(/(&7521,&&,7$7,21 )('$SS$ WK&LU )LOH1DPH ED %$1.5837&<$33(//$7(3$1(/2)7+(6,;7+&,5&8,7 ,QUH 3$0(/$/+22' 'HEWRU BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 3$0(/$/+22' 3ODLQWLII$SSHOOHH Y 1R 7(11(66((678'(17 $66,67$1&(&25325$7,21 'HIHQGDQW$SSHOODQW BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB $SSHDOIURPWKH8QLWHG6WDWHV%DQNUXSWF\&RXUW IRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHH:HVWHUQ'LYLVLRQDW0HPSKLV 1R $GY3UR $UJXHG )HEUXDU\ 'HFLGHGDQG)LOHG 0D\ %HIRUH $8*025*(167(51&/$55(1DQG5+2'(6 %DQNUXSWF\$SSHOODWH3DQHOsXGJHV BBBBBBBBBBBBBBBBBBBB &2816(/ $5*8(' 6DOO\ 5DPVH\ 2)),&( 2) 7+( $77251(< *(1(5$/ 1DVKYLOOH 7HQQHVVHHIRU$SSHOODQW:LOOLDP$&RKQ&2+1/$:),50&RUGRYD7HQQHVVHHIRU $SSHOOHH21%5,() 6DOO\5DPVH\2)),&(2)7+($77251(<*(1(5$/1DVKYLOOH 7HQQHVVHHIRU$SSHOODQW:LOOLDP$&RKQ&2+1/$:),50&RUGRYD7HQQHVVHHIRU $SSHOOHH BBBBBBBBBBBBBBBBBBBB $0(1'('23,1,21 BBBBBBBBBBBBBBBBBBBB 67(9(15+2'(6&KLHI%DQNUXSWF\$SSHOODWH3DQHOsXGJH7KH'HEWRU3DPHOD / +RRG ILOHG DQ DGYHUVDU\ SURFHHGLQJ VHHNLQJ D GHWHUPLQDWLRQ WKDW KHU GHEW WR WKH 7HQQHVVHH6WXGHQW$VVLVWDQFH&RUSRUDWLRQ 76$& LVQRQGLVFKDUJHDEOHXQGHU86& D 7KHEDQNUXSWF\FRXUWGHQLHG76$&jVPRWLRQWRGLVPLVVEDVHGRQVRYHUHLJQ LPPXQLW\DQG76$&DSSHDOHG 7KH3DQHOFRQFOXGHVWKDWDVDSDUWRIWKHSODQRIWKH&RQVWLWXWLRQDO&RQYHQWLRQWKH 6WDWHVFHGHGWR&RQJUHVVWKHLUVRYHUHLJQW\RYHUEDQNUXSWF\GLVFKDUJHPDWWHUV7KHUHIRUH WKHEDQNUXSWF\FRXUWjVRUGHUGHQ\LQJ76$&jVPRWLRQWRGLVPLVVLV$)),50(' , ,668( 21 $33($/ 7KHVROHLVVXHRQDSSHDOLVZKHWKHU76$&KDVVRYHUHLJQLPPXQLW\LQEDQNUXSWF\ GLVFKDUJHPDWWHUV ,, s85,6',&7,21 $1' 67$1'$5' 2) 5(9,(: 7KH%DQNUXSWF\$SSHOODWH3DQHORIWKH6L[WK&LUFXLWKDVMXULVGLFWLRQWRGHFLGHWKLV DSSHDO 7KH 8QLWHG 6WDWHV 'LVWULFW &RXUW IRU WKH :HVWHUQ 'LVWULFW RI 7HQQHVVHH KDV DXWKRUL]HGDSSHDOVWRWKH%$3$ILQDORUGHURIDEDQNUXSWF\FRXUWPD\EHDSSHDOHGE\ ULJKWXQGHU86& D )RUSXUSRVHVRIDSSHDODQRUGHULVILQDOLILWmµHQGVWKH OLWLJDWLRQRQWKHPHULWVDQGOHDYHVQRWKLQJIRUWKHFRXUWWRGREXWH[HFXWHWKHMXGJPHQWjl 0LGODQG$VSKDOW&RUSY8QLWHG6WDWHV 86 6&W FLWDWLRQVRPLWWHG +RRGILOHGDPRWLRQWRGLVPLVVWKLVDSSHDODVVHUWLQJWKDWWKHRUGHUGHQ\LQJWKH PRWLRQWRGLVPLVVLVQRWDILQDORUGHU2Q6HSWHPEHU WKH3DQHOGHQLHG+RRGjV PRWLRQEHFDXVHWKHFROODWHUDORUGHUGRFWULQHDOORZVLPPHGLDWHDSSHOODWHUHYLHZRIDQRUGHU GHQ\LQJDFODLPRI(OHYHQWK$PHQGPHQW,PPXQLW\6HPLQROH7ULEHRI)ODY)ORULGD 866&W 3XHUWR5LFR$TXHGXFW 6HZHU$XWKY0HWFDOI (GG\,QF86 6&W 7KHDSSOLFDWLRQRIDVRYHUHLJQLPPXQLW\GHIHQVHLVDQLVVXHRIODZVXEMHFWWRGH QRYRUHYLHZ6HPLQROH7ULEH86m'HQRYRUHYLHZUHTXLUHVWKH3DQHOWRUHYLHZ TXHVWLRQV RI ODZ LQGHSHQGHQW RI WKH EDQNUXSWF\ FRXUWjV GHWHUPLQDWLRQl )LUVW 8QLRQ 0RUWJDJH&RUSY(XEDQNV ,QUH(XEDQNV %5 %$3WK&LU FLWDWLRQRPLWWHG ,,, )$&76 %HWZHHQsXO\RI DQG)HEUXDU\RI +RRGVLJQHGSURPLVVRU\QRWHVIRU HGXFDWLRQDOORDQVJXDUDQWHHGE\76$&2Q)HEUXDU\ VKHILOHGDFKDSWHU EDQNUXSWF\SHWLWLRQDWZKLFKWLPHVKHRZHGPRQH\RQWKHVHVWXGHQWORDQV76$&WRRN QRDFWLRQLQWKHEDQNUXSWF\FDVH2QsXQH +RRGZDVJUDQWHGDGLVFKDUJH 2Q2FWREHU VKHILOHGDQDGYHUVDU\SURFHHGLQJUHTXHVWLQJGLVFKDUJHRIKHU HGXFDWLRQDOORDQVRQWKHJURXQGVRIXQGXHKDUGVKLSXQGHU86& D $IWHU 76$&ZDVDGGHGDVDGHIHQGDQWLWILOHGDPRWLRQWRGLVPLVVDVVHUWLQJWKDWWKHDGYHUVDU\ SURFHHGLQJZDVEDUUHGE\VRYHUHLJQLPPXQLW\7KHEDQNUXSWF\FRXUWGHQLHGWKHPRWLRQ WRGLVPLVVKROGLQJWKDW86&SURSHUO\DEURJDWHG76$&j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jVYLHZWKDWWKH6WDWHV FHGHGWKHLUVRYHUHLJQW\ZKHQHYHUmDVLPLODUDXWKRULW\LQWKH6WDWHVZRXOGEHDEVROXWHO\DQG WRWDOO\ FRQWUDGLFWRU\ DQG UHSXJQDQWl 7+( )('(5$/,67 12 DW $OH[DQGHU +DPLOWRQ %XFFDQHHU %RRNV $OWKRXJK +DPLOWRQ GLG QRW H[SOLFLWO\ GLVFXVV WKH DSSOLFDWLRQRIWKLVVWDQGDUGLQWKHFRQWH[WRIEDQNUXSWF\KHGLGFRQFOXGHWKDWZKHQWKH 6WDWHVDJUHHGWRWKHQDWXUDOL]DWLRQFODXVHXQGHUZKLFK&RQJUHVVZDVJUDQWHGWKHSRZHU WRHQDFWmXQLIRUPlODZVRQWKDWVXEMHFWWKH6WDWHVGLG\LHOGWKHLUVRYHUHLJQW\7ZRSRZHUIXO FRQVLGHUDWLRQV FRPSHO WKH FRQFOXVLRQ WKDW WKH 6WDWHV PXVW DOVR KDYH \LHOGHG WKHLU VRYHUHLJQW\RYHUEDQNUXSWF\PDWWHUV)LUVWWKHGUDIWHUVRIWKH&RQVWLWXWLRQXWLOL]HGWKH VDPHXQLTXHDQGLGHQWLFDOODQJXDJHWRHPSRZHU&RQJUHVVWRHQDFWmXQLIRUPlODZVRQ WKHVHWZRVXEMHFWV6HFRQGWKHFRQFOXVLRQWKDWLWZRXOGEHFRQWUDGLFWRU\DQGUHSXJQDQW WRDOORZVRYHUHLJQW\WRERWK&RQJUHVVDQGWKH6WDWHVLVDVVWURQJLQWKHEDQNUXSWF\FRQWH[W DVLWLVLQWKHQDWXUDOL]DWLRQFRQWH[W 7KHQH[WSDUWRIWKHRSLQLRQGHPRQVWUDWHVWKDWWKURXJKRXWRXUKLVWRU\WKH6XSUHPH &RXUWj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m$OWKRXJKWKHVRYHUHLJQLPPXQLW\RIWKH6WDWHVGHULYHVDW OHDVWLQSDUWIURPWKHFRPPRQODZWUDGLWLRQWKHVWUXFWXUHDQGKLVWRU\RIWKH&RQVWLWXWLRQ PDNHFOHDUWKDWWKHLPPXQLW\H[LVWVWRGD\E\FRQVWLWXWLRQDOGHVLJQl$OGHQY0DLQH 86 6&W ,Q$OGHQWKH6XSUHPH&RXUWREVHUYHG >7@KH6WDWHVjLPPXQLW\IURPVXLWLVDIXQGDPHQWDODVSHFWRIWKH VRYHUHLJQW\ZKLFKWKH6WDWHVHQMR\HGEHIRUHWKHUDWLILFDWLRQRI WKH&RQVWLWXWLRQDQGZKLFKWKH\UHWDLQWRGD\ HLWKHUOLWHUDOO\RU E\ YLUWXH RI WKHLU DGPLVVLRQ LQWR WKH 8QLRQ XSRQ DQ HTXDO IRRWLQJZLWKWKHRWKHU6WDWHV H[FHSWDVDOWHUHGE\WKHSODQRI WKH&RQYHQWLRQRUFHUWDLQFRQVWLWXWLRQDO$PHQGPHQWV ,GDW 7KH6XSUHPH&RXUWDOVRVWDWHGm7KH(OHYHQWK$PHQGPHQWFRQILUPHGUDWKHUWKDQ HVWDEOLVKHGVRYHUHLJQLPPXQLW\DVDFRQVWLWXWLRQDOSULQFLSOH LWIROORZVWKDWWKHVFRSHRIWKH 6WDWHVjLPPXQLW\IURPVXLWLVGHPDUFDWHGQRWE\WKHWH[WRIWKH$PHQGPHQWDORQHEXWE\ IXQGDPHQWDO SRVWXODWHV LPSOLFLW LQ WKH FRQVWLWXWLRQDO GHVLJQl ,G DW 6HH DOVR 6HPLQROH7ULEH86DWQ $OH[DQGHU +DPLOWRQ H[SUHVVHG WKLV JXLGLQJ SULQFLSOH LQ 7KH )HGHUDOLVW 3DSHUV m8QOHVVWKHUHIRUHWKHUHLVDVXUUHQGHURIWKLVLPPXQLW\LQWKHSODQRIWKHFRQYHQWLRQLWZLOO UHPDLQ ZLWK WKH VWDWHV l 7+( )('(5$/,67 12 DW $OH[DQGHU +DPLOWRQ %XFFDQHHU%RRNV 7KH6XSUHPH&RXUWKDVILUPO\HPEUDFHGWKHSULQFLSOHWKDWDQ\ VXUUHQGHURIVRYHUHLJQW\PXVWEHUHIOHFWHGLQWKHSODQRIWKH&RQVWLWXWLRQDO&RQYHQWLRQ 6HH6HPLQROH7ULEH86DWQ $OGHQ86DW $FFRUGLQJO\WKHSUHFLVHLVVXHLQWKLVDSSHDOLVZKHWKHUDVDSDUWRIWKHSODQRIWKH &RQYHQWLRQZKLFKJUDQWHG&RQJUHVVWKHDXWKRULW\WRHQDFWmXQLIRUPlEDQNUXSWF\ODZVWKH 6WDWHVFHGHGWR&RQJUHVVWKHLUVRYHUHLJQW\RYHUEDQNUXSWF\GLVFKDUJHPDWWHUV &%DQNUXSWF\DQG'HEW&ROOHFWLRQLQ(DUO\$PHULFD $W WKH WLPH RI WKH &RQVWLWXWLRQDO &RQYHQWLRQ WKH SRZHU DQG VRYHUHLJQW\ RI WKH 6WDWHVZHUHIXOO\HQJDJHGLQWKHSURFHVVHVRISULYDWHGHEWFROOHFWLRQDQGRIGLVFKDUJHIURP GHEW,QGHHGWKDWSRZHUZDVHQJDJHGLQWKHPRVWFRHUFLYHZD\DYDLODEOHWRWKH6WDWHV m,PSULVRQPHQWIRUGHEWZDVFRPPRQSODFHLQWKHFRORQLHVDQGWKHQLQWKHVWDWHVXQWLOWKH PLGQLQHWHHQWKFHQWXU\l&KDUOHVsRUGDQ7DEE7KH+LVWRU\RIWKH%DQNUXSWF\/DZVLQWKH 8QLWHG6WDWHV$0 %$1.5 ,167 / 5(9 7KH6WDWHVjXVHRILPSULVRQPHQWIRUSULYDWHGHEWFROOHFWLRQZDVEURXJKWKHUHIURP (QJODQGm)RUDWOHDVWWKHSUHFHGLQJWZRFHQWXULHVWKHKLVWRU\RIEDQNUXSWF\OHJLVODWLRQLQ (QJODQGZDVLQHVVHQFHFRQWLQXRXVVWUXJJOHRYHUWKHSRZHURIWKHNLQJQRWRQO\WRWD[KLV VXEMHFWV EXW DOVR WR LPSULVRQ WKRVH ZKR GLG QRW SD\ WKHLU GHEWV DQG WR VHL]H WKH ODQGKROGLQJVRIWUDLWRUVl%OLHPHLVWHUY,QGXVWULDO&RPPjQRI$] ,QUH%OLHPHLVWHU %5 %DQNU'$UL] DIIjGRQDOWHUQDWHJURXQGV&DVH1R3+; '$]0DU KROGLQJWKDWWKH6WDWHKDGZDLYHGVRYHUHLJQLPPXQLW\E\IDLOLQJWR UDLVHWKHGHIHQVHLQDWLPHO\PDQQHUDQGQRWUHDFKLQJWKHLVVXHZKHWKHUWKH6WDWHKDG VRYHUHLJQLPPXQLW\LQDEDQNUXSWF\SURFHHGLQJ 6HHDOVR1HOVRQY/D&URVVH&RXQW\ 'LVWULFW$WWRUQH\ ,QUH1HOVRQ %5 %DQNU:':LV UHYjG%5 :':LV *DUUDUG*OHQQ)UDXGXOHQW&RQYH\DQFHVDQG3UDFWLFHV9RO F 5HYHG ,QDUJXLQJIRUWKHSDVVDJHRIWKHILUVWEDQNUXSWF\ODZLQWKH8QLWHG6WDWHV'DQLHO :HEVWHUVWDWHGm,DPIUHHWRFRQIHVVP\OHDGLQJREMHFWWREHWRUHOLHYHWKRVHZKRDUHDW SUHVHQWEDQNUXSWKRSHOHVVEDQNUXSWVDQGZKRFDQQRWEHGLVFKDUJHGRUVHWIUHHEXWE\ D EDQNUXSW DFW SDVVHG E\ &RQJUHVVl &KDUOHV :DUUHQ %DQNUXSWF\ LQ 8QLWHG 6WDWHV +LVWRU\ HPSKDVLVDGGHG :HEVWHUIXUWKHUREVHUYHGm>7@KHUHDUHPDQ\ZKR FDQQRW FRPH KHUH WR WKH VHDW RI *RYHUQPHQW IRU IHDU RI DUUHVW E\ FUHGLWRUV LQ VRPH LQWHUYHQLQJ 6WDWH RU LQ WKH 'LVWULFW RI &ROXPELDl ,G DW :HEVWHUjV FRPPHQWV