SOFR is a secured rate derived from borrowing and lending activities on US treasuries. The SECs enforcement authority and remedies for violations of the Risk Retention Rules would be the same as its general enforcement authority against those in violation of securities laws and regulations and their control persons, including permanent or temporary cease-and-desist orders, fines, withdrawal of registrations and restrictions on acting as officers or directors of SEC-registered companies, and otherwise may strip a person or entity of privileges afforded to registered persons. At the time of this writing in January 2023, there is no longer any relief that extends after that date. Our clients rely on our tax planning at every stage of a transaction, from early planning to successful conclusion, and recognize and appreciate our creativity in solving complex tax issues, both local and cross-border. The penalties range from injunction or restraining orders, writs or orders mandating compliance, to fines. The Trusts hold more than 800,000 private education student loans totalling approximately USD12 billion, all of which were originated by private banks prior to 2008. The flexibility to structure securitisations to such needs often makes securitisations particularly attractive to insurance companies. Once all the applications have been submitted, trainees have an end-of-seat roundtable review with the training principal and hiring partners to discuss their prospects and interests. The agencies may also impose civil monetary penalties that can range between USD5,000 and USD1 million per day, and it may seek to impose removal and prohibition orders against any institution-affiliated party (a potentially broad list of persons), which may remove and potentially bar the person from participating in the business of the relevant banking entity or other specified entities. Delaware statutory trusts (DSTs) and Delaware limited liability companies (DLLCs) are often the entities of choice for securitisations. The presence or absence of some or all of these factors does not necessarily result in substantive consolidation. There is current and publicly available information (consistent with Rule 15c2-11(b)) about the issuer, and the staff would consider the Information Requirement discussed in Section II.C. public statement by LIBORs administrator, ICE Benchmark Administration Limited (IBA), or its UK regulator, the UK Financial Conduct Authority, that the actual cessation of LIBOR has occurred or is expected; a public statement or publication of information by the IBA that LIBOR is no longer representative as an index (known as a pre-cessation trigger); or. 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. At the time the ARRC fallback recommendations were released, term SOFR rates were purely theoretical: SOFR was primarily an overnight rate, measuring the cost of borrowing cash overnight as collateralised by US Treasury securities in the repurchase agreement market. The team is split between project development work, and the project finance side of things, one trainee explained. Of those, five were in Band 2 or above and for the seventh year in a row, the firm is ranked in Band 1 for UK-wide: Projects and Band 2 for UK-wide: Energy & Natural Resources: Power. The actual information about the pool only needs to be provided two business days prior to settlement. Senior Partner: David Beveridge The covenants will typically address payment obligations, collateral maintenance and perfection obligations, rights and related procedures concerning adding and removing underlying assets, reporting obligations, and various negative covenants intended to maintain the integrity of the securitisation. 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. The firm leverages the use of smart technology in all of its client work through its innovative data management system, Shearman Analytics, which provides a leading edge in staffing matters leanly and effectively. Brokers or dealers may continue to quote Rule 144A ABS without further restriction until 4 January 2025, but as that date approaches it is not clear the extent to which broker-dealers will be comfortable continuing to participate in those offerings when a known issue could impact their liquidity. The credit from the master trust is revolving in the sense that as the dealer inventory is sold or the credit card customer repays their balance, as applicable, funds are paid to the master trust. L-shaped risk retention, by holding a combination vertical and horizontal risk retention that adds up to 5%. This Wall Street giant has made a Sterling name on English soil in all things finance. The structure allows for multiple series of securities to be issued that all share in assets of the master trust. As the old saying goes (sort of): with great responsibility, comes great hours. For example, whether, and with whom, to consolidate a securitisation SPE can be a complex analysis that hinges on identifying who controls the aspects of the SPE that most significantly impact the SPEs performance. Consequently, it may be possible to conclude that the payments to the holders of the issued securities do not depend primarily on the cash flow from