Corporate & Financial Weekly Digest : Corporate Finance Lawyers & Attorneys for Legal Developments in Business & Financial Services

Co-authored by Daniel J. Silverthorn.

On January 20, the Securities and Exchange Commission announced that, effective February 21, most Securities Act of 1934 transaction fees will decrease from $19.20 per million dollars to $18.00 per million dollars. The assessment on security futures transactions will remain unchanged at $0.0042 for each round turn transaction. The SEC had previously announced fee rates for fiscal year 2012 on May 2, 2011, but these fee rates never became effective.

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As of July 9, broker-dealers must comply with the new suitability standards established by FINRA Rule 2111 (which is modeled after NASD Rule 2310). With respect to customers’ institutional accounts (as defined by FINRA Rule 4512(c)), broker-dealers will be required to fulfill customer-specific suitability obligations by having: (1) a reasonable basis to believe that the institutional customer is capable of evaluating investment risks independently and (2) the institutional customer affirmatively indicate that it is exercising independent judgment in evaluating the broker-dealer’s recommendations.

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Co-authored by Christopher H. Mendoza and Christian B. Hennion.

The staff of the Commodity Futures Trading Commission (CFTC) will hold a public roundtable to discuss the “available to trade” provision for swap execution facilities (SEFs) and designated contract markets (DCMs) on January 30, at 9:30 am (Eastern Time). The roundtable is set to discuss: (1) the filing process under Part 40 of the CFTC’s regulations for a DCM or SEF to notify the CFTC that it has determined that a swap is “available to trade”; (2) the factors that a DCM or SEF must consider to make an “available to trade” determination; and (3) the meaning and parameters of “economically equivalent swap.”

A copy of the roundtable agenda is available here. The CFTC press release containing further information regarding the roundtable is available here.

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Co-authored by Christopher H. Mendoza and Christian B. Hennion.

On January 25, the Commodity Futures Trading Commission released the findings of limited reviews of future commission merchants (FCMs) conducted to assess compliance with requirements to segregate customer funds (including a review of an FCMs obligation to set aside, in secured accounts, funds deposited by customers for trading on foreign boards of trade). As of the review date for each FCM, all of the FCMs that were reviewed were in compliance with the segregation or secured amount requirements.

Further information regarding the scope, methodology, and findings of the limited review are available here.

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Co-authored by Elizabeth D. Langdale.

The Delaware Supreme Court recently held that a “reasonable conceivability” rather than a “plausibility” standard governs motions to dismiss in state court proceedings. The Court held that notwithstanding the (federal) “plausibility” standard adopted by the U.S. Supreme Court in two recent decisions, the governing pleading standard in Delaware to survive a motion to dismiss, “reasonable conceivability,” was a “minimal” one. The Delaware Supreme Court explained that the federal “plausibility” standard “invites judges to determin[e] whether a complaint states a plausible claim for relief and draw on . . . judicial experience and common sense” whereas, under the less stringent “reasonable conceivability” standard, a complaint cannot be dismissed unless the plaintiff would not be entitled to recover under any reasonably conceivable set of circumstances. The Delaware Supreme Court re-emphasized that until it decides otherwise, or a change is duly effected through the Civil Rules process, the governing pleading standard in Delaware to survive a motion to dismiss will remain the “reasonable conceivability” standard.

Cambium Ltd. v. Trilantic Capital Partners, No. 363, 2011 (Del. Supr. Jan. 20, 2011).

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Co-authored by Elizabeth D. Langdale.

Notwithstanding a high level corporate officer’s allegedly duplicitous conduct, the U.S. District Court for the Western District of Pennsylvania recently dismissed a securities fraud claim based on the plaintiff’s failure to allege economic loss attributable to the alleged misrepresentation of the defendant. The plaintiff, a corporation that sells graphite, brought this action against its former president, alleging, among other things, that the defendant had violated Section 10(b) of the Securities Exchange Act. Specifically, the plaintiff alleged that the defendant had made material misrepresentations in his nondisclosure, noncompetition and nonsolicitation agreements, which had induced the plaintiff to issue to the defendant shares of common stock as a part of an employee stock purchase agreement. The defendant operated the company for several years without disclosing that he had, all the while, not actually resigned from his former employer, a competitor of plaintiff’s in the graphite sales industry. The Court classified this 10(b) claim as a “non-typical” one, i.e., one where the allegations do not involve the price of a publicly-traded security. The Court agreed with the defendant that the plaintiff had failed to allege that it had suffered any economic loss, and by extension, loss causation, i.e., economic loss attributable to the alleged misrepresentation of the defendant, both of which are necessary to state a claim for securities fraud. As such, the court dismissed the securities fraud claim.

