early amortisation events that cause accelerated pay-downs of principal and terminate reinvestment or revolving periods (temporarily or permanently); servicer termination events that give rise to a right to terminate the servicer; and. The 2020 election has resulted in a number of new rule proposals and changes by the US Securities and Exchange Commission (SEC) and other regulators. Shearman & Sterling represented J.P. Morgan, Deutsche Bank, HSBC and UBS as the joint lead managers in connection with eHi Car Services Limiteds offering of $300 million 7% senior notes due 2026. requiring clearing of standardised OTC derivatives through regulated central counterparties; requiring trading of standardised transactions to occur on exchanges or electronic trading platforms when appropriate; increasing transparency through regular data reporting; and. Skyfame International Holdings Limiteds $100 million Senior Notes Offering. All the resources you need to research law firms and barristers' chambers, Banking & Finance: Borrowers: Big-Ticket (Band 2), Banking & Finance: Lenders: Big-Ticket (Band 3), Capital Markets: High-Yield Products (Band 3), Corporate/M&A: 100-800 million (Band 3), Energy & Natural Resources: Oil & Gas (Band 3), Energy & Natural Resources: Power (Band 2), Financial Services: Non-contentious Regulatory (Band 3). Market participants have coalesced around a view that, if the issuer of a Rule 144A asset-backed security were to undertake to make the required Rule 144A information publicly available and to keep it current, that would suffice for broker-dealers to quote those securities. Broker-dealers may be restricted from providing price quotations for private debt securities by virtue of Rule 15c2-11 unless certain periodic information and information about the issuer and the offering is made available to the public in a manner that complies with the SECs no-action letter issued on 30 November 2022. I was looking for top-tier transactional work in areas like finance and M&A, one trainee told us, and thats where the firms profile comes into its own. In fact, Chambers UK awards the firm a host of rankings in banking & finance and capital markets in the capital, as well as a top-tier nod for its projects work nationwide. 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. All vac schemes run for two weeks and there's room for up to ten candidates on each. While that analysis is not a legal analysis per se, it will involve a review of the various contractual rights existing in the transaction documents. provisions that require a poll, survey, or inquiries for quotes or information concerning inter-bank lending or deposit rates. The presence or absence of some or all of these factors does not necessarily result in substantive consolidation. The typical representations and warranties in the sale agreement address: The typical enforcement mechanism is notice and indemnification obligations, coupled with a repurchase obligation in the case of a breach of any asset-level representation that has not been cured in a timely manner. The SECs proposed rules would require that registered investment advisors to private funds obtain audited annual financial statements of, and provide quarterly statements regarding fees, expenses and performance for, each private fund it advises, and investment advisers would be required to deliver a fairness opinion in connection with adviser-led secondary transactions in which existing fund investors are offered the option to exchange their investments for interests in other entities managed by the same adviser or related persons. The NAIC has its own credit rating scale that largely ties to ratings from NRSROs, except for an alternative methodology applied to non-agency RMBSs and CMBSs. Shearman & Sterling LLP stands out for its expertise in high-profile energy and infrastructure projects in Indonesia, as demonstrated by its advice to Masdar and PT PJB Investasi on the development and financing of a 145MW floating solar PV project over the Cirata reservoir. The purpose is to allow NRSROs that have not been hired to have access to the same information in real time that is provided to the hired NRSROs. Establishing a bankruptcy-remote special-purpose entity (SPE) is a key aspect of a typical securitisation transaction. The Risk Retention Rules require a sponsor or one of its majority-owned affiliates to retain the required risk exposure in one of the prescribed forms under the rules. The firms success is built on its The industry has been focused on obtaining permanent relief against those aspects of the new regulations that are particularly burdensome for securitisation SPEs. The firms global presence and deep understanding of its clients' businesses and the industries they operate in, drives the firms work to provide outstanding legal service and commercial advice. Most of the remaining ABS are issued in private placement, typically in a manner that permits resales in compliance with Rule 144A. Shearman & Sterling is one of the worlds leading premier global law firms and was established over a century ago. Various courts have noted