GHPRQVWUDWHKRZGHHSO\WKHLVVXHRIDGLVFKDUJHIURPGHEWRUVj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jVRYHUHLJQW\EHFDXVHLWZDVDOLPLWDWLRQRQ WKH SRZHU RI WKH VRYHUHLJQ WR LPSULVRQ GHEWRUV DQG SXQLVK WUDLWRUVRUWRJUDQWLQGLYLGXDOUHOLHI %OLHPHLVWHU %5 DW LQWHUQDO FLWDWLRQV RPLWWHG 7KXV LQ WKHVH WLPHV WKH 6WDWHVmGLVFKDUJHGlGHEWRUVE\SULYDWHHQDFWPHQWVUHOHDVLQJWKHPIURPGHEWRUVjSULVRQ '7KH3ODQRIWKH&RQVWLWXWLRQDO&RQYHQWLRQ 7KLVZDVWKHKLVWRULFDOFRQWH[WWKDWFRPSHOOHGWKHIUDPHUVRIRXU&RQVWLWXWLRQWR LQFOXGHWKH%DQNUXSWF\&ODXVHLQ$UWLFOH,7KLVFODXVHVWDWHVm&RQJUHVVVKDOOKDYHSRZHU 7RHVWDEOLVKXQLIRUP/DZVRQWKHVXEMHFWVRI%DQNUXSWFLHVWKURXJKRXWWKH8QLWHG 6WDWHVl86 &2167DUW,FO7KLVKLVWRULFDOFRQWH[WDOVRFRPSHOVWKHFRQFOXVLRQ WKDW WKH SODQ RI WKH &RQYHQWLRQ QHFHVVDULO\ LQFOXGHG WKH 6WDWHVj VXUUHQGHULQJ WKHLU VRYHUHLJQW\RYHUEDQNUXSWF\ )RUPRUHWKDQDFHQWXU\WKHEURDGLQWHUSUHWDWLRQVRIWKH (OHYHQWK$PHQGPHQWE\WKH6XSUHPH&RXUWKDYHEHHQURRWHG LQ $OH[DQGHU +DPLOWRQjV DQDO\VLV RI WKH MXGLFLDU\jV $UWLFOH ,,, SRZHUV LQ 7KH )HGHUDOLVW 1R >@ ,Q 6HPLQROH 7ULEH>@ WKH PDMRULW\FLWHVWR7KH)HGHUDOLVW1RDWOHDVWWKUHHWLPHV$ FDUHIXO UHDGLQJ RI WKH SDVVDJH RI 7KH )HGHUDOLVW 1R UHYHDOV WKDW +DPLOWRQ GLUHFWHG KLV UHDGHUV WR KLV DUWLFOH RQ &RQJUHVVjV SRZHU RI WD[DWLRQ 7KH )HGHUDOLVW 1R IRU D GLVFXVVLRQRIWKHOLPLWVRQVWDWHVRYHUHLJQW\LPSRVHGE\WKH &RQVWLWXWLRQ ,Q )HGHUDOLVW1R+DPLOWRQGHVFULEHGVWDWH VRYHUHLJQW\DVEHLQJORVWLQWKRVHDUHDVLQZKLFK&RQJUHVVLV JUDQWHG WKH SRZHU WR PDNH XQLIRUP ODZV 7KXV DW WKH LQFHSWLRQRIWKH&RQVWLWXWLRQLWZDVUHFRJQL]HGWKDWEDQNUXSWF\ ODZUHTXLUHGDVXERUGLQDWLRQRIVWDWHVRYHUHLJQW\ /HRQDUG*HUVRQ$%DQNUXSWF\([FHSWLRQWR(OHYHQWK$PHQGPHQW,PPXQLW\ /LPLWLQJWKH 6HPLQROH7ULEH'RFWULQH$0 %$1.5 /s IRRWQRWHVRPLWWHG ,Q WKH ILUVW 6XSUHPH &RXUW GHFLVLRQ DGGUHVVLQJ WKH %DQNUXSWF\ &ODXVH RI WKH &RQVWLWXWLRQ 6WXUJHV Y &URZQLQVKLHOG 86 :KHDW &KLHI sXVWLFH 0DUVKDOOUHFRJQL]HGWKHLPSRUWDQFHDQGXQLTXHQHVVRIWKHXQLIRUPLW\UHTXLUHPHQW 7KH SHFXOLDU WHUPV RI WKH JUDQW FHUWDLQO\ GHVHUYH QRWLFH &RQJUHVVLVQRWDXWKRUL]HGPHUHO\WRSDVVODZVWKHRSHUDWLRQ RIZKLFKVKDOOEHXQLIRUPEXWWRHVWDEOLVKXQLIRUPODZVRQWKH VXEMHFWWKURXJKRXWWKH8QLWHG6WDWHV7KLVHVWDEOLVKPHQWRI XQLIRUPLW\LVSHUKDSVLQFRPSDWLEOHZLWKVWDWHOHJLVODWLRQRQ WKDW SDUW RI WKH VXEMHFW WR ZKLFK WKH DFWV RI FRQJUHVV PD\ H[WHQG ,GDW ,Q 5DLOZD\ /DERU ([HFXWLYHVj $VVjQ Y *LEERQV 86 6 &W WKH 6XSUHPH &RXUW UHYLHZHG LQ VRPH GHWDLO WKH SODQ RI WKH &RQYHQWLRQ DV LW SHUWDLQVWRWKLVLVVXH 7KHVXEMHFWRIEDQNUXSWF\ZDVILUVWLQWURGXFHG>DWWKH &RQVWLWXWLRQDO &RQYHQWLRQ@ RQ $XJXVW E\ &KDUOHV 3LQFNQH\GXULQJGLVFXVVLRQRIWKH)XOO)DLWKDQG&UHGLW&ODXVH 3LQFNQH\ SURSRVHG WKH IROORZLQJ JUDQW RI DXWKRULW\ WR &RQJUHVV m7R HVWDEOLVK XQLIRUP ODZV XSRQ WKH VXEMHFW RI EDQNUXSWFLHV DQG UHVSHFWLQJ WKH GDPDJHV DULVLQJ RQ WKH SURWHVWRIIRUHLJQELOOVRIH[FKDQJHl0)DUUDQG5HFRUGVRI WKH )HGHUDO &RQYHQWLRQ RI S 7ZR GD\V ODWHUsRKQ5XWOHGJHUHFRPPHQGHGWKDWWKHIROORZLQJEHDGGHG WR&RQJUHVVjSRZHUV m7RHVWDEOLVKXQLIRUPODZVRQWKHVXEMHFW RI EDQNUXSWFLHVl ,G DW 7KH %DQNUXSWF\ &ODXVH ZDV DGRSWHGRQ6HSWHPEHUZLWKRQO\5RJHU6KHUPDQRI &RQQHFWLFXWYRWLQJDJDLQVW,GDW >Q@ 3ULRU WR WKH GUDIWLQJ RI WKH &RQVWLWXWLRQ DW OHDVW IRXU 6WDWHVIROORZHGWKHSUDFWLFHRISDVVLQJSULYDWH$FWVWRUHOLHYH LQGLYLGXDO GHEWRUV 1DGHOPDQQ 2Q WKH 2ULJLQ RI WKH %DQNUXSWF\&ODXVH$Ps/HJDO+LVW *LYHQ WKH VRYHUHLJQ VWDWXV RI WKH 6WDWHV TXHVWLRQV ZHUH UDLVHG DV WR ZKHWKHU RQH 6WDWH KDG WR UHFRJQL]H WKH UHOLHI JLYHQWRDGHEWRUE\DQRWKHU6WDWH6HH0LOODUY+DOO86 'DOO /(G s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mWRHVWDEOLVKDQ81,)25058/(RIQDWXUDOL]DWLRQWKURXJKRXWWKH 8QLWHG6WDWHVl+DPLOWRQFRQFOXGHGm7KLVPXVWQHFHVVDULO\EHH[FOXVLYH EHFDXVHLIHDFK 6WDWHKDGSRZHUWRSUHVFULEHD',67,1&758/(WKHUHFRXOGEHQR81,)25058/(l7+( )('(5$/,67 12 DW HPSKDVLVLQRULJLQDO 7KH VDPH FODXVH WKDW JUDQWV &RQJUHVV WKH DXWKRULW\ WR PDNH XQLIRUP