The accounting literature includes commentaries on the legal opinion requirements, including the opinion expressly mentioning each area of continued involvement between an originator and its affiliates and the securitisation SPE. He regularly handles cross-border mandates. in certain securitizations that hold underlying business loans or other assets that reference the SOFR Term Rate and where those assets cannot easily reference other forms of SOFR. 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. Shearman & Sterling represented the initial purchasers in connection with KWG Group Holdings Limiteds offering of $378 million 6% senior notes due 2026. Therefore, quotations of Rule 144A ABS generally are allowed without further inquiry by the broker-dealer. imposing higher capital requirements on non-exchange-traded OTC derivatives. periodic reporting about previously reported incidents, risk policies and procedures, director oversight of risks, and managements role in assessing and managing risks; and. Sponsors are typically in the business that generates the relevant underlying receivables or other financial assets, and also will typically organise and initiate the ABS transaction and engage in selection of the relevant assets. The firms structured transactions practice serves the financing needs of the worlds most sophisticated businesses. The structure is otherwise typically similar to the two-tier structure previously described. disclosure requirements for communications with rating agencies, which, among others, require all information provided to hired Nationally Recognized Statistical Ratings Organizations (NRSROs) in relation to the initial credit rating or any ongoing credit surveillance to be posted to a password-protected website, referred to as the 17g-5 website. Shearman & Sterling is excellent not only in legal matters but one of their important strengths is in providing strategic advice to clients. They do not go with ready-made solutions but actually listen to client needs and address their services and advice accordingly. Re-securitisations are subject to separate risk weight calculations. disclosure of the form and determination of retained risk as specified in the risk retention rules; reporting of repurchases and replacements of securitised assets in connection with breaches of representations and warranties and of the conclusions and findings of third-party due diligence reports; and. 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. Nevertheless, since filing a UCC financing statement is easy and cheap, and would provide perfection regardless of whether the transfer is respected as a sale or whether it is characterised as a loan, such filing is typically the primary means of perfection. Fannie Mae and Freddie Mac are GSEs chartered by Congress for the purpose of providing a stable source of liquidity for the purchase and refinancing of homes and multi-family rental housing. 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. 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. Shearman & Sterling advised Citigroup Global Markets Ltd. as the global coordinator, sole bookrunner and representative of the underwriters of the initial public offering of Black Spade Acquisition Co of 16,900,000 units at an offering price of $10 per unit on the New York Stock Exchange. The team is a recognised global leader in the structured finance industry, domestically and internationally. Business Services. None of the Trusts acted or acts as the related lender, originator or servicer of such student loans; they are merely passive ownership entities that distribute collections to the related securitisation debt and equity investors while hiring third parties to undertake the requisite ongoing administrative and servicing activities on their behalf. In a recent matter, Shearman & Sterling advised NEOM Company on the cross-border financing of a $6.5 billion green energy facility between the UK and Saudi Arabia. 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). 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).. For the firms full list of rankings, visit Chambers and Partners. Finally, the SEC has proposed, but not finalised, conflict-of-interest rules intended to address conflicts of interest inherent in synthetic securitisations that would have made such securitisations impracticable in many circumstances. Shearman & Sterling LLP Website www.shearman.com Share profile Contact details Contact number +8621 6136 5000 Related Rankings Chambers Review Notable Practitioners Ranked The London office opened 50 years ago and quickly became one of the As you might expect from a firm with such an international reach, there are four internationalsecondment opportunities available to trainees at the firm: Dubai, Abu Dhabi, Singapore, and an antitrust seat in Brussels. Legal. The most typical credit enhancements include over-collateralisation, subordination of junior tranches, cash reserves and excess yield on the underlying assets compared to what is needed to service the asset-backed fixed-income securities. The SEC has generally indicated that CDSs, the most common type of derivative used in synthetic securitisations, are not self-liquidating financial assets. Shearman & Sterling's compensation is merit-based. The offering of securities in a synthetic securitisation will be governed by the Securities Act. In response to feedback from industry groups, the SEC issued a no-action letter in December 2021, which established a tiered set of compliance dates in an effort to allow brokers and dealers time to bring themselves into compliance. The CFTC can also impose equitable remedies, including restitution and disgorgement of gains. The firm now recruits exclusively through its vacation scheme. Establishing a bankruptcy-remote special-purpose entity (SPE) is a key aspect of a typical securitisation transaction. Overseeing the efficient and cost effective recruitment of high calibre trainees for the London office, and overseeing the pastoral and professional care of current trainees in the firm, ensuring compliance with SRA requirements. Registered investment companies are subject to leverage and capital structure requirements that are incompatible with a securitisation. annual reporting or proxy disclosure about directors cybersecurity expertise. Delaware is viewed as a favourable jurisdiction for forming business entities. The corresponding rules as implemented in the USA also refer to tranched credit risk, but do not include the pool requirement. In addition to a robust, dedicated structured transactions practice, it offers key practice area expertise to support transactions, including tax, the Employee Retirement Security Act (ERISA), litigation, broker-dealer, real estate and investment company practice lawyers. It is, however, not common to obtain a bankruptcy opinion for such protected contracts. The CFTC has authority over most OTC derivatives, referred to as swaps in the Commodity Exchange Act (CEA), whereas the SEC has authority over OTC derivatives that fall within the Exchange Act definition of security-based swaps, which covers derivatives linked to single-name loans or securities, narrow-based indexes of loans or securities, events relating to such loans or securities, or their issuers. Otherwise, among the items of the required information are the issuers most recent balance sheet (as of a date less than 16 months before the publication or submission of the quotation) and statements of profit and loss and retained earnings (for the 12 months preceding the date of the most recent balance sheet), and similar financial information for any part of the preceding two fiscal years that the issuer has been in existence. Penalties for violating the rules can include suspension or revocation of an NRSROs registration if the SEC makes a finding under certain specified sections of the Exchange Act that the NRSRO violated the conflicts-of-interest rule and the violation affected a credit rating. The extent to which regulators will address securitisation industry feedback on rules that are not yet final remains to be seen. opportunities in developing areas of renewable energy and green power.. If that strategy is not available, there are a number of potential exclusions from the covered fund definition in the Volcker Rule itself, of which the loan securitisation exemption is most important in the securitisation context. He assists clients with administrative proceedings as well as litigation in the US Tax Court. 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. As such, an awareness of the types of features that drive the consolidation analysis is often important in structuring the SPE and drafting the relevant transaction documents. A security interest in deposit accounts can only be perfected by control. In May 2022, the National Association of Insurance Commissioners (NAIC) issued a letter recommending adjustments to the risk-based capital (RBC) treatment of CLO investments held by insurance companies, in order to eliminate a perceived arbitrage opportunity. With respect to the individual rankings, more than half of the firms U.S. partners are recognized as leaders in their respective practice areas. OGUSA's Joint Venture with MHI Group to Acquire Brighter Future Solar Farm. 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. 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. However, not all factors are given equal weight in this analysis. The rules governing such entities will be a combination of: The primary factors driving the type and jurisdiction of the securitisation entity will be bankruptcy remoteness and tax. 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. 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. 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