New AML Rules for Investment Advisors?

James M. Heffner

By James M. Heffner



The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, is proposing new anti-money laundering rules for investment advisors. Continue reading »

Missouri Changes Its No-Oral-Credit Agreement Disclaimer Language Requirements for Lenders

David A. Zobel

By David A. Zobel



Missouri has once again amended its credit agreement statute of frauds to limit the ability of borrowers and guarantors to assert claims against lenders and the parties’ written credit agreement based upon oral promises or commitments.  Specifically, Senate Bill 100, effective late 2013, extends Missouri’s prohibitions to reach not only oral, but now also unexecuted agreements or commitments to loan money, extend credit, or to forebear from enforcing repayment of a debt if the parties’ credit agreement contains certain disclaimer language as provided in the statute.

Extending the prohibition specifically to unexecuted agreements between the parties became necessary after Mo. Rev. Stat. 432.047 was limited by the Missouri Court of Appeals in its Bailey v. Hawthorne Bank decision.  In that case the Court of Appeals broadly construed several different bank documents, including a bank loan summary which was never delivered to the borrower, to find a “credit agreement” as that term is used in the statute. Continue reading »

Missouri Supreme Court Upholds Foreclosure Laws

Jeffrey R. Schmitt

By Jeffrey R. Schmitt



On April 12th, Missouri’s highest court granted lenders across the state a victory by ruling that banks only need to give defaulted borrowers, in foreclosure, credit for the amount of the foreclosure bid, as opposed to the fair market value of the property. The ruling is consistent with existing Missouri precedent, which, for decades, has maintained that the sale price of a foreclosed property is determinative with respect to the deficiency owed by the borrower to the bank, which is the remaining balance on the loan for which the lender can sue.

In the case, First Bank v. Fischer & Frichtel, the borrower, Fischer & Frichtel, a Missouri real estate developer, defaulted on loans to First Bank, which then foreclosed on properties securing the loan. First Bank purchased the property at the foreclosure sale. The lender proceeded to sue the borrower for the deficiency balance remaining on the loan. The borrower defended the case by alleging that the proper method of determining the deficiency was not the sale price at the foreclosure sale, but rather, the fair market value of the property. In so doing, the borrower essentially sought a modification of existing Missouri law with respect to calculations for suing on deficiency against a defaulted borrower. Fischer & Frichtel maintained that Missouri should align itself with other states which require a lender to determine the fair market value of the foreclosed property and apply that amount, which is generally higher than the foreclosure price, to the loan balance before suing a borrower.

The borrower argued that the current law often grants lenders a windfall after a foreclosure. Foreclosure sales require cash buyers on the day of the sale, except that the foreclosing lender can simply bid as a credit against the amount of the indebtedness owed by the borrower. This allows lenders to often easily outbid potential purchasers who may not have cash readily available. If the lenders obtain the properties at a depressed sale price at the foreclosure, they can then resell the property to a third party, in an arms-length transaction, and are entitled to keep any profits from the resale of the foreclosed property, without applying those profits to the borrower’s loan balance.

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Is This by Consent? Changes to Missouri Supreme Court Rule Affect Use of Non-party Subpoenas

David R. Bohm

By David R. Bohm



Part of a series on issues related to Manufacturers, Distributors and International Trade

Co-authored by David R. Bohm and David A. Zobel

A major change involving subpoenas to non-parties has hit the business world in the state of Missouri.

A new amendment to the Missouri Supreme Court Rules now requires non-party record custodians to physically appear at deposition to produce subpoenaed items, unless all parties to the litigation have agreed that the subpoenaed party may produce the items without appearing.

The amendment changes the prevailing practice where parties send out subpoenas to third parties with a letter explaining that they will be excused from appearing at deposition if they produce the requested items along with what is known as a business records affidavit.

Rule 57.09, as amended, now requires parties to first obtain consent from all other parties to the litigation before a subpoenaed witness may produce documents without attending the deposition. This agreement must be communicated to the witness in writing. Absent this agreement, a witness must appear to produce subpoenaed items at deposition.

What does this mean to you? If you receive a subpoena, you may only produce the documents to the party serving the subpoena without appearing at deposition if that party represents to you in writing (e.g., in a letter) that all other parties have consented to production of the docume

nts without need for you to appear at the deposition. Such a letter should protect you from allegations that you improperly produced records by mail, instead of bringing the documents to the deposition. You do not need to see the actual agreement. If you have any questions as to whether you can simply mail the documents, instead of appearing at deposition, you should either call your attorney for advice or simply wait and bring the documents at the time and place designated in the subpoena.