ODZV RQ QDWXUDOL]DWLRQDOVRSURYLGHVIRUXQLIRUPODZVRQEDQNUXSWF\m&RQJUHVVVKDOOKDYHSRZHU 7RHVWDEOLVKDQXQLIRUP5XOHRI1DWXUDOL]DWLRQDQGXQLIRUP/DZVRQWKHVXEMHFWVRI %DQNUXSWFLHVWKURXJKRXWWKH8QLWHG6WDWHVl86 &2167DUW,FO7KHSDUDOOHO EHWZHHQQDWXUDOL]DWLRQDQGEDQNUXSWF\ZDVQRWHGLQ%OLHPHLVWHU 7KHLPSOLFDWLRQLVXQPLVWDNDEOH7KHSHRSOHDQGWKHVWDWHV DJUHHGLQWKHRULJLQDOSODQRIWKHFRQYHQWLRQWKDWLI&RQJUHVV VKRXOGHOHFWWRDFWRQWKHVXEMHFWRIEDQNUXSWFLHVWKHVWDWHV VXUUHQGHUHGWKHLUVRYHUHLJQSRZHUVRQWKHVXEMHFW$QGDV ,QWHUHVWLQJO\IRRWQRWHLQWKLVSDVVDJHVWDWHVmµ0U6KHUPDQREVHUYHGWKDW %DQNUXSWFLHVZHUHLQVRPHFDVHVSXQLVKDEOHZLWKGHDWKE\WKHODZVRI(QJODQG +HGLG QRWFKXVHWRJUDQWDSRZHUE\ZKLFKWKDWPLJKWEHGRQHKHUHj0)DUUDQG5HFRUGVRI WKH)HGHUDO&RQYHQWLRQRIS l86DW +DPLOWRQLQGLFDWHGWKHIUDPHUVKDGWDNHQmWKHPRVWSRLQWHG FDUHlWRVSHFLI\WKHVWDWHVj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mXQLIRUPlODZVRQEDQNUXSWF\m:KHQ WKH VWDWHV DJUHHG WR D XQLIRUP IHGHUDO UXOH WKH\ KDG WR XQGHUVWDQG WKDW WKH\ ZHUH VXUUHQGHULQJWKHLUVRYHUHLJQW\RYHUWKHVXEMHFWRIEDQNUXSWFLHVl%OLHPHLVWHU%5DW 6HHDOVR1HOVRQ%5DW 0RUHRYHUWKHVHFRQGRI+DPLOWRQjVJURXQGVXSRQZKLFKWKH6WDWHV\LHOGHGWKHLU VRYHUHLJQW\DOVRDSSOLHVLQWKHEDQNUXSWF\FRQWH[W+HUH+DPLOWRQFRQFOXGHGWKDWVWDWH VRYHUHLJQW\ZDV\LHOGHGZKHQWKH&RQVWLWXWLRQJUDQWVDXWKRULW\WR&RQJUHVVZKLOHH[SOLFLWO\ SURKLELWLQJWKDWDXWKRULW\WRWKH6WDWHVm7KHEDQNUXSWF\FODXVHHQWDLOVDQDELOLW\WRLPSDLU WKHREOLJDWLRQVRIFRQWUDFWVDSRZHUZKLFKZDVH[SUHVVO\GHQLHGWRWKH6WDWHVE\DUW, VHFW 6HH +DQRYHU 1DWjO %DQN Y 0R\VHV 86 6 &W l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sHUVH\Y$QGHUVRQ866&W WKH6XSUHPH&RXUW KHOGWKDWDVWDWHFRXUWj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jVGHWHUPLQDWLRQRQWKHWD[LVVXH ,QGHHGWKH&RXUWjVGHWHUPLQDWLRQWKDWWKHEDQNUXSWF\FRXUWKDVWKHH[FOXVLYHMXULVGLFWLRQ RQWKHVWDWHWD[LVVXHLPSDFWVERWKWKH6WDWHjVUROHDVDFUHGLWRUDQGLWVUROHDVDVRYHUHLJQ H[HUFLVLQJLWVMXGLFLDOIXQFWLRQ ,Q 1HZ W@KH FRQVWLWXWLRQDO DXWKRULW\ RI &RQJUHVV WR JUDQW WKH EDQNUXSWF\ FRXUW SRZHU WR GHDO ZLWK WKH OLHQ RI D 6WDWH KDV EHHQ VHWWOHG ,Q 9DQ +XIIHO Y +DUNHOURGH 86 WKH &RXUW KHOG WKDW WKH EDQNUXSWF\ FRXUW ZDV FRQVWLWXWLRQDOO\ HPSRZHUHG WR RUGHU D VDOH RI SURSHUW\ RI D EDQNUXSWIUHHDQGFOHDURIDOLHQRID6WDWHIRUWD[HV *DUGQHU 86DW ,Q+RIIPDQY&RQQHFWLFXW'HSjWRI,QFRPH0DLQW 86 6&W WKHLVVXHZDVZKHWKHUWKH %DQNUXSWF\5HIRUP$FWDEURJDWHGWKH VRYHUHLJQLPPXQLW\RIWKH6WDWHVLQXQPLVWDNDEO\FOHDUODQJXDJH,QDSOXUDOLW\RSLQLRQ sXVWLFH:KLWHDQGWKUHHRWKHUMXVWLFHVFRQFOXGHGWKDW86&ZDVQRWVXIILFLHQWO\ FOHDU1HYHUWKHOHVVsXVWLFH:KLWHVWDWHGm>$@6WDWHWKDWILOHVQRSURRIRIFODLPZRXOGEH ERXQGOLNHRWKHUFUHGLWRUVE\GLVFKDUJHRIGHEWVLQEDQNUXSWF\LQFOXGLQJXQSDLGWD[HV>@l ,G 86DW,QWKLVYLHZD6WDWHWKDWVHHNVWREHSDLGDQ\GLVWULEXWLRQRQLWVFODLP DVDFUHGLWRUPXVWILOHDSURRIRIFODLPOLNHDOORWKHUFUHGLWRUV)RXURWKHUMXVWLFHVFRQFOXGHG LQGLVVHQWWKDWWKH%DQNUXSWF\&RGHGLGSURSHUO\DEURJDWHVRYHUHLJQLPPXQLW\,WWKXV VHHPVOLNHO\WKDWWKHVHIRXUMXVWLFHVZRXOGDJUHHZLWKsXVWLFH:KLWHjVFRQFOXVLRQUHJDUGLQJ WKH6WDWHVjQHHGWRILOHSURRIVRIFODLP ,Q DQ\ HYHQW WKH LVVXH RI WKH 6WDWHVj QHHG WR FRPSO\ ZLWK EDQNUXSWF\ FODLPV SURFHGXUHVZDVSXWWRUHVWLQWKHUHFHQWFDVHRI5DOHLJKY,OOLQRLV'HSjWRI5HYHQXH 866&W ,PSRUWDQWO\WKH6XSUHPH&RXUWGHFLGHGWKLVFDVHDIWHU 6HPLQROH7ULEH&ROOHJH6DYLQJV,&ROOHJH6DYLQJV,,DQG$OGHQ7KHVSHFLILFTXHVWLRQ LQ5DOHLJKLQYROYHGWKHEXUGHQRISURRIRQDFRQWHVWHGSURRIRIFODLPILOHGE\WKH6WDWHLQ EDQNUXSWF\ FRXUW ,Q WKH FRXUVH RI LWV RSLQLRQ KROGLQJ WKDW WKLV EXUGHQ LV WKH VDPH LQ EDQNUXSWF\ DV LW ZRXOG EH RXWVLGH RI EDQNUXSWF\ WKH &RXUW VWDWHG m>)@HGHUDO ODZ KDV JHQHUDOO\HYROYHGWRLPSRVHWKHVDPHSURFHGXUDOUHTXLUHPHQWVIRUFODLPVXEPLVVLRQRQ WD[ DXWKRULWLHV DV RQ RWKHU FUHGLWRUV>@l 86 DW 7KH &RXUW DOVR VWDWHG m>7@D[ OLWLJDWLRQZLOOEHVXEMHFWWRDQDXWRPDWLFVWD\>@l,GDW7KHVLJQLILFDQFHRIWKLVFDVHLV WKDWHYHQDIWHU6HPLQROH7ULEHDQGLWVSURJHQ\WKH&RXUWKDVFRQVLGHUHGWKDWWKH6WDWHV