Specialty Graphite Services, Inc. v. Chiodo, No. 2:11-cv-1438 (W.D. Pa. Jan. 19, 2012).

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On January 23, the Consumer Financial Protection Bureau, which regulates banks over $10 billion in assets and non-bank consumer financial products and services, and the Federal Trade Commission entered into a Memorandum of Understanding to develop a framework for working together in many areas, including:

• coordinating rules, law enforcement and "other activities";
• consulting prior to beginning an investigation;
• cooperating on consumer education efforts; and
• sharing consumer complaints.

The arrangement, which among other things seeks to avoid duplication or conflict with respect to certain rulemaking activities, was required by law.
Click here for more information.

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The Financial Stability Board (FSB), created under the auspices of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), announced last week the creation of a Legal Entity Identifier (LEI) Expert Group. The LEI Expert Group will be made up of public officials from around the world and supported by an industry advisory panel. The FSB has committed the group to deliver proposals by April on the implementation of a global LEI system for review by the FSB and delivery to the G-20 at the June 2012 Summit. The Treasury Department stated, "During the financial crisis, market participants and regulators did not have the information they needed to assess exposures to risky or failing companies globally. In the United States, the Dodd-Frank Act addressed this gap by creating the Office of Financial Research (OFR) to improve the information we have about our financial system. One of the OFR’s most important initiatives to date has been advancing the establishment of a legal entity identifier, a global standard that will enable regulators and companies around the world to, for the first time, quickly and accurately identify parties to financial transactions.

For more information, click here.

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Plaintiffs’ lawyers have recently attempted to convert a negative shareholder advisory “say on pay” vote under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) into a breach of fiduciary duty where the board of directors implements a compensation program and awards thereunder. A U.S. district court in Oregon has rejected such a claim on procedural grounds, applying Delaware corporate law in affirming the business judgment presumption for the directors’ vote. Plumbers Local No. 137 Pension Fund v. Davis.

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On January 25, the UK Financial Services Authority (FSA) announced the imposition of penalties totaling £7.3M (approximately $11.5M) on David Einhorn and Greenlight Capital Inc. (Greenlight), for market abuse in June 2009 in relation to trading in equities of Punch Taverns plc (Punch).

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On January 23, the UK Financial Services Authority (FSA) published a discussion paper (DP12/1) on the implementation of the EU Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD). The UK is required to transpose the AIFMD into UK Law by July 22, 2013.

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On January 24, the EU Council of Ministers (the Council) published a press release setting out its evolving position with respect to the proposed European Market Infrastructure Regulation (EMIR).

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Co-authored by Avi Badash.

On January 13, the Securities and Exchange Commission approved for immediate effectiveness the Financial Industry Regulatory Authority’s proposal to extend FINRA Rule 0180 to January 17, 2013. FINRA Rule 0180 temporarily limits, with certain exceptions, the application of FINRA rules with respect to security-based swaps.

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Co-authored by Jason F. Clouser.

Plaintiff Scott McNamara, M.D. brought an action against defendants Catherine Picken, M.D. and Washington ENT Group, PLLC (WENT) for an accounting, conversion, breach of contract, interference with business relations, and defamation.

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Co-authored by Jason F. Clouser.

Plaintiff Gwendolyn Donald, a former restaurant assistant manager, filed a suit against an Arby’s franchise owner claiming that the franchise terminated her employment in violation of the Family and Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA), and Michigan’s Persons With Disabilities Civil Rights Act (PWDCR). The district court granted summary judgment for defendant Sybra, Inc. (Sybra).

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On January 17, the Federal Deposit Insurance Corporation approved a final rule requiring an insured depository institution with $50 billion or more in total assets to submit periodic contingency plans to the FDIC for resolution in the event of the institution's failure. These resolution plans "will inform the FDIC's ability, as receiver, to resolve the institution in a manner that ensures that depositors receive access to their insured deposits within one business day of the institution's failure (two business days if the failure occurs on a day other than a Friday), maximizes the net-present-value return from the sale or disposition of its assets, and minimizes the amount of any loss to be realized by the institution's creditors."

