On May 17, the FDIC issued a proposed rule that would require certain insured depository institutions to submit a contingent resolution plan outlining how they could be separated from their parent structures and wound down in an orderly and timely manner. Institutions with assets greater than $10 billion that are subsidiaries of a holding company with total assets of more than $100 billion would be subject to this proposal.
On April 23, the FDIC published additional Q&As on the Statement of Policy on Qualifications for Failed Bank Acquisitions (“Policy Statement”) issued in September 2009. The Q&As clarify that there is no requirement that investors must have held their ownership for a specific amount of time.
The FDIC voted to extend the safe harbor provided under 12 C.F.R. § 360.6 until September 30, 2010, from the FDIC’s ability, as conservator or receiver, to recover assets securitized or participated out by an insured depository institution. When the safe harbor was initially adopted in 2000, the FDIC provided important protections for securitizations and participations by confirming that, in the event of a bank failure, the FDIC would not try to reclaim loans transferred into such transactions so long as an accounting sale had occurred.
The UK Government has announced a consultation on proposals to strengthen the administration regime for insurers, in particular to improve the protection and payment of benefits for persons insured with companies facing financial difficulties and addressing gaps in the administration regime for insurers as compared with the liquidation regime. The proposals include:
1. applying to administration the existing rules for valuing insurance contracts in liquidation; and
2. revising the objectives of administration in insurance company cases by:
Readers of our December 2009 issue will recall that we wrote about the Scottish court decision on the Scottish Lion Insurance Company scheme of arrangement. Just before this issue went to press the decision of the Scottish court of appeal (the Inner House of the Court of Session) on the issue of whether “creditor democracy” would be allowed to prevail or whether unanimity was required became known.
Protecting clients’ money and assets has been a pillar of the UK financial regulatory regime. The obligation on regulated entities to “…arrange adequate protection for clients’ assets when it is responsible for them” is enshrined in Principle 10 of the Principles of Business Sourcebook of the Financial Services Authority (FSA) Handbook. The FSA has made rules to protect client money by requiring FSA regulated entities to hold such money in trust accounts (the Client Money Rules).
Court Broadens Interpretation of Code Sections Invalidating Ipso Facto Contract Provisions
During the second afternoon session of the first day of the PLUS D&O Symposium, the panelists discussed the complex underwriting issues that arise when the company to be insured is insolvent, in bankruptcy, or close to bankruptcy. The panelists discussed the following topics and provided the following insights:
Scottish Lion appealed against a judgment delivered by Lord Glennie in which the petition for the proposed scheme of arrangement was dismissed (see our previous blog entries http://www.insurereinsure.com/BlogHome.aspx?entry=1910 and http://www.insurereinsure.com/BlogHome.aspx?entry=1985).
In a significant ruling with potentially wide-reaching implications, Judge Lewis Kaplan of the U.S. District Court for the Southern District of New York dismissed the Securities Act of 1933 causes of action (Sections 11, 12, and 15) against McGraw Hill and Moody's (the "Rating Agencies") in In re: Lehman Brother Mortgage Backed Securities Litigation.