Liquidity: Community Banks and the Liquidity Coverage Ratio Community banks already have begun to feel the trickle-down effect of regulations designed to address systemic risk. The proposal for a liquidity coverage ratio for the largest banks that was issued on October 24, 2013, by the federal banking agencies (the LCR Proposal or the Proposal ) 1 looks to be the most recent instance of this phenomenon. Although the Proposal would not apply to community banks, or almost any bank with less than $50 billion in total consolidated assets 2, the Proposal is likely to inform the application of other agency guidance on liquidity that does apply to community banks, particularly the Interagency Policy Statement on Funding and Liquidity Risk Management (the "Interagency Statement"). 3 Moreover, as part of the Basel process, a specific liquidity coverage ratio is a companion to the risk-based capital rules, which apply to community banks. These banks accordingly should review the LCR Proposal in the course of assessing their liquidity programs. Three elements of the Interagency Statement the need to maintain a cushion of high-quality securities, the preparation and use of cashflow projections, and the use of meaningful time horizons anticipate provisions in the LCR Proposal. As they consider these items, the regulators may look to the LCR Proposal for guidance, and banks may want to do so as well. Of course, the fundamental point of the LCR Proposal that a bank should have sufficient liquid assets to meet all reasonably expected demands on it over a 30-day period applies with equal force to all banks. By the way of background, the LCR is intended to function as one of many tools to mitigate systemic risk. Accordingly, the full Proposal is limited to banking organizations with total consolidated assets of more than $250 billion or more than $10 billion in foreign exposures, other financial institutions that have been designated as systemically important except for those institutions with substantial insurance activities, and their consolidated depository institution subsidiaries with more than $10 billion in total consolidated assets. The quantitative LCR requirement would be 100 percent; that is, a covered institution must have sufficient liquid assets (as defined) to meet all possible demands for funds (after accounting for funds the institution could demand for itself) over a 30-day stress scenario. The Proposal also contains a modified LCR requirement for bank and savings and loan holding companies that are not internationally active but that have more than $50 billion in total consolidated assets. The 1 See "Liquidity Coverage Ratio: Liquidity Risk Measurement, Standards, and Monitoring," available at http://www.federalreserve.gov/newsevents/press/bcreg/20131024a.htm. As of this writing, the Proposal has not been published in the Federal Register. Comments on the Proposal are due by Jan. 31, 2014. 2 Unless otherwise noted, we use the term "bank" in a collective sense to include national and state member and nonmember banks, federal and state savings associations, bank holding companies, and savings and loan holding companies. An insured depository institution with less than $50 billion but with at least $10 billion or more in consolidated assets is covered, if it is a consolidated subsidiary of a holding company above the $250/$10 billion thresholds. 3 Federal Reserve Board SR Letter 10-6 (Mar. 17, 2010), available at http://www.federalreserve.gov/boarddocs/srletters/2010/sr1006.htm. 1 November 19, 2013
modification shortens the timeframe for the LCR analysis from 30 to 21 days, which results in lower cash outflow and inflow assumptions. Cushion of highly liquid assets The LCR Proposal appears to widen the universe of assets that a bank includes in its liquidity cushion. The Interagency Statement states that "a critical component of an institution's ability to effectively respond to potential liquidity stress is the availability of a cushion of highly liquid assets" that are unencumbered and that the "quality of [such] assets is important as it will ensure accessibility during the time of most need." The only quality assets identified in the Interagency Statement are U.S. Treasury securities, securities issued by U.S. governmentsponsored agencies, and excess reserves at the central bank. "Similar instruments" also would qualify, although the statement does not set forth any criteria. Potential criteria are set forth in the LCR Proposal, which identifies three levels of "high quality liquid assets" (HQLA) that may comprise the cushion. The cushion may consist of up to three levels of assets Levels 1, 2A, and 2B that are differentiated by the degree of liquidity they provide. (For ease of reference, we have summarized the three levels of includable assets in Annex A.) Although we do not expect regulators to measure the liquidity of a community bank s assets with the same granularity that the LCR Proposal applies to the three levels, the levels do suggest (i) that regulators may treat a wider spectrum of assets as having liquidity cushioning features but also (ii) that the regulators will distinguish between these assets. U.S. Treasury securities and excess reserves continue, under the Proposal, to be recognized as among the highest quality liquid assets, known as Level 1 