On July 1, 2020, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Farm Credit Administration, and the Federal Housing Finance Agency (together, the “agencies”) published a final rule adopting amendments to the agencies’ regulations imposing margin requirements on swap dealers and security-based swap dealers (“covered swap entities”).[1] On the same date, the agencies also published an interim final rule prompted by the COVID-19 crisis, postponing certain initial margin implementation deadlines.[2]

The amendments in the final rule include several clarifications of importance to market participants, including with respect to the treatment of legacy swaps in connection with IBOR transitions. Some of the more significant amendments include the following:

Legacy Swap Status. The final rule permits swaps entered into before an applicable compliance date (“legacy swaps”) to retain their legacy status (and so, not trigger margin requirements) in certain circumstances:

IBOR Transition. Legacy swaps retain their status if such swaps are amended to replace an IBOR or other discontinued benchmark rate. The final rule clarifies that benchmark amendments may be made to interest rates under any category of non-cleared swap, not just interest rate swaps (g., a rate used as a discounting interest rate for collateral or payment calculations in a commodity, foreign exchange, equity or credit swap).
Other Amendments. Legacy swaps also retain their status if they are amended to reflect technical changes (g., administrative or operational provisions, such as payment instructions) that do not alter the fundamental economic terms of the non-cleared swap or to reduce operational or counterparty risk, such as notional reductions and portfolio compressions.

Initial Margin Compliance Dates. The final rule introduces an additional compliance date for initial margin requirements. Prior to this amendment, the initial margin requirements were implemented in five phases, from September 1, 2016 through September 1, 2020, depending on the size of the covered swap entity’s portfolio of non-cleared swaps and the market participant’s portfolio of non-cleared swaps. (Variation margin requirements for all covered swap entities and in-scope market participants were completely phased in by March 1, 2017.)

The fifth phase was scheduled to take effect on September 1, 2020 and would have applied to covered swap entities and market participants with an average daily aggregate notional amount (AANA) of between $8 billion and $750 billion.[3] This fifth phase was intended to cover the category with the lowest thresholds, with market participants having less than $8 billion in AANA exempt from the initial margin requirements. However, the amended compliance schedule has split the fifth stage into two, adding a sixth phase for certain entities. Specifically, the amendments require compliance by September 1, 2020, for market participants with an AANA ranging from $50 billion to $750 billion, while the compliance date for those with AANA ranging from $8 billion up to $50 billion has been extended until September 1, 2021.

At the same time, the COVID-19-related interim final rule extends for one year the phase five and phase six deadlines. Hence, the effective date for phase five is September 1, 2021, and for phase six is September 1, 2022.

Inter-affiliate Swaps. The final rule modifies the initial margin (but not variation margin) requirements for non-cleared swaps between covered swap entities and their affiliates, subject to certain conditions. Specifically, a covered swap entity will calculate and monitor the amount of inter-affiliate initial margin that otherwise would be required to be collected, but must actually collect initial margin from its affiliates only if such aggregate initial margin calculation amount exceeds 15 percent of the covered swap entity’s Tier 1 capital (the “15 Percent Tier 1 Threshold”).

The requirement to collect initial margin will apply to inter-affiliate swaps executed on any business day that the 15 Percent Tier 1 Threshold is exceeded and will remain in place until the 15 Percent Tier 1 Threshold is no longer exceeded.

Trading Documentation. The final rule clarifies that a covered swap entity is not required to execute initial margin trading documentation with a counterparty until it is actually required to collect or post initial margin.

The postponed phase five and phase six effective dates should allay industry concerns about the difficulties associated with the full implementation of the initial margin requirements. A large number of relatively small market participants fall under the postponed fifth and sixth phases, affording welcome additional time for compliance. Similarly, the final rule should provide clarity regarding the treatment of covered swap entity inter-affiliate swaps and relief regarding the treatment of qualifying amendments to legacy swaps, including in connection with expected IBOR transitions.

[1] Margin and Capital Requirements for Covered Swap Entities, 85 Fed. Reg. 39754 (Jul. 1, 2020), found here.

[2] Margin and Capital Requirements for Covered Swap Entities, 85 Fed. Reg. 39464 (Jul. 1, 2020), found here.

[3] The applicable compliance date for a covered swap entity is based on the AANA of non-cleared swaps, foreign exchange forwards and foreign exchange swaps of the covered swap entity and its counterparty (accounting for their respective affiliates) for each business day in March, April, and May of that year.