that some factors may be more important than others; in particular, the consolidation of financial statements, difficulty of separating assets, commingling of assets and profitability to all creditors. In response to that further feedback, the SEC staff issued a revised no-action letter in November 2022. Department profile | Shearman & Sterling LLP. On 13 December 2021, the Federal District Court in Delaware denied the Trusts motions to dismiss the complaint on the grounds that the securitisation Trusts meet the definition of covered persons, because even if they themselves do not directly service the loans, they engage in loan servicing through third-party servicers who perform those functions on their behalf. Its fast-paced, but you are never needlessly busy, a trainee told us. A typical trainee day in the seat can range from doing legal research, helping draft submissions for tribunal hearings or doing some due diligence to helping file submissions and make sure documents are in correct shape with indexes. A couple of trainees even got the chance to attend hearings. These types of contracts can therefore be used as a means of transferring exposure to the assets underlying a securitisation as an alternative to a true sale. As the old saying goes (sort of): with great responsibility, comes great hours. Hogan Lovells has around 2500 attorneys and Shearman boasts about 850. According to the ARRC, use of the SOFR Term Rate should be in proportion to the depth of transactions in the underlying derivatives market and should not materially detract from volumes in the underlying SOFR-linked derivatives transactions that are relied upon to construct the SOFR Term Rate itself over time and as the market evolves initially. In June 2017, the ARRC identified SOFR as its preferred alternative to LIBOR for many purposes, including securitisations. The proposed disclosures do not appear particularly relevant to ABS issuers and would be problematic if made applicable to ABS issuers in their current form. The firms lawyers are true business partners to their clients and pride themselves on forming long-standing working relationships, while navigating shifting regulations and market developments, to help clients succeed. SPEs used in securitisations can theoretically take almost any organisational form, including a limited liability company, a corporation, a trust or a partnership. L-shaped risk retention, by holding a combination vertical and horizontal risk retention that adds up to 5%. Jay Singer is noted for his strength in structuring tax-efficient corporate transactions. Shearman & Sterling LLP > The Legal 500 Rankings Dispute resolution > Securities litigation: defense Tier 1 Shearman & Sterling LLP is recognized as one of the pre-eminent firms for securities litigation, investigations, and enforcement actions. oversight and governance of climate-related risks; how climate-related risks, including those that are reasonably likely to have a material impact on business or financial statements, may affect business; how climate-related risks have affected or are likely to affect strategy, business model and outlook; processes for identifying, assessing and managing climate risks and how those processes fit into overall risk management; impact of climate-related events and transition activities (such as policy changes) on the financial statements and financial estimates; and. Co-Global Managing Partners: George Casey, Adam Hakki Shearman & Sterlings compensation is aligned with the standard market-rate salary scale. Sorsby says We intentionally designed a separate assessment day so that we could use the vacation scheme as an experience. Enforcement and Penalties for Non-compliance. The firm was recognized with 106 practice and individual The covered fund definition only captures entities that would have to register under the Investment Company Act but for the exemption set forth in Section 3(c)(7) or 3(c)(1), or that are commodity pools for which the commodity pool operator has claimed an exemption from registration and record-keeping requirements pursuant to Section 4.7 of the CEA, or that are substantially similar commodity pools. Participation agreements will also typically include provisions relating to a participation buyers ability to give consent and otherwise participate in voting actions relating to the underlying asset, as well as elevation rights that establish when either party to the participation can call for reasonable efforts to effectuate a full assignment of title. Theres plenty of room for pro bono work at Shearman too, with a dedicated pro bono point person (shoutout to Nina!) The case is currently stayed and briefs have been filed, including an amicus curiae brief filed by the Structured Finance Association in support of the Trusts position. These funds are used to service interest and principal on the issued securitisation notes and are otherwise available to acquire new receivables or loans, as applicable. Senior Partner: David Beveridge Ltd. on its acquisition of Korchina Logistics Holdings Limited. Generally, the opinion will describe the salient facts and analyse these facts in light of the factors identified by the courts as relevant to the true sale determination. In September 2017, the Consumer Financial Protection Bureau (CFPB) filed suit against 15 National Collegiate Student Loan Trusts (the Trusts), alleging that the Trusts had violated the Consumer Financial Protection Act (CFPA) by engaging in unfair and deceptive practices in connection with the servicing and collection of the private education (not Federally guaranteed) student loans owned by each of the Trusts (but not originated nor serviced by any Trust entity). 