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. The London office opened 50 years ago and quickly became one of the Apply today at CareerBuilder! 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. To the extent such securitisations are registered, they must comply with the Reg AB II requirements described in 4.1 Specific Disclosure Laws or Regulations, and otherwise the general disclosure requirements described in 4.2 General Disclosure Laws or Regulations apply. 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. 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. 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. 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. An SPE that is subject to entity-level tax, such as a corporation or a partnership that is taxed as a corporation, will potentially incur tax liability for any gains resulting from the sale of financial assets and any income otherwise paid with respect to the financial assets in excess of deductible expenses. 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. Clients regularly entrust us with their most complex and strategic tax matters, resulting in our involvement in ground breaking transactions throughout the world. Future Diamond Limited's $200 Million Senior Notes Offering. When it comes to seat allocation, incoming trainees wont get a choice over their first seat, with each of the newbies placed according to business need. This Wall Street giant has made a Sterling name on English soil in all things finance. Anton Oilfield Services Groups $150 Million Exchange Offer and Concurrent New Money Offering. the issuer becoming subject to insolvency proceedings. 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. The firm looks at the top schools, but also we look for impressive students reducing the risk of the issuer becoming substantively consolidated with any affiliates should they become subject to bankruptcy proceedings. The flexibility to structure securitisations to such needs often makes securitisations particularly attractive to insurance companies. 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. 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. The available mode of perfection differs based on the type of asset and type of transfer. The firms success is built on its These are typically used in dealer floor plan securitisations and credit card securitisations. Skyfame International Holdings Limiteds $100 million Senior Notes Offering. 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. Shearman & Sterling continues to garner recognition in the 2023 edition of Chambers UK receiving 35 rankings in the new edition, including 13 practice and 22 individual rankings. In the UK Shearman & Sterling has historically run four vacation schemes: one in the winter, two in spring, and one in the summer. In the USA, taxes can theoretically be assessed at federal, state and local level. 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. 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).. 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. Chambers and Partners has been publishing guides to the legal profession since 1990. This framework is built around the principles of: In addition, Title VII imposes registration, oversight and business conduct standards for dealers and large participants in the derivatives market. In particular, the Trusts moved to dismiss the lawsuit on the grounds that the CFPB lacked enforcement authority over the Trusts because they are not covered persons as defined in the CFPA. 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. Its easier to learn by osmosis from everyone around me, one told us, admitting that I like to come in just to see people and be present. The firm recently introduced a new remote working policy allowing people to work from anywhere in August, which trainees welcome the flexibility is great!, Trainees praised Shearman & Sterlings efforts in increasing diversity at the firm too. Investors in securitisations include banks, asset managers, insurance companies, pension funds, mutual funds, hedge funds and high net worth investors. The trustees tend to be large banking associations that satisfy relevant regulatory and ratings agency criteria such as requirements under the Trust Indenture Act (for registered ABS issuances) and as required by Investment Company Act Rule 3a-7, where the issuer relies on that exemption. Radiance Capital Investments Limiteds $300 Million Senior Green Notes Offering. 2015 - aujourdhui8 ans 1 mois Counsel juil. Consequently, the risk of substantive consolidation is generally addressed by requiring the SPE and its credit to be separate from its affiliates based on factors that speak for substantive consolidation identified in the case law. The structure is otherwise typically similar to the two-tier structure previously described. would be great. The calendar year 2023 also should see a continued focus on the transition from the use of the London Interbank Offered Rate (LIBOR) to the Secured Overnight Financing Rate (SOFR). conflicts that must be disclosed and managed by the NRSRO; and. Re-securitisations are subject to separate risk weight calculations. Substantive consolidation is an equitable doctrine that permits a bankruptcy court to disregard the separateness of an entity that itself is not otherwise in bankruptcy and that provides an alternative pathway for an SPE to become entangled in its affiliates bankruptcy proceedings. The best practices only recommend the use of term SOFR in these circumstances to date: The ARRC did not recommend term SOFR for most securitizations, stating that as a general principle [it] recommends that market participants use overnight SOFR and SOFR averages given their robustness, particularly in markets where we have seen that there can be successful adoption of these rates such as floating rate notes, consumer products including adjustable-rate mortgages and student loans, and most securitizations. Shearman & Sterling represented the initial purchasers in connection with KWG Group Holdings Limiteds offering of $378 million 6% senior notes due 2026. This approach