Bryan Cave’s Financial Crisis Response Team represents clients in connection with legal and business issues resulting from the current financial markets crisis.  Team members are engaged to address the full range of issues:  problems involving distressed banks and other financial institutions; litigation, government investigations, and compliance;  bankruptcy and work-outs; negotiating and documenting derivatives transactions; and numerous other problems that spring from the market turmoil.  Team members include lawyers throughout Bryan Cave’s 15 offices and represent multiple practice areas.

Derivative Transactions
Derivative transactions have become an important element in the financial structure of our clients.  These transactions can provide protections against unfavorable changes in interest rates, currency exchange rates, commodity prices and other factors that impact the business, including such variables as weather and energy prices.  All of these transactions have one element in common, which has recently become a cause of great concern - counterparty credit exposure.
For our clients with credit exposure to financial institutions, the initial concern is to understand the nature of the exposure and the remedies which may be available if the credit standing of the financial institution should suddenly deteriorate.  For clients entering into or extending derivative transactions with financial institutions, the objective should be to include protections that are adequate in the current environment.
The standard International Swaps and Derivatives Association (ISDA) documentation for derivative transactions includes available provisions which can provide appropriate protections: requirements for each party to provide collateral based on its credit rating or changes thereto; rights of termination by a party if the counterparty defaults in payment or other obligations; financial reporting requirements; and limitations on the manner in which a secured party may hold and deal with deposited collateral, among others.  Such provisions may or may not be included in our clients’ documentation, or may be included in a manner which provides protection to the financial institution but not to the other party.
In addition to the overall risk that the counterparty may not be able to make payments under a swap or other derivative agreement, our client may be at risk if it has deposited collateral with a counterparty under an ISDA Credit Support Annex.  Depending on the elections made in the document, the counterparty may have the right to lend, pledge or otherwise deal with collateral deposited with it.  In the event of insolvency by the counterparty, our client may find itself in the position of general unsecured creditor in seeking to reclaim excess collateral.
We have advised clients on many different types of derivatives transactions, including swaps, caps and collars related to interest rates, currency exchange rates, securities prices, commodities prices, energy and weather, as well as credit default swaps.  We have provided these services to our financial institution clients as well as to many of our other largest clients for many years.
Our team is available to assist in analyzing existing derivatives documentation, to advise as to our clients’ rights in the event of deterioration in the financial condition of a counterparty or liquidity provider, and to recommend approaches for documentation of new derivatives transactions.  Also, our team can provide guidance on transactions involving collateralized debt obligations (CDOs), auction rate securities (ARSs), and variable rate demand debt (VRDs).  Team members with specific transactional expertise include Jeremy Finkelstein, Ed Marlow, Denis McCusker, Sharon Nowakowski, Bob Pedersen, David Reid, Marty Rolle, Matt Scheidt, Stephen Sparks and Bart Wall.

Insolvency and Restructuring Issues
Financial distress always results in increased activity in restructurings, including possible filings under title 11 of the United States Code (the “Bankruptcy Code”).  As a direct result of the pending financial crisis, we have been asked to advise a number of clients on derivative transactions and other financial transactions regarding the impact of insolvency or bankruptcy of one or more parties to the transaction. 
The Bankruptcy Code and the Securities Investor Protection Act of 1970 include a number of special provisions designed to reduce the adverse implications of insolvency or bankruptcy of broker-dealers and other financial market participants on investors and counterparties to investment accounts, securities and commodities contracts, repurchase agreements, swaps and master netting agreements.  For our clients who are parties to such contracts, it is important to understand the nature of the exposure and the courses of action and remedies available if the financial condition of the counterparty suddenly deteriorates or a liquidation proceeding is initiated. 
Our team is available to assist in analyzing transaction documentation and to advise as to our clients’ rights in the event of insolvency or bankruptcy of a counterparty.  Team members with the requisite experience include Larry Gottesman, Ren Hayhurst, Mark Mersel, Bob Miller, Lloyd Palans, Mark Stingley, Brian Walsh, Robert Wieder, and Cassie Writz.

Litigation, Investigations, and Defense in Regulatory Enforcement Actions
Many of our clients will likely need to contend with litigation or government or internal investigations arising out of the distressed financial markets.  Team members have extensive experience in advice, investigation, and litigation concerning CDOs, ARSs, credit default swaps, and other derivative transactions, including those related to subprime mortgages.
The team has handled numerous matters involving credit derivatives, CDOs, and ARSs, including:

• Review of institutional procedures for valuing and accounting for credit default swaps on bonds related to subprime mortgages and recommendations for improvements on such procedures;
• Independent monitor investigation of complex financial transactions to determine their effect, among other things, on counterparties’ accounting;
• Litigation and guidance on disputes involving failed or failing CDOs, ARSs, and credit derivatives, and the suitability of those investments to meet the investors’ financial needs;
• Representation of an indenture trustee in a dispute over the valuation of the settlement amount required under a credit default swap;
• Representation of broker-dealers, individuals, funds, and investment advisors in SEC, New York Attorney General, and other investigations that involve (i) structured note assets, (ii) originating, valuing, and trading CDOs backed by subprime mortgages, and (iii) linked swaps that allegedly had no economic purpose; and
• Advice regarding disputes over claimed collateral calls and alleged defaults in connection with CDOs and other derivative instruments.

