Corporate & Securities Law
Jim Hamilton's World of Securities Regulation 
Opines on every level of securities regulation (federal, state, international, theoretical) covering market players of all types (e.g., accountants, broker-dealers, foreign issuers, hedge funds, market manipulators) who engage all sorts of transactions and activities (acquisitions, financial reporting, private placements, pyramid schemes). Highlights issues of particular importance to securities lawyers and their clients with emphasis on SEC rulemaking, industry trends, and the many curiosities that inhabit this world.
Post Frequency: 2.6/day Last Entry: November 20, 2009 at 18:45:00 Recent Entries: 891
By Jim Hamilton
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New Mexico Proposes Rule Revisions
Posted on November 20, 2009New Mexico Proposes Rule Revisions to Align with New 2010 Securities ActRule amendments were proposed by the New Mexico Securities Division to align the rules with adoption of the new New Mexico Uniform Securities Act that takes effect January 1, 2010...
House Legislation Would Provide
Posted on November 19, 2009House Legislation Would Provide for Extraterritorial Reach of Federal Securities LawsPerhaps obviating the need for US Supreme Court review of a case involving the extraterritorial reach of the federal securities laws, House draft legislation would provide for the transnational reach of the antifraud provisions of the Securities Act, the Exchange Act, and the Investment Advisers Act...
NYSE Forms Corporate Governance
Posted on November 18, 2009NYSE Forms Corporate Governance Commission as Legislation LoomsAgainst the backdrop of pending federal legislation on corporate governance, the NYSE has formed a Commission on Corporate Governance to address U.S. corporate governance reform and the overall proxy voting process for public companies...
Senate Draft Legislation Would
Posted on November 17, 2009Senate Draft Legislation Would Overrule Supreme Court Precedent and Allow Private Right of Action for Aiding and Abetting Securities FraudThe Senate draft legislation, Restoring American Financial Stability Act, would enable investors to sue persons who aid and abet securities fraud...
House and Senate Draft Legislation
Posted on November 16, 2009House and Senate Draft Legislation Would Expand PCAOB JurisdictionThe Madoff fraud revealed that the Public Company Accounting Oversight Board lacked the power it needed to examine the auditors of non-public broker-dealers. House and Senate draft legislation would close this loophole and bring the auditors of non-public broker-dealers under the PCAOB oversight regime...
White Paper Available on the Restoring
Posted on November 12, 2009White Paper Available on the Restoring American Financial Stability ActThe Senate Banking Committee has released draft legislation providing for a sweeping overhaul of the regulation of US financial services and markets. The overhaul of the US financial regulatory system is based on the themes of regulating systemic risk, enhancing transparency and disclosure, delinking executive compensation from excessive risk, expanding consumer and investor protection, and preventing regulatory arbitrage...
Dodd Draft Legislation Would Create
Posted on November 11, 2009Dodd Draft Legislation Would Create New SEC Office of Credit Ratings as Key Part of Rating Agency ReformCredit rating agencies market themselves as providers of independent research and in-depth credit analysis. But in the financial crisis, instead of helping people better understand risk, they failed to warn people about risks hidden throughout layers of complex structures...
Senate Banking Committee Issues
Posted on November 10, 2009Senate Banking Committee Issues Draft Legislation Reforming US Financial RegulationThe Senate Banking Committee has released draft legislation that would provide a sweeping overhaul of the regulation of US financial services and markets. The draft would provide for joint SEC-CFTC regulation of derivatives, make the SEC self-funding, strengthen the Commission?s powers, better protect investors, and efficiently and effectively regulate the securities markets The Restoring American Financial Stability Act of 2009 would also reform the credit rating agency process by, among other things, establishes a new Office of Credit Rating Agencies at the SEC to enhance rating agency regulation and mandating new rules for internal controls, independence, transparency and penalties for poor performance in order to restore investor confidence in these ratings...
Know Your Limits: Government Lawyers
Posted on November 09, 2009Know Your Limits: Government Lawyers Weigh In on Inquiry Notice CaseIn late November the U.S. Supreme Court will hear oral argument in an important securities litigation case. The court will address the meaning of "inquiry notice" for limitations purposes in its review of Merck & Co...