assets. The Proposal identifies other assets as well, including securities unconditionally guaranteed by Treasury or, if backed by the full faith and credit of the United States, by another U.S. government agency. Level 1 also includes liquid and readily marketable securities issued by foreign sovereigns or certain international entities that are risk weighted at zero percent. Securities issued by a non-zeropercent risk-weighted sovereign are also eligible in certain circumstances. Notably, U.S. GSE securities are no longer on a par with U.S. Treasury securities. These securities are instead eligible for Level 2A, which means that, under the LCR Proposal, if a covered bank wishes to include them in the cushion, it would be required to apply a 15 percent haircut. Instruments on the same level as GSE securities include securities with risk weights no higher than 20 percent that are issued by a sovereign entity or a multilateral development bank and that have a proven history as a source of liquidity in stressed market conditions. The total of all Level 2A assets (after the 15 percent haircut) would not be permitted to make up more than 40 percent of the cushion. A third level of HQLA, known as Level 2B, consists of investment grade corporate debt and certain common equity that are issued by a non-financial company and that have a proven history of liquidity in stressed market conditions. Common equity is includable in Level 2B only if it is represented in the S&P 500 or in another index that represents equities that are as 2 November 19, 2013
liquid and readily marketable as those in the S&P 500. 4 A substantial haircut 25 percent would be required for both types of assets, and these assets may not constitute more than 10 percent of the cushion. The LCR Proposal also is interesting for excluding from HQLA assets or other resources that a bank otherwise may include in its liquidity policy. For example, state and municipal bonds are not regarded as a source of liquidity. The LCR Proposal also rejects a provision in the Basel Committee s LCR that includes certain residential mortgage-backed securities in Level 2B assets. The LCR Proposal also does not allow a bank to consider access to the Federal Reserve s discount window or the availability of advances from a Federal Home Loan Bank as sources of liquidity in calculating the LCR. By contrast, banks often include the sources in their assessments of their own liquidity. Beyond the specifics of the three levels of liquid assets, the Proposal provides greater insight into two principles of liquidity that are well understood in general but where specifics have remained vague. Both concepts should apply to whenever a bank of any size decides to rely on instruments other than Treasury securities and other instruments named in the Interagency Standard for liquidity. First, qualifying assets must be liquid and readily marketable. Treasury securities and similar instruments are self-evidently liquid and readily marketable, but that is not the case for other assets that may have characteristics of liquidity. The Proposal defines the term liquid and readily marketable to refer to any asset traded in an active secondary market, that is, a market with (i) more than two committed market makers, (ii) a large number of committed non-market maker participants on both the buying and selling sides of the transactions, (iii) timely and observable market prices, and (iv) high trading volumes. A community bank that may seek to rely on assets comparable to those in Levels 2A and 2B should take these factors into account. A community bank also should keep in mind that the Proposal does not recognize securities issued by financial sector entities as liquid instruments, since the liquidity of such securities is likely to be positively correlated to a bank s liquidity needs: at the time when a bank needs liquidity, the market for the securities is likely to be losing participants on both sides of a transaction and trading volume. The second concept is that certain assets should have a proven record as a reliable source of liquidity in the repurchase or sales market during stressed market conditions. Under the Proposal, the necessary proof varies from asset to asset, but the Proposal provides specific metrics. The data are historical market prices during times of general liquidity stress, including but not limited to the crisis experienced in 2007 and 2008. The test for the liquidity history of securities issued by zero-risk-weight sovereigns is qualitative, but for those securities issued by a slightly higher risk sovereign, a bank must be prepared to show that the market price declined by no more than 10 percent or the haircut demanded by the market increased by no more than 10 percent during a 30-day calendar period of significant stress. The test for 4 Common equity included in a foreign index would be eligible if the supervisor in that jurisdiction includes equity in that index in Level 2B assets. 3 November 19, 2013
