Sector developments and company hires

SFA paper supports agency CRT
The SFA has published a white paper on the economics of credit risk transfer at Fannie Mae and Freddie Mac. The paper responds to an earlier FHFA report that had questioned the economic benefits of CRT (SCI passim) and illustrates how CRT has been - and can continue to be - an effective credit risk management tool. It also notes that the recently announced notice of proposed rulemaking (NPR) from the FHFA responds to questions that the securitisation industry has raised, and that the economic analysis of the white paper will form the basis of the SFA’s response to the FHFA’s NPR on enterprise capital.

The paper not only supports the GSE CRT programmes, but also provides statistics on credit risk transfer securities relative to the performance of the underlying risk itself and highlights the risk distribution benefit of programmatic issuance of such transactions under a more reasonable capital framework. Further, to help create an efficient CRT market, the SFA suggests that the FHFA adopt a principles-based approach to the Enterprise Capital Rule that achieves three main goals.

The first goal is to establish a stable and predictable capital regime that prioritises safety and soundness. The second encourages the GSEs to engage in programmatic CRT issuance by providing for meaningful transfer of risk as soon as practicable following loan acquisition. The third is to facilitate access to credit by transferring risk on loans targeted at underserved borrowers.

In other news…

Asia
Richard Ambery has been named senior counsel at the Asian Development Bank, based in Manila. He was formerly partner and head of capital markets at Ganado Advocates in Malta, with a particular focus on international structured finance. Before that he was a partner at Arthur Cox and also worked at Paul Hastings, Mayer Brown, Dechert, Clifford Chance and Freshfields.

Further TCA execs charged
The US SEC has charged Robert Press, the former ceo of TCA Fund Management Group, and Donna Silverman, TCA’s former chief portfolio manager, for their roles in the firm’s scheme to artificially inflate the net asset values and performance results of several TCA-managed funds. The SEC previously charged TCA Global Credit Fund with fraud and obtained the appointment of a receiver over those entities and the TCA funds, as well as two other TCA executives for their roles in the alleged fraud.

The SEC’s order against Press finds that, through Press’s actions, TCA fraudulently inflated net asset values and performance of the TCA funds by recording non-binding transactions and fraudulent investment banking fees on the funds’ books and records. According to the order, the inflated asset values and false performance results were included in promotional materials and account statements distributed to the TCA funds’ current and prospective investors, which showed the funds as always having positive monthly returns. In fact, without the fraudulently booked transactions, the TCA funds would have had at least 34 months of negative returns since inception.

The SEC’s order against Silverman finds that she included the non-binding transactions and fraudulent investment banking fees in data she prepared that was used to calculate the TCA funds’ asset values and performance results.

The SEC’s orders find that Press violated the antifraud provisions of the federal securities laws and that Silverman aided and abetted violations of certain antifraud provisions. Without admitting or denying the SEC’s findings, Press and Silverman each agreed to the entry of a cease-and-desist order.

In addition, Press agreed to be barred from the securities industry and to pay disgorgement of overcharged management and performance fees he received of US$4.41m, plus prejudgment interest of US$755,178 and a penalty of US$292,570. Silverman agreed to a limitation on activities from acting in a director or officer capacity in the securities industry, with a right to apply after three years, and to pay a penalty of US$50,000.

North America
Rohit Chopra has been confirmed as the new director of the CFPB, replacing Trump appointee Kathy Kraninger, who resigned in January. Chopra was confirmed by the US Senate yesterday (30 September) in a close vote of 50-48 along party lines. There has been increasing evidence of a more bellicose CFPB over the last few months, and the securitization market has already found itself in the cross-hairs.