Fierce Debate Rages on Amendment
Posted on November 08, 2009Fierce Debate Rages on Amendment to House Legislation Exempting Smaller Companies from 404(b) of Sarbanes-OxleyThe bi-partisan Garrett-Adler Amendment exempting smaller reporting companies from the internal control auditor attestation requirements contained in Section 404(b) of the Sarbanes-Oxley Act has been criticized by an SEC Commissioner even while it appears to have White House and Treasury support...
Chamber of Commece Opposes Waters
Posted on November 06, 2009Chamber of Commece Opposes Waters Amendment on Shareholder Access Legislation passed by the House Financial Services Committee would authorize the SEC to implement shareholder access to management?s proxy card to nominate directors for election to the board...
House Financial Services Committee
Posted on November 05, 2009House Financial Services Committee Passes Legislation Reforming SEC, PCAOB and SIPC OversightThe House Financial Services Committee has passed legislation reforming the SEC to strengthen its powers, better protect investors, and efficiently and effectively regulate the securities markets...
Key House Committee Passes Credit
Posted on November 04, 2009Key House Committee Passes Credit Agency Reform LegislationThe House Financial Services Committee has passed bi-partisan legislation reforming the governance and operations of credit rating agencies. The Accountability and Transparency in Rating Agencies Act, HR 3890, enhances the accountability of credit rating agencies by clarifying the ability of individuals to sue such agencies...
Supreme Court Oral Argument in
Posted on November 03, 2009Supreme Court Oral Argument in Fund Fee Case Raises Questions of Judicial Involvement in Determining Fees and Fiduciary Duty of AdvisersSupreme Court Justices questioned the efficacy of having judicial involvement in determining the fairness of the fees investment advisers charge the mutual funds they advise in oral argument in a case questioning the viability the 1982 Gartenberg ruling...
Bachus Amendment to House Hedge
Posted on November 02, 2009Bachus Amendment to House Hedge Fund Adviser Legislation Clarifies Fiduciary DutyAn important amendment offered by Financial Services Committee Ranking Member Spencer Bachus to the Private Fund Investment Advisers Registration Act, HR 3818, is designed to protect the fiduciary obligations that investment advisers owe their clients...
Seven Former SEC Chairs Urge Supreme
Posted on October 31, 2009Seven Former SEC Chairs Urge Supreme Court to Uphold Constitutionality of the PCAOBSeven former SEC Chairs appointed by Presidents of both parties, and representing four decades of SEC leadership, have asked the US Supreme Court to uphold the constitutionality of the PCAOB in an action alleging that the Board?s existence runs afoul of the Appointments Clause...
New Mexico Proposes Rules to Coordinate
Posted on October 30, 2009New Mexico Proposes Rules to Coordinate with Adoption of New Securities ActNew rules and amendments to existing rules were proposed by the Securities Division of the New Mexico Regulation and Licensing Department to coordinate with the State's new Securities Act that takes effect January 1, 2010...
Minnesota Adopts Securities Rules
Posted on October 29, 2009Minnesota Adopts Securities Rules to Coordinate with 2007 Uniform Securities ActNew rules involving federal covered securities, exemptions from registration and securities registrations, broker-dealers, agents, investment advisers and federal covered investment advisers were adopted by the Minnesota Department of Commerce to coordinate with the State's Uniform Securities Act that took effect on August 1, 2007...
Fraud by Hindsight Claims Fail
Posted on October 28, 2009Fraud by Hindsight Claims Fail to Show Scienterby Rodney TonkovicAssociate Writer-AnalystCCH Federal Securities Law ReporterIn Indiana State District Council of Laborers and Hod Carriers Pension and Welfare Fund v. Omnicare, Inc., a 6th Circuit panel affirmed the dismissal of a fraud complaint that attempted to show "fraud by hindsight...
Florida Proposes to Review Associated
Posted on October 27, 2009Florida Proposes to Review Associated Person Applicants' Law Enforcement RecordAs proposed, the law enforcement records of associated person applicants who have been found guilty of, or who have pled guilty or nolo contendere to, certain crimes would be reviewed by the Office of Financial Regulation to determine their eligibility to register in Florida...