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On January 17 the Federal Deposit Insurance Corporation approved a notice of proposed rulemaking (NPR) that would require certain depository institutions with more than $10 billion in consolidated assets to conduct annual capital-adequacy stress tests. The NPR, to implement section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), would apply to FDIC-insured state nonmember banks and FDIC-insured state-chartered savings associations with total consolidated assets of more than $10 billion. The FDIC regulated 23 state non-member banks with total assets of more than $10 billion as of September 30, 2011. The proposed rule expands upon proposed guidance issued on June 15, 2011 on covered banks’ stress testing as a part of overall institution risk management. That guidance included stress testing non-capital related aspects of financial condition. The Dodd-Frank Act requires each primary federal financial regulator, including the FDIC, to issue consistent and comparable stress-testing regulations for financial companies with total consolidated assets of more than $10 billion. In terms of its requirements, the NPR "is substantively similar to a proposal the Federal Reserve published in December 2011."

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On January 17, Frank Keating, President of the American Bankers Association, asked Congress to ask the agencies charged with drafting the Volcker Rule, which would curtail proprietary trading and private equity and hedge fund investments by banks, to start over. The letter states that "[t]he proposed rules as written are unworkable and fail to carry out the intent of Congress to clearly define prohibited activity in proprietary trading and investments in hedge funds and private equity funds. ABA therefore requests that Congress (1) communicate its Volcker Rule objectives to the agencies in writing and at the hearing, and (2) call for a re-proposed set of rules for public comment that readily align with such objectives." The letter was delivered one day before agency heads testified before Congress on their efforts to implement the Volcker Rule.

The letter may be found here.
 

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Co-authored by Evan A. Belosa.

On January 10, the Department of Health and Human Services (HHS) issued interim final regulations regarding the standards applicable to electronic funds transfers (EFTs) made by health plans to health care providers. The regulations were prompted by Section 1104(b)(2)(A) of the Patient Protection and Affordance Care Act, which amended the earlier Health Insurance Portability and Accountability Act (HIPAA) by adding EFTs to the list of transactions for which HHS must adopt a standard under HIPAA. The goal of the new regulation is to make EFTs a more efficient method for the receipt of health claim payments. Comments regarding the regulations are due before March 12. Compliance will be required effective January 1, 2014.

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Co-authored by David S. Kravitz.

On January 6, the Securities and Exchange Commission again updated its planned schedule for adopting rules and taking other actions to implement the corporate governance and disclosure provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). As reported in the April 15 and August 5 editions of the Corporate and Financial Weekly Digest, the SEC has on several occasions announced revised planned rulemaking schedules to implement provisions of the Dodd-Frank Act. Below are the updated time periods set forth in the SEC’s current rulemaking schedule for governance and disclosure rules to be proposed and adopted during such time periods, as well as certain related actions. Section references are to the Dodd-Frank Act.

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Co-authored by Christopher H. Mendoza and Christian B. Hennion.

At a public meeting held on January 11, the Commodity Futures Trading Commission adopted three final rules and agreed to publish for comment another rule implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).

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Co-authored by Christopher H. Mendoza and Christian B. Hennion.

The Commodity Futures Trading Commission adopted final rules implementing section 724 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), which prescribes the manner in which cleared swaps and related collateral must be treated prior to and after bankruptcy. The final rule sets forth a model entitled “Complete Legal Segregation.” The purpose of the rules is to protect swaps customers from so-called “fellow customer” risk, i.e., the risk of loss resulting from the default of one or more customers. Similar to the rules governing funds segregated on behalf of customers trading on US futures exchanges, the rules permit futures commission merchants (FCMs) and derivatives clearing organizations (DCOs) to hold cleared swaps customer collateral in commingled customer omnibus accounts. However, the rules further require FCMs that are members of a DCO to provide the DCO at least once each day with information regarding: (1) the identity of the underlying customers whose positions are held in the omnibus account, (2) the portfolio of positions held by each customer, and (3) the margin associated with those positions. In the event a default by one or more of the clearing member FCM’s cleared swaps customers results in the default of the clearing member to the DCO, the DCO would not have recourse to the collateral posted by non-defaulting cleared swaps customers to meet the FCM’s obligations to the DCO. The rules contemplate that the positions and related margin of non-defaulting customers would either be transferred to another clearing member FCM or liquidated and returned to the Trustee in bankruptcy for distribution in accordance with the commodity broker liquidation provisions of the Bankruptcy Code (Chapter 7, Subchapter IV).

