This site is operated by O'HEFFERNAN LLC, the law practice organized in New York by Geoffrey F. Heffernan, its sole member and attorney.
systemically important blog
1. FDIC, Securitization Safe Harbor Rule; Notice of proposed rulemaking, 84 Fed. Reg. 43732, 733 col. 2 (Aug. 22, 2019), avail. at https://www.govinfo.gov/content/pkg/FR-2019-08-22/pdf/2019-15536.pdf#page=2.
2. Id. at 43734 col. 3, https://www.govinfo.gov/content/pkg/FR-2019-08-22/pdf/2019-15536.pdf#page=3.
3. Id. at 43736 col. 1, https://www.govinfo.gov/content/pkg/FR-2019-08-22/pdf/2019-15536.pdf#page=5.
Public comments on the proposed rule have been posted here.
Dear Non-Defaulting Party,
In re: Notice of Breach
We hereby notify you that we (the “Defaulting Party”) have breached our agreement with you, manifesting all benefits and perquisites flowing therefrom to the Defaulting Party. Per Mission Products Holdings v. Tempnology, LLC, 139 S.Ct. 1652 (2019), this is not a rescission and all rights conveyed under the agreement continue. The Defaulting Party reserves all rights.
Sincerely,
Defaulting Party
The AP reported on Friday that Google is considering building a data center in Minnesota with power coming from wind farms, according to information in regulatory filings by Xcel Energy. The filings (here and here) include, among other things, redacted copies of a Retail Electric Service Agreement, a Competitive Rate Rider Agreement; and an Interconnection Agreement for Retail Electric Service at Transmission Voltage entered into by Northern States Power Company (Xcel) with Honeycrisp Power LLC, an entity identified as an affiliate of Google.
It’s a nice touch to name the Google affiliate after an apple developed at the University of Minnesota, since the data center would be in Minnesota. Interestingly, a statement a few months ago in a Bloomberg article, “The Curse of the Honeycrisp Apple,” that the Honeycrisp apple “succeeded beyond anyone’s wildest dreams, . . . [but] became a nightmare for some producers, forcing small Northeastern growers to compete with their massive, climatically advantaged counterparts on the West Coast,” almost sounds like something that could apply to search engines—not just apple growers.
At least the budget covered the pictured notice.
— Jeff Heffernan (@GFH_oheffllc) December 22, 2018
"Due to the lapse in appropriations, Department of Justice websites will not be regularly updated...." https://t.co/wWwRSSmzEL pic.twitter.com/Dsx0RzmH4s
.
High-fives all around at DPW1 for convincing a NY state court2 to interpret a NY law ISDA3 by following dicta4 in English case law that was referred to (but not followed) in a non-precedential federal bankruptcy court decision5 regarding another NY law ISDA.6
__________
1 “Because Loss is utilized as a fallback to Market Quotation – which by definition seeks to determine the replacement cost of the terminated transaction in the market – courts have held, under what is termed the “cross-check principle,” that a determination of Loss should achieve broadly the same result as Market Quotation.” Plaintiff’s Memorandum in Opposition to Defendant’s Motion for Summary Judgment, Lehman Bros. Int'l v. AG Fin. Prods., Inc. (Sep. 28, 2018), NYSCEF Doc. No. 340, 16, avail. at https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=8gXdP8_PLUS_CJCK86jJnS1rA8w==&system=prod, shared folder copy at https://app.box.com/s/skfv7lv7oi251cqqx2uo5jkuqsoy71zh
2 “At the very least, however, the significant discrepancy between the indicative bids and Assured's Loss calculation supports a finding that triable issues of fact exist as to whether the cross-check principle is capable of application to this case and, if so, whether Assured's calculation of Loss satisfies the test imposed by that principle.” Lehman Bros. Int'l v. AG Fin. Prods., Inc., 60 Misc. 3d 1214(A) (Sup. Ct. 2018), shared folder copy at https://app.box.com/s/ms26h2d4rj27l3sh9vfi91uyvnqpifyv, Google Scholar version at https://scholar.google.com/scholar_case?case=14259224773283682134&hl=en&as_sdt=6,33