Arkansas Revises its Securities
Posted on October 26, 2009Arkansas Revises its Securities RulesArkansas rule changes pertaining to federal covered securities; exemptions from securities registration; registration of securities; registration and post-registration requirements for broker-dealers, agents, investment advisers and investment adviser representatives, notice filings for federal covered investment advisers; and administrative procedures for conducting investigations and hearings, and reviewing exemption filings were adopted by the Arkansas Securities Department, effective November 1, 2009...
Senior Senate Democrat Asks How
Posted on October 25, 2009Senior Senate Democrat Asks How Treasury Can Support House Derivatives LegislationIn a letter to Treasury Secretary Tim Geithner, Senator Maria Cantwell expressed severe disappointment in Treasury's support for the OTC Derivatives Markets Act reported out of the House Financial Services Committee with what the senator called large loopholes that would allow financial firms to continue unregulated derivatives trading...
Utah Proposes IA licensing ExemptionAn
Posted on October 23, 2009Utah Proposes IA licensing ExemptionAn exemption from licensing for investment advisers and investment adviser representatives was proposed by the Utah Securities Division, along with an amendment to the number of working days the disclosure statement for a coordination registration must be filed with the Division to take effect in the State, the elimination of references to notification registration and the repeal of a definitions rule...
NASAA Issues Reminder About U4
Posted on October 21, 2009NASAA Issues Reminder About U4 Disclosure DeadlineThe North American Securities Administrators Association (NASAA) issued a reminder today that November 14, 2009, is the effective date for completion of the six regulatory action disclosure questions that were added to the Form U4 on May 18, 2009...
Financial Stability Board Becoming
Posted on October 20, 2009Financial Stability Board Becoming International Coordinator of Financial Reform LegislationAll major participants in financial reform, including the Obama Administration, the EU, and the G-20, all agree that the financial crisis was global and that the reform legislation must be globally coordinated...
House Financial Services Committee
Posted on October 15, 2009House Financial Services Committee Approves Legislation Regulating OTC Derivatives MarketsThe House Financial Services Committee has approved legislation that would, for the first time ever, require the comprehensive regulation of the over-the-counter (OTC) derivatives marketplace...
US Supreme Court to Decide Fate
Posted on October 14, 2009US Supreme Court to Decide Fate of Honest Services Fraud, Linked to Duty of LoyaltySenior corporate officers have gained Supreme Court review of their convictions that were partially based on a scheme to deprive the company and its shareholder of their right to honest services...
EU Central Banker Applauds Derivatives
Posted on October 13, 2009EU Central Banker Applauds Derivatives Regulation as Key to Containing Systemic RiskAs legislation regulating the OTC derivatives markets advances in the EU and the US Congress, a member of the European Central Bank said that it is critical to regulate the market for credit default swaps since it is systemically important...
SEC Asks for Changes to House Draft
Posted on October 12, 2009SEC Asks for Changes to House Draft Derivatives Legislation to Prevent Regulatory ArbitrageWhile praising the House Financial Services Committee?s draft legislation to regulate the OTC derivatives markets, the SEC warned that the draft could present opportunities for significant regulatory arbitrage...
Hedge Fund Industry Supports House
Posted on October 09, 2009Hedge Fund Industry Supports House Draft Legislation Regulating OTC Derivatives MarketsThe hedge fund industry has expressed qualified support for the House Financial Services Committee draft legislation regulating the OTC derivatives markets. In testimony before the committee, the Managed Funds Association expressed full support for the broad goals of the Over-the-Counter Derivatives Markets Act of 2009 to reduce systemic risk through the use of central clearing houses, the segregation of customer collateral by central clearing houses, and by providing customers with the option of having their collateral for customized swaps segregated...
Bar Group Calls SEC Shareholder
Posted on October 08, 2009Bar Group Calls SEC Shareholder Access Proposal Unworkable; Endorses Private OrderingThe SEC?s proposal to give shareholders access to management?s proxy card in the election of directors is unworkable, in the view of the American Bar Association Committee on Federal Securities Regulation...
Federal Judge Approves Global Settlement
Posted on October 07, 2009Federal Judge Approves Global Settlement of Internet IPO Actions; Not Good Time to Chill Class ActionsA federal judge has given final approval to the global settlement of one of the most protracted multi-district securities litigations in history. It has been eight years since thousands of investors brought the class actions consolidated in this action alleging that 55 underwriters, more than 300 issuers, and hundreds of individuals defrauded the public with regard to Internet IPOs...