was based not on term SOFR but on 30-day average SOFR with a monthly reset period, set in advance of the interest accrual period. Vac schemers spend each week in a different department. Apr 2015 - Jan 20193 years 10 months. For contracts without any fallback provision (other than the disregarded fallback provisions described below), or with fallback provisions that do not identify a specific USD LIBOR benchmark replacement or identify a determining person with authority to select a benchmark replacement, a benchmark replacement recommended by the Federal Reserve will automatically replace the LIBOR benchmark in the contract after 30 June 2023. Agency securities and private placements are not subject to ABS-specific disclosure requirements other than the disclosure requirements relating to risk retention, repurchase requests, the third-party due diligence disclosure and rating agency communication requirements. is a global law firm with approximately 2,200 legal professionals in 31 offices across North America, Europe, Asia and the Middle East. The structure allows for multiple series of securities to be issued that all share in assets of the master trust. Owner trustees typically act on behalf of the holders of any trust certificates issued by an issuer trust (if applicable). Law. Appointing an independent director whose fiduciary duty runs to the SPE and not to its shareholders, and employing an entity type that allows for such redirection of fiduciary duties, reduces the risk of a filing for the benefit of its shareholders. As is often the case in corporate seats, the hours can be unpredictable, particularly around closing, but small teams working on each deal meant great responsibility and ownership. Research forms a big part of trainee life in the corporate M&A group, which I hadnt expected from a transactional seat. 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. 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. 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. 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. Shearman & Sterlings commitment to client service was once again honored in the 2022 edition of Chambers USA. 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. Furthermore, FDIC-insured banks may face higher insurance premiums for taking on exposures in securitisations collateralised predominantly by sub-prime and other high-risk assets, which reduces the attractiveness of such securitisations. If a foreign securitisation issuer were to be engaged in US trade or business for US federal income tax purposes, it would become subject to US federal income tax and potentially also subject to state and local income tax. One of the requirements for achieving sale accounting for financial assets under US Generally Accepted Accounting Principles (GAAP) is that the transferred financial assets have been isolated from the transferor even in bankruptcy or other receivership, and a part of that analysis looks to the legal true sale analysis. Graduate recruitment manager, Paul Gascoyne tells us the online form is pretty standard and contains three open-ended questions: 'Why do you want to be a solicitor?' You hear that US firms have cut-throat cultures, but that isn't the case, one emphasised. 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. degree of difficulty in segregating and ascertaining individual assets and liabilities; presence or absence of consolidated financial statements; profitability of consolidation at a single physical location; commingling of assets and business functions; unity of interests and ownership between the various corporate entities; existence of parent or intercorporate guarantees or loans; and. It is typically used for retail auto loans, equipment leases, student loans, consumer loans and a number of other asset classes. The proposed requirements would impose a significant number of new disclosure requirements for registrants, including disclosure of: As drafted, the proposed rules do not apply to ABS issuers, although the SEC solicited comment on whether they should apply and in what form. 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. It is important to note that the issue before the Third Circuit is whether the Trusts are indeed covered persons and thus could be vicariously liable for the conduct of their agents, the servicers. imposing higher capital requirements on non-exchange-traded OTC derivatives. Consequently, the traditional means of addressing the Volcker Rule have been to avoid relying on any of these exemptions. According to that section of the Rule 144A adopting release, [i]nstead of the financial statements and other information required about issuers of more traditional structures, the Commission would interpret the information requirement to mandate provision of basic, material information concerning the structure of the securities and distributions thereon, the nature, performance and servicing of the assets supporting the securities, and any credit enhancement mechanism associated with the securities. Unlike many other jurisdictions where bankruptcy effectively amounts to liquidation proceedings, bankruptcy proceedings in the USA also encompass a workout regime (Chapter 11 bankruptcy). 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. The qualities on which rankings are assessed include technical legal ability, professional conduct, client service, commercial astuteness, diligence, commitment and other qualities most valued by clients. 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. 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. 