3 “Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York (without reference to choice of law doctrine).” Schedule to ISDA in Exhibit 8 to Affirmation of Kimberly J. Brunelle in Support of Defendant's Motion for Summary Judgment, Lehman Bros. Int'l v. AG Fin. Prods., Inc. (Sep. 28, 2018), NYSCEF Doc. No. 183, AG00018295, avail. at https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=Q7xZjSSXJcOUIlvh_PLUS_njHQQ==&system=prod
4 Argued by ISDA:
Some might try to blur the distinctions between Market Quotation and Loss by invoking dicta of an English court to the effect that the two damages calculational mechanisms are “intended to lead to broadly the same result.” Peregrine Fixed Income Ltd v. Robinson Dep’t Store Plc, [2000] Lloyds Rep. Bank. 304 (Q.B.). This dicta is true generally only in the sense that both mechanisms are intended to lead to satisfactory resolutions in appropriate circumstances. Although this dicta may have been convenient in the case in which it was expressed, Peregrine, that case is totally inapposite[] and has not even been mentioned by a U.S. court.
Amicus Curiae Memorandum of Law in Support of Defendant Intel Corporation’s Motion for Summary Judgment, Lehman Brothers Holdings Inc. et al v. Intel Corporation, Bk. No. 08-13555, Adv.No. 13-01340 (Bankr. S.D.N.Y. Jan. 20, 2015), Doc 57-1, 14-15 avail. at https://www.isda.org/a/56iDE/de-057-1-1-20-15-isda-memo-of-law.pdf
5 Possibly the first time a US court refers to this principle:
No party has cited a case in which the Anthracite “cross-check” principle has been applied, where, as here, there were no deliveries or payments to be made after the Early Termination Date. Accordingly, while the principle may have hardened into hornbook law in the context of contracts for which deliveries or payments were to be made after the Early Termination Date, that context is not present here. Lehman has not provided a convincing argument as to why the principle should be extended.
Lehman Brothers Holdings Inc. et al v. Intel Corporation, Bk. No. 08-13555, Adv.No. 13-01340, 31 (Bankr. S.D.N.Y. Sep. 16, 2015), avail. at http://ia800300.us.archive.org/26/items/gov.uscourts.nysb.238947/gov.uscourts.nysb.238947.110.0.pdf
6 “Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York (withoutreference to choice of law doctrine).” Schedule to ISDA in Exhibit 2 to Declaration of Mahesh Venkatakrishnan in Support of Motion for Summary Judgment, Lehman Brothers Holdings Inc. et al v. Intel Corporation, Bk. No. 08-13555, Adv.No. 13-01340 (Bankr. S.D.N.Y. Jan. 1, 2015), Doc 63-2, 7, avail. at https://www.courtlistener.com/recap/gov.uscourts.nysb.238947/gov.uscourts.nysb.238947.63.2.pdf
On Friday, Aug. 24, Governor Cuomo signed into law (take a deep breath)... "An act to amend the uniform commercial code, the civil practice law and rules, the lien law, the general obligations law, the banking law, the general business law, the arts and cultural affairs law and the personal property law, in relation to making technical corrections to conform with revisions to the uniform commercial code."
The purpose of the legislation is to fix certain cross-references in several sections of law. This is described in the Memorandum in Support of Legislation for Bill Number A9564, sponsored by NY State Assemblyman Jeffrey Dinowitz. This legislation includes various fixes, and it is relevant to those who deal with contracts that have choice of law provisions that select NY law and contract clauses which refer to NY GOL section 5-1401 to buttress enforceability of such choice. In 2014, changes were made to the NY UCC, including one which moved a concept from UCC 1-105 to 1-301. The concept that changed its statutory location in the UCC relates to the power to choose NY law to govern transactions that bear a reasonable relation to NY ("reasonable relation requirement"). GOL 5-1401 goes further than the UCC in empowering parties to transactions to select NY as governing law by providing that, for transactions covering at least $250k, the parties may select NY law without regard to the reasonable relation requirement in the UCC provision. However, since the 2014 UCC amendments and until now, GOL 5-1401 referred to the wrong UCC provision.
