History of the Legislation
The House-passed version of the legislation (H.R. 4173) did not
contain any provisions addressing the capital treatment of TRUPS.
The subsequent Senate bill included provisions inserted by Senator
Collins (R-Maine) that were supported by the FDIC, which would have
eliminated Tier 1 capital treatment for TRUPS. These provisions
were eased during the deliberations between the Senate and House of
Representative conferees that produced the Conference Report, which
was approved by the House on June 30 and the Senate on July 15.
Final Provisions of Dodd-Frank
The final rules concerning TRUPS are as follows:
Bank and thrift holding companies with assets of less than $15
billion as of December 31, 2009, will be permitted to include TRUPS
that were issued before May 19, 2010, as Tier 1 capital.
TRUPS issued before May 19, 2010, by larger bank and thrift
holding companies will continue to be treated as Tier 1 capital
until January 2013. At that time, the Tier 1 capital treatment will
be phased out over a three-year period ending in January 2016. The
specifics of this phaseout of Tier 1 capital treatment are to be
determined by the bank regulators.
Bank holding companies with assets of less than $500 million
will be permitted to continue to issue TRUPS and have them count as
Tier 1 capital.
TRUPS issued by a bank or thrift holding company (other than
those with assets of less than $500 million) after May 19, 2010,
will no longer count as Tier 1 capital. TRUPS still will be
entitled to be treated as Tier 2 capital.
On November 13, 2013, the Division of Corporation Finance of the Securities and Exchange Commission issued new Compliance and Disclosure Interpretations providing guidance regarding new rules allowing for general solicitation in private offerings.
On November 14, the Division of Swap Dealer and Intermediary Oversight of the Commodity Futures Trading Commission created confusion and consternation in the derivatives world by issuing an advisory indicating that certain requirements will apply to swaps entered into between a registered non-U.S. swap dealer and a non-U.S. person if the swap is handled by personnel or agents of the non-U.S. swap dealer located in the United States.
On September 30, 2013, the US Securities and Exchange Commission Division of Trading and Markets issued Frequently Asked Questions in an effort to provide guidance regarding potential supervisory liability of broker-dealer compliance and legal personnel under Sections 15(b)(4) and 15(b)(6) of the Securities Exchange Act of 1934, as amended.
On November 12, the liquidators for two Bear Stearns overseas hedge funds filed their complaint against McGraw Hill, Standard & Poor’s, Moody’s, and Fitch in an action in New York Supreme Court alleging that fraudulent ratings led to over $1 billion in losses for the funds’ investors.
Last week the Second Circuit held that: (1) a creditor can face liability under the Fair Debt Collection Practices Act (FDCPA) when a third party it hires to contact debtors does not make bona fide attempts to collect the debt but rather acts as a mere conduit between the creditor and debtor; and (2) the assignee of a debt is not a "creditor" for purposes of the Truth in Lending Act (TILA).
Recently, the Delaware Court of Chancery in Pfeiffer v. Leedle declined to dismiss a shareholder derivative action against a board for breach of fiduciary duty, where the directors allegedly approved stock options exceeding the maximum number of options permissible under the corporation’s stock incentive plan. C.A. No. 7831-VCP (Del. Ch. Nov. 8, 2013).