Original Source: blogs.orrick.com

A reader writes:

I had a job offer pulled last week, and I’ve reflected on it, but I still don’t know where I went wrong.

I interviewed with my would-be supervisor on Thursday. On Friday, the recruiter calls to extend a verbal offer for the position. I express that this is good news to hear, and I ask for some time to think it over (I intended to accept the job offer, but wanted time to receive/review the written offer letter and an opportunity to negotiate salary). The recruiter says, “Yes sure, would you like to take some time over the weekend to think about it?” I respond, “Yes, I would really appreciate taking time over the weekend. If I have any questions, would it be appropriate to still reach out to you during the weekend?” Then the recruiter made herself (strangely) available by mentioning how her boyfriend is a CEO of some company, so she would somehow also be available and working.

I review the offer letter, which in terms of total compensation package only stated my salary. I call the recruiter back at the end of business day Friday, with the intent to ask her questions about the medical/dental benefits, retirement, time off, holidays, etc. and to negotiate salary. She doesn’t answer, so I write her an email asking her to contact me at her earliest convenience.

The weekend passes and on Monday, I received a call from the recruiter and she states that they are rescinding the offer to move forward with another candidate because “it seems like you didn’t even open or sign the offer letter, and you don’t appear to be as interested in the position as we had hoped.”

I said, “I did review the offer letter and there wasn’t information about health benefits, holidays, and time off, so I wanted to discuss this with you further since these items weren’t stated in the offer letter. And I’m not sure if I misinterpreted our conversation on Friday, but it appeared that taking time over the weekend to think about the offer was appropriate.” She says that she would speak with the team and get back to me. 36 hours later, she calls to say they are rescinding the offer and moving forward with another candidate.

Is there anything I should have done differently? I’m not sure where I went wrong!

Based on this account, you didn’t do anything wrong. Everything you did was textbook standard — you thanked them for the offer, expressed enthusiasm, asked for some time to think it over, and then contacted them the next day with questions.

That’s exactly in line with what you should do when you receive a job offer.

My guess is that one of the following happened:

1. They didn’t include any info about health insurance, time off, or retirement contributions because they don’t offer much on that front at all. Maybe none of it. And they don’t like the audacity of candidates who expect those things.

I’m leaning away from this explanation because most employers who are stingy about benefits will just shamelessly tell you they don’t offer those things when you ask. They might not be transparent about it earlier in the process, but usually by the time they’re making you an offer, they know the jig is up and they have to tell you.

2. Another candidate emerged in those few days, they preferred that person, and they were looking for an excuse to the pull the offer. This one is very possible. Or relatedly, it could be that someone higher-up was putting pressure on them to hire someone else, and when you didn’t accept immediately, that person had more opportunity to push their preferred hire. (“Well, has she accepted yet? No? Then we can still offer it to Cecil Mongoose.”)

3. There was some sort of miscommunication. For example, it’s possible that you didn’t convey your enthusiasm as much as you thought you did or maybe even said something they interpreted as aggressively unenthusiastic, or something else was misunderstood in those conversations. Or who knows what. I do wonder about the recruiter’s statement that “it seems like you didn’t even open or sign the offer letter” — while of course you hadn’t signed anything yet, why do they think you didn’t even open it? Is it possible there was an attachment you missed that did cover their benefits, or that an attachment went missing? This would be an awfully extreme reaction to that, but it’s a weird enough statement that I wondered about that.

In any case, it doesn’t sound like you did anything wrong. Pulling an offer is a really big deal; it’s something employers should do only when they have a really good reason. These people seem to have done it pretty casually — which says some damning things about them. That means this is probably an employer you wouldn’t want to work for … although if you really needed or wanted the job, I know that’s not much comfort.

One key thing to take away, though, is that normal employers don’t do this. As a general rule, employers don’t pull offers just because you ask for a few days to think it over, ask questions, or try to negotiate salary. So don’t let this make you gun-shy about negotiating or asking for time in the future.

You may also like:I think I went to a fake job interviewI got a job offer — then found out they’re negotiating with another candidate toomy new company won’t honor the extra week of vacation I negotiated

employer rescinded my job offer — where did I go wrong? was originally published by Alison Green on Ask a Manager.

Original Source: askamanager.org