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Bank Transfer Day and its Prospects for “Main Street” Banking

Jeffrey R. Schmitt

By Jeffrey R. Schmitt



November 5, 2011 marked “Bank Transfer Day” around the United States, as initiated by 27-year old Los Angeles art dealer Kristen Christian, via this facebook page in early October. The movement, purposefully or not, coincided with the Occupy Wall Street movement and spread throughout the United States, denouncing big banks and the Wall Street financial industry. Perhaps the greatest alleged perpetrator, and possibly the greatest victim, of the Occupy and Bank Transfer Day movements was Bank of America, who announced earlier this year it intended to implement $5.00 monthly service fees for certain deposit accounts. Bank of America’s plan imploded when other big banks failed to follow suit with their own fees, and Bank of America became the sole target of criticism for its planned fee policy.

The result, in part, was the concept of Bank Transfer Day, where consumers were urged to withdraw their deposits from big banks and move their money to smaller and locally run credit unions. The result, according to the Credit Union National Association (CUNA), was that more than 40,000 people signed up for accounts at credit unions on November 5th, corresponding to about $80 million in deposits.  CUNA represents most of the chartered credit unions in the United States, and reports that its members saw increases in new account activity during the month of October and early November, prior to Bank Transfer Day.

While Bank Transfer Day created headlines and long lines at credit unions on a Saturday morning, did it really have the desired impact on Bank of America and other big banks?  The answer is probably not, given the size of the market share that Bank of America and other top banks in the United States hold, a loss of even tens of thousands of customers in a given week probably does not represent much of a blip on the banks’ radars. In fact, most large banks are flush with deposits right now, given the unstable market and the desire for many people and investors to remain liquid. Additionally, banks are benefitting from the low interest rates on deposit accounts, which means that many consumers are not even shopping rates to find the best return on their deposits, as has historically been the case.

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Consumer Financial Protection Bureau releases Supervision and Examination Manual

James M. Heffner

By James M. Heffner



Established in 2010 by Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau (“CFPB”) has released its first edition of the Supervision and Examination Manual. The Manual is a guide to how the CFPB will supervise and examine consumer financial service providers under its jurisdiction for compliance with Federal consumer financial law.

As stated on the CFPB’s website, the Manual is divided into three parts:

  • Part One describes the supervision and examination process.
  • Part Two contains examination procedures, including both general instructions and procedures for determining compliance with specific regulations.
  • Part Three presents templates for documenting information about supervised entities and the examination process, including examination reports.

While the Manual is designed in large part to supervise the nation’s largest mortgage servicers, it will impact all lenders who deal with consumer loans.

Posted by Attorney James M. Heffner. Heffner practices in corporate and real estate law. He is experienced in the purchase, sale, financing, and leasing of real estate, as well as the creating and negotiation of construction documents. In corporate matters, he supports business owners in structuring entities, shareholder disputes, mergers, and stock purchases/redemptions. 

Banks Loosening the Purse Strings?

James M. Heffner

By James M. Heffner



New York Times article notes that banks are making more loans. Corporate lending is leading the way, up 7.2% from October 2010.

Posted by Attorney James M. Heffner. Heffner practices in corporate and real estate law. He is experienced in the purchase, sale, financing, and leasing of real estate, as well as the creating and negotiation of construction documents. In corporate matters, he supports business owners in structuring entities, shareholder disputes, mergers, and stock purchases/redemptions.  

Making the Most of a Failed Bank: FDIC Loss-Sharing and Purchasing Loan Portfolios

Jeffrey R. Schmitt

By Jeffrey R. Schmitt



One potentially lucrative by-product of the recent economic downturn and corresponding bank failures is the opportunity to acquire banks or loan portfolios at a substantial discount and on favorable terms. An FDIC receivership of a failed bank presents other healthy lenders with an opportunity to obtain receivables at a discount, and possibly corresponding deposits as well. Bank failures also offer options to investors with capital who may be considering non-traditional investment options given the current economic climate and real property market.

These opportunities usually present themselves in one of two ways. First, the FDIC may sell all of the assets of a failed bank, including receivables and deposits, to a third party, which generally is another lender. Second, the FDIC can pool individual loans together and essentially auction a pooled loan portfolio to a third party without corresponding deposits. Both scenarios require scrutiny of certain issues for the acquiring lender or investor in order to maximize the investment revenue from the purchase and ensure compliance with the terms of the agreement with the FDIC.

Loss-Sharing with the FDIC

A purchaser of a failed bank will generally enter into a Loss-Share Agreement with the FDIC. Loss-Share Agreements have developed in the past two decades, and give a purchaser the benefit of the FDIC’s agreement to absorb a percentage of a loss realized on the acquired receivables. Under a Loss-Share Agreement, the purchasing lender incurs the remaining portion of a loss on a loan, generally around 20%, while the FDIC incurs the greater share.