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 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. According to data provided by the Securities Industry and Financial Markets Association (SIFMA), the most commonly securitised financial assets are: Common structures used for the various types of securities previously outlined (see 8.1 Common Financial Assets) include the following. The London office opened 50 years ago and quickly became one of the Shearman & Sterling advised IFC on the first housing bond issued in Bangladesh, provided to BRAC Bank Limited. It is also worth noting that the non-recourse language typically included in agreements with SPEs, including derivative agreements, would cause such derivatives to fall outside the standard terms for derivatives that are currently centrally cleared and traded, although that may change should swaps with such terms be included as part of a traded standard. The Exchange Act allocates enforcement authority for the risk retention rules to the appropriate federal banking agency with respect to any securitiser that is an insured depository institution and the SEC with respect to any other securitiser. for consumer contracts and most other contracts, SOFR (in place of overnight LIBOR) or term SOFR of the relevant tenor; for derivatives, 30-day average SOFR compounded in arrears (the SOFR rate used in the ISDA protocol); for certain contracts for which a Federal Housing Administration-regulated entity is a party, SOFR (in place of overnight LIBOR) or 30-day average SOFR (or, for Federal Home Loan Bank advances, the SOFR rate used in the ISDA protocol as described above); and. In particular, Reg AB II includes expanded asset-level disclosure requirements for registered offerings of securities backed by specified asset classes that reflects a significant departure from the pool-level information that historically has been given and that is still the dominant form of disclosure in private placements. In all matters, Shearman & Sterling is dedicated to serving clients at the highest level. Shearman & Sterling advised Qxpress Pte. 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. 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. 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. This litigation has been ongoing through various motions. In circumstances where that exemption does not apply, the withholding tax could still be reduced or eliminated by virtue of applicable income tax treaties. While New York law governs the vast majority of LIBOR-utilising contracts, the statute did not and could not address LIBOR transition issues in all legacy contracts. Shearman & Sterling's compensation is merit-based. 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. Department profile | Shearman & Sterling LLP. Synthetic securitisations typically use credit default swaps (CDSs) to transfer such exposure. In June 2017, the ARRC identified SOFR as its preferred alternative to LIBOR for many purposes, including securitisations. 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. Preferred: Relevant work experience; law journal/moot court participation; foreign language skills. 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. Sections 15E and 17 of the Exchange Act and the rules promulgated thereunder establish a detailed set of records that must be created and disclosed to the SEC, and mandate that some of this information must be made publicly available free of charge, including the assigned credit rating and any subsequent upgrade or downgrade. 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. 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. vertical risk retention by holding of at least 5% of each class of ABS interests issued; horizontal risk retention by holding junior most interests in an amount equal to at least 5% of the fair value of all ABS interests issued; and. failure, after expiry of the applicable cure periods, to turn over collections when required to do so; misrepresentations or breach of covenants; often, the occurrence of an event of default. Overview. Payments based on US-source income to foreign individuals and corporations are potentially subject to withholding tax. While the ARRC suggests that the first alternative should be a forward-looking term SOFR with a matching term to LIBOR, no such rates were available at the time the ARRC released its recommendations. 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. 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. As such, the banking agencies may seek cease-and-desist orders requiring cessation and potential corrective actions. the safe harbour provisions of 12 CFR 360.6 relating to transfer of assets in connection with a securitisation, which are discussed in, the Basel III capital requirements discussed in. The nature of the CDS may also impact the Investment Company Act analysis for the issuer. 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. Shearman & Sterling represented HSBC as the sole dealer manager in connection with an offer to purchase for cash by Jiayuan International Group Limited for its outstanding 13.75% senior notes due 2022 and 13.75% senior notes due 2023. The form also gives trainees the option of requesting a secondment. 599 Lexington AvenueNew YorkNY 10022-6069USA. Registered investment companies are subject to leverage and capital structure requirements that are incompatible with a securitisation. clarifying that the rules preempt any state or local law or standard relating to the selection or use of a benchmark replacement or benchmark replacement conforming changes. This option reinforces the notion that registered ABS where the issuer is subject to Exchange Act reporting requirements do not pose compliance issues under the Rule 15c2-11(b). 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. 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 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 ARRC, after issuing consultations and soliciting feedback, recommended fallback language for securitisations to facilitate a benchmark transition from LIBOR to SOFR in May 2019. Business Services. opportunities in developing areas of renewable energy and green power.. 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. There are also some client secondments available in the financial space, covering investment banks and companies like ICE (Intercontinental Exchange). The rights of a purchaser of such assets attach if: Although it is possible for a security interest to attach in some circumstances without a written agreement, it is not practicable to rely on those circumstances always being present in a securitisation transaction. The US bank regulators have generally implemented the Basel III capital and liquidity rules but with some important distinctions. 