ABS issuers generally do not prepare financial statements. If a debtor becomes subject to bankruptcy proceedings, creditors will, with some exceptions, be automatically stayed from collecting and enforcing against the debtor and any posted collateral. These are used in agency-guaranteed securitisation and are described in more detail in 4.13 Participation of Government-Sponsored Entities. Ginnie Mae, Fannie Mae and Freddie Mac are the principal agencies and government-sponsored entities (GSEs) engaged in the securitisation of mortgages. The general construct of the Securities Act is that an offer or sale of securities has to be registered unless made pursuant to an available exemption ie, a private placement. In particular, the Trusts moved to dismiss the lawsuit on the grounds that the CFPB lacked enforcement authority over the Trusts because they are not covered persons as defined in the CFPA. First, SOFR is an overnight rate, while LIBOR has been available in many different tenors (eg, one month, three months) and is forward looking. To be eligible for the relief provided under these no-action letters, the securitisation issuer must: The CFTC has also issued various interpretations that allow certain securitisation SPEs that are wholly owned subsidiaries of non-financial entities to avail themselves of certain exceptions from otherwise applicable clearing and margin requirements available to non-financial end users. The issuer will receive cash flows from the permitted investments and the CDS protection premiums. For example, a single-member limited liability company (LLC) is, for federal tax purposes, disregarded (in the absence of the SPE electing any contrary tax treatment) and therefore any transfer of assets from a parent to its wholly owned LLC will not be a taxable event. The issues and regulations are similar to the general securitisation structure in double SPE structure securitisations, but the titling trust may require additional analysis for purposes of the Investment Company Act exemption compared to the other entities in the structure. Guangzhou Fineland Real Estate Developments Exchange Offer and Concurrent New Money Offering. With lawyers in New York, London, Washington DC, and Frankfurt, Shearman & Sterlings Structured Finance & Securitization Group assists clients in developing, structuring and executing a broad range of financings, including securitisations, structured products, asset-based lending, tailored leasing and royalty arrangements, and other sophisticated financing techniques. While it was stipulated that the alleged misconduct resulted from actions taken by the Trusts servicers and sub-servicers in the course of their debt collection activities, and not by any actions taken by the Trusts themselves, the CFPB named only the Trusts as defendants in this lawsuit after having previously settled with the servicers involved. Shearman & Sterling has a distinguished history of supporting clients wherever they do business, from major financial centres to growing markets. This analysis will typically focus on the entities that have the ability to direct the SPEs activities (and may also look at activities that took place prior to the relevant transaction). The principal covenants in a securitisation transaction vary, based on the relevant document and the type of securitisation. The agreement will also often contain provisions that define the servicing standard and further address the relevant role and any additional obligations of the servicer. As such, broker-dealers can continue to provide quotations for ABS offered under Rule 144A if they reasonably believe that the issuer will provide the information specified in Rule 144(d)(4) upon request. A two-week vacation scheme is run in both spring and summer, with around 14 students attending each. Title VII of the DoddFrank Act establishes a comprehensive regulatory framework for OTC derivatives to address a number of aspects of OTC derivatives that were identified as causing vulnerabilities in the financial system; in particular, the complexity, lack of transparency and interconnectivity of the OTC market and the lack of consistent margin requirements. This Wall Street giant has made a Sterling name on English soil in all things finance. Chambers and Partners has been publishing guides to the legal profession since 1990. The team is split between project development work, and the project finance side of things, one trainee explained. Most of the remaining ABS are issued in private placement, typically in a manner that permits resales in compliance with Rule 144A. Shearman & Sterling. The firms success is built on its clients success. Although the analysis differs somewhat between various US circuits, in general a bankruptcy court may order substantive consolidation where the separateness of the entities has not been sufficiently respected or where the affairs of the debtor entities are so entangled that unscrambling will be prohibitive and hurt all creditors. The specific RBC formula varies depending on the primary insurance type and focus on asset risk, underwriting risk and other risk. The Trusts hold more than 800,000 private education student loans totalling approximately USD12 billion, all of which were originated by private banks