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Co-authored by Christopher H. Mendoza and Christian B. Hennion.

The Commodity Futures Trading Commission adopted final rules implementing business conduct standards rules for swap dealers (SDs) and major swap participants (MSPs) (collectively, SDs/MSPs), regulating their dealings with counterparties and additional requirements when they deal with “Special Entities,” which the final rules define to include: (1) a Federal agency; (2) a State, State agency, city, county, municipality, or other political subdivision of a State, or any instrumentality, department, or a corporation of or established by a State or political subdivision of a State; (3) any employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974 (ERISA); (4) any governmental plan, as defined in Section 3 of ERISA; (5) any endowment, including an endowment that is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986; or (6) any employee benefit plan defined in Section 3 of ERISA, not otherwise defined as a Special Entity, that elects to be a Special Entity by notifying an SD/MSP of its election prior to entering into a swap with the particular SD/MSP.

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Co-authored by Christopher H. Mendoza and Christian B. Hennion.

The Commodity Futures Trading Commission adopted final rules establishing a registration process for SDs and MSPs. Registration requirements will not be mandatory until certain swap definitions are finalized and become effective. Persons who believe that they are SDs or MSPs will be able–but not required–to register before that time. As part of the registration requirements, SDs and MSPs are required to become and remain members of a registered futures association. Push-out affiliates will also be subject to the foregoing requirements. A push-out affiliate is a non-insured depository institution affiliate that is an SD or MSP.

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Co-authored by Christopher H. Mendoza and Christian B. Hennion.

The Commodity Futures Trading Commission issued an order authorizing the National Futures Association to process and grant applications for registration and withdrawals of registration with respect to SDs and MSPs, to issue notices of provisional registration, to confirm initial compliance with requirements applicable to SDs and MSPs under Section 4s of the CEA, to conduct proceedings to deny, condition, suspend, restrict, or revoke the registration of any SD or MSP, to maintain records regarding SDs and MSPs, and to serve as the official custodian of those records.

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Co-authored by Christopher H. Mendoza and Christian B. Hennion.

At a public meeting on January 11, the Commodity Futures Trading Commission, by a 3-2 vote (Commissioners O’Malia and Sommers, dissenting), voted to propose regulations to implement the provisions of Section 619 of the Dodd-Frank Act, commonly known as the “Volcker Rule.” Among other things, the Volcker Rule generally prohibits federally insured depository institutions, bank holding companies, and their subsidiaries and affiliates (collectively, banking entities) from engaging in short-term proprietary trading and owning, sponsoring or having certain other relationships with hedge funds or private equity funds, in each case, subject to various exceptions.

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Co-authored by Dean N. Razavi.

The U.S. Court of Appeals for the Seventh Circuit last week held that the Illinois doctrine of adverse domination for tolling the statute of limitations on an action does not apply where a defendant was not a co-conspirator of a wrong-doing officer or director.

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Co-authored by Dean N. Razavi.

The Delaware Chancery Court granted indemnification to an officer who defended claims against him arising from representations he allegedly made before a merger, and for related conduct that occurred after that merger.

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On January 6, the Office of the Comptroller of the Currency (OCC), regulator of the nation's national banks and federal savings associations, issued a Bulletin 2012-2 (Bulletin), rescinding much of the guidance that the Office of Thrift Supervision (OTS) had issued in previous years with respect to its supervisory function over federal savings institutions. The purpose of the rescission was "to produce one common set of supervisory policies that will apply to both federal savings associations and national banks, while recognizing differences anchored in statute." The Bulletin rescinded 389 CEO Letters, and dozens of Regulatory and Thrift Bulletins as well as Trust Handbook guidance issued previously by the OTS. In many but by no means all cases, thrift institutions were informed that guidance issued by the OCC would now control.