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. Also, there is likely to be basis risk between the cash flows on ABS and the underlying pool assets if floating interest rates on both do not adjust simultaneously and based on the same reference rate. in the case of a foreign financial institution (defined broadly to include a hedge fund, a private equity fund, a mutual fund, a securitisation vehicle or other investment vehicle), the entity must identify and provide information in respect of financial accounts with such entity held directly or indirectly by US persons and US-owned foreign entities; and. Delaware is viewed as a favourable jurisdiction for forming business entities. It is common to obtain a true sale opinion in securitisation transactions that evaluates the relevant facts in light of the factors outlined above. Finalists University of The typical items of documentation used to effectuate bankruptcy-remote transfers are: As previously noted, title is not dispositve of ownership, nor is it necessary for the consideration to be in the form of cash. Benchmark replacement conforming changes are changes that the Federal Reserve determines would address one or more issues surrounding the replacement of the contracts benchmark, or (for non-consumer contracts) that are necessary or appropriate to implement the new benchmark in the reasonable judgment of the calculating person responsible for calculating that benchmark under the contract. Because most collateralised loan obligation (CLO) transactions rely on Section 3(c)(7) of the Investment Company Act of 1940, as amended, for an exemption from investment company status, those CLOs constitute private funds within the meaning of the Advisers Act, and the proposed rules may therefore become applicable to those CLOs and related collateral managers, if adopted in their proposed form. SPEs established as single-member LLCs or Delaware statutory trusts can be readily structured to avoid entity-level tax. Shearman & Sterling represented Seazen Group Limited as the guarantor in connection with the offering of $200 million 4.25% guaranteed senior notes due 2022 by Future Diamond Limited,. This takes place with either a senior associate or a partner and a member of the graduate recruitment team, and isn't too formal, according to Gascoyne. Under the most recent no-action letter, the SEC staff will not take enforcement action against a broker-dealer that publishes, or submits for publication, quotations for fixed-income securities, if the broker-dealer reasonably has determined that the security or its issuer meets one of several specified criteria, or there is current and publicly available financial information (consistent with Rule 15c2-11(b)) about the issuer. US Summer Program. On the basis of in-depth research, Chambers and Partners identifies the worlds top lawyers in more than 175 countries, providing independent rankings and editorial commentary. The courts have also identified a variety of other factors that do not fall within the categories above but may be indicative of a secured loan, including: Some states have sought to bolster securitisations by restricting recharacterisation of a purported sale transaction. Because SOFR is effectively a risk-free rate, it requires a spread adjustment, known as the applicable benchmark replacement adjustment in ARRC parlance, to match LIBORs unsecured and riskier calculation. Another tax issue that arises in connection with the use of foreign SPE issuers that are treated as corporations for US federal tax purposes is whether the SPE is engaged in a US trade or business for US federal income tax purposes. The information must be published at least three days prior to bringing a covered securitisation to market. specific greenhouse gas emission metrics. 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. At Shearman & Sterling, being a full service law firm means that we are able to offer a full range of legal services to our clients. Reg AB II enables the SEC to extend the asset-level disclosure requirements to 144A private placements and to additional asset classes. Chambers and Partners guides offer in-depth analysis of the legal market within countries and regions across the globe. 