prior to 2008. New Yorks Shearman & Sterling was one of the earliest US firms to make the starting line-up in London, bringing a sizeable reputation in all things banking & finance from across the pond. The National Association of Insurance Commissioners (NAIC) has adopted a risk-based capital (RBC) methodology intended to be a minimum regulatory capital standard based on the insurance companys risk profile and is one of the tools that give regulators legal authority to take control of an insurance company. Applicable tax laws may also cause debt instruments to be characterised as equity interests for purposes of that determination. The minimum risk weight that will be given to a securitisation exposure is 20%. These are typically used in dealer floor plan securitisations and credit card securitisations. degree of difficulty in segregating and ascertaining individual assets and liabilities; presence or absence of consolidated financial statements; profitability of consolidation at a single physical location; commingling of assets and business functions; unity of interests and ownership between the various corporate entities; existence of parent or intercorporate guarantees or loans; and. As is often the case in corporate seats, the hours can be unpredictable, particularly around closing, but small teams working on each deal meant great responsibility and ownership. Research forms a big part of trainee life in the corporate M&A group, which I hadnt expected from a transactional seat. and 'Why Shearman & Sterling?' Shearman & Sterling represented the initial purchasers in connection with TaiChen Development (BVI) Limiteds tap offering $65 million 12.5% senior notes due 2022, unconditionally and irrevocably guaranteed by Longjitaihe Property Co., Ltd. Jiayuan International Group Limiteds Tender Offer And $300 Million Bond Offering. The Section 3(c)(5) exemption is available for issuers securitising accounts receivable, loans to manufacturers, wholesalers, retailers or purchasers of specified merchandise, insurance or services, as well as for mortgages and other liens on and interests in real estate as long as a holder of any such issuers securities does not have the right to require early redemption of such securities. The most relevant of the securitisation-specific rules are: The banks are also subject to risk retention, but the rules are the same as those applicable to non-banking entities. Duddell Street Acquisition Corp.s Business Combination with FiscalNote Holdings, Inc. Shearman & Sterling represented Citigroup Global Markets Inc. and J.P. Morgan Securities LLC in connection with Duddell Street Acquisition Corp. (Duddell Street)'s business combination with FiscalNote Holdings, Inc. (FiscalNote). In the early 1970s, long before Raheem Sterling was on the scene, another famous Sterling pulled on an England shirt. The available mode of perfection differs based on the type of asset and type of transfer. As noted above, transactions that violate the securities laws may be voidable and may give rise to both private and public enforcement. Shearman & Sterling continues to garner recognition in the 2023 edition of Chambers UK receiving 35 rankings in the new edition, including 13 practice and 22 individual rankings. The accounting standards also include a discussion of various types of qualifiers and assumptions that are deemed not to be appropriate for accounting purposes. An SPE that is subject to entity-level tax, such as a corporation or a partnership that is taxed as a corporation, will potentially incur tax liability for any gains resulting from the sale of financial assets and any income otherwise paid with respect to the financial assets in excess of deductible expenses. make payments based on cash flows and not based on changes in the issuers assets; not acquire or sell assets primarily for the purpose of realising market gains or minimising market losses; and. Delaware statutory trusts (DSTs) and Delaware limited liability companies (DLLCs) are often the entities of choice for securitisations. SPEs used in securitisations can theoretically take almost any organisational form, including a limited liability company, a corporation, a trust or a partnership. About 90% of the US securitisation market consists of mortgage-backed securities that were issued or guaranteed by Ginnie Mae, Fannie Mae and Freddie Mac, and are expressly exempt from registration pursuant to the relevant congressional act by which such entities were formed. The perfection of a security interest in a financial asset automatically also perfects a security interest in related supporting rights, such as collateral or letter of credit rights. Admittedly, I had no idea what these terms meant going in, one trainee (reassuringly) quipped, but you learn so much as you go. In fact, trainees told us that through regular meetings, the firm was always transparent about what trainees could get involved in, which ranged from document management and helping with conditions precedent, to board minutes and one-on-one emails with clients and counsel. Insurance companies capital rules are typically more closely tied to ratings. Whether this option covers registered ABS that are subject to Exchange Act reporting requirements but where those requirements were