Chairman Frank Circulates Draft
Posted on October 06, 2009Chairman Frank Circulates Draft Legislation Regulating OTC DerivativesRep. Barney Frank, Chair of the Financial Services Committee, has introduced draft legislation regulating the OTC derivatives markets by mandating exchange clearing and trading for the majority of derivatives products while preserving the over-the-counter market for specialized derivatives...
9th Circuit: Privilege Not Applicable
Posted on October 05, 20099th Circuit: Privilege Not Applicable to Interview in Backdating Case A CFO's statements to outside corporate counsel concerning alleged options backdating were not protected by the attorney-client privilege. A 9th Circuit panel found that the officer's statements "were not made in confidence, but rather for the purpose of outside disclosure...
House Leader Circulates Draft of
Posted on October 04, 2009House Leader Circulates Draft of SEC Reform and Investor Protection LegislationDraft legislation that would impose a uniform fiduciary standard on brokers and advisers, eliminate mandatory arbitration of brokerage disputes, and enhance the SEC?s authority to impose sanctions on and seek remedies from individuals who violated the securities laws but who are no longer associated with a regulated firm has been circulated by Rep...
PCAOB Finds Mixed Results in Review
Posted on October 03, 2009PCAOB Finds Mixed Results in Review of First Year of Internal Control Auditing Standard (AS5)While auditors generally applied the new standard for internal control reporting to focus on the areas presenting more significant audit risk, a PCAOB report found deficiencies in some engagement teams' implementation of certain aspects of the standard...
Nebraska Bill Requires its Professional
Posted on October 02, 2009Nebraska Bill Requires its Professional Licensees to be U.S. Citizens or Legal AliensBill No. 403 in the Nebraska legislature will require beginning October 1, 2009 that all state agencies in Nebraska verify the lawful presence of every individual receiving "public benefits" from a Nebraska state agency...
Georgia Clarifies Coordination
Posted on October 01, 2009Georgia Clarifies Coordination and Qualification Registration FeesUnder the Georgia Uniform Securities Act of 2008, issuers registering securities by coordination pay an initial fee of $250 and renewal fee of $100. Issuers registering securities by qualification pay an initial fee of 1/20 of 1% of the maximum aggregate offering price at which the registered securities will be offered in Georgia, with a minimum fee of $250 and a renewal fee of $100...
Oral Argument Set for Supreme Court
Posted on September 30, 2009Oral Argument Set for Supreme Court Case Challenging PCAOB's ConstitutionalityThe US Supreme Court has set December 7, 2009 as the date for oral argument in the action challenging the constitutionality of the PCAOB. At the same time, the Court extended to October 13, 2009 the deadline for the government?s merits brief in the action...
SEC Amicus Says Attribution of
Posted on September 29, 2009SEC Amicus Says Attribution of False or Misleading Statement Not Sole Way of ``Making'' Statement under Central Bank ParadigmIn an amicus brief filed in the Second Circuit Court of Appeals, the SEC said that attribution of a false or misleading statement to a person is only one means by which that person can create the statement and thus be a primary violator under the Central Bank rubric...
Senior Senate Democrat Sponsors
Posted on September 28, 2009Senior Senate Democrat Sponsors Legislation Regulating OTC DerivativesDraft legislation establishing a comprehensive regulatory framework for derivatives has been introduced by Jack Reed, Chair of the Senate Securities Subcommittee. The Comprehensive Derivatives Regulation Act, S...
G-20 Calls for Broad Financial
Posted on September 27, 2009G-20 Calls for Broad Financial Regulatory Reform; Exec Comp Overhaul and Regulation of OTC DerivativesIn the final communiqué from their Pittsburgh summit, the G-20 leaders called for the sweeping reform of global financial regulation, including strengthening prudential oversight, improving risk management, enhancing transparency, promoting market integrity, establishing supervisory colleges, and reinforcing international cooperation...
Global Audit Firms Oppose Requiring
Posted on September 25, 2009Global Audit Firms Oppose Requiring Engagement Partner to Sign Audit ReportGlobal audit firms believe that requiring an engagement partner to sign the audit report would not enhance either transparency or accountability; and may even damage the carefully constructed corporate governance structure that gives a key role to audit committees...
