Co-authored by Kari Hoelting.
On February 16, the House Committee on Financial Services approved H.R. 3606 (the Reopening American Capital Markets to Emerging Growth Companies Act of 2011) and H.R. 2308 (the SEC Regulatory Accountability Act).
Co-authored by Jason F. Clouser.
Defendant Great American Broadcasting, Inc. (GAB) purchased all of the shares of plaintiff Supernova Systems, Inc. (Supernova) through a Stock Purchase Agreement in July 2008. GAB agreed to issue Supernova 53,350 shares of GAB in addition to cash and a promissory note. Supernova alleged that GAB violated the registration requirements of the Indiana Uniform Securities Act (IUSA). GAB moved for summary judgment, arguing that the transaction was exempt from the IUSA’s registration requirements and that it was therefore entitled to judgment as a matter of law.
Co-authored by Jason F. Clouser.
Plaintiff Vincent Licata agreed to sell the assets of his temporary employment services businesses to Tri-State Employment Services, Inc., a New York corporation (Tri-State). An affiliate of Tri-State (Services) had previously negotiated the purchase and formed an entity that would facilitate the acquisition. The plaintiff and Tri-State also entered into an employment agreement which named Plaintiff vice-president of Tri-State and included various commission-based compensation clauses.
To encourage defined contribution plans (such as 401(k) plans) to offer annuities, the Treasury Department issued several pieces of guidance on February 2.
Continue Reading...On February 21, the Council of the European Union announced the adoption of the Regulation on Short Selling and Certain Aspects of Credit Default Swaps. The version of the Regulation adopted by the Council is substantially the same as the version adopted by the European Parliament in November 2011.
Continue Reading...On February 9, it was announced that the European Parliament, the Council of the European Union and the European Commission had reached agreement on the proposed European Market Infrastructure Regulation (EMIR).
Continue Reading...Following on from the February 9, announcement of agreement with respect to the European Market Infrastructure Regulation (EMIR) on February 17, the European Securities and Markets Authority (ESMA) published a discussion paper on draft technical standards for the regulation of over-the-counter (OTC) derivatives, central counterparties (CCPs) and trade repositories.
Continue Reading...On February 23, the European Securities and Markets Authority (ESMA) published a discussion paper on key concepts of the EU Alternative Investment Fund Managers Directive (AIFMD).
Continue Reading...On February 17, the Hedge Fund Standards Board (HFSB) published a revised version of its Standards.
Continue Reading...Co-authored by James B. Anderson.
On February 13, the Securities and Exchange Commission’s Division of Corporation Finance issued a new Compliance and Disclosure Interpretation (C&DI 169.07) which provides guidance as to the proper description on a proxy card and voting instruction form of an advisory shareholder vote to approve a registrant’s executive compensation (Say-on-Pay) that is required by Rule 14a-21 of the Securities Exchange Act of 1934, as amended.
Continue Reading...Form SHC is due once every five years as part of a survey conducted by the U.S. Department of the Treasury regarding ownership of foreign securities by U.S. residents. The Form solicits information identifying foreign securities owned by U.S. residents. The Form is due on March 2, 2012 for the year ending December 31, 2011.
Continue Reading...Co-authored by Christopher T. Shannon.
The Securities and Exchange Commission has adopted amendments to Rule 205-3 under the Investment Advisers Act of 1940, as amended (the Advisers Act), to revise the definition of "qualified client." Under Rule 205-3, accounts of qualified clients are exempted from the Advisers Act's general prohibition against SEC-registered investment advisers charging performance-based fees to their advisory clients. Currently, a qualified client generally includes any client that has either (1) $750,000 or more under management with the investment adviser or (2) a net worth of at least $1.5 million.
Continue Reading...Co-authored by Elizabeth D. Langdale.
The U.S. District Court for the Southern District of New York recently addressed lead plaintiff designation in a consolidated class action brought under the Private Securities Litigation Reform Act (PSLRA).
Continue Reading...Co-authored by Christopher Buch.
Under final regulations issued February 9, group health plans must issue a summary of benefits and coverage and a uniform glossary. The final rule implements a Patient Protection and Affordable Care Act (PPACA) requirement of group health plans to provide its enrollees and potential enrollees with certain disclosures to help them better understand their health coverage, as well as to learn about additional coverage options. The final regulations were the combined effort of the Internal Revenue Service, the Employee Benefits Security Administration, and the Centers for Medicare & Medicaid Services, the three agencies responsible for implementing healthcare reform legislation under PPACA.