investment-grade, publicly traded corporate debt securities is a market price decline or a market haircut increase of no more than 20 percent, and for publicly traded common stock it is a market price decline or a market haircut increase of no more than 40 percent. These specific bounds would not, of course, apply to a community bank, but a bank that would like to include corporate debt or common equity in its portfolio of liquid assets should be prepared to demonstrate that these instruments have had relatively stable prices over a full business cycle. Although the regulators will not apply all of the tests to assets in the liquidity cushion of community banks, the LCR Proposal teaches that assets with some liquidity differ in the degree of liquidity that they provide and should not be treated uniformly. To the extent that a community bank relies on sources of liquidity other than Treasury securities, the bank s earnings and liquidity committee should re-assess the true liquidity of any asset either that would not qualify as HQLA under the Proposal or that would make up a significant proportion of the bank s liquidity cushion. In some cases, the committee should consider whether to shift its holdings into more liquid assets. Alternatively, the bank should be prepared to explain to its regulator the bank's basis for treating as liquid any assets not includable in the cushion under the LCR Proposal. Cash flow projections and assumptions The Interagency Statement instructs all banks to use "robust methods" for projecting cash inflows and outflows associated with all assets, liabilities, and off-balance sheet items. The reliability of the assumptions underlying the projections is crucial. As the Interagency Statement observes, Cash flow projections can range from simple spreadsheets to very detailed reports depending upon the complexity and sophistication of the institution and its liquidity risk profit under alternative scenarios. Given the critical importance that assumptions play in constructing measures of liquidity risk and projections of cash flows, institutions should ensure that the assumptions used are reasonable, appropriate, and adequately documented. Institutions should periodically review and formally approve these assumptions. Institutions should focus particular attention on the assumptions used in assessing the liquidity risk of complex assets, liabilities, and off-balance-sheet positions. Assumptions applied to positions with uncertain cash flows, including the stability of retail and brokered deposits and secondary market issuances and borrowings, are especially important when they are used to evaluate the availability of alternative sources of funds under adverse contingent liquidity scenarios. For better or worse, the LCR Proposal would set a baseline for nearly all of the necessary assumptions, which for ease of reference we have summarized in Annexes B (outflows) and C (inflows). A community bank is not required to use these assumptions. The assumptions are quantitative and far more granular than is appropriate for most community banks, although the specific assumptions about deposit outflows may be of interest. If a bank has developed its own set of quantitative assumptions, it may be a useful validation exercise to compare them to the assumptions in the Proposal. More importantly, we can derive the following general standards 4 November 19, 2013
from the Proposal s quantitative assumptions which should inform the liquidity analysis performed by almost all community banks. Overall, a bank must prepare for a significant cash outflow. Under the LCR Proposal, a bank must assume that its cash inflows can never be more than 75 percent of cash outflows. Uninsured deposits from small businesses are assumed to run off by 10 percent during a 30 calendar day stress period, and all other uninsured funding from small businesses that mature within 30 days should be expected to run off entirely. Brokered deposits may run off at different rates, and the Proposal provides several specific assumptions. Not all of the assumptions are relevant for a community bank, but, among other things, sweep deposit accounts are considered less stable than brokered deposits that a bank acquires directly. A bank will, the Proposal assumes, be required to pay out 10 percent of its retail mortgage commitments that can be drawn upon during a 30-day stress period. With respect to cash inflow, a bank should assume it will recover only 50 percent of amounts that are payable by either retail customers or wholesale customers that are not financial institutions within the 30-day stress period. Time Periods By design, the LCR Proposal as it would apply to the largest banks is based on a single time period of 30 calendar days. The Basel Committee is reviewing a measurement of liquidity over a one-year period, known as the Net Stable Funding Ratio. For covered banks under the $250 billion threshold, the Proposal would apply a modified LCR, which reflects a shorter and presumably simpler time period of 21 calendar days. Since 21 is 70 percent of 30, the assumed outflow and inflow rates in the modified proposal are 70 percent of those in the full Proposal. 5 The Interagency Statement instructs banks to use an appropriate set of time horizons, including not only a monthly or 30-day period, but also weekly and quarterly horizons, even daily in some cases. The general or qualitative factors that may be derived from the Proposal would be meaningful for most time periods, but the specific quantitative assumptions in the Proposal may not be relevant for any periods other than 30 days, give or take a few days. 5 For the larger banks, the ratio is not calculated on Day 30, but instead as of the day within the 30 day period on which outflows will be higher. 5 November 19, 2013