Up until this month's legislation, the inclusion of a specific reference to 5-1401 in a contract, was a reference to a statute that itself referenced the wrong section of law.
The benefits of specifically referencing 5-1401 in a governing law clause are debatable, but it is not uncommon to see contract clauses that select NY as governing law and specifically refer to GOL 5-1401, e.g.:
If the purpose of referencing 5-1401 within a contract clause is to buttress parties' rights to select NY law, then this was arguably not achieved during the time that the technical disconnect between the GOL and UCC existed. Whether or not referencing such section in a contract during the technical disconnect did harm, is a separate question, which, at least going forward, is now moot.
Lawyers may debate the utility of referencing specific sections of any statute within the terms of a contract. It is interesting to note that the sample choice of law provision in New York's Rules of the Commercial Division of the Supreme Court (excerpted below) does not make reference to 5-1401:
"THIS AGREEMENT AND ITS ENFORCEMENT, AND ANY CONTROVERSY ARISING OUT OF OR RELATING TO THE MAKING OR PERFORMANCE OF THIS AGREEMENT, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO NEW YORK'S PRINCIPLES OF CONFLICTS OF LAW." 22 NYCRR 202.70, App. D (2017), avail. at https://www.nycourts.gov/rules/trialcourts/202.shtml#70 (last visited Aug. 27, 2018).
The Commercial Division's provision does carve out New York's principles of conflicts of law, which is interesting, as one interpretation is that some such principles are likely to support the application of NY law, such that one would not want to carve those principles out. Under such an interpretation, one would be most interested in carving out only the principles that would not support the application of NY law (especially those that support that of another jurisdiction).
It's also worth noting that the highest court in NY has stated that one does not even need to carve out any conflict of laws principles in order to have NY law apply.
“[P]arties are not required to expressly exclude New York conflict - of - laws principles in their choice - of - law provision in order to avail themselves of New York substantive law.” IRB-Brasil Resseguros, S.A. v. Inepar Invs., S.A., 20 N.Y.3d 310, 316 (2012), avail. at http://www.nycourts.gov/reporter/3dseries/2012/2012_08669.htm, Google Scholar version at https://scholar.google.com/scholar_case?case=8445181017526440089&hl=en&as_sdt=6,33.
Kind of kills the rest of the 500-word confidentiality provision this is in: “acknowledges and agrees that Party B is required to disclose the terms of, and provide a copy of, this Agreement and related agreements entered into between Party A and Party B, via the EDGAR system”
— Jeff Heffernan (@GFH_oheffllc) April 26, 2018
Today is the deadline for public comment on Retail Commodity Transactions Involving Virtual Currency, Proposed interpretation; request for comment, 82 Fed. Reg. 60335 (Dec. 20, 2017), avail. at https://www.gpo.gov/fdsys/pkg/FR-2017-12-20/pdf/2017-27421.pdf. Comments submitted (as of 2018 Mar 21, 11-45 AM) are included in the timeline below, along with other relevant information.
If that's your position, you want to cite Figure 18: Global OTC Derivatives by Asset Class.1
Thanks, as always, to colleagues who bring valuable information to my attention.
1 U.S. Dep't of Treas., A Financial System That Creates Economic Opportunities: Capital Markets: Report to President Donald J. Trump: Executive Order 13772 on Core Principles for Regulating the United States Financial System (Oct. 2017), avail. at https://www.treasury.gov/press-center/press-releases/Documents/A-Financial-System-Capital-Markets-FINAL-FINAL.pdf#page=125 at 115 [PDF 125th].