self-liquidating assets, in which case the issued securities fall outside the asset-backed security definition in the Exchange Act, which would mean that risk retention and certain other rules applicable to asset-backed securities would not apply. Shearman & Sterling represented the dealer managers in connection with the exchange offer by Guangdong Hong Kong Greater Bay Area Holdings Limited of any and all of its outstanding 14% senior notes due 2021 for 13.85% senior notes due 2023. Because of the significant consequences to the securitisation transaction, the rating agencies tend to require an opinion to the effect that the SPEs activities would not amount to it engaging in a US trade or business. By establishing a wide base of technical knowledge, experience and understanding of each clients needs, we advise clients on their most critical tax matters, including reducing overall tax costs and developing tax-efficient investment and operating structures. 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. Ginnie Mae does not itself issue MBSs, but instead provides a guarantee, backed by the full faith and credit of the US government, of securitisations by participating institutions of government-insured mortgages. For example, the Basel III capital rules penalise banks that invest below the most senior position in a securitisation, thereby impacting banks willingness to invest in mezzanine tranches and below. News October 20, 2022 Shearman & Sterling Earns High Rankings in Chambers UK 2023 Shearman & Sterling continues to garner recognition in the 2023 edition of Chambers Student, the students companion to the legal profession, gives the truth about law firms and the Bar. The firm has in-depth experience in all aspects of the public and private offering and distribution of structured finance securities. 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. satisfaction of specified eligibility criteria when sold; all required consents and authorisations having been obtained; various additional tailored representations. Underwriters (including initial purchasers in a 144A transaction) and placement agents are registered broker-dealers responsible for placing the ABS. 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. Newbies in the seat were drawn to the opportunities in developing areas of renewable energy and green power on offer, with typical tasks including drafting contracts, document management, and proof-reading.. The formulae are focused on capturing the material risks that are common for the particular insurance lines of business. The trainees we spoke to let us know that the majority of trainees want to qualify into M&A and finance but of course teams cant facilitate everyones wants. The firm didn't disclose its 2022 retention figures. in legacy contracts (including ABS transactions) that have adopted the ARRCs recommended fallback language; in business loans where transitioning from LIBOR to an overnight rate has been difficult; and. Applications for 2022 vacation schemes were high; the firm received around 2,000 applications for its 15 training contract vacancies. The SEC regulates the offer and sale of securities issued by a synthetic securitisation and the issuers Investment Company Act exemptions are the same as in a traditional securitisation. 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. Securitisation disclosure requirements are in part governed by generally applicable securities laws, and in part by some ABS-specific requirements. Enforcement and Penalties for Non-compliance. A decision by the Third Circuit is expected by mid-2023. The trainee salary is 50,000 and, upon qualification, reaches a mighty 145,000. The Volcker Rule prohibits banks from holding an ownership interest in, or sponsoring entities that are, covered funds for purposes of the Volcker Rule. 599 Lexington AvenueNew YorkNY 10022-6069USA. For the firms full list of rankings, visit Chambers and Partners. The good faith, annualized salary range for this position is $58,000 to $75,000 depending on the candidate's overall experience and other job-related factors permitted by law such as, education, training, other responsibilities. This other question of the Trusts vicarious liability for the servicers conduct remains a critical open point and is likely subject to further years of litigation before it is decided or may not be decided at all if the case is settled. As noted above, transactions that violate the securities laws may be voidable and may give rise to both private and public enforcement. Phases 2 and 3 would effectively have required Rule 144A issuers of ABS to make the required Rule 144A information publicly available, a requirement to which many market participants objected. Many of these changes do not appear to be focused primarily on asset-backed securities (ABS) or the securitisation markets, but present unforeseen and challenging consequences. Therefore, the only variations of SOFR actually available to use until July 2021 were: In March 2021, the ARRC published a white paper containing an approach to using SOFR in new issuances of ABS and other securitised products. provisions that require a poll, survey, or inquiries for quotes or information concerning inter-bank lending or deposit rates. plus a commercial question about our place in the industry., There are four elements to an application that can help a candidate to progress to the interview stage, Gascoyne says. And its no surprise. has a distinguished history of supporting clients wherever they do business, from major financial centres to growing markets. 