DUHIXOO\VXEMHFWWRWKHEDQNUXSWF\SURFHVVLQFOXGLQJWKHFODLPVSURFHVVDQGWKHDXWRPDWLF VWD\ 6XSUHPH&RXUW&DVHV,PSDFWLQJWKH6RYHUHLJQW\ RIWKH6WDWHVLQWKHLU/HJLVODWLYHDQGsXGLFLDO)XQFWLRQV 7KH6XSUHPH&RXUWKDVFRQVLVWHQWO\UHFRJQL]HGWKDWWKH&RQVWLWXWLRQDODXWKRULW\RI &RQJUHVVWRHQDFWXQLIRUPEDQNUXSWF\ODZVQHFHVVDULO\LPSDFWVWKHVRYHUHLJQW\RIWKH 6WDWHV LQ WKHLU OHJLVODWLYH DQG MXGLFLDO IXQFWLRQV 7KLV SULQFLSOH ZDV VXPPDUL]HG LQ 6WHOOZDJHQY&OXP866&W 7KH IHGHUDO &RQVWLWXWLRQ DUWLFOH , VHFWLRQ JLYHV &RQJUHVVWKHSRZHUWRHVWDEOLVKXQLIRUPODZVRQWKHVXEMHFW RIEDQNUXSWF\WKURXJKRXWWKH8QLWHG6WDWHV ,QYLHZRIWKLV JUDQWRIDXWKRULW\WRWKH&RQJUHVVLWKDVEHHQVHWWOHGIURPDQ HDUO\GDWHWKDWVWDWHODZVWRWKHH[WHQWWKDWWKH\FRQIOLFWZLWK WKH ODZV RI &RQJUHVV HQDFWHG XQGHU LWV FRQVWLWXWLRQDO DXWKRULW\RQWKHVXEMHFWRIEDQNUXSWFLHVDUHVXVSHQGHG 6WXUJHVY&URZQLQVKLHOG 86 :KHDW /(G 2JGHQY6DXQGHUV86 :KHDW /(G ,Q6WHOOZDJHQWKH&RXUWKHOGWKDWXQGHUHRIWKH%DQNUXSWF\$FW UHSHDOHG D EDQNUXSWF\WUXVWHHFRXOGXWLOL]HDVWDWHODZSHUPLWWLQJUHFRYHU\RIIUDXGXOHQWFRQYH\DQFHV EHFDXVHWKHVWDWHODZGLGQRWFRQIOLFWZLWKIHGHUDOEDQNUXSWF\ODZV 2QWKHRWKHUKDQGLQ3HUH]Y&DPSEHOO86 6&W WKH 6XSUHPH&RXUWKHOGWKDWDVWDWHODZXQGHUZKLFKWKH6WDWHVXVSHQGHGDGHEWRUjVGULYHUjV OLFHQVHSHQGLQJVDWLVIDFWLRQRIRXWVWDQGLQJPRWRUYHKLFOHDFFLGHQWMXGJPHQWVGLGFRQIOLFW ZLWKWKHIHGHUDOEDQNUXSWF\GLVFKDUJHDQGZDVWKXVXQFRQVWLWXWLRQDO7KHVRYHUHLJQW\RI WKH 6WDWH WR HQDFW ODZV PXVW \LHOG WR WKH EDQNUXSWF\ GLVFKDUJH SURYLVLRQV HQDFWHG E\ &RQJUHVVSXUVXDQWWRLWVEDQNUXSWF\SRZHUVXQGHUWKH&RQVWLWXWLRQ ,Q%XWQHUY8QLWHG6WDWHV86 6&W WKHLVVXHZDVZKHWKHU DFUHGLWRUjVVHFXULW\LQWHUHVWH[WHQGHGWRSRVWSHWLWLRQUHQWV7KH6XSUHPH&RXUWVWDWHG m&RQJUHVV KDV JHQHUDOO\ OHIW WKH GHWHUPLQDWLRQ RI SURSHUW\ ULJKWV LQ WKH DVVHWV RI D EDQNUXSWjVHVWDWHWRVWDWHODZl,G86DW+RZHYHUWKH&RXUWHPSKDVL]HG 7KHFRQVWLWXWLRQDODXWKRULW\RI&RQJUHVVWRHVWDEOLVKmXQLIRUP /DZV RQ WKH VXEMHFW RI %DQNUXSWFLHV WKURXJKRXW WKH 8QLWHG 6WDWHVlZRXOGFOHDUO\HQFRPSDVVDIHGHUDOVWDWXWHGHILQLQJWKH PRUWJDJHHjVLQWHUHVWLQWKHUHQWVDQGSURILWVHDUQHGE\SURSHUW\ LQDEDQNUXSWHVWDWH%XW&RQJUHVVKDVQRWFKRVHQWRH[HUFLVH LWVSRZHUWRIDVKLRQDQ\VXFKUXOH ,G6LJQLILFDQWO\&RQJUHVVKDVQRZFKRVHQWRH[HUFLVHLWVSRZHUWRGHILQHWKHPRUWJDJHHjV LQWHUHVWLQWKHUHQWV6HH86& E 7ZRUHFHQWGHFLVLRQVUHJDUGLQJUHVWLWXWLRQREOLJDWLRQVDOVRGHPRQVWUDWHWKHSRLQW ,Q.HOO\Y5RELQVRQ 866&W WKH6XSUHPH&RXUWKHOGWKDW XQGHUWKHSURYLVLRQVDSSOLFDEOHLQ&KDSWHUDUHVWLWXWLRQREOLJDWLRQLQDFULPLQDOVHQWHQFH LVQRWGLVFKDUJHDEOH86& D 2QRWKHUKDQGLQ3HQQV\OYDQLD'HSjWRI 3XEOLF:HOIDUHY'DYHQSRUW 866&W VXSHUFHGHGE\VWDWXWH WKH 6XSUHPH &RXUW KHOG WKDW XQGHU WKH SURYLVLRQV RI &KDSWHU WKH 6WDWHj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jO%DQN91HZsHUVH\'HSjWRI(QYWO3URWHFWLRQ86 6 &W 7KH VWDWHjV REMHFWLRQ WR WKH WUXVWHHjV PRWLRQ WR DEDQGRQ FRQWDPLQDWHGSURSHUW\VKRXOGEHVXVWDLQHGQRWEHFDXVHWKH6WDWHZDVLPPXQHWRWKH EDQNUXSWF\SURFHVVEXWEHFDXVHWKHWUXVWHHUHPDLQHGVXEMHFWWRDSSOLFDEOHHQYLURQPHQWDO UHJXODWLRQV )DUUH\Y6DQGHUIRRW86 6&W 7KHFUHGLWRUjV VWDWHMXGLFLDOOLHQZDVQRWDYRLGDEOHXQGHU86& I EXWQRWEHFDXVHRIDQ\ FRQVLGHUDWLRQVRIVWDWHVRYHUHLJQW\ 2ZHQY2ZHQ866&W ,QWKLVFDVHWKHFUHGLWRUjVVWDWHMXGLFLDOOLHQZDVDYRLGDEOHXQGHU86& I ,Q 5DLOZD\ /DERU ([HFXWLYHVj $VVjQ Y *LEERQV WKH 6XSUHPH &RXUW SXW WKLV H[FODPDWLRQSRLQWRQWKHLVVXHm7KH)UDPHUVVRXJKWWRSURYLGH&RQJUHVVZLWKWKHSRZHU WRHQDFWXQLIRUPODZVRQWKHVXEMHFWHQIRUFHDEOHDPRQJWKH6WDWHVl86DW HPSKDVLVDGGHG FLWDWLRQRPLWWHG 6LPLODUO\LQ,QWHUQDWLRQDO6KRH&RY3LQNXV 86 6&W WKH6XSUHPH&RXUWVWDWHGm7KHQDWLRQDOSXUSRVHWR HVWDEOLVKXQLIRUPLW\QHFHVVDULO\H[FOXGHVVWDWHUHJXODWLRQ6WDWHVPD\QRWSDVVRU HQIRUFHODZVWRLQWHUIHUHZLWKRUFRPSOHPHQWWKH%DQNUXSWF\$FWRUWRSURYLGHDGGLWLRQDO RUDX[LOLDU\UHJXODWLRQVl FLWLQJ3ULJJY3HQQV\OYDQLD86 3HW /(G 1RUWKHUQ3DF5\Y:DVKLQJWRQ866&W 6W/RXLV,URQ0W 65\Y(GZDUGV866&W (ULH 55&RY1HZWKDW@OLPLWV WKHJUDQWRIMXGLFLDODXWKRULW\LQDUW,,,>@l6HPLQROH7ULEH86DW