Companies often disclose certain regulatory concerns as risk factors in their annual reports that are filed on Form 10-K with the Securities and Exchange Commission. Its been about 7 years since Dodd-Frank legislation was enacted, and regulations have developed over this period. To see how some companies have modified certain views of risk factors, a PDF is saved at the link below containing a comparison using redline (track changes) of Dodd-Frank or derivatives regulation risks identified in the Form 10-K annual reports under Item 1A “Risk Factors” for 3 energy companies from 2009 – 2016. In some years some companies did not identify such risk factors. This comparison only looks at Dodd-Frank derivatives regulation or derivatives regulation in general. It does not detail other DF rules, e.g., mineral extraction, or other financial regulation, or mention of Dodd-Frank outside of Item 1A of Form 10-K.
https://app.box.com/s/jw675j0ey61714kzaimigznhypp4l86z
Its interesting, for example, to see how one company, in a report filed in March of 2017, updated its assessment of Dodd-Frank factors of 2016 from 2015, in part by adding text as shown by track changes in the screen capture below:
Oh well.
For perspective on the scope of Item 1A in general, in addition to Dodd-Frank and derivatives regulation, the following are some of the types of risk factors identified in Item 1A of the 2014 10K for Noble (which are not part of the comparison):
energy prices
global economy
geopolitical developments
OPEC
government subsidies
transportation availability
shale & drilling developments
changes in fuel for electricity generation
access to government-owned land
trends in tax changes worldwide
natural disasters or adverse weather
anticorruption laws
environmental laws and rules
changes in US energy policy
future legislation and regulation
global populism
anti-development activity
adequate supplies of water for drilling
debt
credit rating
banking regulation, like Basel III rules
hedging limitations on gains
competition
counterparty credit risk
litigation
As of yesterday, the Federal Reserve Board (FRB) was still posting comment letters to its website re: the Financial Holding Company (FHC) commodities activities Notice of proposed rulemaking (NOPR).1 These include letters dated Tuesday of last week. That’s slow. Based on the comments so far (really hope they are all posted now), between 76 to more than 79% of commenters are against proposals contained in the NOPR, depending on how you tally the responses. There are 46 submissions listed on the FRB site. These include some letters submitted as follow-ups to prior submissions, as well as some letters that were submitted jointly by various organizations or individuals. To be conservative and not count follow-up letters (or separate letters submitted by those who initially submitted jointly), one could say that there were expressions of 39 viewpoints submitted to the FRB, 30 of which (over 76%) were opposed to proposals in the NOPR. A better way to tally the submissions may be to separately count each of those that filed as part of any joint submission. When this is done, one ends up with a list of 64 commenters, 51 of which (over 79%) are opposed to the proposals in the NOPR. The details of such a tally are shown in the table below. Where an entity was part of more than 1 joint submission, e.g., Institute of International Bankers, who jointly signed with SIFMA and with The Clearinghouse Association, such entity was counted once. The letters referenced in the table are hyperlinked.