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On January 6, the Division of Corporation Finance (the Division) of the Securities and Exchange Commission issued disclosure guidance, stating that it is "concerned about the risks to financial institutions that are SEC registrants from direct and indirect exposures" to European sovereign debt holdings. "To date we note that disclosures about the nature and extent of these exposures that registrants, including foreign private issuers, have provided in reports filed or furnished with the Commission have been inconsistent in both substance and presentation. We believe this inconsistency may lead to disclosures that lack transparency and comparability for investors."

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On January 11, the Consumer Financial Protection Bureau (CFPB) released a new examination manual entitled Mortgage Origination Examination Procedures. The manual is a field guide for CFPB examiners looking at mortgage originators in both the bank and nonbank sectors of the mortgage industry.

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Despite a delay in the issuance of the final rule, the Department of Labor (DOL) expects service provider fee disclosure obligations to go into effect April 1. The final rule, which is expected to be very similar to the interim final rule issued in July, 2010, will likely require retirement plan service provider to disclose to plan fiduciaries certain information about the fees they collect from the plan. While certain industry professionals have been requesting a delay in the effective date, the DOL has not yet indicated that such a delay will be forthcoming.

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Co-authored by James B. Anderson.

On December 21, the Securities and Exchange Commission adopted an amendment to the accredited investor net worth standard under Regulation D of the Securities Act of 1933, as amended, to exclude the value of an individual’s primary residence from the $1 million net worth calculations used to determine whether such individual is an “accredited investor” qualified to invest in certain unregistered securities offerings. The amendment conforms the SEC’s definition of an “accredited investor” to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).

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Co-authored by Kari E. Hoelting.

On December 21, the Securities and Exchange Commission adopted final rules (the Final Rules) implementing Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), which included disclosure requirements for operators of coal or other mines.

 

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Co-authored by Christopher H. Mendoza and Christian B. Hennion.

On December 19, 2011, the Commodity Futures Trading Commission issued a final order that extends the CFTC’s prior grant of temporary relief from certain swap-related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) that would otherwise have taken effect on July 16, 2011 (the Order). Specifically, the Order provides relief with respect to (1) self-effectuating provisions of the Dodd-Frank Act that reference terms requiring further definition, and (2) self-effectuating provisions of the Dodd-Frank Act that repealed existing statutory safe harbors for over-the-counter derivatives transactions. The latest “sunset” date for the Order is July 16, 2012.

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Co-authored by Christopher H. Mendoza and Christian B. Hennion.

On December 20, 2011, the Commodity Futures Trading Commission approved final rules on swap data recordkeeping and reporting requirements for swap data repositories (SDRs), derivatives clearing organizations (DCOs), designated contract markets (DCMs), swap execution facilities (SEFs), swap dealers (SDs), major swap participants (MSPs), and swap counterparties that are neither swap dealers nor major swap participants (non-SD/MSP counterparties).

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Co-authored by Christopher H. Mendoza and Christian B. Hennion.

On December 20, 2011, the Commodity Futures Trading Commission approved final rules governing real-time public reporting of swap transaction data. The final rules cover all interest rate, credit, equity, foreign exchange and “other commodity” swaps, regardless of the method of execution or whether such swaps are cleared.

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Co-authored by Christopher H. Mendoza and Christian B. Hennion.

The Commodity Futures Trading Commission will hold a public meeting on January 11 at 9:30 a.m. (Eastern Time) to consider the following matters:

• Final Rule: Registration of Swap Dealers and Major Swap Participants
   
• Final Rule: Protection of Cleared Swaps Customer Contracts and Collateral: Conforming Amendments to the Commodity Broker Bankruptcy Provisions
   
• Final Rule: Business Conduct Standards for Swap Dealers and Major Swap Participants with Counterparties
   
• Proposed Rule: Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds
   
• Delegation of Authority Order: Performance of Registration Functions by National Futures Association with Respect to Swap Dealers and Major Swap Participants.

Further information regarding the open meeting is available here.
 

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Co-authored by Christopher H. Mendoza and Christian B. Hennion.

On January 3, the Commodity Futures Trading Commission issued an order rejecting a motion filed by the International Swaps and Derivatives Association (ISDA) and the Securities Industry and Financial Markets Association (SIFMA) requesting that the CFTC stay the effective date of its final and interim final position limit rules pending resolution of the judicial challenge filed by ISDA and SIFMA on December 2, 2011. The CFTC rejected the motion by a vote of 3 to 2. A copy of the CFTC order is available here.