suspended before ABS issuers had to file for the life of the deal poses an interpretive question. Investors in unfunded ABS tranches will typically have contingent funding obligations and may be required to provide additional credit support or face replacement if their credit drops below agreed levels. The SEC launched a proposed set of rules in 2011, but since these rules would effectively have ended synthetic securitisations, they were never finalised. The trainees we spoke to let us know that the majority of trainees want to qualify into M&A and finance but of course teams cant facilitate everyones wants. The firm didn't disclose its 2022 retention figures. The movement is in the right direction.. a requirement on filing financing statements; provisions requiring notification and potentially opinions prior to any changes in the name or jurisdiction of the organisation; control over securities accounts, deposit accounts and electronic chattel paper; delivery or custody of chattel paper, securities and instruments; and. TaiChen Development (BVI) Limiteds $65 Million Tap Offering. The exact levels and types of credit enhancement will depend on the ratings requirements relating to the desired ratings levels, in addition to commercial constraints on the securitisation. It is important to note that the issue before the Third Circuit is whether the Trusts are indeed covered persons and thus could be vicariously liable for the conduct of their agents, the servicers. Regularly advises on complex tax planning and structuring matters. In particular, Reg AB II includes expanded asset-level disclosure requirements for registered offerings of securities backed by specified asset classes that reflects a significant departure from the pool-level information that historically has been given and that is still the dominant form of disclosure in private placements. In 2021, Shearman interviewed students from over 30 law schools both on campus and through job fairs. The proposed rules would require a number of new disclosures for registrants, including: The proposed rules do not distinguish ABS issuers from corporate issuers, and their application to ABS issuers in the form proposed would be problematic in several respects. The agencies may also impose civil monetary penalties that can range between USD5,000 and USD1 million per day, and it may seek to impose removal and prohibition orders against any institution-affiliated party (a potentially broad list of persons), which may remove and potentially bar the person from participating in the business of the relevant banking entity or other specified entities. It is important to note that because this decision came from a Federal court sitting in Delaware, if upheld by the Third Circuit, it could potentially have much broader consequences to the securitisation marketplace affecting a variety of asset classes (such as securitisation trusts that own auto loans, mortgages, credit card receivables, unsecured personal loans, etc) than a decision in a different judicial district, as most special purpose entities (trusts and limited liability companies) that are formed for securitisation purposes are organised in Delaware and are thus subject to suit in the same court under the CFPBs authorising statute. There are also some client secondments available in the financial space, covering investment banks and companies like ICE (Intercontinental Exchange). Rule 15c2-11 under the Securities Exchange Act of 1934 (Exchange Act) allows brokers or dealers to initiate or resume trading quotes on OTC securities not listed on a national securities exchange by requiring them to obtain and review specified issuer information prior to publishing or submitting for publication a quotation on the securities. This litigation has been ongoing through various motions. A large number of these deals present no readily apparent amendment mechanism to incorporate the ARRCs recommended fallback provisions. For example, the Basel III capital rules penalise banks that invest below the most senior position in a securitisation, thereby impacting banks willingness to invest in mezzanine tranches and below. On top of that, we try to connect those who express a particular interest in a certain area with relevant people around the office, says Gascoyne. In the event that a pre-cessation event is operative, the ARRCs recommended five-year historical median spread adjustments will be determined at the same time as the ISDAs spread adjustments, which will be at the time of any announcement that LIBOR will cease or has ceased or will or has become no longer representative. The Federal Deposit Insurance Act (FDIA) provides the bank regulatory agencies with broad enforcement powers against individuals and entities for violation of the applicable banking laws and regulations, including the Risk Retention Rules. Wilful violations of the Risk Retention Rules may also give rise to federal or state criminal actions. In March 2022, the SEC proposed a set of climate change disclosure requirements for public companies. To be best placed at the beginning of your legal career, you need to be in the best place. A place like Shearman & Sterling one of the elite international law firms. 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