Derivatives, Securitization and Structured Products

Our lawyers are experienced in negotiating over-the-counter (OTC) and exchange-traded derivatives and futures contracts.  We offer our clients technical, substantive, and public policy experience at a time when the US$615 trillion OTC market is subject to a historic transformation to an exchange-based and centrally cleared, global market. We assist clients in all aspects of that transformation.  We are experienced in handling every stage of the derivative transaction life cycle, from negotiating and executing the foundational documentation to finalizing trade confirmations for each trade. 

The practitioners in the Derivatives and Structured Products practice regularly advise investment management and other end-user and select sell-side clients with respect to the full range of OTC derivatives (e.g., credit, equity, interest rate, currency, energy swaps, options, currency forwards, repos, and synthetic investments).  Our counseling covers derivatives structuring, negotiation and trading, regulatory compliance, claims negotiation in bankruptcy, and other issues.  Our end-user clients include hedge funds, registered investment companies, ERISA and government plans, U.S. and non-U.S. manufacturing and mining corporations, investment advisers, energy producers and marketers, utilities, individuals, and other market participants.  We have an active tri-party control agreement practice that has succeeded in keeping assets from becoming enmeshed in high-profile insolvency proceedings.

Our lawyers are experienced in negotiating listed options, futures, and other exchange-traded products.  We are well-versed in central clearing requirements and regularly advise clients who face futures commission merchants (FCMs), negotiate FCM agreements and ancillary documentation, challenge margin calls, and develop and establish cutting-edge collateral arrangements.  We offer our clients technical, substantive, and public policy experience relating to the central clearing mandates that are imposed by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and we are tracking similar mandates and reform initiatives in the European Union and elsewhere. 

We regularly advise issuers, investors, servicers, and others with respect to a wide range of securitization transactions and asset classes.   Our experience includes private-label and agency residential mortgage securitization, commercial mortgage securitization, and securitization of non-mortgage consumer assets such as automobile loans and leases.  We also have significant experience in collateral debt obligations (CDOs) and collateralized loan obligations (CLOs) backed by a wide variety of assets including commercial loans, corporate bonds, emerging market bonds, asset-backed securities, and emerging or non-correlated assets such as life settlements.  Our experience in CDOs and CLOs covers both cash transactions and synthetic transactions.  We have been active participants in restructuring of securitizations and litigation related to investments in securitization tranches.

We regularly advise financial institutions and others throughout the world in respect of a wide range of structured products that do not cleanly fall within the ambit of pure derivatives or pure securitization.   For example, we have represented financial institutions in respect of p-notes and other market access programs, tax-deferred asset monetization programs, and credit-linked note and equity-linked note programs.

We advise hedge funds, registered investment companies, retirement plans, investment advisers, U.S. and non-U.S. corporations, special purpose entities, REITs, brokerage firms, other financial institutions, energy companies, utilities, and individuals on the documentation and regulatory and compliance issues relating to their use of OTC derivative instruments, including swaps, caps, floors, collars, futures contracts, and options and exchange-traded instruments. 

We regularly represent a large number of end-users in drafting, negotiating, renegotiating, and interpreting a large number of repurchase, reverse repurchase, and securities lending agreements, as well as master securities forward transaction agreements.  We also regularly represent our clients with respect to securities lending and securities lending agency activities, and we draft and negotiate on their behalf related documentation.  K&L Gates also advises financial institution clients in connection with transactional and securities and other regulatory issues arising in connection with a variety of structured products and synthetic investments.

We also determine whether firms may be exempt from registration as commodity pool operators (CPOs) and commodity trading advisors (CTAs) with the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA); register firms as CPOs, CTAs, futures commission merchants, and introducing brokers; and advise them on CFTC and NFA disclosure, reporting, and record-keeping requirements.  We regularly review account agreements between registered investment companies and private funds (including procedural and record-keeping agreements), ERISA plans and other clients, and futures commission merchants or broker-dealers regarding the trading of futures contracts and options, and prepare supervisory and internal liability control policies and procedures regarding futures and options advice and trading.

We have an extensive practice in representing clients in SEC, CFTC, FINRA, NFA, and state regulatory inspections, audits, and enforcement investigations and actions, including those focused on OTC derivative products and sales.  More than 35 of our lawyers devote substantially all of their time to such matters, giving us substantial institutional knowledge and experience in this area.  This practice has included representation of, among others, hedge funds, registered investment companies, investment advisers, CTAs, energy companies, and traders in regulatory inspections, investigations, and civil and criminal prosecutions with respect to the creation of, investment in, sale of, and/or trading of OTC and exchange-traded derivatives.  We also regularly perform confidential, internal compliance reviews and, when necessary, internal investigations in these areas and provide in-house training on legal standards governing the sale and trading of derivatives.