LQWHUQDOTXRWDWLRQ PDUNV DQG FLWDWLRQ RPLWWHG DOWHUDWLRQ LQ RULJLQDO 7KH &RXUW FRQFOXGHG mWKDW WKH EDFNJURXQGSULQFLSOHRIVWDWHVRYHUHLJQLPPXQLW\HPERGLHGLQWKH(OHYHQWK$PHQGPHQW LV QRW VR HSKHPHUDO DV WR GLVVLSDWH ZKHQ WKH VXEMHFW RI WKH VXLW LV DQ DUHD OLNH WKH UHJXODWLRQ RI ,QGLDQ FRPPHUFH WKDW LV XQGHU WKH H[FOXVLYH FRQWURO RI WKH )HGHUDO *RYHUQPHQWl,GDW 7KH 3DQHO FRQFOXGHV WKDW DOWKRXJK LW PXVW UHPDLQ IDLWKIXO WR WKH &RXUWjV FRQVWLWXWLRQDODQDO\VLVLQ6HPLQROH7ULEHQRWKLQJLQWKH&RXUWjVQDUURZKROGLQJRIWKDWFDVH UHODWLQJWRWKHLVVXHRIVWDWHVRYHUHLJQW\LQWKH,QGLDQ&RPPHUFHFRQWH[WSUHFOXGHVRXU KROGLQJKHUH 76$&KRZHYHUUHOLHVRQODQJXDJHLQ6HPLQROH7ULEHWKDWJRHVEH\RQGWKHLVVXH RIVWDWHVRYHUHLJQW\LQWKH,QGLDQ&RPPHUFHFRQWH[W,QGLFWDWKH&RXUWEURDGO\VWDWHG m7KH(OHYHQWK$PHQGPHQWUHVWULFWVWKHMXGLFLDOSRZHUXQGHU$UWLFOH,,,DQG$UWLFOH,FDQQRW EHXVHGWRFLUFXPYHQWWKHFRQVWLWXWLRQDOOLPLWDWLRQVSODFHGXSRQIHGHUDOMXULVGLFWLRQl,G DW,QDGGLWLRQLQLWVUHVSRQVHWRsXVWLFH6WHYHQVjGLVVHQWLQJRSLQLRQTXHVWLRQLQJWKH LPSDFWRIWKLVGLFWDRQRWKHU$UWLFOH,SRZHUVLQFOXGLQJEDQNUXSWF\,GDW 6WHYHQVs GLVVHQWLQJ WKHPDMRULW\VWDWHG sXVWLFH67(9(16XQGHUVWDQGVRXURSLQLRQWRSURKLELWIHGHUDO MXULVGLFWLRQRYHUVXLWVWRHQIRUFHWKHEDQNUXSWF\FRS\ULJKWDQG DQWLWUXVW ODZV DJDLQVW WKH 6WDWHV +H QRWHV WKDW IHGHUDO MXULVGLFWLRQ RYHU WKRVH VWDWXWRU\ VFKHPHV LV H[FOXVLYH DQG WKHUHIRUH FRQFOXGHV WKDW WKHUH LV mQR UHPHG\l IRU VWDWH YLRODWLRQVRIWKRVHIHGHUDOVWDWXWHV3RVWDWQ7KDW FRQFOXVLRQ LV H[DJJHUDWHG ERWK LQ LWV VXEVWDQFH DQG LQ LWV VLJQLILFDQFH )LUVW sXVWLFH 67(9(16j VWDWHPHQW LV PLVOHDGLQJO\RYHUEURDG:HKDYHDOUHDG\VHHQWKDWVHYHUDO DYHQXHV UHPDLQ RSHQ IRU HQVXULQJ VWDWH FRPSOLDQFH ZLWK IHGHUDO ODZ 6HH Q VXSUD 6HFRQG FRQWUDU\ WR WKH LPSOLFDWLRQRIsXVWLFH67(9(16jFRQFOXVLRQLWKDVQRWEHHQ ZLGHO\ WKRXJKW WKDW WKH IHGHUDO DQWLWUXVW EDQNUXSWF\ RU FRS\ULJKWVWDWXWHVDEURJDWHGWKH6WDWHVjVRYHUHLJQLPPXQLW\ 7KLV&RXUWKDVQHYHUDZDUGHGUHOLHIDJDLQVWD6WDWHXQGHUDQ\ RIWKRVHVWDWXWRU\VFKHPHV>@$OWKRXJKWKHFRS\ULJKWDQG EDQNUXSWF\ ODZV KDYH H[LVWHG SUDFWLFDOO\ VLQFH RXU 1DWLRQjV LQFHSWLRQDQGWKHDQWLWUXVWODZVKDYHEHHQLQIRUFHIRURYHUD FHQWXU\WKHUHLVQRHVWDEOLVKHGWUDGLWLRQLQORZHUIHGHUDOFRXUWV RIDOORZLQJHQIRUFHPHQWRIWKRVHIHGHUDOVWDWXWHVDJDLQVWWKH 6WDWHV 6HPLQROH7ULEH86DWQ HPSKDVLVDGGHG 7KLVVXPPDU\WUHDWPHQWRIWKHSRWHQWLDOLPSDFWRIVXERUGLQDWLQJEDQNUXSWF\ODZV WRWKHVRYHUHLJQW\RIWKH6WDWHVGHPRQVWUDWHVWKDWWKH6HPLQROH7ULEHPDMRULW\GLGQRWIXOO\ FRQVLGHUWKHLVVXH,QGHHGWKHUHYLHZRIWKHFDVHVLQ3DUW(DERYHIXOO\GLVSURYHVWKH PDMRULW\jVWZLQVWDWHPHQWV WKDWLWKDVQRWEHHQZLGHO\WKRXJKWWKDWEDQNUXSWF\VWDWXWHV DEURJDWHGWKH6WDWHVjVRYHUHLJQLPPXQLW\DQG WKDWWKHUHLVQRHVWDEOLVKHGWUDGLWLRQRI DOORZLQJHQIRUFHPHQWRIEDQNUXSWF\DJDLQVWWKHVWDWHV6HHHJ$QGHUVRQ,UYLQJ7UXVW *DUGQHU3HUH]'DYHQSRUW5DOHLJKDQG+RIIPDQ,QHDFKRIWKHVHFDVHVLWZDVDVVXPHG RUVWDWHGWKDWDSSOLFDEOHIHGHUDOEDQNUXSWF\ODZDEURJDWHGWKH6WDWHVjVRYHUHLJQLPPXQLW\ DQGLQVHYHUDORIWKHVHFDVHVWKH&RXUWIXOO\HQIRUFHGWKHEDQNUXSWF\SURFHVVDJDLQVWWKH 6WDWHLQYROYHG7KXVFRQWUDU\WRWKHGLFWDLQ6HPLQROH7ULEHTXRWHGDERYHWKHVHFDVHV FOHDUO\GHPRQVWUDWHWKH6XSUHPH&RXUWjVKLVWRULFDOUHFRJQLWLRQWKDWWKH6WDWHVjVRYHUHLJQW\ LVOLPLWHGLQWKHDUHDRIEDQNUXSWF\ 0RUHRYHU WKH DOWHUQDWLYH SURFHVVHV WKDW 6HPLQROH 7ULEH RIIHUHG WR YLQGLFDWH LPSRUWDQWIHGHUDOEDQNUXSWF\ULJKWVDQGUHPHGLHVDUHXQUHDOLVWLFLQWKHEDQNUXSWF\FRQWH[W 6SHFLILFDOO\LQIRRWQRWHWKH6XSUHPH&RXUWRIIHUHGWKHIROORZLQJWKUHHDOWHUQDWLYHV 7KH)HGHUDO*RYHUQPHQWFDQEULQJVXLWLQIHGHUDOFRXUWDJDLQVW D 6WDWH VHH HJ 8QLWHG 6WDWHV Y 7H[DV 86 6 &W ILQGLQJ VXFK SRZHU QHFHVVDU\WRWKHmSHUPDQHQFHRIWKH8QLRQl DQLQGLYLGXDOFDQ EULQJ VXLW DJDLQVW D VWDWH RIILFHU LQ RUGHU WR HQVXUH WKDW WKH RIILFHUjVFRQGXFWLVLQFRPSOLDQFHZLWKIHGHUDOODZVHHHJ([ SDUWH +@LVWRULFDOO\RQHRIWKHSULPHSXUSRVHVRIWKHEDQNUXSWF\ODZ KDVEHHQWREULQJDERXWDUDWDEOHGLVWULEXWLRQDPRQJFUHGLWRUVRIDEDQNUXSWjVDVVHWV