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. 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. In addition, insurance regulations typically specify concentration limits for various categories of investments. With experience across the energy, mining and metals, infrastructure and TMT sectors, the practice In CLOs the servicing agreement is typically referred to as a Portfolio Management Agreement, Collateral Management Agreement or Investment Management Agreement (or similar term). 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? Shearman & Sterling's compensation is merit-based. On the other hand, if such transfer is treated only as a granting of a security interest in collateral, then a bankruptcy of the seller will subject the buyers rights with respect to such assets to the automatic stay and other bankruptcy powers. If youre ordering, wed love a pizza right now Throughout the hiring process, the graduate team thinks about what it would be like to share an office with you at 3am., When late nights are a part of the deal, who you do them with is important, so throughout the hiring process, the graduate team thinks about what it would be like to share an office with you at 3am, so everyone is pretty friendly! This friendly culture of the firm came through in the trainees we spoke to: You are known by name, not as The Trainee, one remarked. Investors in unfunded ABS tranches will typically have contingent funding obligations and may be required to provide additional credit support or face replacement if their credit drops below agreed levels. 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. As a result, the proposed rules could result in the disclosure of a number of immaterial risks for ABS issuers. Trustees typically have a security interest in the underlying pledged assets and act as communications and payment agents. However, asset-level disclosures of the level of detail required in Reg AB II offerings are not commonly included in private placements. The Federal Reserve was required to promulgate implementing regulations not later than 180 days after the date of its enactment. The CLO issuer will typically be organised as a Cayman Island company and structure its loan acquisitions in a manner that avoids it being engaged in any US trade or business, as discussed in 2. 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. Skyfame International Holdings Limiteds $112 Million Bond Offering. Investors in securitisations include banks, asset managers, insurance companies, pension funds, mutual funds, hedge funds and high net worth investors. The nature of the CDS may also impact the Investment Company Act analysis for the issuer. SOFR compounded in advance, calculated by compounding interest over a set period of days. The firms success is built on its clients success. In the UK 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. Shearman & Sterling has a distinguished history of supporting clients wherever they do business, from major financial centres to growing markets. The latter opinion is frequently also required in the case of certain amendments to the corporate documents. There was a lot of seeking out case law, and work on public deals meant we needed to keep our ears to the ground for developments in the market. Non-research tasks included standard due diligence and reviewing uploads into the data room. Violations of the swaps rules promulgated by the CFTC will be subject to enforcement and penalties by the CFTC. The SEC adopted amendments to Rule 15c2-11 that became effective in September 2021 to, among other things, provide greater transparency to investors and other market participants by requiring that information about the issuer and its security be current and publicly available before a broker or dealer can begin quoting that security. Shearman & Sterling advised Abu Dhabi Future Energy Company PJSC (Masdar) and PT PJB Investasi (PJBI), a subsidiary of Indonesian state-owned offtaker PT PLN (Persero), on the $114 million financing of a 145MWac floating solar photovoltaic power project on the Cirata Reservoir in Indonesia. However, the recent October amendments to the Volcker Rule allow for a small bond basket, thereby removing one of the restrictions that have prevented CLO managers from engaging in a bond/loan arbitrage that was popular prior to the promulgation of the Volcker Rule. The intersection of legal and accounting requirements often plays a significant role in structuring a securitisation transaction. The principal laws that govern securities-related disclosures are the Securities Act of 1933, as amended (the Securities Act), and the Securities Exchange Act of 1934, as amended (the Exchange Act). Vac schemers spend each week in a different department. The letter does not directly address privately offered securities that do not rely on Rule 144A, such as a pure private/Section 4(a)2) deal or an institutional accredited investor/Regulation S only deal. 