Loss-Share Agreements are intended to facilitate the FDIC’s sale of a greater number of assets to a purchasing lender while also burdening the acquiring lender with the obligation to manage and collect non-performing loans sold from a failed bank. In effect, loss-sharing results in the alignment of interests between an acquiring lender and the FDIC, which both now face risk associated with the workout of the bad debt acquired.

It is essential to understand the potential effects of a Loss-Share Agreement when bidding on a failed bank. The obvious benefit to the acquiring lender is the reduced risk associated with the purchase of a bank or loan portfolio. However, the benefit to the FDIC is that the loss-share, and the reduced risk to the purchaser, will likely create greater interest in acquiring a failed bank, and therefore increased bids for the purchase.

Dealing with Collateral

Evaluation of collateral packages for loans subject to sale by the FDIC is essential in evaluating the transaction and should be undertaken at the earliest possible opportunity. It is not only important to evaluate the collateral, but to take steps to further protect the collateral, even if a particular loan is not in default.

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Illinois Considering Substantial Changes to Improve Foreclosure Process

James M. Heffner

By James M. Heffner



Chicago Tribune reports Illinois considering changes to its foreclosure process, potentially affecting any one of the approximately 70,550 foreclosures pending in the State.

NYSE and Deutsche Boerse (DB) Merge to Survive

Brian S. Weinstock

By Brian S. Weinstock



Is America’s dominance in capitalism clearly over?

The NYSE merger is one of survival both for the NYSE and for the German securities exchange Deutsche Boerse.

The NYSE is inefficient, i.e. the pit, traders on the floor. Lower fees and better efficiencies created the mess at the NYSE.  The NYSE has too many outdated traditions which created numerous types of inefficiencies, forcing the NYSE into a downward position. Even the NASDAQ was doing better than the NYSE regarding efficiencies via electronic trading.

We live in a global economy. There are trading exchanges all over the world, i.e. China, Tokyo, Brazil , Russia, India, Australia, London, etc. The stock exchanges in China and Brazil are some of the largest in the world. Everybody in the world can access securities exchanges via the Internet.

The dollar is weak right now. Europe has a debt crisis and the Euro is not so stable.

Not long ago, one of Europe’s leading independent forecasters for the Treasury asserted that the Euro could collapse as a result of Europe’s debt crisis. The European Central Bank’s Governing Council Member asserted that it is not up to the bank to save countries where governments run the risk of being insolvent.

Right now, Ireland, Greece, Portugal, Italy, and Spain have a lot of debt problems and plenty of entities are buying more insurance at higher prices to cover potential losses in those countries.

Germany had good growth in 2010 but their economic model is centered around exports, i.e. cars and machines. Asia (China) drove Germany’s growth in 2010. Can Germany sustain their economic model since other European countries (mainly southern Europe) have stagnant economies re: exports and imports? The European debt crisis has pushed the Euro down which has made German exports more competitive.

Right now, US exports are even better than German exports because the US dollar is weak, too.

Since Germany appears to be in the best economic position in Europe more people are putting capital in Germany when investing in Europe. German exporters could take a huge hit if Europe’s debt crisis runs into other European countries.

Who knows what will happen because regulators have to look this over. Also, there are may political issues with this deal starting with a fight over what to name the exchange. Politicians could crush the regulatory process simply because they do not like the proposed name. I suspect it will go through because both exchanges need this for survival.

I think the NYSE deal is a play on a world asset which is undervalued as a result of a weak US dollar.

Ex: InBev could not purchase AB if the US dollar was strong. InBev took advantage of a weak US dollar and is now dealing with a lot of debt and debt service. The strength of the US dollar runs in cycles just like the markets. Will the US dollar stay at its current value forever or remain at lower values when priced against other global currencies? I suspect not.

The World Bank has predicted a global growth of 3.3% for 2011. Europe’s debt crisis is a huge factor which could derail any global recovery.

The European Central Bank has asserted that inflation may be around for months in Europe which would probably require a European interest rate hike which would make borrowing from global banks tougher than it already is.

However, major companies are lean and mean now and sitting on trillions of dollars of cash. In addition to inflation and a debt crisis, the 17 member European nation is still facing 10% unemployment which was after a recent drop. Also, housing prices continue to drop in Europe although it appears that it has bottomed out.

Is America’s dominance in capitalism clearly over? I would say no since nothing is clear right now with global economies, global financial markets and global debts and debt service.