Conclusion The LCR Proposal presents one of several instances in which principles behind the regulation of systemically important banks may be expected to trickle down to other, smaller banks. While the LCR Proposal does not formally apply to community banks and, as a practical matter, could not fully apply without disturbing many existing and effective liquidity polices, the Proposal incorporates general concepts that are important to a bank of any size in managing its liquidity and preparing a contingency funding plan. Among these concepts are that a reasonably wide range of assets, including GSE debt and certain publicly traded corporate debt and equity, are legitimate sources of liquidity and that funding sources will contract at different rates. A community bank accordingly should review the LCR Proposal and consider whether its current approach to liquidity is out of line with the basics in the Proposal. A bank may depart from the concepts in the Proposal without undue concern reliance on state and municipal bonds as a source of liquidity comes to mind but a bank may expect conversations with its supervisor if its portfolio of liquid assets differs substantially from that outlined in the Proposal. If you have questions regarding this publication, please contact any of the lawyers listed below or your regular Nelson Mullins contact: Dwight Smith: 202.545.2885 or dwight.smith@nelsonmullins.com Neil Grayson: 864.250.2235 or neil.grayson@nelsonmullins.com Brennan Ryan: 404.322.6218 or Brenan.ryan@nelsonmullins.com Jonathan Talcott: 202.712.2806 or jon.talcott@nelsonmullins.com Benjamin Barnhill: 864.250.2246 or ben.barnhill@nelsonmullins.com 6 November 19, 2013
Annex A High Quality Liquid Assets All assets must be unencumbered, and certain other across-the-board requirements apply. Level 1: includable without limit in HQLA Federal Reserve Bank balances. Foreign withdrawable reserves. U.S. Treasury securities and any security unconditionally guaranteed by the U.S. Treasury. Liquid and readily marketable securities issued or guaranteed by a U.S. government agency other than Treasury and whose obligations are backed by the full faith and credit of the U.S. government. Liquid and readily marketable securities issued or guaranteed by a sovereign entity, BIS, IMF, ECB and European Community, or a multilateral development bank that is risk weighted at under capital rules and that meets certain other prerequisites. Any liquid and readily marketable securities issued by a sovereign that is not risk weighted at where sovereign issues security in own currency and bank holds that security to meet net cash outflows in that jurisdiction. Level 2A: haircut at 15% of fair value and, when aggregated with Level 2B, includable only up to 4 of HQLA Investment-grade GSE securities that are senior to preferred stock. Any security risk-weighted no higher than 2 that is issued by a sovereign entity or multilateral development bank whose obligations have a proven history as a source of liquidity in stressed market conditions. Level 2B: haircut at 5 of fair value and limited to 15% of HQLA Publicly traded investment grade corporate debt securities issued by entities whose obligations have a proven history as a source of liquidity in stressed market conditions and that is not an obligation of a financial company (or certain other financial entities) or any affiliate. Publicly traded common equity shares included in either (i) the S&P 500, (ii) a foreign index that the foreign regulator recognizes as eligible for Level 2B (if the share is held in that jurisdiction), or (iii) any other index representing equities that are as liquid and readily marketable as those in S&P 500. Other prerequisites apply as well. 7 November 19, 2013
Annex B Cash Outflow Projection Assumptions Outflow Assumption Unsecured Retail Funding Stable retail deposits. 1 3% Other retail deposits. 1 Other unsecured retail funding that matures within 30 days. Term deposits with residual maturity greater than 30 days. Brokered Deposits Reciprocal brokered deposits provided by a retail customer or counterparty: o Entire amount is covered by deposit insurance. o Less than entire amount is covered by deposit insurance. 1 25% Brokered sweep deposit accounts provided by a retail customer or counterparty: o That are deposited in accordance with a contract between the bank and the customer or counterparty and that are fully insured. o That are not deposited in accordance with a contract and where the entire amount is fully issued. o Where less than the entire amount is fully insured. All other brokered deposits provide by a retail customer or counterparty: o That mature within 30 calendar days or less. o That mature later than 30 calendar days. 1 25% 4 1 Unsecured Wholesale Funding Unsecured wholesale funding that is not an operational deposit and is not provided by certain financial entities: o Entirely covered by deposit insurance. o Less than entire amount is covered by deposit insurance. o Funding in the form of a brokered deposit. 2 4 4 1 The term deposit includes both demand and term deposits. Retail customers include individuals and small businesses with liquidity risks comparable to individuals and that do not provide more than $1.5 million in funding. A stable account is one that is fully insured by the FDIC and that is either a transactional account or an account held by a depositor with another established relationship at the bank. 8 November 19, 2013