Levitt, Volcker Stress Need for
Posted on September 24, 2009Levitt, Volcker Stress Need for Resolution Authority for Large Financial Institutions; Basel Urges Cross-Border FrameworkWith the US contemplating legislation establishing the orderly resolution of cross-border financial institutions, and the issue of global coordination of national resolution regimes looming, former SEC Chair Arthur Levitt and former Fed Chair Paul Volcker told Congress that the creation of such a resolution authority is the key to eliminating the moral hazard of too big to fail...
Maine Adopts Electronic Form D
Posted on September 23, 2009Maine Adopts Electronic Form D Requirements and Caution for Third Party Brokers at BanksElectronic Form D Requirements. Issuers intending to make a Rule 506 offering of federal covered securities in Maine under Section 18(b)(4)(D) of the Securities Act of 1933 must file with the Maine Securities Division a hard copy of the SEC-filed electronic Form D, following the SEC's adoption of electronic filing of Form D on March 16, 2009...
IASB Assures Obama and G-20 on
Posted on September 22, 2009IASB Assures Obama and G-20 on Fair Value Accounting ReformsAhead of the G-20 Pittsburgh summit, the oversight body of the IASB has assured the G-20 that the reform of the international standard for fair value accounting in proceeding along the lines of principles outlined by the Basel Committee...
IOSCO Issues Risk Liquidity and
Posted on September 21, 2009IOSCO Issues Risk Liquidity and Due Diligence Standards for Funds of Hedge FundsWith the US and EU readying legislation to regulate hedge funds, IOSCO has set forth regulatory standards for funds of hedge funds, focusing primarily on liquidity risk and due diligence...
Law and Business Professors, Including
Posted on September 20, 2009Law and Business Professors, Including former SEC Officials, Urge Supreme Court to Clarify Gartenberg Ruling on Advisory FeesIn a case challenging the 1982 Gartenberg ruling involving the fiduciary duty imposed on mutual fund advisers under Section 36(b) of the Investment Company, law and finance professors have urged the Supreme Court to clarify the Gartenberg factors in recognition of the significant changes that have occurred in the mutual fund industry...
Hong Kong Investment Banker Found
Posted on September 18, 2009Hong Kong Investment Banker Found Guilty of Insider Dealing as SFC Assert Its PowersAs part of its ongoing vigorous initiative to combat insider dealing, the Hong Kong Securities and Futures Commission successfully concluded an enforcement against an investment banker for insider dealing during an acquisition deal...
Former Fed Chair Volcker Says Banks
Posted on September 17, 2009Former Fed Chair Volcker Says Banks Should Be Prohibited from Sponsoring Hedge FundsBanking organizations should be prohibited from sponsoring and capitalizing hedge funds or private equity funds, said former Fed Chair Paul Volcker, and there should be strict regulation, with strong capital and collateral requirements, on proprietary securities and derivatives trading...
House Passes Securities Technical
Posted on September 16, 2009House Passes Securities Technical Corrections LegislationBy a voice vote, the House has passed legislation making technical corrections to the federal securities laws and conforming amendments related to the repeal of the Public Utility Holding Company Act...
Banking Industry Says Proposed
Posted on September 15, 2009Banking Industry Says Proposed Changes to Fair Value Accounting Would Contravene G-20 Goals by Disrupting Convergence and Increasing ProcyclicalityAhead of the G-20 meeting, a letter to the Treasury and the Fed from the banking industry emphasized that the fair value accounting changes proposed by the IASB and FASB would increase procyclicality, disrupt the global convergence of accounting standards, and undermine the banking business model...
Federal Court Disapproves Proposed
Posted on September 14, 2009Federal Court Disapproves Proposed Settlement of SEC Enforcement Action Against Bank of AmericaA federal judge has disapproved the proposed consent settlement of an SEC enforcement action against Bank of America upon finding that the settlement was neither fair, nor reasonable, nor adequate...
