BPCE - Risk Report - Pillar III 2020

LEGAL RISKS

LEGAL AND ARBITRATION PROCEEDINGS – NATIXIS

Legal and arbitration proceedings – Natixis 10.2

Only proceedings subject to updates or new proceedings are presented in this section.

Madoff fraud

Outstanding assets exposed to the Madoff affair as expressed in euros were estimated at €503.4 million at December 31, 2020 and were fully provisioned for at that date. The actual impact of this exposure will depend on both the extent of recovery of assets invested in Natixis’ name and the outcome of the measures taken by the bank, notably in terms of legal procedures. Furthermore, in 2011 a dispute emerged over the application of the insurance policy for professional liability in this case, which had been taken out with successive insurers for a total amount of €123 million. In November 2016, the Paris Court of Appeal vindicated the Commercial Court’s prior ruling that primary insurers were liable for covering the losses incurred by Natixis due to the Madoff fraud, up to the amount for which the bank was insured. On September 19, 2018, the Court of Cassation subsequently annulled the judgment under appeal and referred the case back to the Paris Court of Appeal with a differently constituted bench. On September 24, 2019, the Court issued a ruling against Natixis, overturning the ruling of the Paris Commercial Court. Natixis filed an appeal in December 2019. Irving H. Picard, the court-appointed trustee for Bernard L. Madoff Investment Securities LLC (BMIS), submitted a restitution claim concerning the liquidation of amounts received prior to the discovery of the fraud through a complaint filed with the United States Bankruptcy Court for the Southern District of New York against several banking institutions, including a $400 million claim against Natixis. Natixis denies the allegations made against it and has taken the necessary steps to defend its position and protect its rights. Natixis has launched appeals, including a motion to dismiss the case on a preliminary basis, or prior to any ruling on the merits, and a motion to withdraw the reference to transfer certain matters to the United States district court. These proceedings have been subject to numerous rulings and appeals and are still ongoing. A November 2016 ruling by the bankruptcy court dismissed a number of restitution claims initiated by the trustee on the grounds of extraterritoriality. In September 2017, the Second Circuit Court granted the BMIS liquidator and the defendants the right to appeal the bankruptcy court’s ruling on the grounds of extraterritoriality directly through the Second Circuit, thereby avoiding the need to file an intermediary appeal with the district court. In February 2019, the Court of Appeals for the Second Circuit overturned the bankruptcy court’s extraterritoriality ruling. In August 2019, Natixis joined the defendants having filed a motion for permission to appeal the ruling of the Second Circuit

Court to the Supreme Court. In June 2020, the Supreme Court refused to hear the case. The case will be referred back to the Second Circuit Court of the bankruptcy court. The liquidator of BMS seeks the suspension of outstanding actions for restitution pending the settlement of specific actions on the concept of good faith in the restitution request. Furthermore, the trustees of Fairfield Sentry Limited and Fairfield Sigma Limited have initiated a large number of proceedings against investors having previously received payments from these funds for redemptions of shares (over 200 proceedings have been filed in New York). Some Natixis entities have been named as defendants in some of these proceedings. Natixis deems these proceedings to be entirely unfounded and is vigorously defending its position. These proceedings have been suspended for several years, and in October 2016 the bankruptcy court authorized the trustees to modify their initial claim. The defendants filed joint responses in May and June 2017. In August 2018, the bankruptcy court ruled on a motion to dismiss filed by the defendants (requesting that the case be dismissed on a preliminary basis and prior to any ruling on the merits). The judge only gave a ruling on one of the merits (that of personal jurisdiction), having found that the latter was missing from the claim made against the defendants. In December 2018, the judge ruled on the motion to dismiss, rejecting the claims brought by trustees founded on common law (unjust enrichment, money had and received, mistaken payment and constructive trust) as well as contractual claims. However, it overturned the motion to dismiss in respect of claims founded on British Virgin Islands law, while reserving the right to file a plea for the application of the Section 546(e) Safe Harbor provision. In May 2019, the liquidators appealed the ruling of the Bankruptcy Court to the District Court. The defendants, including Natixis, submitted on March 9, 2020 a motion to dismiss this appeal and renewed this initial motion on March 16, 2020. The bankruptcy court asked the defendants to limit the motion to dismiss to arguments that can lead to the dismissal of all the actions of the liquidators (as per Section(e) 546 of the safe harbor provision or impropriety of the initial petition). In December 2020, the bankruptcy court dismissed the claims based on the law of the British Virgin Islands, considering that the defendants, including Natixis, benefit from the 546(e) Safe Harbor provision. This ruling, which could result in the rejection of clawback requests, is subject to appeal. The case is ongoing.

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RISK REPORT PILLAR III 2020 | GROUPE BPCE