Continue Reading...The Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System (Federal Reserve) announced on February 15 that the deadline for submitting requests for review under the Independent Foreclosure Review has been extended. The new deadline, July 31, 2012, provides an additional three months for borrowers to request a review if they believe they suffered financial injury as a result of errors in foreclosure actions on their homes in 2009 or 2010 by one of the servicers covered by enforcement actions issued in April 2011.
Continue Reading...On January 31, four federal financial regulatory agencies, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency, issued supervisory guidance on allowance for loan and lease losses estimation practices associated with loans and lines of credit secured by junior liens on one- to four-family residential properties, including second mortgages and home equity lines of credit taken out by mortgage borrowers.
The guidance, which includes instructions to examiners on how to examine for the risks imposed by second liens, may be found here.
On February 2, the Office of the Comptroller of the Currency (OCC), regulator of national banks and federal savings associations, announced that it will phase out printing and mailing of hard-copy publications, including many now mailed to national banks, employees, and other interested parties. By June 1, the OCC will discontinue the printing and mailing of most publications. The publications for external and internal audiences that will no longer be printed and mailed include OCC alerts, bulletins, legal interpretations, consumer advisories, and Banking Regulations for Examiners. This also includes e files DVDs.
Continue Reading...Co-authored by Sam Tyfield.
As reported in the August 19, 2011 edition of Corporate and Financial Weekly Digest, France, Belgium, Spain and Italy imposed short selling bans in relation to certain banking and financial institutions in August 2011.
Continue Reading...Co-authored by Sam Tyfield.
On February 16, the Office of Fair Trading (OFT) published a speech by its Chief Executive, John Fingleton, addressing issues with respect to competition in the UK banking sector. Mr. Fingleton addressed several issues which had been identified in various previous governmental or regulatory inquiries and investigations of the UK banking industry. He noted that UK banks had made certain incremental changes and improvements but observed that concerns still remained about the competitive structure and performance of the UK banking market.
Continue Reading...Co-authored by Sam Tyfield.
On February 16, following on from the disciplinary actions against David Einhorn, Greenlight Capital, Alexander Ten-Holter and Caspar Agnew reported in the January 27, 2012 and February 3, 2012 editions of Corporate and Financial Weekly Digest, the UK Financial Services Authority (FSA) published a further final notice and announced that it had imposed a fine of £350,000 (approximately $550,000) on Andrew Osborne, a former Corporate Broking Managing Director of a major investment bank, for engaging in market abuse by improperly disclosing inside information ahead of a significant equity fundraising by Punch Taverns Plc (Punch) in June 2009.
Continue Reading...On February 9, the Commodity Futures Trading Commission adopted by a vote of 4 to 1 final rules amending its part 4 regulations governing commodity pool operators (CPOs) and commodity trading advisors (CTAs).
Continue Reading...Co-authored by Gregory E. Xethalis.
Rule 4.5 Amendment. On February 9, the Commodity Futures Trading Commission (CFTC) adopted final amendments to its Part 4 Rules, which set out the registration and compliance obligations for commodity pool operators (CPOs) and commodity trading advisors (CTAs). CFTC Rule 4.5 formerly provided a blanket exemption from CFTC registration and associated regulatory requirements for registered investment companies and their advisers. Amended Rule 4.5 is a step back to the rule as it existed before 2003, with certain modifications, where an adviser of a registered fund that trades over a de minimis amount of futures contracts, options on futures or swaps (Derivatives) or otherwise markets the fund as a commodity fund will be required to register as a CPO.
Co-authored by Dean N. Razavi.
The U.S. Court of Appeals for the Fifth Circuit recently held that documents referenced in an agreement may satisfy the statute of frauds even if those documents are not finalized. Preston Exploration Company entered into three agreements with Chesapeake Energy Corporation for the sale of certain oil and gas leases. The specific leases to be conveyed were not set forth in the body of the agreements, but rather were referenced in the agreements as being defined in the attached exhibits. Drafts of the exhibits were circulated with the draft agreements and, although it was clear that the exhibits were not finalized, the agreements were executed by Chesapeake without protest.
Co-authored by Dean N. Razavi.
The U.S. Court of Appeals for the Fifth Circuit recently held that collective bargaining agreements cannot provide for judicial review of the Railway Labor Act’s (RLA) exclusive and mandatory dispute resolution process. Retired Continental Airline pilots alleged that Continental had breached the retirees’ pension plan by improperly calculating their salaries when determining their pension benefits. The collective bargaining agreement (CBA) between the parties required that, for “minor disputes” involving the interpretation of the pension plan, the retirees must seek review through arbitration before a System Board composed of two representatives from the company and two representatives from the pilot’s union. Although resolution of minor disputes through the System Board was required, the CBA also provided that, if the System Board’s ruling was adverse to a retiree, the retiree could seek judicial review of the dispute under the Employee Retirement Income Security Act (ERISA).