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. Examples of such conduct alleged by the CFPB are that tens of thousands of collection lawsuits were brought by the Trusts against borrowers without possession of the requisite legal documentation to prove that the Trusts actually owned the loans and that the related servicer filed false or misleading affidavits in such debt collection lawsuits against the applicable students. annual reporting or proxy disclosure about directors cybersecurity expertise. A security interest in deposit accounts can only be perfected by control. Variations on the ARRC recommended fallback language are now commonly included in US securitisations. The proposed rules would require a number of new disclosures for registrants, including: The proposed rules do not distinguish ABS issuers from corporate issuers, and their application to ABS issuers in the form proposed would be problematic in several respects. "He is very proactive, approachable, easy to work with and technical.". To be best placed at the beginning of your legal career, you need to be in the best place. A place like Shearman & Sterling one of the elite international law firms. Trainees have shaped our success story and played a pivotal role in the firms growth. And its no surprise. 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. The NAIC also recommended the addition of two new RBC factors of 75% and 100%, in order to account for the tail risk in any structured finance tranche. Wilful violations of the Risk Retention Rules may also give rise to federal or state criminal actions. 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. 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. The project development side covers projects-related M&A in sectors like energy, mining and transportation, with the project finance wing overseeing the financing of infrastructure projects in these sectors through their entire life cycle. 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. 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. in the case of a non-financial foreign entity, the entity must identify and provide information in respect of substantial US owners of such entity. The firms success is built on its clients success. 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. As a result, the ruling, if upheld on appeal, would allow the CFPB to proceed with an enforcement action directly against the Trusts for liability for actions undertaken by the Trusts servicers (on behalf of the Trusts) and not by the Trusts themselves. 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. Chambers and Partners guides offer in-depth analysis of the legal market within countries and regions across the globe. 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. The LIBOR Act covers contracts that reference LIBOR tenors other than the uncommon one-week and two-month tenors, and provides as follows. He regularly handles cross-border mandates. ABS issuers generally do not prepare financial statements. 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. with respect to transactions where the underlying pool assets bear floating rates, a transition of a specified percentage of those assets from LIBOR based to adjusting using an alternative index. 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. 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. If its the international side of the firms work that youre keen on, then there arent many places youll find more of it than in international arbitration. representations that the secured party has a perfected security interest. There is no federal value added tax, sales tax or stamp tax on the transfer of financial assets to a securitisation SPE, but in some cases the transfer of loans or leases accompanied by transfers of the underlying assets securing such loans or leases could trigger certain state or local sales tax. TaiChen Development (BVI) Limiteds $65 Million Tap Offering. The derivatives underlying such securitisation are regulated by the SEC if they reference a single security, a single loan or a narrow-based security index and by the CFTC if they are deemed to be swaps (in which case the SPE may also be a commodity pool). As you might expect from the third of the firms core focus areas, finance is a likely destination for trainees at Shearman & Sterling. The formulae are focused on capturing the material risks that are common for the particular insurance lines of business. As such, the mapping of ABS assets to an NAIC rating will often dictate the attractiveness of a particular asset-backed security for an insurance company. Furthermore, the CFTCs authority to penalise manipulation and fraud is similar to the SECs authority under Section 10(b) of the Exchange Act. As such, broker-dealers can continue to provide quotations for ABS offered under Rule 144A if they reasonably believe that the issuer will provide the information specified in Rule 144(d)(4) upon request. Consequently, in order to be attractive to banks, securitisation entities tended to avoid becoming a covered fund under the Volcker Rule. 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. abstain from engaging in certain abusive or anti-competitive conduct. Among the reasonable determinations that qualify for relief are the following. A place like Shearman & Sterling one of the elite international law firms. One additional open question, which will not be answered in the short-term, is, if the Trusts are eventually deemed liable, whether the CFPB would seek to force such Trusts to require the related investors to disgorge previously made distributions and how it would go about enforcing such actions. Securitisation transactions often have three types of default provisions: Servicer defaults or termination events typically include: Principal indemnities cover losses due to a breach by the seller or servicer of their obligations. Hi all, Anyone had any experience with these guys? 