| Name | View | Comments |
| Accuride Corporation | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| Air Products and Chemicals, Inc. | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| Alon | con | LETTER DATED February 20, 2017 |
| American Bankers Association | con | JOINT LETTER AMONG Clearing House Association L.L.C., the American Bankers Association, the Financial Services Forum, the Financial Services Roundtable and the Institute of International Bankers, February 21, 2017 |
| American Investment Council | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| American Public Gas Association | con | LETTERS DATED December 19, 2016 & February 20, 2017 |
| American Wind Energy Association | con | LETTER DATED December 19, 2016 |
| Ball Corporation | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| Barrick Gold | con | LETTERS DATED December 7, 2016 & February 17, 2017 |
| Black Belt Energy Gas District | con | LETTER DATED February 21, 2017 & JOINT LETTER WITH Clarke Mobile Counties, December 16, 2016 |
| BP | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| Bradley Byrne, Member, House of Rep | con | LETTER DATED December 22, 2016 |
| Calpine | con | LETTER DATED December 13, 2016 |
| Central Plains Energy Project | con | LETTER DATED February 21, 2017 |
| Cheniere Energy, Inc. | con | LETTER DATED February 20, 2017 |
| City of Rocky Mount, NC | con | LETTER DATED February 20, 2017 |
| Clarke-Mobile Counties Gas District | con | LETTER DATED February 21, 2017 & JOINT LETTER WITH Black Belt Energy Gas Districts, December 16, 2016 |
| Clearing House Association L.L.C. | con | JOINT LETTER AMONG Clearing House Association L.L.C., the American Bankers Association, the Financial Services Forum, the Financial Services Roundtable and the Institute of International Bankers, February 21, 2017 |
| Cogentrix | con | LETTER DATED December 20, 2016 |
| Delek US Holdings | con | LETTER DATED February 20, 2017 |
| Edison Electric Institute | con | JOINT LETTER WITH National Rural Electric Cooperative Association February 20, 2017 |
| Financial Services Forum | con | JOINT LETTER AMONG Clearing House Association L.L.C., the American Bankers Association, the Financial Services Forum, the Financial Services Roundtable and the Institute of International Bankers, February 21, 2017 |
| Financial Services Roundtable | con | JOINT LETTER AMONG Clearing House Association L.L.C., the American Bankers Association, the Financial Services Forum, the Financial Services Roundtable and the Institute of International Bankers, February 21, 2017 |
| FMC Corporation | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| Futures Industry Association | con | LETTER DATED February 17, 2017 |
| General Electric Company | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| Goldman Sachs Group | con | LETTER DATED February 21, 2017 |
| Greenville Utilities Commission | con | LETTER DATED December 29, 2016 |
| Harley-Davidson, Inc. | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| Honeywell International | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| Institute of International Bankers | con | JOINT LETTER AMONG Clearing House Association L.L.C., the American Bankers Association, the Financial Services Forum, the Financial Services Roundtable and the Institute of International Bankers, February 21, 2017 & JOINT LETTER with SIFMA dated February 17, 2017 |
| International Energy Credit Association | con | LETTER DATED February 20, 2017 |
| International Swaps and Derivatives Association, Inc. | con | LETTER DATED February 17, 2017 |
| National Association of Corporate Treasurers | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| National Mining Association | con | LETTERS DATED December 9, 2016 & February 17, 2017 |
| National Rural Electric Cooperative Association | con | JOINT LETTER WITH Edison Electric Institute February 20, 2017 |
| Natural Gas Supply Association | con | LETTER DATED December 15, 2016 |
| NextEra Energy Resources LLC | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| Northern Virginia Electric Cooperative | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| Novelis | con | LETTER DATED December 21, 2016 |
| Orbital ATK, Inc. | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| Philadelphia Energy Solutions | con | LETTER DATED December 20, 2016 |
| Public Utility District No. 1 of Chelan County, Washington | con | LETTER DATED December 22, 2016 |
| Securities Industry and Financial Markets Association | con | JOINT LETTER WITH Institute of International Bankers February 17, 2017 |