Co-authored by Sam Tyfield.
On February 8, the French government released details of a proposed financial transaction tax (FTT). The proposal will be considered by the French parliament and, if passed, will impose taxes on certain transactions in shares and other financial instruments, as well as on high frequency trading (HFT).
On January 25, the New York Stock Exchange (NYSE) issued Information Memo 12-4, which announced significant limitations on the ability of member brokers to vote customer shares without specific instructions from their clients. Previously, the NYSE permitted brokers to vote uninstructed shares with respect to certain corporate governance matters proposals when the proposal in question was supported by the issuer’s management. Going forward, absent specific instructions from customers, brokers will no longer be allowed to vote customer shares with respect to various corporate governance proposals, including proposals to de-stagger the board of directors, regarding majority voting in the election of directors, eliminating supermajority voting requirements, providing for the use of consents, providing rights to call a special meeting, and certain types of anti-takeover provision overrides.
On January 27, the Court of Chancery of the State of Delaware found that a manager of a limited liability company owes traditional fiduciary duties of loyalty and care unless the limited liability company’s operating agreement specifically modifies or eliminates such duties.
Continue Reading...Co-authored by Christopher H. Mendoza and Christian B. Hennion.
On February 1, the Commodity Futures Trading Commission and the Securities and Exchange Commission (the Agencies) submitted to Congress a Joint Report of International Swap Regulations (Report). The Report, which Congress directed the Agencies to prepare under section 719(c) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, describes the regulation of swaps and security-based swaps in the United States, Asia and Europe and identifies areas of regulation that are similar and other areas of regulation that can be harmonized. As required by section 719(c), the Report also identifies major dealers, exchanges, clearinghouses, clearing members, and regulators in each geographic area and lists the major contracts (including trading volumes, clearing volumes, and notional values), the methods for clearing swaps, and the systems used for setting margin in each geographic area.
A copy of the Report can be found here.
Co-authored by Tanja Samardzija.
The Securities and Exchange Commission has approved the Financial Industry Regulatory Authority’s proposal to amend Section 1 of Schedule A to the FINRA By-Laws to adjust the rate of FINRA’s Trading Activity Fee (TAF) for transactions in covered equity securities. Effective March 1, 2012, the TAF rate for sales of covered equity securities will increase from $0.000090 per share to $0.000095 per share. The per-transaction cap for covered equity securities will increase by $0.25, from $4.50 to $4.75. The new rate applies to any sale of a covered equity security subject to the TAF occurring on or after March 1, 2012. Please note that the rules governing the TAF also include a list of exempt transactions.
Click here to see Section 1 of Schedule A to the FINRA By-Laws.
The Securities and Exchange Commission has approved the Financial Industry Regulatory Authority’s proposal to amend Section 1 of Schedule A to the FINRA By-Laws to adjust the rate of FINRA’s Trading Activity Fee (TAF) for transactions in covered equity securities. Effective March 1, 2012, the TAF rate for sales of covered equity securities will increase from $0.000090 per share to $0.000095 per share. The per-transaction cap for covered equity securities will increase by $0.25, from $4.50 to $4.75. The new rate applies to any sale of a covered equity security subject to the TAF occurring on or after March 1, 2012. Please note that the rules governing the TAF also include a list of exempt transactions.
Click here to see Section 1 of Schedule A to the FINRA By-Laws.
The Securities and Exchange Commission has approved the Financial Industry Regulatory Authority’s proposal to amend Section 1 of Schedule A to the FINRA By-Laws to adjust the rate of FINRA’s Trading Activity Fee (TAF) for transactions in covered equity securities. Effective March 1, 2012, the TAF rate for sales of covered equity securities will increase from $0.000090 per share to $0.000095 per share. The per-transaction cap for covered equity securities will increase by $0.25, from $4.50 to $4.75. The new rate applies to any sale of a covered equity security subject to the TAF occurring on or after March 1, 2012. Please note that the rules governing the TAF also include a list of exempt transactions.
Click here to see Section 1 of Schedule A to the FINRA By-Laws.
On January 30, the Securities and Exchange Commission approved the Financial Industry Regulatory Authority’s proposed rule change to adopt a telemarketing rule in the FINRA Consolidated Rulebook. The new rule adopts NASD Rule 2212 into the FINRA Consolidated Rulebook as FINRA Rule 3230 (Telemarketing).
Continue Reading...On January 18, the Securities and Exchange Commission issued a no-action letter (the 2012 Letter) in response to a number of questions relating to the registration requirements of certain entities that are affiliated with registered investment advisers.
