9 Appold Street, Broadgate West, London, Greater London, UK, EC2A 2AP, 300 West 6th Street, Suite 2250, Austin, Texas, USA, 78701, 2828 North Harwood Street, 18th Floor, Dallas, Texas, USA, 75201, Bank of America Tower, 800 Capitol Street, Suite 2200, Houston, Texas, Houston, Texas, USA, 77002, 1460 El Camino Real, 2nd Floor, Menlo Park, California, USA, CA 94025-4110, 535 Mission Street, 25th Floor, 94105, San Francisco, California, USA, 401 9th Street, NW, Washington, DC, District of Columbia, USA, DC, 20004-2128, Authored by Michael Dorf, Cody Wright, Robert J Cardone, Cassandra Cuellar, Authored by Lorna Xin Chen, Anil Motwani, Ji Zhang, Litigation: White-Collar Crime & Government Investigations, California: San Francisco, Silicon Valley & Surro, Litigation: General Commercial: Highly Regarded, 599 Lexington Avenue, New York, New York, USA, NY 10022-6069. pleb1. Shearman & Sterling In 2021, Shearman interviewed students from over 30 law schools both on campus and through job fairs. 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. Enforcement is usually a combination of events of default under the indenture, which gives the noteholders the right to direct the indenture trustee to take enforcement actions, and servicer defaults, which give the specified class or classes of noteholders rights to replace the servicer. 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. As a global, elite law firm, Shearman & Sterling represents many of the worlds leading corporations and major financial institutions, as well as emerging growth companies, governments and state-owned enterprises, on ground-breaking, precedent-setting matters. 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. You hear that US firms have cut-throat cultures, but that isn't the case, one emphasised. There are extensive fundamental and technical differences between ABS and corporate issuers, not the least of which is that ABS issuers engage in limited activities that pose limited cybersecurity risks. Investors in securitisations include banks, asset managers, insurance companies, pension funds, mutual funds, hedge funds and high net worth investors. Limiting the SPEs unrelated activities and restricting the SPE from having employees and unrelated property reduces the risk of unrelated liabilities. The intersection of legal and accounting requirements often plays a significant role in structuring a securitisation transaction. Our The NAICs letter described a hypothetical example in which an investment in all of the tranches in a CLO transaction would be subject to a lower RBC factor than a direct investment in the CLOs underlying collateral, and they expressed their position that the RBC factor each such investment should be equal. The CLO is actively managed and will acquire and maintain a diversified pool of underlying loans that is managed to conform to a number of concentration limits for the pool, with the goal of maximising return while maintaining the required pool diversification and other relevant transaction criteria. 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. With $1,012,059,000 gross revenue in 2021, the firm placed 50th on The American Lawyer's 2022 Am Law 200 ranking. 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). 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. In addition, it is typical for trustees to be entitled to indemnification under the transaction for any losses and liabilities that may arise other than as a result of their own gross negligence or wilful misconduct and the trustee will also be entitled to indemnification in connection with any directions given by noteholders. Any identified determining person will have the authority to replace the LIBOR rates with the SOFR-based benchmark replacement selected by the Federal Reserve. For example, the CFTC has issued no-action letters exempting from the definition of commodity pool certain securitisation entities that are operated consistent with SEC Regulation AB or Investment Company Act Rule 3a-7. In sum, Rule 15c2-11 rule does not appear to pose problems for brokers or dealers desiring to quote registered public ABS, at least so long as they are currently reporting. daily simple SOFR in arrears, calculated using simple interest over the current interest period; SOFR compounded in arrears, calculated by compounding interest over the current interest period; and. The structure also allows for some series to be in their revolving period while other series are in their amortisation period. He goes on to tell us that supervisors are told to treat vac schemers as they would a first seat trainee. The court did not decide whether the Trusts have any liability for the actions of the servicers only that the CFPB has enforcement jurisdiction over the Trusts. 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). Regularly advises on complex tax planning and structuring matters. 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. One trainee quipped that its more likeable than other types of finance, because its more tangible and more rewarding when youre working to finance something from nothing! Trainees were quick to highlight that the teams work involves plenty of crossover with the firms offices in Abu Dhabi and Saudi Arabia too. Number of lawyers worldwide: 800+. 