Unsecured wholesale funding that is not an operational deposit but that otherwise is not covered in wholesale funding categories immediately above. o Includes funding by a consolidated subsidiary of the bank or by a consolidated subsidiary of bank s tier-tier holding company. Operational deposits other than escrow accounts: o Entire amount covered by deposit insurance. o All other operational deposits including escrow accounts and deposits not fully insured. 5% 25% All unsecured wholesale funding not otherwise covered above. Debt Securities Debt securities issued by bank that mature in more than 30 days and for which bank is the primary market maker: o Not structured securities. o Structured securities. Secured Funding All funds bank must pay pursuant to secured funding transactions to the extent that funds are secured by: o Level 1 assets. o Level 2 assets. o Level 2B assets. All funds bank must pay pursuant to transactions with sovereign, multilateral development banks, or U.S. GSEs that are assigned a 2 risk weight, to the extent funds are not secured by Level 1 or Level 2A assets. 3% 5% 15% 5 25% All funds received from secured funding transactions that are customer short positions where the positions are covered by other customers collateral and collateral is not HQLA. 5 Asset Exchanges Fair value of Level 1 assets that bank must post to counterparty pursuant to asset exchanges where bank will receive any of the following assets from counterparty: o Level 1 assets. o Level 2A assets. o Level 2B assets. 15% 5 9 November 19, 2013
Fair value of Level 2A assets that bank must post to counterparty pursuant to asset exchanges where bank will receive any of the following assets from counterparty: o Level 1 and Level 2A assets. o Level 2B assets. Fair value of Level 2B assets that bank must post to counterparty pursuant to asset exchanges where bank will receive the following assets from counterparty: o Any HQLA assets. Mortgage Commitments Potential cash outflows related to commitments to fund retail mortgage loans within 30 days. o For inflows, no recognition of proceeds from potential sale of mortgages in the to-be-announced, specified pool, or similar forward sales market. Other Commitments 2 Between affiliated insured depository institutions. Retail facilities (individual and small businesses). Credit facilities committed to non-financial sector companies whose securities are excluded from HQLA. Liquidity facilities committed to non-financial sector companies whose securities are excluded from HQLA. Credit and liquidity facilities committed to depository institutions (other than affiliated depository institutions), depository institution holding companies, and foreign banks. Credit facilities to all other regulated financial companies, investment companies, non-regulated funds, pension funds, investment advisers, identified companies, or any consolidated subsidiary of the foregoing. Liquidity facilities to same financial institutions. Liquidity facilities with special purpose entities. Changes in Collateral Positions Amounts banks would need to post or fund as additional collateral under a contract as a result of a change in its financial condition. 35% 85% 5 1 5% 1 3 5 4 Fair value of assets posted as collateral that are not Level 1 assets. o No outflow assumed for Level 1 assets posted as collateral. 2 2 Other commitments are the undrawn portions of committed credit and liquidity facilities than can be drawn down within 30 days. The fair value of any Level 1 assets or Level 2A assets (with a 15% haircut) that secure the facility are to be subtracted from this amount, provided that the bank has not included the collateral in its HQLA amount. 10 November 19, 2013
Fair value of collateral posted by counterparties that exceed the current collateral requirement in a governing contract. Fair value of collateral that bank is contractually required to post bank has not yet posted. Collateral Substitutions 3 Fair value of collateral posted to bank that bank includes in Level 1 of HQLA and that a counterparty may replace only with: o Level 1 assets. o Level 2 assets. o Level 2B assets. 15% 5 Fair value of collateral posted to bank that bank includes in HQLA Level 2A and that a counterparty may replace only with: o Level 1 or 2A assets. o Level 2B assets. Fair value of collateral posted to bank that bank includes in HQLA Level 2B and that a counterparty may replace only with: o Level 1, 2A or 2B assets. 35% 85% 5 Structured Transactions For each structured transaction, the greater of (i) of all debt obligations of issuing entity that mature within 30 days or less and all commitments made by the entity to purchase assets within 30 days or less, or (ii) the maximum amount of funding the bank may be required to provide to issuing entity within 30 days or less through a liquidity facility, a return or repurchase of assets, or another funding agreement. Net Derivatives Sum of payments and collateral that a bank will make or deliver within 30 days to each counterparty under derivative transactions, less (if subject to a valid qualifying master netting agreement) the sum of payments and collateral due from each counterparty within 30 days. o If no master netting agreement, total cash outflows to all 3 A collateral substitution is the differential between the post-haircut fair value of HQLA collateral posted by a counterparty and the lower-quality HQLA or non-hqla with which it could be substituted under an applicable contract. 11 November 19, 2013