WR SURWHFWWKHFUHGLWRUVIURPRQHDQRWKHUl 6DPSVHOOY,PSHULDO3DSHU&RUS86 6&W 6HHDOVR+5 5(3 12DW UHSULQWHGLQ 86&&$1 7KH&RGHLVLQWHQGHGmWRHQIRUFHDGLVWULEXWLRQRIWKHGHEWRUjV DVVHWVLQDQRUGHUO\PDQQHULQZKLFKWKHFODLPVRIDOOFUHGLWRUVDUHFRQVLGHUHGIDLUO\LQ DFFRUGDQFHZLWKHVWDEOLVKHGSULQFLSOHVUDWKHUWKDQRQWKHEDVLVRIWKHLQVLGHLQIOXHQFHRU HFRQRPLFOHYHUDJHRIDSDUWLFXODUFUHGLWRUl 7KHUHIRUH WKH 3DQHO FRQFOXGHV WKDW DOWKRXJK WKH GHFLVLRQ LQ 6HPLQROH 7ULEH HVWDEOLVKHV WKH DQDO\WLFDO IUDPHZRUN WR EH DSSOLHG LQ WKLV DSSHDO LWV GLFWD DERXW WKH DSSOLFDWLRQRIWKDWIUDPHZRUNLQWKHEDQNUXSWF\FRQWH[WLVHQWLWOHGWROLWWOHZHLJKWLQWKLV DSSHDO6HH&ROJURYHY%DWWLQ86 6&W m:H FDQQRWWKHUHIRUHDFFRUGWKHXQVXSSRUWHGGLFWDRIWKHVHHDUOLHUGHFLVLRQVWKHDXWKRULW\RI GHFLGHGSUHFHGHQWVl 6HHDOVR&HQWUDO*UHHQ&RY8QLWHG6WDWHV86 6&W 86%DQFRUS0RUWJDJH&RY%RQQHU0DOO3DUWQHUVKLS86 6&W +XPSKUH\jV([jUY8QLWHG6WDWHV 866 &W 'LFWDmPD\EHIROORZHGLIVXIILFLHQWO\SHUVXDVLYHl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sXVWLFH0DUVKDOOLQKLVGLVVHQWLQ+RIIPDQ m,VHHQRUHDVRQWRWUHDW&RQJUHVVjSRZHUXQGHUWKH%DQNUXSWF\&ODXVHDQ\GLIIHUHQWO\ >WKDQWKH&RPPHUFH&ODXVHSRZHUDVDGGUHVVHGLQ3HQQV\OYDQLDY8QLRQ*DV&R 86 6&W @IRUERWKFRQVWLWXWLRQDOSURYLVLRQVJLYH&RQJUHVVSOHQDU\ SRZHU RYHU QDWLRQDO HFRQRPLF DFWLYLW\l +RIIPDQ 86 DW 0DUVKDOO s GLVVHQWLQJ 7KH)RXUWK&LUFXLWjVUHOLDQFHRQWKLVVWDWHPHQWLVPLVSODFHG)LUVWWKHFRPPHQW PXVWEHXQGHUVWRRGLQWKHFRQWH[WLQZKLFKLWZDVPDGH,Q8QLRQ*DVWKH6XSUHPH&RXUW KDG GHWHUPLQHG WKDW &RQJUHVV GLG KDYH WKH DXWKRULW\ XQGHU WKH ,QWHUVWDWH &RPPHUFH &ODXVHWRDEURJDWHVWDWHVRYHUHLJQLPPXQLW\$FFRUGLQJO\sXVWLFH0DUVKDOOjVFRPPHQW DGYRFDWHGWKDW&RQJUHVVDOVRKDGWKHSRZHUWRDEURJDWHVWDWHVRYHUHLJQLPPXQLW\XQGHU WKH%DQNUXSWF\&ODXVH 0DUVKDOOZDVDUJXLQJWKDWQRWKLQJLQWKH%DQNUXSWF\&ODXVH LPSRVHV D JUHDWHU OLPLW RQ WKH SRZHU RI &RQJUHVV WKDQ WKH &RXUW LQ 8QLRQ *DV KDG IRXQG WR H[LVW XQGHU WKH ,QWHUVWDWH &RPPHUFH &ODXVH sXVWLFH 0DUVKDOO KDG QR UHDVRQ WR FRQVLGHU ZKHWKHU WKH %DQNUXSWF\ &ODXVH PLJKW FRQIHU D EURDGHUSRZHURQ&RQJUHVVWKDQKDGEHHQJUDQWHGXQGHUWKH ,QWHUVWDWH&RPPHUFH&ODXVH WKLVLVVXHRQO\DURVHDIWHUWKH 6XSUHPH &RXUW ODWHU RYHUUXOHG LWV GHFLVLRQ LQ 8QLRQ *DV LQ 6HPLQROH7ULEH *HUVRQ$0 %$1.5 /sDW 6HFRQGQHLWKHUsXVWLFH0DUVKDOOLQKLVGLVVHQWLQ+RIIPDQQRUWKH)RXUWK&LUFXLWLQ &UHDWLYH*ROGVPLWKVORRNHGDWWKHSODQRIWKH&RQYHQWLRQWRGHWHUPLQHLIWKH6WDWHVKDG FHGHGWKHLUVRYHUHLJQW\RYHUEDQNUXSWF\DVUHTXLUHGE\6HPLQROH7ULEHDQGSURJHQ\ 0RUHRYHU6FKORVVEHUJKDVEHHQXQGHUPLQHGE\WZRVXEVHTXHQW)RXUWK&LUFXLW GHFLVLRQVWKDWGRUHFRJQL]HWKHQHFHVVLW\RIVXERUGLQDWLQJVWDWHVRYHUHLJQW\LQEDQNUXSWF\ ,Q0DU\ODQGY$QWRQHOOL&UHGLWRUVj/LTXLGDWLQJ7UXVW)G WK&LU WKHFRXUW KHOG WKDW WKH 6WDWH ZDV QRW LPPXQH IURP WKH HQIRUFHPHQW RI WKH GHEWRUjV FRQILUPHG FKDSWHUSODQEHFDXVHmWKHSRZHURIWKHEDQNUXSWF\FRXUWWRHQWHUDQRUGHUFRQILUPLQJ DSODQGHULYHVQRWIURPMXULVGLFWLRQRYHUWKHVWDWHRURWKHUFUHGLWRUVEXWUDWKHUIURP MXULVGLFWLRQRYHUGHEWRUVDQGWKHLUHVWDWHVl,GDW 6LPLODUO\LQ9LUJLQLDY&ROOLQV ,QUH&ROOLQV )G WK&LU WKHFRXUW DGGUHVVHG WKH YHU\ LVVXH UDLVHG LQ WKH SUHVHQW DSSHDO DQG KHOG WKDW WKH 6WDWH LV QRW LPPXQHWRWKHEDQNUXSWF\FRXUWj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mIUHVK VWDUWl KHUHWRIRUH JXDUDQWHHGE\WKHEDQNUXSWF\ODZV$VWKH6XSUHPH&RXUW KDVVDLGWKHSXUSRVHRIWKHEDQNUXSWF\ODZVLVWRmJLYH>@WR WKHKRQHVWEXWXQIRUWXQDWHGHEWRUDQHZRSSRUWXQLW\LQOLIH DQGDFOHDUILHOGIRUIXWXUHHIIRUWXQKDPSHUHGE\WKHSUHVVXUH DQGGLVFRXUDJHPHQWRISUHH[LVWLQJGHEWl/RFDO/RDQ&RY +XQW 866&W /(G 7KLVSXUSRVHFDQEHIXOILOOHGWRGD\RQO\LIWKHEDQNUXSWF\FRXUWV UHWDLQWKHSRZHUWRGLVFKDUJHGHEWVLQFOXGLQJGHEWVRZHGWR VWDWHV FRQVLVWHQW ZLWK HVWDEOLVKHG IHGHUDO VXSUHPDF\ ZLWK UHVSHFWWREDQNUXSWF\ ,GDW DOWHUDWLRQLQRULJLQDO FLWDWLRQRPLWWHG 7KUHH RWKHU GHFLVLRQV E\ FRXUWV RI DSSHDOV GHVHUYH DWWHQWLRQ ,Q 6DFUHG +HDUW +RVSRI1RUULVWRZQY3HQQV\OYDQLD'HSjWRI3XEOLF:HOIDUH ,QUH6DFUHG+HDUW+RVSRI 