On August 14, Institutional Shareholders Services Inc. (ISS), a leading proxy advisory firm, announced the launch of a new equity plan data verification portal for all US companies receiving proxy recommendations. The intent of this portal is to ensure that ISS’s voting recommendations for its institutional investor clients reflect the most current and accurate data, and this portal may help to alleviate concerns expressed by issuers that some past voting recommendations may not have been based upon accurate information about the equity plans. This portal follows similar recent ISS verification initiatives, including its Governance QuickScore Data Verification program and S&P 500 Draft Review process. With this portal, a US company that is submitting an equity plan proposal for approval by its shareholders will now have the opportunity to review ISS’s data and resolve any discrepancies before ISS makes its voting recommendation on the proposal. Continue Reading
With exactly one month left until the September 22 effective date of the International Swaps and Derivatives Association’s (ISDA) new 2014 Credit Derivatives Definitions, ISDA has published a protocol to assist in applying the new definitions to existing credit derivative transactions that are governed by the 2003 version of those definitions. By adhering to the protocol, a market participant is agreeing with all other adherents that its transactions will incorporate the new definitions in place of the old. Parties are not obligated to change the terms of their existing transactions, but may prefer to do so if they want to switch to the new definitions for future swaps and want to avoid the risk of having different terms for their old and new trades. Continue Reading
The Financial Crimes Enforcement Network (FinCEN) has issued separate advisories relating to (1) anti-money laundering (AML) and counter-terrorist financing (CTF) deficiencies and (2) promoting a culture of compliance with Bank Secrecy Act (BSA) and AML obligations. Continue Reading
On August 18, the Commodity Futures Trading Commission’s Division of Market Oversight issued No-Action Letter No. 14-108, which provides time-limited conditional relief to swap execution facilities (SEFs) from certain confirmation and recordkeeping requirements. CFTC Regulation 37.6(b) requires a SEF to provide to each counterparty a written confirmation of each transaction entered into on or pursuant to the rules of the SEF that contains all terms of the transaction and which must legally supersede the terms in any previously negotiated master or other agreement that has been entered into by the parties to the transaction. In connection with this requirement, the CFTC has previously taken the position that in order for a SEF to incorporate the terms of any previously negotiated agreements into such confirmations, such agreements must be submitted to the SEF prior to the execution of the relevant transaction. A SEF is also required to keep records of the documents incorporated by reference in the SEF’s confirmations under Regulation 45.2(a). Continue Reading
On August 19, Judge Jed S. Rakoff of the US District Court for the Southern District of New York issued a ruling in the case of Robert Faiella, holding that bitcoins are “money,” citing the plain meaning of the term in The Merriam-Webster Dictionary. Faiella was charged with operating an unlicensed money transmitting business in violation of 18 U.S.C. § 1960, in connection with the sale of bitcoins for use on the Silk Road website, the “deep web” black market website which was shut down by the Federal Bureau of Investigation in October 2013. Continue Reading
In Parkcentral Global Hub Ltd,. et al. v. Porsche Automobile Holdings SE, et al., Dkt. No. 11-397-cv (2d Cir. Aug. 15, 2014), the US Court of Appeals for the Second Circuit affirmed the lower court’s dismissal of plaintiffs’ claim under Section 10(b) of the Securities Exchange Act of 1934. In a broad and defense-friendly interpretation of the US Supreme Court’s decision in Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010), the Second Circuit declined to disturb the presumption against extraterritorial application of US securities laws and held that “a domestic transaction or listing is necessary to state a claim under § 10(b), [but] a finding that . . . transactions were domestic would not suffice to compel the conclusion that the plaintiffs’ invocation of § 10(b) was appropriately domestic.” Continue Reading
On August 15, the Texas Court of Appeals decertified a class of Brigham Exploration Co. shareholders, holding that the trial court failed to comply with a state rule requiring rigorous analysis of certification requirements. The suit stems from Brigham’s approval of a $36.50 per share tender offer from Statoil ASA in 2011. Shareholders sued shortly after Brigham announced the transaction, alleging that the board members breached their fiduciary duties by failing to disclose material information to shareholders. The trial court granted class certification and adopted the shareholders’ proposed trial plan, which omitted any discussion or analysis of defendants’ affirmative defenses. Defendants appealed and asserted that the omission evidenced the trial court’s failure to conduct a “rigorous analysis” before certification, as required by state rules. The court of appeals agreed with defendants and reversed the trial court, stating that it is improper to certify a class without knowing how claims can and will be tried, as Texas courts reject the “certify now and worry later” approach.
Brigham Exploration Co., et al. v. Boytim, et al., No. 03-13-00191-cv (Tex. Ct. App. 3d Dist. Aug. 15, 2014).
On August 15, the Securities and Exchange Commission filed a complaint against Heidi Ann Gamer and two companies under her control, Gamer Economic Systems, LLC and Gamer Media Partners Corp. The SEC alleged that between August 2011 and August 2012, Gamer fraudulently sold $771,900 of securities to over three dozen investors. According to the SEC, Gamer intentionally misrepresented to prospective investors that their funds would be used to develop and market interactive technology such as smart-phone applications, and later misinformed investors about non-existent contracts with a college, a football team and the Bollywood film industry. The SEC asserted that Gamer used the funds for personal expenses, rather than for operating capital, violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10(b)-5 thereunder. The SEC is seeking a permanent injunction, disgorgement of illicit profits and civil penalties.
Securities and Exchange Commission v. Heidi Ann Gamer, Gamer Economic Systems, LLC, and Gamer Media Partners, No. 1:14-cv-02650-ODE (N.D. Ga.).
On August 20, the Office of the Comptroller of the Currency (OCC) issued the “Merchant Processing” booklet of the Comptroller’s Handbook. This booklet, which replaces the booklet of the same name issued in December 2001, has been revised to include the supervision of federal savings associations. The “Merchant Processing” booklet provides updated guidance to examiners and bankers on assessing and managing the risks associated with merchant processing activities. Continue Reading
On August 6, the UK Financial Conduct Authority (FCA) published its guidance consultation on social media and customer communications (Guidance). The Guidance is intended to clarify and confirm the FCA’s approach to the supervision of customer communications and, more specifically, financial promotions published using social media platforms. It also proposes guidance to assist those firms that use social media to communicate financial promotions to their clients as to how they might do so while still complying with the relevant rules of the FCA. Continue Reading