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. The servicing provisions generally relate to continued collection and servicing of the relevant asset and typically include a number of provisions relating to reporting, notice and turnover of collections. A titling trust is established to originate the lease and hold title to the leased assets. 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. For a sale of financial assets to be valid and enforceable against third parties, it has to attach and be perfected similar to what applies to a security interest in collateral. In a typical securitisation the investors will have a right to payment, and investors will also have certain rights to direct the trustee to take enforcement actions, and the controlling class of noteholders will thereafter have enhanced ability to direct the trustee in accordance with the terms of the transaction documents. With $1,012,059,000 gross revenue in 2021, the firm placed 50th on The American Lawyer's 2022 Am Law 200 ranking. Shearman & Sterling LLP. DAVID SCHEFFER, former U.S. For example, ABS issuers have a finite life, strict limits on their activities and no active governance. 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. 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. The level of comfort is reflected in terms such as will, should and more likely than not, where will is the highest level of comfort and should still provide a high level of confidence but with a more than insignificant risk of a different conclusion. Shearman & Sterling LLP Website www.shearman.com Share profile Contact details Contact number +8621 6136 5000 Related Rankings Chambers Review Notable Practitioners Ranked The latter opinion is frequently also required in the case of certain amendments to the corporate documents. In March 2022, the SEC proposed a set of cybersecurity disclosure rules for public companies. 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). Hogan Lovells has around 2500 attorneys and Shearman boasts about 850. Jay Singer is noted for his strength in structuring tax-efficient corporate transactions. With experience across the energy, mining and metals, infrastructure and TMT sectors, the practice 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.. 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. 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. The penalties range from injunction or restraining orders, writs or orders mandating compliance, to fines. 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. The SEC has the power to enforce its rules. Shearman & Sterlings Litigation Group is strongly positioned to counsel and protect clients in todays challenging environment. 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. 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. 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. Insurance companies capital rules are typically more closely tied to ratings. 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. Notable team of practitioners with impressive experience acting in domestic and international mandates. It is, however, not common to obtain a bankruptcy opinion for such protected contracts. 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. It is important to note that because this decision came from a Federal court sitting in Delaware, if upheld by the Third Circuit, it could potentially have much broader consequences to the securitisation marketplace affecting a variety of asset classes (such as securitisation trusts that own auto loans, mortgages, credit card receivables, unsecured personal loans, etc) than a decision in a different judicial district, as most special purpose entities (trusts and limited liability companies) that are formed for securitisation purposes are organised in Delaware and are thus subject to suit in the same court under the CFPBs authorising statute. We might arrange for them to have a coffee with a partner from that department, for example.. 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. The firm was recognized with 106 practice and individual 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 private deals, the investor vote required for certain actions is primarily a negotiated point, although in registered securitisations these requirements are more prescribed. Morgan, Lewis & Bockius LLP In February 2022, the SEC proposed new rules under the Investment Advisers Act of 1940 (Advisers Act) with the stated purpose of providing transparency to investors in private funds regarding the cost of investment in, and performance of, those private funds. The firm now recruits exclusively through its vacation scheme. An SPE that is organised as a partnership or an LLC that has elected to be treated as a partnership for tax purposes would not be subject to entity-level tax, but transfers to a securitisation SPE that is treated as a partnership for tax purposes may have different tax consequences than transfers to a disregarded entity and, as such, it is possible to structure the SPE (and use a multi-SPE structure) so as to optimise the securitisation for the desired tax neutrality. The number of independent directors should be at least equal to the minimum number of members or partners required to continue the SPEs existence. Securitisation disclosure requirements are in part governed by generally applicable securities laws, and in part by some ABS-specific requirements. And its no surprise. However, such securities offerings generally will look to, and to the extent practicable seek to comply with, the disclosure requirements applicable to registered offerings. Exchange Act Rule 17g-5 divides conflicts of interest into two categories: As part of the conflict rules in 17g-5, an NRSRO is required to obtain a representation from the issuer, sponsor or underwriter of an asset-backed security that it will post on a real-time basis information any of them provides to any hired NRSRO in connection with the initial credit rating or subsequent credit surveillance to a password-protected website. The firm was recognized with 106 practice and individual rankings for excellence representing clients across our practices and industries throughout the United States. Section 3(c)(7) provides a general registration exemption for issuers that do not publicly offer their securities and limits their investors to qualified purchasers. The sponsor is responsible for compliance with risk retention and other relevant regulatory requirements. Typically, investors will not have responsibilities per se, although investors may be subject to certain deemed representations relating to their eligibility to invest in the securitisation. 