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. The tasks and the work that you do is always valued. Whats more, the firms client list includes most of the big banks you can name, from J.P. Morgan, Goldman Sachs and Credit Suisse to Barclays and HSBC. Rule 3a-7 is available for entities holding primarily self-liquidating assets that are only sold or purchased in accordance with the terms of the transaction, and not for the purpose of capturing market gains or avoiding market losses. Instead of selling the assets and leases to be securitised to a particular issuer, the titling trust segregates such leases and assets, and issues special units of beneficial interests (SUBIs) that represent the interest in such segregated pool. If the determining person does not select any non-LIBOR benchmark replacement, the benchmark replacement selected by the Federal Reserve will automatically replace the LIBOR rates in the contract. As noted in 4.11 Activities Avoided by SPEs or Other Securitisation Entities, this has impacts on the Investment Company Act and Volcker Rule analysis. Consequently, a true sale and non-consolidation opinion delivered as part of a securitisation transaction may receive additional comments from accountants relating to assumptions and qualifications that are viewed as potentially problematic under applicable accounting literature. As noted above, transactions that violate the securities laws may be voidable and may give rise to both private and public enforcement. 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. The actual information about the pool only needs to be provided two business days prior to settlement. The servicer will typically be responsible for collecting payments under, and ensuring that the issuer complies with, the obligations relating to the collateral. 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. Guangzhou Fineland Real Estate Developments Exchange Offer and Concurrent New Money Offering. 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. Shearman & Sterling has over 850 lawyers globally, speaking more than 75 languages. A titling trust is established to originate the lease and hold title to the leased assets. Owner trustees typically act on behalf of the holders of any trust certificates issued by an issuer trust (if applicable). the issuer becoming subject to insolvency proceedings. 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 industry has been focused on obtaining permanent relief against those aspects of the new regulations that are particularly burdensome for securitisation SPEs. The latter opinion is frequently also required in the case of certain amendments to the corporate documents. 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? opportunities in developing areas of renewable energy and green power.. Skyfame International Holdings Limiteds $100 million Senior Notes Offering. 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. Shearman & Sterling represented the initial purchasers in connection with Skyfame International Holdings Limiteds offering of $100 million 13% senior notes due 2023, unconditionally and irrevocably guaranteed by Skyfame Realty (Holdings) Limited. 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. SOFR is a secured rate derived from borrowing and lending activities on US treasuries, while LIBOR is based on a survey of quotations from participating banks regarding what they believed the going-forward unsecured interest rate should be. At the time of this writing in January 2023, there is no longer any relief that extends after that date. 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. The recommended benchmark replacement will be based on SOFR, including any recommended spread adjustment and benchmark replacement conforming changes. However, an outright prohibition against the SPE itself voluntarily filing for bankruptcy is unenforceable as against public policy and such risk must therefore be mitigated by more indirect means. Wilful violations of the Risk Retention Rules may also give rise to federal or state criminal actions. 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 transaction documents typically include non-petition clauses that restrict involuntary bankruptcy filings against the issuer. The FDIC has promulgated non-exclusive safe harbour provisions for participations involving covered banking entities in 12 CFR 360.6 that, if complied with, provide additional comfort that the FDIC, when acting as conservator or receiver, will respect such participations as an assignment. As such, the TBA market permits lenders to lock in rates for mortgages before they are originated, which, in turn, allows borrowers access to lower, locked-in rates. We want them to have as authentic an experience as possible. Along with a supervisor for each department they visit, attendees are assigned a trainee mentor, whose workload they shadow in between various HR-led activities. 