THE LAW OF TRANSNATIONAL SECURITIZATION

Transcription

1 THE LAW OF TRANSNATIONAL SECURITIZATION DAVID RAMOS MUNOZ Consultant editor: Kevin Ingram OXFORD UNIVERSITY PRESS

2 CONTENTS SUMMARY Preface xiii Acknowledgements. xv Table of Cases "" xvii Table of Legislation, Treaties, and Conventions xxxi List of Abbreviations xlvi 1. Introduction: Guide to this Work and Securitization Regulatory and International Challenges 1 2. Securitization and Creditor Protection Rules Securitization and Direct Investor Protection (I): Prospectus Disclosure in Asset-Backed Securities Offerings Securitization and Direct Investor Protection (II): SPV, Managers, and Trustees Securitization and Indirect Investor Protection (I): Sponsor Responsibility Securitization and Indirect Investor Protection (II): Underwriters/Placement Agents and Rating Agencies Securitization and Financial Regulation Transnational Securitization (I). Securitization and Conflicts of Laws Transnational Securitization (II). Securitization and the Limits to the States' Extraterritorial Jurisdiction 419 Index 447 vu

3 CONTENTS Preface xiii Acknowledgements xv Table of Cases ' - ' xvii Table of Legislation, Treaties, and Conventions xxxi List of Abbreviations xlvi 1. Introduction: Guide to this Work and Securitization Regulatory and International Challenges 1. A Guide Through Securitization: its Structure and Legal Challenges 1.03 A. Securitization basic aspects: an overview 1.04 B. The different types of securitization Securitization: Legal, Regulatory, and International Challenges 1.28 A. Securitization: legal challenges 1.29 B. Securitization: crisis and regulatory challenges (I). Events of the crisis 1.40 C. Securitization: crisis and regulatory challenges (II). The causes of the crisis and their implications for securitization regulation 1.41 D. International challenges: international securitization and regulatory competition Securitization and Creditor Protection Rules 1. Preventive Creditor Protection Rules and their Impact on the Inception and Existence of the Vehicle 2.04 A. Inception of the vehicle and creditor protection rules 2.05 B. Characterization of investors'rights 2.13 C. Corporate capital rules and SPVs Transfer and Insulation of the Assets, 2.34 A. Validity of the asset transfer and enforceability of derivatives contracts 2.35 B. Insulation, servicing, and cash management 2.77 C. Avoidance and recharacterization of the asset transfer Securitization and Bankruptcy/Insolvency Remoteness A. Resilience of securitization structures to the demise of transaction parties B. Securitization and substantive consolidation C. Regulating out SPV bankruptcy: SPVs and bankruptcy eligibility ix

4 Contents D. Contracting out SPV bankruptcy: insolvency-remote structures and Early Amortization Events Securitization and Direct Investor Protection (I): Prospectus Disclosure in Asset-Backed Securities Offerings 1. Scope of Application of the Prospectus Disclosure Rules 3.02 A. Scope of application of prospectus disclosure 3.04 B. The notion of'asset-backed securities'offerings Information Disclosed in Securitization Offerings 3.34 A. Formalities in the display of information in asset-backed securities offerings 3.36 B. Information regarding transaction parties 3.43 C. Information on transaction structure 3.58 D. Information about the underlying asset pool 3.63 E. Other relevant disclosure rules for ABS Securitization and Direct Investor Protection (II): SPV, Managers, and Trustees 1. The Structure of Protection 4.02 A. The diagram of direct protection ' 4.03 B. The Anglo-Saxon structure of protection 4.05 C. The structure of protection in civil law countries, and the attempts to replicate the Anglo-Saxon trustee: corporate law 'commissioners', management companies, and fiduciary representatives Administration and Protection Duties 4.18 A. Direct liability (of SPV and civil law management companies) for misstatements 4.19 B. Duties and standard of care of directors, trustees, and management companies, 4.23 C. The duties in action, and the actual protection to investors Reforming Direct Investor Protection and Governance A. Traditional reform proposals: reforming securitization governance by reforming the role of trustees B. Collective investment as a blueprint for reforming securitization governance Securitization and Indirect Investor Protection (I): Sponsor Responsibility 1. Sponsors and Indirect Liability: Securitization and Veil Piercing 5.03 A. Elements for veil piercing (I). Control, confusion, and commingling (reference) 5.07