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The plaintiff, Sagarra Inversiones, S.L. (Sagarra), the minority shareholder in Corporación Uniland S.A. (Uniland), a Spanish Corporation, sought to rescind the sale to Uniland of Giant Cement Holdings, Inc. (Giant), a company controlled by the defendant, Cementos Portland Valderrivas (CPV), the majority shareholder of Uniland. Sagarra asserted that the price paid for Giant was inflated and that CPV caused Uniland to acquire Giant solely to further its own interests, in breach of its fiduciary duties to Uniland. To challenge the sale, Sagarra brought a derivative action in Delaware on behalf of Uniland Acquisition Corp. (UAC), a Delaware subsidiary of Uniland that was created to facilitate the sale. The Delaware Court of Chancery held that Sagarra did not have standing to challenge the sale because it had not satisfied the demand requirements of Spanish law.

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The plaintiff filed a class action suit in the U.S. District Court for the Southern District of California, alleging that the defendants omitted material facts from a proxy statement, breaching their fiduciary duties and violating the Securities Exchange Act of 1934. In the District Court, defendants moved to stay discovery in three related state court proceedings until a motion to dismiss the federal suit was resolved. The defendants argued that the Court should exercise its power under the Securities Litigation Uniform Standards Act, which permits a district court to stay discovery proceedings in state court in aid of the district court’s jurisdiction.

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On January 4, President Obama appointed former Ohio Attorney General Richard Cordray as Director of the Consumer Financial Protection Bureau (the CFPB). The appointment was made without Senate approval while "in recess," even though the Senate had not been in recess for more than three business days, the long-accepted standard of what constitutes a recess. Republican senators, who had vowed to block the confirmation of any CFPB director unless the bureau’s structure and funding are changed, had been holding pro forma sessions to prevent such an appointment. It is expected that the President's action will spur a legal challenge based on the President's alleged disregard of the “advice and consent” requirements for his nominees. American Bankers Association president, Frank Keating, was critical of the appointment, stating, “The controversial nature of [the] recess appointment reinforces the banking industry’s concerns about the bureau’s structure and lack of accountability. It puts the bureau’s future actions in constitutional jeopardy, threatening its work, complicating compliance efforts of banks, and further undermining the entity’s authority and credibility.”

To read the press release, click here.
 

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On December 23, 2011, four federal agencies, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission, extended until February 13, the comment period on a proposal to implement the so-called Volcker Rule of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).

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The Financial Crimes Enforcement Network (FinCEN) announced on December 20, 2011 that the deadline for financial institutions to utilize FinCEN's new Currency Transaction Report (CTR) and Suspicious Activity Report (SAR) for reporting purposes will be extended to March 31, 2013.

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On December 19, 2011, the federal bank regulatory agencies announced the annual adjustment to the asset-size thresholds used to define small bank, small savings association, intermediate small bank, and intermediate small savings association under the Community Reinvestment Act (CRA) regulations. The annual adjustments are required by the CRA rules. Financial institutions are evaluated under different CRA examinations procedures based upon their asset-size classification.

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The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (the Board), and Federal Deposit Insurance Corporation (FDIC) (collectively, the agencies) are seeking comment on an amendment to the notice of proposed rulemaking (NPR) to modify the agencies’ market risk capital rules, published in the Federal Register on January 11, 2011 (January 2011 NPR). The January 2011 NPR did not include the methodologies adopted by the Basel Committee on Banking Supervision (BCBS) for calculating the standard specific risk capital requirements for certain debt and securitization positions, because the BCBS methodologies generally rely on credit ratings.

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Co-authored by Michael R. Durnwald.

In the December 16, 2011, edition of Corporate and Financial Weekly Digest, we reported on Internal Revenue Service guidance regarding informational reporting to employees, via form W-2, of the cost of their employer-sponsored health coverage.

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On December 21, 2011, the London Stock Exchange announced that the disciplinary committee of its Alternative Investment Market (AIM) had imposed a fine of £400,000 (approximately $620,000) and a public censure on Seymour Pierce, a nominated advisor (NOMAD) for breaches of the AIM rules applicable to NOMADs.

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Co-authored by Sam Tyfield.

On December 22, 2011, the European Securities and Markets Association (ESMA) published its final Guidelines on systems and controls in an automated trading environment. These were based on a consultation that ended in October 2011.

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