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. 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. The group is split into three sub-teams in investment-grade finance, leveraged finance, and structured finance. Regularly advises on complex tax planning and structuring matters. Chambers Student, the students companion to the legal profession, gives the truth about law firms and the Bar. 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. There may also be additional representations relating to the nature and characteristics of the relevant assets. News October 20, 2022 Shearman & Sterling Earns High Rankings in Chambers UK 2023 Shearman & Sterling continues to garner recognition in the 2023 edition of Indeed, trainees told us that it is almost certain you will have to work evenings and the odd weekend at some point. Hoursgenerally start at 9.30am and finish around 7.30pm on average, but dont fret too much: time off is well respected, and most teams track it if you are working more than four hours at the weekend. Trainees felt well compensated for these hours too. With more than 130 attorneys in the United States, Europe Because there are differences between CLOs and other private funds, the potential application of certain aspects of the proposed rules to existing and future CLO transactions remains unclear. The master trust receives the proceeds from the repaid loans and uses those proceeds in part to pay interest and principal on the issued notes. The minimum risk weight that will be given to a securitisation exposure is 20%. Student insights. Delaware is viewed as a favourable jurisdiction for forming business entities. Phase 1 extended from 3 January 2022 through 3 January 2023. While new securitisation documents can provide for an effective alternative reference rate, LIBOR transition has posed more difficult problems for many existing ABS and their underlying pool assets. However, not all factors are given equal weight in this analysis. Delaware statutory trusts (DSTs) and Delaware limited liability companies (DLLCs) are often the entities of choice for securitisations. 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. 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. A two-week vacation scheme is run in both spring and summer, with around 14 students attending each. The structure also allows for some series to be in their revolving period while other series are in their amortisation period. for Federal Family Education Loan Program (FFELP) loan ABS, either 30-day average SOFR (for one-, six-, and twelve-month LIBOR) or 90-day average compounded SOFR (for three-month LIBOR). 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. The general construct of the Securities Act is that an offer or sale of securities has to be registered unless made pursuant to an available exemption ie, a private placement. the sellers continued administration and control of the assets, particularly if the obligor is not notified of the sale (however, under current market practice, sellers often act as servicer of the sold assets and such continued involvement is generally not viewed as dispositive of the loan or sale characterisation). 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. We like to see that, at the very least, candidates attended firm open days or other non-assessed events that shows they're committed to a career in the law., Around 5% of applicants go on to a first-round interview. The general counsel's comprehensive guide | Hong Kong, 76 items provided by Shearman & Sterling LLP. Under older practice, which still applies in some circuits, the courts may rely on a multi-factor analysis. In addition, a non-consolidation opinion is often required if the transfer is to an affiliated entity (ASC 860-10-55-18A), although the opinion may not be required if the accountants are comfortable that the appropriate legal opinion(s) would be given if requested (id at 55-18B). Trainees must complete an application form with their top choices (we heard most people submit at least a couple, but there isn't a limit). Sorsby says We intentionally designed a separate assessment day so that we could use the vacation scheme as an experience. 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. The old trope of competition at US firms was something that the current intake was quick to dismiss too. 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. Banks that are primarily constrained by the leverage ratio, as compared to the risk-weighted assets (RWA) ratio, will also typically view highly rated, but lower-yielding, senior securities as less attractive investments, whereas insurance companies and banks that are primarily constrained by the RWA requirements may find the highly rated senior tranche highly attractive due to the small amount of regulatory capital required. In the early 1970s, long before Raheem Sterling was on the scene, another famous Sterling pulled on an England shirt. SOFR differs from LIBOR in several key respects. 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. Trainees have shaped our success story and played a pivotal role in the firms growth. US Summer Program | Shearman & Sterling. The Federal Reserve was required to promulgate implementing regulations not later than 180 days after the date of its enactment. Issuers are typically SPEs that are restricted from engaging in activities unrelated to the securitisation. Banks are highly regulated entities and are also subject to a separate insolvency regime compared to other entities, and are therefore not eligible for bankruptcy protection. 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. 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