| Southwest Airlines Co. | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| Tennessee Energy Acquisition Corporation | con | LETTER DATED February 21, 2017 |
| The Boeing Company | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| The Hershey Company | con | JOINT LETTER UNDERSIGNED BY 16 ENTITIES February 20, 2017 |
| Town of Slaughter, Louisiana | con | LETTER DATED February 21, 2017 |
| TrailStone Group | con | LETTER DATED December 22, 2016 |
| U.S. Chamber of Commerce | con | LETTER DATED January 5, 2017 |
| Amazon Watch | pro | LETTER DATED December 20, 2016 |
| Americans for Financial Reform | pro | LETTER DATED February 23, 2017 |
| Better Markets | pro | LETTER DATED February 17, 2017 |
| Elise J. Bean | pro | JOINT LETTER DATED December 22, 2016 |
| Exante Regulatory Compliance Consultants | pro | SUBMISSION DATED December 19, 2016 |
| Institute for Agriculture and Trade Policy | pro | LETTER DATED December 21, 2016 |
| Jack Reed | pro | JOINT LETTER DATED February 9, 2017 |
| James D. Hanson | pro | SUBMISSION DATED November 24, 2016 |
| Jeff Merkley | pro | JOINT LETTER DATED February 9, 2017 |
| Public Citizen | pro | LETTER DATED February 10, 2017 |
| Saule Omarova | pro | LETTER DATED February 14, 2017 |
| Sherrod Brown | pro | JOINT LETTER DATED February 9, 2017 |
| Tyler E. Gellasch | pro | JOINT LETTER DATED December 22, 2016 |
| Reid B. Stevens and Jeffery Y. Zhang | other | paper dated December 21, 2016 |
More than 70% of commenters are against proposals contained in the Federal Reserve Board's Notice of Proposed Rulemaking regarding financial holding company involvement in commodities (NOPR). 1 (There were 39 submissions posted as of 1-59 PM, Feb. 24, 2017, one of which was not responsive, and a couple of which were follow-up letters. So, the >70% figure comes from 26 out of 35. It is also worth noting that some comment submissions were signed jointly by more than one organization.) The NOPR follows an Advance notice of proposed rulemaking 2 and Senate subcommittee hearings in 2014 (see timeline).
Update(2017 Feb 28, 9-57 AM): SIFMA's 2-17 letter now posted (commenters' submissions post on the FRB's website slower than molasses), bringing the total # of (posted) submissions to 40.
Update (2017 Mar 02, 12-41 PM): several more letters have been posted. Will detail submissions further in next post.
One of the comment letters submitted in response to the NOPR was from U.S. Senators Sherrod Brown, Jeff Merkley, and Jack Reed. It expressed support for the proposed rule and presented various arguments. The text highlighted in yellow in the screen capture below is part of just one of the arguments, but it comes out looking a bit funny. "Morgan Stanley's jet fuel supply activities assisted the airline while the parent corporation was going through bankruptcy proceedings." So, is the takeaway that this was a bad thing? Like, we don't want to see any more assistance like that again? Or, maybe it’s a good thing, but its part of an argument against bad things, and we don’t want those kind of good things. (Naturally, not every argument is going to be a winner.)
The Senators' letter was addressed to Janet Yellen. It cc'd Robert deV. Frierson, Secretary, Board of Governors of the Federal Reserve System. That would appear to have been a considerate thing to do except that the instructions for the NOPR are pretty clear about who the comments are to be submitted to--Robert deV. Frierson, Secretary, Board of Governors of the Federal Reserve System. He's the one who's name is specified in the mailing address in the beginning of the NOPR, he is also the contact specified to whom any comments related to the Paperwork Reduction Act should be sent, and his name is also on the closing of the NOPR (under the text "By order of the Board...") as representing the Board--he's pretty much the point person on the NOPR. Can one be forgiven for thinking that there's a little bit of 'tude here? Kind of feels like they are trying to go over the Secretary's head--straight to the Chair. I understand that they are in very high positions and its not wrong to want to talk to someone else in a high position, like the one in charge, so-to-speak. But, Janet Yellen's name doesn't appear anywhere in the NOPR, and except for the submission of one scholarly article that was not addressed to anyone and for one submission made via electronic form, all other commenters, including U.S. Representative, Bradley Byrne, addressed their submissions to Secretary Robert deV. Frierson.
