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CFPB-Arbitration Clauses, Swap Rules, Bonus Bonds: Compliance

18.05.12

The U.S. Consumer Financial Protection Bureau is seeking comment on the use of clauses that require consumers to resolve disputes with companies through arbitration rather than through the court system.

CFPB Director Richard Cordray said yesterday in an e-mail statement announcing the request that the bureau wants to assess whether rules are needed with respect to arbitration clauses. Comments are due to the agency by June 23.

Mandatory arbitration clauses are used for products including credit cards, checking accounts and payday loans.

The bureau didn’t say when it would complete its study, which is required under the Dodd-Frank Act. Under the 2010 law, the consumer bureau can ban or condition the use of mandatory arbitration in financial-services contracts, consistent with the results of the study.

The U.S. Commodity Futures Trading Commission may vote to delay some Dodd-Frank Act derivatives regulations from taking effect until as late as the end of the year, a person briefed on the matter said.

Source: BusinessWeek

ACA Financial gets go-ahead for Abacus fraud case v. Goldman

18.05.12

Goldman Sachs' chicancery in advance of the mortgage meltdown has once again convinced a judge to permit one of the bank's (alleged) dupes to proceed with a fraud case. And this time, the ruling specifically holds that Goldman's actions were egregious enough to overcome the high bar for sophisticated investors.

The bond insurer ACA Financial Guaranty and its lawyers at Kasowitz, Benson, Torres & Friedman certainly had some help from the Securities and Exchange Commission and the Senate Permanent Subcommittee on Investigations. ACA was nominally the portfolio selection agent on Goldman's notorious Abacus collateralized debt obligation, the allegedly designed-to-fail instrument for which hedge fund honcho John Paulson helped picked a reference portfolio of ailing mortgage-backed securities so he'd reap huge profits on his short position. (Goldman and Paulson maintain that ACA had the final authority to select the securities in the reference portfolio and actually rejected many proposed by Paulson.) Before ACA ever filed its fraud complaint in New York State Supreme Court in 2010, Goldman had agreed to pay $550 million to resolve the SEC's Abacus claims and the Senate had featured Abacus prominently in its enormous tome on the economy's collapse .

Source: Thomson Reuters News & Insight