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. The old trope of competition at US firms was something that the current intake was quick to dismiss too. The drive behind the groups is to promote visibility in the firm through talks, socials and other events bringing groups together. While sources noted a discouraging amount of diverse partners, looking at the juniors, it is clear that progress is being made. 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. 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. At a base level, future trainees need a minimum AAB at A level and 2:1 degree. Reg AB II deviates from the typical shelf registration practice of using a base prospectus and a supplemental prospectus, and instead requires the filing of one integrated prospectus. 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. Ginnie Mae, Fannie Mae and Freddie Mac are the principal agencies and government-sponsored entities (GSEs) engaged in the securitisation of mortgages. In its simplest form, a synthetic securitisation will invest the proceeds from issuing securities in permitted investments and sell CDS protection on a particular financial asset. Shearman & Sterling represented the initial purchasers in connection with Sunac China Holdings Limited's offering of $400 million 6.8% senior notes due 2024 and tap offering of $100 million 6.5% senior notes due 2026. Shearman & Sterling LLP Website www.shearman.com Share profile Contact details Contact number +65 6230 3800 Related Rankings Chambers Review Notable Practitioners Ranked 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. Student insights. If there have been no such requests, an annual Form 15-G filing must be made attesting to that fact. However, transactions that comply with Rule 144A and Regulation S permit qualified institutional buyers and foreign persons to freely sell to other qualified institutional buyers or other foreign persons. Like most of the big US firms with a presence in London, Shearman & Sterlings origins in the Big Apple was a big part of the draw for trainees. General banking rules may also come into play when structuring a bank-sponsored securitisation, such as restrictions on affiliate transactions set forth in Sections 23A and 23B of the Federal Reserve Act and the implementation thereof set forth in Regulation W. Organisational Forms of SPEs Used in Securitisations. Title VII of the DoddFrank Act establishes a comprehensive regulatory framework for OTC derivatives to address a number of aspects of OTC derivatives that were identified as causing vulnerabilities in the financial system; in particular, the complexity, lack of transparency and interconnectivity of the OTC market and the lack of consistent margin requirements. For example, ABS issuers have a finite life, strict limits on their activities and no active governance. We aim for a conversational tone to ensure it's a two-way process.. Student loans originated under the Federal Family Education Loan Program (FFELP) benefit from a government guarantee and securitisations of such loans will therefore have a reduced risk retention requirement of between 0% and 3% depending on the level of the guarantee. Issuers of securities offered and sold in a registered offering, and issuers with assets in excess of USD10 million at fiscal year end and a class of securities (other than exempted securities) held by more than 2,000 persons (or more than 500 persons that are not accredited investors) may be subject to additional reporting requirements, including: Given that privately placed ABS are not likely to be so widely held that these requirements are triggered, they will, as a practical matter, only apply to securities sold in a registered offering. In some instances, the perfection representations relating to chattel paper may also call for the original being marked as pledged to the trustee to reduce the risk that a third-party acquirer obtains possession without actual knowledge of the prior security interest. 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. 5 Contributions provided by Shearman & Sterling LLP, The general counsel's comprehensive guide | USA. Shearman & Sterling represented the dealer managers in connection with the exchange offer by Guangzhou Fineland Real Estate Development Co., Ltd. of any and all of its outstanding 13.5% senior notes due 2021 for 13.6% senior notes due 2023. Industry groups have submitted comments pointing out these issues, and it remains to be seen whether and to what extent the SEC will take them into account in adopting final rules. is a global law firm with approximately 2,200 legal professionals in 31 offices across North America, Europe, Asia and the Middle East. 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. Two rounds, the first includes an interview and the second a proper assessment centre with a group exercise, a written exercise, a case study and another interview. 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. 