Separately, but not unrelated, Jeb Hensarling, Chairman of the House Financial Services Committee, and 33 other members of the U.S. House of Representatives, sent a succinct letter yesterday to Janet Yellen, Chair of the Federal Reserve Board. The letter refers to Janet Yellen's recent testimony about a possible rulemaking related to stress tests, and the letter cites a section of the Dodd-Frank Act regarding the appointment of a Vice Chairman for Supervision to explain that the Federal Reserve shouldn't propose or adopt any new rules until such appointment is made as required by the Act. It goes on to note the ability to take appropriate action to overturn rules pursuant to the Congressional Review Act. This presents an interesting contrast to the last line of the Senators' letter regarding the NOPR, which states "and we hope that you will move forward in finalizing your rules without any further undue delay."
1. Federal Reserve System, Regulations Q and Y; Risk-Based Capital and Other Regulatory Requirements for Activities of Financial Holding Companies Related to Physical Commodities and Risk-Based Capital Requirements for Merchant Banking Investments, Notice of proposed rulemaking, 81 Fed. Reg. 67220 (Sep. 30, 2016), avail. at https://www.gpo.gov/fdsys/pkg/FR-2016-09-30/pdf/2016-23349.pdf
2. Federal Reserve System, Complementary Activities, Merchant Banking Activities, and Other Activities of Financial Holding Companies Related to Physical Commodities, Advance notice of proposed rulemaking, 79 Fed. Reg. 3329 (Jan. 21, 2014), avail. at https://www.gpo.gov/fdsys/pkg/FR-2014-01-21/pdf/2014-00996.pdf
Ever say to yourself "If only I could assemble a team of energy industry subject matter experts comprised of credit, contracting and legal professionals from different companies and firms to analyze the differences between the terms of standard credit support agreement forms commonly used to transact in a variety of energy commodities and derivatives, so that I could better understand and be more able to manage the legal risks associated with any potential inconsistencies resulting from the application of margining standards published by different trade groups to different parts of my company's trading portfolio (i.e., has anyone done a legal gap risk analysis of margining agreements used in energy)."? Ever said that? If you did, you might have then thought to yourself that it would be too cost prohibitive, and that you would never be able to get approval for such an undertaking. Worry not (even if you haven't said the foregoing to yourself)! The International Energy Credit Association (IECA) has produced a valuable and informative table based on such an analysis, and they have made it available here--for free!
In 2015, the IECA also did this with master trading agreements (to which the aforementioned margining agreements tend to relate), which is also available for free download here.
The 2 tables:
More information about the forms is available on the Industry Tools & Forms page.
Among the comments submitted (12 posted as of 2016 Dec 15, 11-07 AM) to the FDIC in response to its notice of proposed rulemaking ("NOPR"),1 were at least 4 commenters who identified issues concerning the authority of the regulatory agency to even make some of the proposals contained in the NOPR, e.g., see excerpts from several commenters below:
“Proposed Rule would inappropriately bypass the legislative process to override the specific and carefully-planned statutory framework established by Congress in the U.S. Bankruptcy Code and FDIA”
“may amount to an unconstitutional delegation of legislative authority”
“imposition of a separate contractual cross-default prohibition could interfere with operation of the statutory intent regarding application of the Title II stay”
“As a practical matter, it is not even clear that a U.S. regulator or receiver would be allowed to have input into a state or foreign proceeding or have the ability to ensure fair treatment of the non-defaulting counterparties”
“would require [members] to relinquish contractual rights in the absence of a law or regulation mandating such relinquishment”
“This end-run is done by requiring ... companies with which they do business to sign contracts giving ... these special rights”
“in the U.S., Congress alone has the authority to enact U.S. bankruptcy legislation”
“the FDIC is using proposed §382.4 to alter fundamentally the effect of the U.S. Bankruptcy Code, rather than seeking to have Congress enact necessary statutory amendments”
“Regulators intend to require end-users facing U.S. SIFIs to agree to broad stays of their Cross-Default Rights, even where Congress has not enacted legislation imposing such stays”
“The fact that certain U.S. regulators are members of the FSB does not equate to a mandate from Congress to implement FSB policies without the protections afforded by the U.S. legislative framework”
“the U.S. Regulators’ Cross-Default Stay Initiative circumvents the U.S. legislative process by effectively imposing key aspects of OLA in relation to U.S. ordinary bankruptcy proceedings, contrary to congressional intent”
“the FDIC should stop short of compelling Covered Banks from refusing to trade with government plans that have not agreed to such amendments”
1 Federal Deposit Insurance Corporation, Restrictions on Qualified Financial Contracts of Certain FDIC-Supervised Institutions; Revisions to the Definition of Qualifying Master Netting Agreement and Related Definitions, 81 Fed. Reg. 74326 (Oct. 26, 2016)(Notice of Proposed Rulemaking), avail. at https://www.gpo.gov/fdsys/pkg/FR-2016-10-26/pdf/2016-25605.pdf .