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. Here, they give you a taste of what its really like as a trainee.. Those rules, which were proposed in July 2022 and adopted in December 2022, will become effective 30 days after their publication in the Federal Register. Notably, the DC Court of Appeals ruled in 2018 that subjecting managers of open-market CLOs to the Risk Retention Rules exceeded the statutory authority under Section 941 of the DoddFrank Act and consequently such CLOs are currently not subject to the risk retention requirements. Issuers are typically SPEs that are restricted from engaging in activities unrelated to the securitisation. In securitisations with revolving periods during which there is a constant replenishment period, the servicer will also typically be required to ensure compliance with applicable pool criteria and provide relevant reports in connection with any collateral removal, additions or substitutions. The occurrence of a benchmark replacement event means that the applicable benchmark replacement has taken place for the USD LIBOR rates that have ceased to be published on the date of cessation, which was the related benchmark replacement date. This Wall Street giant has made a Sterling name on English soil in all things finance. Shearman & Sterling has a distinguished history of supporting clients wherever they do business, from major financial centres to growing markets. If the violation of the Risk Retention Rules also amounts to a disclosure violation, there could be separate SEC or private action on that basis, as discussed in 4.2 General Disclosure Laws or Regulations. Summer associate programs of However, Section 27B requires implementing rules to be passed within 270 days, and to date no such regulations have been put in place. Under the CFPA, a covered person includes (A) any person that engages in offering or providing a consumer financial product or service; and (B) any affiliate of a such a person, if such affiliate acts as a service provider to such person. 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. Toronto Summer Program. The firms initiatives include WISER (Womens Initiative for Success, Excellence and Retention), BLAQUE (Black Lawyers Aligned in the Quest for Excellence), AACES (Asian Attorneys for Community, Empowerment and Success), and finally: BUILD (Black Undergraduate Internship & Lawyer Development). Phase 2 was scheduled to extend from 4 January 2023 through 4 January 2024, and Phase 3 was scheduled to begin on 5 January 2024 and extend indefinitely. We were told that if you hit a certain number of hours of pro bono, you get a star on your door. Who said lawyers couldnt be suckers for some positive reinforcement? A security that has been issued in a private placement will typically be subject to resale limitations that may restrict the liquidity of the issued securities. The SEC has the power to enforce its rules. This structure is typically used in auto lease securitisations and other lease transactions relating to titled goods. To avoid this outcome, foreign securitisation issuers tend to conduct their activities in accordance with detailed guidelines that are aimed at ensuring that they are not engaged in loan origination or otherwise treated as conducting a lending or other financial business in the USA. periodic reporting about previously reported incidents, risk policies and procedures, director oversight of risks, and managements role in assessing and managing risks; and. The trainee salary is 50,000 and, upon qualification, reaches a mighty 145,000. However, there is significant uncertainty around a bankruptcy courts acceptance of such statutes, and securitisations are therefore typically structured to comply with the judicially created true sale criteria. The formulae are focused on capturing the material risks that are common for the particular insurance lines of business. Shearman & Sterling 2023 | Attorney Advertising, Committee on Foreign Investment in the United States (CFIUS), Financial Institutions Advisory & Financial Regulatory, Environmental, Social and Governance (ESG), EU General Data Protection Regulation (GDPR), Future of Financial Services Regulation in the UK, Global Compliance & Anticorruption (FCPA), Special Economic Zone and Regulatory Drafting. Shearman & Sterling represented the initial purchasers in connection with KWG Group Holdings Limiteds offering of $378 million 6% senior notes due 2026. Such information would be a very brief statement of the nature of the business of the issuer and the products and services it offers; and the issuers most recent balance sheet and profit and loss and retained earnings statements, and similar financial statements for such part of the two preceding fiscal years as the issuer has been in operation (the financial statements should be audited to the extent reasonably available).. Violations of rules pertaining to security-based swaps promulgated by the SEC will be subject to similar enforcement and penalties as other violations of securities laws, as discussed in 4.2 General Disclosure Laws or Regulations. As noted above, both the SEC and the CFTC have comprehensive regulations around entering into derivatives, and such instruments may be subject to clearing, settlement and margin requirements specified in the securities acts and the Commodities Exchange Act. 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