In addition, team members have advised banks, broker-dealers, and other financial market participants about issues and claims concerning federal regulation of the industry, state consumer protection statutes, and common law predatory lending claims in federal and state courts throughout the country.  Such issues and claims have concerned investigations of short selling, alleged sale of unsuitable securities, alleged predatory lending practices, “bait and switch” loan product tactics, fraudulent appraisal and other loan settlement services, inadequate loan origination disclosures, and improper loan servicing fees.  Representative matters include:

• Class actions alleging violations of, among other things, the Truth in Lending Act, Homeowners’ Equity Protection Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Practices Act, various state unfair business practices and consumer protection statutes;
• Individual borrower suits seeking to rescind or reform loans, stay foreclosure, and/or recover damages for regulatory violations and predatory lending practices;
• SEC and Attorneys General investigations concerning alleged predatory lending practices;
• Defense of investment funds and their U.S. financial adviser in federal securities claims arising out of alleged market manipulation through short selling;
• Representation of a hedge fund in an SEC investigation into short-selling securities of publicly traded companies;
• Representation of secured and unsecured creditors in bankruptcy proceedings involving loan originators;
• Negotiation of disputes between loan originators and secondary market investors on indemnification obligations;
• Litigation to rescind purchases of syndicated mortgage backed securities and enforcement of repurchase rights;
• Representation of financial services firm before Congress, the SEC, and other agencies on matters such as (i) seeking changes to net capital and customer protection rules to allow broker-dealers to hold funds in certain money market funds, (ii) Rule 12b-1 issues concerning revenue stream to registered representatives, and (iii) altering FINRA’s sales practice requirements for variable annuities; and
• Counseling of clients on a variety of other issues related to broker-dealers, such as (i) broker-dealer and associated person status questions, U4-U5 compliance and state registration, (ii) required content and format of CEO Certification and Annual Report requirements under NYSE Rule 342 and NASD Rules 3012/3013, and (iii) Regulation NMS, Regulation M, Regulation SHO, margin, and books and records requirements.

The team consists of lawyers with experience in bankruptcy, securitization, commercial and real estate litigation, securities litigation, securities enforcement, consumer regulations, civil rights laws enforcement, and federal and state government investigations.  Team members include Kevin Abel, Leo Asaro, Marilyn Barker, Christine Cesare, Nick Cherryman, James Cole, Bill Hibsher, Stuart Kaswell, Mark Mersel, Bob Pedersen, Therese Pritchard, Eric Rieder, Tom Schell, Richard Schulman, Steven Smith, Mark Stingley, Noah Weismann, and Robert Wieder.

Counseling and Advice regarding Distressed Financial Institutions
The team also has a specialty practice that provides legal counsel to financial institutions struggling to maintain their capital and profitability, as well as to their customers, third-party service providers and potential acquirers of banks or bank assets.  Members of the team are prepared to answer questions from customers and service providers regarding their rights if a bank fails, the safety of “fully insured” deposits and the legal process involved in purchasing assets of a failed institution.  The team also helps struggling institutions divest themselves of assets, create revenue-generating deposit and loan products that comply with the law and deal with ever more complex regulatory oversight.
Representative matters include:

• Advising financial institutions in their efforts to be retained by the U.S. Treasury Department to manage and dispose of assets under the Emergency Economic Stabilization Act of 2008.
• Advising both financial institutions and former executives on “golden parachute” issues;
• Counseling clients on a variety of contract repudiation issues;
• Assisting borrowers, lenders and loan participants in working with the FDIC in its receivership capacity in connection with loans held by the receivership;
• Providing guidance to financial institutions on regulatory issues generally, and on matters related to liquidity, capital, loan quality and resolution of “troubled bank” status;
• Assisting clients with acquisitions of assets from troubled banks or the FDIC;
• Providing regulatory, operational, and management advice to financial institutions concerning bank acquisitions;
• Advising depository institutions and other clients on deposit insurance issues;
• Advising financial institutions and officers and directors in connection with actual or threatened regulatory enforcement actions.

Team members in this practice area include Andrew Auerbach, John Barrie, John Boyle, Ronald Emanuel, Karen Garrett, Ren Hayhurst, David Kim, Linda Koffman, Christopher Lause, Jonathan Lautt, John Miller, Robert Miller, Judith Rinearson, Benjamin Thompson, William Weisberg, and Katherine Windler.