The International Energy Credit Association (IECA) announced today that it has completed a standardized form of master netting agreement which is available for download from its website at www.ieca.net/education-resources/master-netting-agreement
Quoting from the website, it states that compared to other forms, its advantages include the following:
8 out of 20 commenters to the Federal Reserve Board (FRB) on its proposed rules for QFCs of GSIBs expressed concern that the FRB is treading on legislative terrain or otherwise acting outside of its authority.1 This is an update as 3 more commenters’ submissions were finally posted today. Prior to today, only 17 submissions were being shown. For some reason, the FRB did not post all commenters’ submissions immediately. While some submissions were posted promptly, others took more than a week to appear.
1 See comments filed in response to Federal Reserve Board’s Proposed Rule entitled Restrictions on Qualified Financial Contracts of Systemically Important U.S. Banking Organizations and the U.S. Operations of Systemically Important Foreign Banking Organizations; Revisions to the Definition of Qualifying Master Netting Agreement and Related Definitions, 81 Fed. Reg. 29190 (May 11, 2016).
(2016 Aug 19, 8-36 AM) update: 21 submissions now shown. A 2nd letter from DPW was submitted to add BOA to accompany CITI, Goldman, JPM and MS, on whose behalf DPW commented.
(2016 Aug 22, 11-49 AM) update: 23 submissions now shown as end of last week (really just 22, as 1 by DPW is just an update).
(2016 Aug 26, 2-28 PM) update: a supplemental letter dated Aug 23 from the State of Wisconsin Investment Board (SWIB) has been posted. It is focused on an issue of no small moment, as identified in the screen capture below:
CFTC, Pre-publication version of Final Response to District Court Remand Order in Securities Industry and Financial Markets Association, et al. v. United States Commodity Futures Trading Commission (Aug. 15, 2016, final version to be published on Aug. 16, 2016), pre-publication version available at https://goo.gl/lv43y8 , final version to be available at https://www.federalregister.gov/articles/2016/08/16/2016-18854/securities-industry-and-financial-markets-association-et-al-v-united-states-commodity-futures . I saved highlights to pre-publication version on box.com (see window or link below, depending on browser):
This relates to Sec. Indus. & Fin. Mkts. Ass'n v. CFTC, 67 F. Supp. 3d 373, 2014 BL 454212 (D.D.C. 2014), Bloomberg Law version available at https://goo.gl/iJieAL , Google Scholar version available at https://goo.gl/uGY705 .
6 out of 17 commenters to the Federal Reserve Board (FRB) on its proposed rules for QFCs of GSIBs express concern that the FRB is treading on legislative terrain or otherwise acting outside of its authority.1
1 See comments filed in response to Federal Reserve Board’s Proposed Rule entitled Restrictions on Qualified Financial Contracts of Systemically Important U.S. Banking Organizations and the U.S. Operations of Systemically Important Foreign Banking Organizations; Revisions to the Definition of Qualifying Master Netting Agreement and Related Definitions, 81 Fed. Reg. 29190 (May 11, 2016).
(2016 Aug 15, 8-52 PM) update: its 8 out 20 now.