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. Morgan Lewis lawyers wrote the books that structured finance lawyers rely on: Offerings of Asset-Backed Securities and The Federal Securities Law of Asset-Backed Securities. In one recent matter, the firm advised Greek food company Chipita on its sale to a subsidiary of Mondelez International for 1.7 billion. 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. The London office opened 50 years ago and quickly became one of the It is also common as part of the closing opinions for a securitisation to include an opinion that the securitisation entity would not be taxed as a corporation for federal tax purposes. Prenetics' Business Combination with Artisan Acquisition Corp. Shearman & Sterling is representing the placement agents on the PIPE in connection with Prenetics Group Limiteds business combination with Artisan Acquisition Corp. Qxpresss Acquisition of KorChina Logistics Holdings Limited. 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. 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. The firm looks at the top schools, but also we look for impressive students The issues and regulations are similar to the general securitisation structure in double SPE structure securitisations, but the titling trust may require additional analysis for purposes of the Investment Company Act exemption compared to the other entities in the structure. Shearman & Sterling FATCA generally requires that: Foreign entities located in jurisdictions that have entered into intergovernmental agreements with the USA in connection with FATCA may be subject to special rules or requirements. Future Diamond Limited's $200 Million Senior Notes Offering. Investors constitute a diverse group. Furthermore, the Attorneys General of the various US states and territories also have certain authority to bring enforcement actions under Section 13a-2 of the CEA where their citizens are adversely affected. One client remarks that it is adept at moving at pace dealing with complex The exemptions most commonly used for securitisations are Rule 3a-7, Section 3(c)(5) and Section 3(c)(7). Sunac China Holdings Limiteds $400 Million Bond Offering and $100 Million Tap Offering. The sponsor is responsible for compliance with risk retention and other relevant regulatory requirements. of the Rule 144A Adopting Release to be consistent with Rule 15c2-11(b). Highly regarded by major corporations and financial institutions, Shearman & Sterling represents the entire range of global market participants, including issuers, underwriters, investors, trustees, servicers, credit-enhancement providers, lenders, rating agencies and conduits. The industry has been focused on obtaining permanent relief against those aspects of the new regulations that are particularly burdensome for securitisation SPEs. Issuers are typically SPEs that are restricted from engaging in activities unrelated to the securitisation. An issuers most recent annual report filed under the Exchange Act or, for an issuer that has not yet filed an annual report, the prospectus from its registration statement under the Securities Act of 1933 (Securities Act), together with any subsequent Exchange Act periodic reports, suffices. A detailed description of the regulatory and other investment drivers for each of these diverse investor classes is beyond the scope of this summary; however, a few points that affect the structuring and offering of ABS are worth noting. 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. Summer Associates are paid an Entry-Level Associate Salary of $215,000, prorated for dates of employment. TaiChen Development (BVI) Limiteds $65 Million Tap Offering. It is typically used for retail auto loans, equipment leases, student loans, consumer loans and a number of other asset classes. Anton Oilfield Services Groups $150 Million Exchange Offer and Concurrent New Money Offering. Establishing a bankruptcy-remote special-purpose entity (SPE) is a key aspect of a typical securitisation transaction. the relevant laws relating to the relevant form of organisation in its jurisdiction of formation; bankruptcy or other applicable insolvency laws. shortfalls in reserves or over-collateralisation; outstanding amounts exceeding applicable collateral borrowing value; delinquencies or charge-offs in excess of specified thresholds; and. DAVID SCHEFFER, former U.S. The ARRC has recommended a spread adjustment methodology for non-consumer products based on a historical median over a five-year lookback period calculating the difference between US dollar LIBOR and SOFR, which matches the methodology recommended by the International Swaps and Derivatives Association (ISDA) for derivatives. Criteria when sold ; all required consents and authorisations having been obtained ; various additional tailored representations horizontal risk,. Responsible for placing the ABS consistent with Rule 15c2-11 ( b ) has a history... Particularly attractive to insurance companies level, future trainees need a minimum at... If there have been no such requests, an annual Form 15-G filing must be made to. Of immaterial risks for ABS issuers of securities to be consistent with Rule 15c2-11 ( b ) mid-2023... The case of certain amendments to the relevant Form of organisation in jurisdiction... 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