counterparties within 30 days less total cash inflows from all counterparties within 30 days. o Net cash outflow calculation issues: Does not include inflows when assets posted by counterparty to support the inflows are included in bank s HQLA. Does not include amounts arising in connection with forward sales of mortgage loans or any derivatives that are mortgage commitments. Includes derivatives that hedge interest rate risk associated with a mortgage pipeline. Derivative Collateral Changes Absolute value of the largest 30- consecutive calendar day cumulative net market-to-market collateral outflow or inflow resulting from derivative transactions realized during the preceding 24 months. Foreign Central Bank Borrowings In a foreign jurisdiction with minimum liquidity rules, where bank has borrowed from the jurisdiction central bank. Amount established in the jurisdiction on central bank borrowings In a foreign jurisdiction without a minimum liquidity standard for central bank borrowings. Amount calculated under rules for asset exchanges Other Contracts Funding or amounts payable by bank under legally binding contracts not otherwise specified. Excluded Amounts for Intragroup Transactions Transactions between: o Bank and consolidated subsidiary of bank. o Consolidated subsidiaries of bank. Excluded from calculation 12 November 19, 2013
Annex C Cash Inflow Projection Assumptions Threshold Rules Total inflows capped at 75% of total cash outflows. Amounts not included in inflows: o Operational deposits held by bank in other regulated financial companies. o Payments bank expects or is contractually entitled to receive in 30 calendar days or less due to forward sales of mortgage loans and any derivatives that are mortgage commitments. o Any credit or liquidity facilities extended to bank. o Any asset included in banks HQLA amount and any amount payable to bank with respect to such assets. o Any payable from a non-performing asset or an asset bank expects to become nonperforming within 30 calendar days or less. o Any payable on an exposure with no maturity or that matures after 30 days. Inflow Retail Cash Payments contractually payable within 30 days from retail customers and counterparties. Unsecured Wholesale Cash Principal and interest payments contractually payable from regulated financial companies, investment companies, non-regulated funds, pension funds, investment advisers, or identified companies (and their consolidated subsidiaries), or central banks. Assumption 5 Principal and interest payments contractually payable from all other wholesale customers or counterparties. o For revolving credit facility, amount of existing loan may not be included and remaining undrawn balance must be included in commitment outflow amount. 5 Securities Cash Contractual payments due on securities owned by bank that are not included in HQLA. Secured Lending Contractual payments due to bank pursuant to secured lending transactions secured by the following assets, provided any such HQLA assets are included in bank s HQLA amount and provided bank is using such assets to cover any of its shorter position: o Level 1 assets (proviso on covering short position does not apply). 13 November 19, 2013
o Level 2A assets. o Level 2B assets. Contractual payments due to bank pursuant to collateralized margin loans, provided loans are not secured by HQLA and bank is not using collateral to cover any of its short positions. 15% 5 5 Asset Exchanges Fair value of Level 1 assets to be received from counterparty where bank must post to counterparty: o Level 1 assets o Level 2A assets o Level 2B assets o Non-HQLA assets Fair value of Level 2A assets to be received from counterparty where bank must post to counterparty: o Level 1 or Level 2A assets o Level 2B assets o Non-HQLA assets Fair value of Level 2B assets to be received from counterparty where bank must post to counterparty: o HQLA assets o Non-HQLA assets Net Derivatives Sum of net derivatives cash inflow, if greater than zero, for each counterparty o Gross inflow for each counterparty is sum of payments and collateral bank will receive from counterparty in 30 calendar days or less o If transactions with counterparty are subject to a qualifying master netting agreement, the sum of payments and collateral bank must make or deliver in 30 calendar days or less 15% 5 35% 85% 5 Other Payments All other cash inflow payments Excluded Intragroup Transactions Payments arising from transactions between: o Bank and consolidated subsidiary o Two consolidated subsidiaries of bank N/A The articles published in this newsletter are intended only to provide general information on the subjects covered. The contents should not be construed as legal advice or a legal opinion. Readers should consult with legal counsel to obtain specific legal advice based on particular situations. 14 November 19, 2013