Continue Reading...The plaintiff filed a class action suit in the District Court of the District of Columbia against the defendant, Whole Foods Market, Inc. (Whole Foods), alleging that Whole Foods had violated antitrust laws by purchasing one of its competitors, Wild Oats Markets. The class certification hearing focused on whether the plaintiff could demonstrate that the putative class of consumers of natural and organic foods had been adversely affected by the merger and their alleged damages could be proven with evidence common to the class. The plaintiff offered an expert witness, who proposed to create an econometric model to demonstrate that the merger caused prices of Whole Foods products to rise. Whole Foods disputed the proposed model, offering its own expert.
Continue Reading...Plaintiffs filed a class action suit in the District Court for the Eastern District of New York against Chinese manufacturers (the defendants) of vitamin C, alleging that the defendants violated antitrust laws by engaging in a cartel to fix prices and limit the output of vitamin C. In this long- pending litigation, class certification motions were addressed nearly seven years after the litigation was commenced. The plaintiffs moved to certify two classes, one that sought damages from the defendants, and another that sought injunctive relief. The defendants challenged the creation of both classes on a number of different grounds.
Continue Reading...The Consumer Financial Protection Bureau (CFPB), which has been taking complaints from consumers over its internet page, has updated its Complaint Systems Manual. The manual addresses how institutions should handle complaints received from consumers on credit cards and mortgages. (The CFPB plans on expanding the range of products about which consumers may complain.) In addition to more detail, the updated manual now allows an institution 15 days instead of 10 within which to give an initial response to a complaint, although the CFPB made it clear that this expected timeframe would not supersede any laws that require an earlier response. The CFPB also indicated it would be more likely to take enforcement action if an institution did not respond within 30 days of receiving the complaint, or if a response was "in progress' for more than 60 days.
Continue Reading...The Federal Deposit Insurance Corporation (FDIC) announced on January 31 that it will host a national conference on "The Future of Community Banking" on February 16, 2012. The conference will provide a forum for community bank stakeholders to explore the unique role community banks play in the country's economy and the challenges and opportunities this segment of the banking industry faces.
Continue Reading...The Federal Deposit Insurance Corporation (FDIC) announced on February 3 that it is seeking comment on a Notice of Proposed Rulemaking (NPR) to implement requirements of Section 165 (i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under this section of the Act, FDIC-insured state nonmember banks and FDIC-insured state-chartered savings associations with total consolidated assets of more than $10 billion are required to conduct annual stress tests under regulations prescribed by the FDIC. This NPR, which proposes regulations for state nonmember banks and state savings associations, is substantively similar to regulations already proposed by the Federal Reserve and the Office of the Comptroller of the Currency.
Continue Reading...The Federal Trade Commission has announced new notification thresholds for Premerger Notification Reports that must be filed under the Hart Scott Rodino Antitrust Improvements Act (HSR). The notification thresholds are adjusted every year for inflation. The new thresholds go into effect on February 27, 2012
Continue Reading...Co-authored Christopher K. Buch.
On January 20, the United States Department of Labor (DOL) made its semiannual regulatory agenda and regulatory plan statement available on its website. The regulatory agenda is the DOL’s list of regulations it expects to have under active consideration for promulgation, proposal, or review during the next six to 12 months. The Employee Benefits Security Administration (EBSA) is the DOL agency that is responsible for administering and enforcing much of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
Co-authored Christopher K. Buch.
On February 2, the Employee Benefits Security Administration (EBSA) of the United States Department of Labor (DOL) issued its final rule under the Employee Retirement Income Security Act of 1974, as amended (ERISA) Section 408(b)(2) relating to service provider disclosures.
On January 31. the UK Financial Services Authority (FSA) issued guidance FG12/03 with respect to certain aspects of counterparty credit risk management by central counterparties (CCPs). The guidance focuses on risk models and associated governance, processes and procedures. The FSA notes that other aspects related to counterparty credit risk management, such as participant entry criteria, while viewed by the FSA as equally important, are being discussed in other regulatory fora.
Continue Reading...Following on from the disciplinary actions against David Einhorn and Greenlight Capital as reported in the January 27, 2012 edition of Corporate and Financial Weekly Digest, the UK Financial Servcies Authority (FSA) published final notices against two more individuals: Alexander Ten-Holter (a trader and former compliance officer at Greenlight Capital (UK) LLP) and Caspar Agnew (a trading desk director at JP Morgan Cazenove).
Continue Reading...On January 30 the European Securities and Markets Authority (ESMA) released a consultation paper on guidelines for ETFs (exchange traded funds) and other UCITS (undertakings for collective investment in securities) issues (ESMA/2012/44).
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