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. satisfaction of specified eligibility criteria when sold; all required consents and authorisations having been obtained; various additional tailored representations. These GSEs purchase loans that satisfy their origination criteria and issue securities backed by pools of such loans that are guaranteed by the relevant GSE. They are strong academics, evidence of relevant work experience, tailored answers to our questions, and an error-free application form. We might arrange for them to have a coffee with a partner from that department, for example.. The combination of our extensive experience and global presence enables us to provide clients with swift, coordinated and effective advice on a variety of tax issues in multiple jurisdictions. The Volcker Rule discussed below has made it less attractive for securitisation SPEs to rely on Section 3(c)(7), although the exemption is still relied on by actively managed CLOs. For subsequent seats however, trainees submit a form with five ranked practice groups, including reasons for each of their choices. For most securitisations, risk retention may take any of three standard forms: The person required to retain the risk is the sponsor, defined as a person who organises and initiates an asset-backed securities transaction by selling or transferring assets, either directly or indirectly, including through an affiliate, to the issuer, a phrase that is substantially identical to the definition of sponsor under Regulation AB. The number of independent directors should be at least equal to the minimum number of members or partners required to continue the SPEs existence. the transferor has rights in the relevant asset, or the right to grant rights in the relevant asset; and. Under the ARRCs recommended language, a transition from LIBOR to SOFR in a securitisation is triggered upon the declaration of a specific benchmark transition event: The ARRC has confirmed that the March 2021 IBA USD LIBOR announcement constituted a benchmark transition event and amended its recommended fallback language to reflect that occurrence. Jiayuan International Group Limiteds Tender Offer. Clients regularly entrust us with their most complex and strategic tax matters, resulting in our involvement in ground breaking transactions throughout the world. 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. In a securitisation transaction it is common for tax counsel to provide an opinion addressing the tax treatment of the issued securities; in particular, whether the offered notes would be treated as debt securities for US federal income tax purposes. Shearman & Sterling LLP Website www.shearman.com Share profile Contact details Contact number +8621 6136 5000 Related Rankings Chambers Review Notable Practitioners Ranked In turn, this has allowed for the emergence of a highly liquid to-be-arranged (TBA) market, where pools of MBSs are deemed to be fungible, and traded, on the basis of a few basic characteristics, such as the issuer, amortisation type (eg, 30 years or 15 years), the coupon rate, the settlement date and the maximum number of mortgage securities per basket. Tax Laws and Issues. Therefore, the rule does not pose an issue for registered ABS sold after the effectiveness of the post-crisis changes to Rule 15d-22(b) that require ABS reporting for the life of the deal. Famous for: elite Wall Street firm; large English law practice; top-end salary, UK partners/solicitors/trainees: 33/86/23, Overseas seats: Singapore, Abu Dhabi, Brussels, Dubai. Typically, the power to exercise such rights and remedies is given to the trustee with provisions that entitle the trustee to obtain directions backed by indemnification. The issuer trust will typically issue notes to investors and trust certificate(s) to the depositor. 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. SOFR has been used routinely in CLOs, where the pool assets consist generally of floating rate commercial loans, but the ARRC has expressed displeasure over the recent use of term SOFR as the benchmark for other floating-rate ABS backed by fixed-rate receivables. The Securities Act is the principal law governing the offer and sale of securities, and the Exchange Act provides the SEC with broad powers to regulate various market participants and prohibit certain types of conduct in the market, and empowers the SEC to require certain periodic reporting. Where the securitisation involves securities within the meaning of the Investment Advisers Act of 1940, as amended (the Advisers Act), such as CLOs, and involve more active or discretionary management of the collateral, the agreement would also typically address requirements and prohibitions under the Advisers Act and rules promulgated thereunder. The trustees also undertake other specified administrative tasks, but typically avoid taking any discretionary actions other than pursuant to a direction from the relevant noteholders. In May 2021 the ARRC selected CME Group as the administrator for forward-looking term SOFR rates, and in July 2021, the ARRC formally recommended CME Groups term SOFR rates. Ambassador at Large for War Crimes Issues; HON. The team is split between project development work, and the project finance side of things, one trainee explained. It is, however, not common to obtain a bankruptcy opinion for such protected contracts. While the decision does not constitute binding precedent, other judges in different jurisdictions are likely to give the decision significant weight in a case presenting the same general questions. Our Head Start programme is a one-day event specifically designed for First Year law students and Second Year non-law students looking for an introduction to City law. "He is very proactive, approachable, easy to work with and technical.". 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