1RUULVWRZQ )G G&LU DQGLQ'HSDUWPHQWRI7UDQVS 'HYY31/ $VVHW0JPW&R//& ,QUH)HUQDQGH] )G WK&LU WKHFRXUWVVXPPDULO\ UHMHFWHGWKHDUJXPHQWWKDWWKHXQLIRUPLW\UHTXLUHPHQWLQWKH%DQNUXSWF\&ODXVHRIWKH &RQVWLWXWLRQFRPSHOOHGDGLIIHUHQWFRQFOXVLRQWKDQWKHFRQFOXVLRQUHDFKHGE\6HPLQROH 7ULEHDQGLWVSURJHQ\LQRWKHU$UWLFOH,FRQWH[WV)RUH[DPSOHLQ6DFUHG+HDUWWKHFRXUW VWDWHGmWKHUHLVVLPSO\QRSULQFLSOHGEDVLVWRGLVWLQJXLVKWKH%DQNUXSWF\&ODXVHIURPRWKHU $UWLFOH,FODXVHVl)GDW ,QVRKROGLQJWKHFRXUWVLQ6DFUHG+HDUWDQG)HUQDQGH]UHOLHGLQVXEVWDQWLDOSDUW RQWKLVRQHVHQWHQFHLQDFRQFXUULQJRSLQLRQE\sXVWLFH)UDQNIXUWHULQ9DQVWRQ%RQGKROGHUV 3URWHFWLYH &RPP Y *UHHQ 86 6 &W m7KH &RQVWLWXWLRQDOUHTXLUHPHQWRIXQLIRUPLW\LVDUHTXLUHPHQWRIJHRJUDSKLFXQLIRUPLW\l,G )UDQNIXUWHUsFRQFXUULQJ +RZHYHURQO\WZRRWKHUMXVWLFHVMRLQHGsXVWLFH)UDQNIXUWHU DQGWKHPDMRULW\UHMHFWHGVRVLPSOHDYLHZRIWKHXQLIRUPLW\UHTXLUHPHQW,QWKDWFDVHWKH LVVXHZDVZKHWKHUWKHIHGHUDOEDQNUXSWF\FRXUWVKRXOGDOORZLQWHUHVWRQLQWHUHVWRQDFODLP $ WHVW EDVHG RQ JHRJUDSKLF XQLIRUPLW\ ZRXOG KDYH H[DPLQHG DQG DSSOLHG VWDWH ODZ ,QVWHDGWKH&RXUWVWDWHGm,QGHWHUPLQLQJZKDWFODLPVDUHDOORZDEOHDQGKRZDGHEWRUjV DVVHWVVKDOOEHGLVWULEXWHGDEDQNUXSWF\FRXUWGRHVQRWDSSO\WKHODZRIWKHVWDWHZKHUH LWVLWVl 86DW)XUWKHUm>Z@KHQDQGXQGHUZKDWFLUFXPVWDQFHVIHGHUDOFRXUWVZLOO DOORZLQWHUHVWRQFODLPVDJDLQVWGHEWRUVjHVWDWHVEHLQJDGPLQLVWHUHGE\WKHPKDVORQJEHHQ GHFLGHGE\IHGHUDOODZl,GDW7KH&RXUWXOWLPDWHO\FRQFOXGHGWKDWDOORZLQJVXFK LQWHUHVW RQ LQWHUHVW mZRXOG QRW EH LQ DFFRUG ZLWK WKH HTXLWDEOH SULQFLSOHV JRYHUQLQJ EDQNUXSWF\GLVWULEXWLRQVl,G 7KHWKLUGDSSHOODWHFRXUWFDVHDSSO\LQJ6HPLQROH7ULEHLQWKHEDQNUXSWF\FRQWH[WLV 0LWFKHOOY)UDQFKLVH7D[%G ,QUH0LWFKHOO )G WK&LU ,QWKDW FDVHWKHFRXUWOLPLWHGLWVGLVFXVVLRQWRWKLVVWDWHPHQW m,QVKRUWWKHUHLVQRSROLF\EDVHG H[FHSWLRQVXFKDVQDWLRQDOXQLIRUPLW\WRWKH6HPLQROH7ULEHUXOHWKDW&RQJUHVVPD\QRW DEURJDWHVWDWHLPPXQLW\IURPVXLWXQGHU$UWLFOH,l,G,QVRUXOLQJWKH&RXUWUHOLHGRQO\RQ WKHEURDGGLFWDLQ6HPLQROH7ULEHZLWKRXWIXUWKHUDQDO\VLV )LQDOO\LWPXVWEHREVHUYHGWKDWWKHGLVWULFWFRXUWRSLQLRQLQ,QUH1HOVRQ%5 :' :LV UHYHUVLQJ WKH EDQNUXSWF\ FRXUWjV GHFLVLRQ WUHDWV WKH LVVXH DV VXPPDULO\DV0LWFKHOO7KHFRXUWjVWZRVHQWHQFHDQDO\VLVVLPSO\VWDWHVm%RWKWKH,QGLDQ &RPPHUFH&ODXVHDQGWKH%DQNUXSWF\&ODXVHDUHIRXQGLQ$UWLFOH,RIWKH&RQVWLWXWLRQ 7KHKROGLQJRI6HPLQROHSURYLGHVWKDWWKH%DQNUXSWF\&ODXVHLQ$UWLFOH,FDQQRWEHXVHG 6LJQLILFDQWO\ sXVWLFH )UDQNIXUWHU DOVR VWDWHG m%DQNUXSWF\ OHJLVODWLRQ LV VXSHULPSRVHGXSRQULJKWVDQGREOLJDWLRQVFUHDWHGE\WKHODZVRIWKH6WDWHVl 86DW )UDQNIXUWHUsFRQFXUULQJ WR FLUFXPYHQW WKH (OHYHQWK $PHQGPHQW UHVWULFWLRQ RI VXLWV E\ SULYDWH SDUWLHV DJDLQVW VWDWHVl,GDW 7KHVHRSLQLRQVDUHQRWELQGLQJRQWKH3DQHODQGWKH3DQHOILQGVWKHDQDO\VLVLQ WKHPXQSHUVXDVLYH$FFRUGLQJO\WKH3DQHODFFRUGVWKHPQRZHLJKW 9 &21&/86,21 7KH6WDWHVFHGHGWKHLUVRYHUHLJQW\RYHUWKHEDQNUXSWF\GLVFKDUJHDVDSDUWRIWKH SODQRIWKH&RQVWLWXWLRQDO&RQYHQWLRQ:KHUHWKHUHLVQRVRYHUHLJQW\WKHUHFDQEHQR VRYHUHLJQLPPXQLW\$FFRUGLQJO\76$&LVQRWLPPXQHLQWKLVGLVFKDUJHDELOLW\DFWLRQDQG WKHRUGHURIWKHEDQNUXSWF\FRXUWGHQ\LQJ76$&jVPRWLRQWRGLVPLVVLV$)),50(' ,QWKHUHFHQWFDVHRI$UHFLER&PW\+HDOWK&DUH,QFY3XHUWR5LFR)G VW &LU WKH )LUVW &LUFXLW MRLQHG WKH RWKHU FRXUWV WKDW KDYH JLYHQ VXPPDU\ WUHDWPHQWWRWKLVLVVXH m:HFDQVHHQRSULQFLSOHGUHDVRQWRGLVWLQJXLVKWKHOHJLVODWLRQLQ WKLV FDVH RU WR VXVWDLQ LWV FRQVWLWXWLRQDOLW\ LQ WKH IDFH RI WKH 6XSUHPH &RXUWjV UHFHQW GHFLVLRQUHJDUGLQJVRYHUHLJQLPPXQLW\l,GDW FLWLQJ&ROOHJH6DY%DQN86 $ IXUWKHU SUREOHP ZLWK $UHFLER LV WKDW LW DOORZV 3XHUWR 5LFR WR DVVHUW VRYHUHLJQ LPPXQLW\HYHQWKRXJKERWKLWVSURRIRIFODLPLQWKHEDQNUXSWF\FDVHDQGWKHDGYHUVDU\ SURFHHGLQJILOHGDJDLQVWLWZHUHEDVHGRQWKHVDPHFRQWUDFW7KXVWKLVGHFLVLRQGLUHFWO\ FRQWUDYHQHV*DUGQHU 86ZKLFKWKH6XSUHPH&RXUWUHDIILUPHGLQ&ROOHJH6DY %DQN86DWQ *DUGQHUmVWDQGVIRUWKHXQUHPDUNDEOHSURSRVLWLRQWKDWD6WDWH ZDLYHVLWVVRYHUHLJQLPPXQLW\E\YROXQWDULO\LQYRNLQJWKHMXULVGLFWLRQRIWKHIHGHUDOFRXUWl