5 Contents B. Elements for veil piercing (II). The fraudulent use element 5.10 C. Financial vehicles and SPVs and veil piercing Liability for Misrepresentation 5.31 A. Pure economic loss, and the elements of liability for misstatements 5.32 B. Liability of the originator for information contained in the prospectus 5.44 C. Liability for other wrongful statements (I). Objective and subjective elements 5.50 D. Liability for other wrongful statements (II). Sponsor involvement The Importance of Proper Standards v A. Originating practices (I). Massive fraudulent schemes B. Originating practices (II). Loans in breach of mandatory provisions C. Originating practices (III). Lax lending practices D. Servicing and credit enhancement practices Other Sources of Liability A. Insolvency and sponsors as de facto 'shadow' directors B. Sponsor's liability towards general investors: liability forfinancialstatements Securitization and Indirect Investor Protection (II): Underwriters/Placement Agents and Rating Agencies 1. Appraising Liability of'secondary Players': the Key Elements 6.02 A. -Approaches and elements of secondary actors' liability 6.03 B. Investor sophistication, reliance, and secondary actors' liability Liability of Underwriters/Placement Agents 6.22 A. Underwriters/placement agents' liability in tort, and the standard of care 6.23 B. Underwriters/placement agents' fiduciary duties Liability of Rating Agencies 6.55 A. Antecedents and basis for rating agency liability 6.56 B. Rating agencies and securitization transactions Securitization and Financial Regulation 1. Regulation of Securitization Entities (I): to Regulate or not to Regulate... or to Regulate Well, 7.02 A. Hands-off approach: securitization entities, business and piecemeal regulation 7.03 B. Basic regulatory choices 7.17 C. 'Traditional' securitization structures, licensing and supervision, and limitation of activities, assets, and liabilities Regulation of Securitization Entities (II). Derivatives, Managed Structures, and the 'Shadow Banking System' 7.40 A. Derivatives contracts and synthetic securitization 7.41 XI

6 Contents B. Managed structures, operating companies, and the shadow banking system Securitization and Accounting Rules 7.95 A. Accounting for asset transfers in securitization transactions 7.97 B. Originator, SPVs and consolidation accounting Securitization and Banking Regulation A. The Basel I Framework and its inadequacy for off-balance-sheet transactions B. The Basel II Framework (I). The (ir)relevance of consolidated accounts C. The Basel II Framework (II). Banking regulation, risk transfer, and securitization D. Epilogue? Banking regulatory reform in the wake of the crisis Transnational Securitization (I). Securitization and Conflicts of Laws 1. Conflict Rules for Corporate, Trust, and Insolvency Matters 8.03 A. Applicable law to corporate and trust vehicles 8.05 B. Jurisdiction and applicable law in the insolvency context 8.23 C. Conflict of laws and veil piercing Conflict of Laws, Risk Transfer, and Liability 8.73 A. Conflict of laws and risk transfer (I). Conflict rules on receivables assignment 8.74 B. Conflict of laws and risk transfer (II). Conflict rules, derivative transactions, and synthetic securitization 8.95 C. Conflict of laws and liability Conflict of Laws and Financial Regulation A. Securities regulations, asset-backed securities offering, and international regulatory jurisdiction B. Prudential regulation and regulatory jurisdiction Transnational Securitization (II). Securitization and the Limits to the States' Extraterritorial Jurisdiction 1. Recognition of the Vehicle and EU Freedoms 9.03 A. Cross-border recognition of corporate vehicles 9.04 B. Cross-border recognition of trust vehicles Extraterritorial Regulation and EU Freedoms 9.26 A. EU freedoms and extraterritorial corporate regulation 9.27 B. EU freedoms and extraterritorialfinancialand securities regulation 9.45 Index 447 xu