Corporate & Financial Weekly Digest

Corporate & Financial Weekly Digest

Delaware Chancery Court Declines to Dismiss Fraud Claims Against Private Equity Fund and Directors

Posted in SEC/Corporate

In Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, the Delaware Court of Chancery denied the defendants’ motion to dismiss fraud-based claims made in connection with Great Hill’s acquisition of Plimus, a private company, from SIG and Plimus’ founders.  Continue Reading

Agencies Amend Regulatory Capital and Liquidity Coverage Ratio Rules

Posted in Broker-Dealer, Dodd-Frank Developments

In general, banking organizations are currently permitted to calculate their exposure with respect to derivatives transactions on a net basis under relevant regulatory capital and liquidity coverage ratio rules if such transactions are governed by a “qualifying master netting agreement.” The current definition of this term recognizes that a banking organization’s right to exercise its termination rights under these agreements may be stayed if the counterparty is in receivership, conservatorship or resolution under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act. However, this definition does not take into account foreign special resolution regimes, which did not exist when the definition was initially adopted.  Continue Reading

FINRA Proposes Rule Change to Identify Transactions with Non-Member Affiliates

Posted in Broker-Dealer

The Financial Industry Regulatory Authority proposed a rule change to amend FINRA Rule 6700 Series to require member firms to identify transactions with non-member affiliates in Trade Reporting and Compliance Engine reports using a new contra-party identifier. The proposed rule change also will require member firms to flag transactions with non-member affiliates (i) when both parties are trading for their own accounts and (ii) when such transactions occur within the same day, price and security as a transaction with another counterparty. Such transactions are generally back-to-back trades between (a) the FINRA member firm and a counterparty and (b) the FINRA member firm and its non-member affiliate. FINRA seeks to suppress the dissemination of such non-member affiliate transactions, as they are not arms‑length transactions, are not economically distinct and fail to provide useful pricing information. FINRA believes the proposed rule change will increase the transparency of disseminated trade information. 

The proposed rule change will be effective within 45 days of its publication in the Federal Register on December 11. 

Click here to read the proposed rule change.

FINRA Proposes Rule Change to Codify Reporting Requirement for Accounts Acting in Concert

Posted in Broker-Dealer

On December 11, the Financial Industry Regulatory Authority proposed a rule change to amend FINRA Rule 2360(b)(5) to reflect the current requirement that reporting rules apply to all accounts acting in concert. FINRA Rule 2360(b)(5) requires FINRA member firms to file, or cause to be filed, reports for any account with 200 or more options contract positions on the same side of the market and covering the same security or index (Large Options Position Reports or LOPRs). Such LOPRs allow FINRA to monitor for position limit compliance and for compliance with other rules and regulations. FINRA had previously issued clarification in the form of Notices to Members that any accounts acting in concert must be reported as such and believes member firms are already in compliance with the requirement. The proposed rule change is intended to harmonize the FINRA rule with options exchange rules that explicitly require in-concert reporting and to ensure continued compliance with the requirement. 

Click here to read the proposed rule change.

Swap Push-Out Rule Narrowed

Posted in Banking, Derivatives, Dodd-Frank Developments

The so-called “Push-Out Rule” relating to swap activity conducted by banks has been significantly narrowed in scope by a provision in the Consolidated and Further Continuing Appropriations Act, 2015 (Spending Bill), which was signed into law by President Obama on Tuesday. Under the Push-Out Rule (Section 716 of the Dodd-Frank Wall Street Reform and Consumer Protection Act), which provides that a bank swap dealer is not entitled to any federal assistance (including federal deposit insurance) in connection with its swap activities, every bank swap dealer faced the prospect of being forced to transfer (or push out) all or part of its swap portfolio to affiliated non-bank entities in order to avoid violation of the rule when it comes into full effect next July. The Push-Out Rule had a number of important exceptions that were available to insured depository institutions, but not to uninsured US branches and agencies of non-US banks until the Federal Reserve issued a rule saying that non-US banks were entitled to the same exceptions; however, the exceptions generally complicated matters rather than providing complete relief to affected banks. Continue Reading

CFTC Extends Relief from Certain Recordkeeping Requirements

Posted in CFTC, Dodd-Frank Developments

The Division of Swap Dealer and Intermediary Oversight and the Division of Market Oversight (Divisions) of the Commodity Futures Trading Commission expanded and extended the no-action relief previously granted to commodity trading advisors (CTAs) that are registered with the CFTC and are members of designated contract markets (DCMs) or swap execution facilities (SEFs) from the requirement, under CFTC Regulation 1.35(a), to record certain oral communications. Continue Reading

CFTC Approves Amended Order of Registration for LCH.Clearnet Ltd.

Posted in CFTC, Dodd-Frank Developments

On December 17, the Commodity Futures Trading Commission approved the application of LCH.Clearnet Ltd. for an Amended Order of Registration as a derivatives clearing organization (DCO). Pursuant to the Amended Order, LCH is permitted to clear (i) swaps and (ii) futures and options on futures contracts on all assets classes traded on or subject to the rules of a designated contract market. LCH had been clearing swaps pursuant to no-action relief issued by the CFTC Division of Clearing and Risk. Continue Reading

CFTC Extends Relief to Four Foreign Clearing Organizations

Posted in CFTC

On December 18, the Division of Clearing and Risk (DCR) of the Commodity Futures Trading Commission extended the no-action relief previously granted to four foreign clearing organizations: ASX Clear (Futures) Pty Limited, Clearing Corporation of India Ltd., Korea Exchange, Inc. and OTC Clearing Hong Kong Limited. Continue Reading