Fed as Systemic Risk Regulator
Posted on September 13, 2009Fed as Systemic Risk Regulator Haunts US Regulatory Reform Effort; While EU Opts for Council of Regulators with Central Bank in Key RoleThere is a fierce debate raging at the center of the effort to pass financial regulatory reform in the US, while the EU has already crossed that Rubicon...
House Passes Legislation Requiring
Posted on September 11, 2009House Passes Legislation Requiring Annual SEC, PCAOB, and FASB TestimonyBy a voice vote, the House passed bi-partisan legislation requiring the Chairs of the PCAOB, the SEC, and the FASB to testify annually before Congress on accounting and auditing issues, beginning this year...
House Set to Pass Legislation Requiring
Posted on September 09, 2009House Set to Pass Legislation Requiring SEC, PCAOB, and FASB Annual TestimonyThe House is expected to pass this week bi-partisan legislation requiring the Chairs of the PCAOB, the SEC, and the FASB to testify annually before Congress on accounting and auditing issues, beginning this year...
Michigan Adds Registration Requirements
Posted on September 08, 2009Michigan Adds Registration Requirements for Investment Adviser Representatives in Light of Upcoming New Securities ActRegistration requirements for investment adviser representatives are being imposed for the first time in Michigan in light of adoption of the State's new Uniform Securities Act on October 1, 2009...
G-20 Finance Ministers Endorse
Posted on September 07, 2009G-20 Finance Ministers Endorse Reform of Executive Compensation in Alingment with Long-Term Value CreationIn preparation for the upcoming G-20 summit in Pittsburgh, the G-20 Finance Ministers have issued a communiqué calling for a framework on corporate governance and executive compensation practices designed to prevent short-term risk taking and mitigate systemic risk...
Fund Industry Defends Gartenberg
Posted on September 06, 2009Fund Industry Defends Gartenberg Ruling on Advisory Fees as US Supreme Court Test LoomsWith a case challenging the 1982 Gartenberg ruling involving the fiduciary duty imposed on mutual fund advisers under Section 36(b) of the Investment Company Act set for oral argument before the US Supreme Court on November 2, a flurry of amicus briefs defending Gartenberg have been filed...
German Legislation Would Provide
Posted on September 04, 2009German Legislation Would Provide Resolution Authority for Failed Systemically Important BanksProposed German legislation would provide a restructuring model for the rescue of systemically important banks. Finance Minister Peer Steinbrueck emphasized that the legislation is absolutely necessary in order to provide for the orderly reorganization of systemically relevant financial institutions and prevent a government takeover in the event of a crisis...
SEC Inspector General Finds Madoff
Posted on September 03, 2009SEC Inspector General Finds Madoff Enforcement Failures, Particularly Failure to Verify Through Independent Third PartiesThe SEC Inspector General has concluded that, despite numerous credible and detailed complaints, the SEC never properly investigated Bernard Madoff?s trading and never took the necessary steps to determine if Madoff was operating a Ponzi scheme...
Institutional Investors Oppose
Posted on September 02, 2009Institutional Investors Oppose Call for Differential Voting Rights; India Allows Differential Shares, For NowThe call of UK Finance Minister Paul Myners? for differential voting rights for shareholders depending on the length of time they have held shares in the company has met with opposition from institutional investors...
Fed Must Produce Documents on Securities
Posted on September 01, 2009Fed Must Produce Documents on Securities Relating to Its Lending Programs; FOIA Exemptions Not AvailableRejecting claims of FOIA exemption privileges, a federal judge has ordered the Federal Reserve Board to produce documents about the Federal Reserve System?s extraordinary actions taken in early 2008 during one of the worst financial crisis in the nation?s history...
Chairman Schapiro Issues Open Letter
Posted on August 31, 2009Chairman Schapiro Issues Open Letter to Broker-Dealer CEOsSEC Chairman Mary L. Schapiro issued an open letter to remind broker-dealer chief executive officers of their supervisory responsibilities following reports that special recruitment programs at some firms are premised on enhanced compensation arrangements...
Challenge to Gartenberg Ruling
Posted on August 30, 2009Challenge to Gartenberg Ruling on Fund Advisory Fees Set for November Oral Argument before US Supreme CourtA case challenging the 1982 Gartenberg ruling involving the fiduciary duty imposed on mutual fund advisers under Section 36(b) of the Investment Company Act is set for oral argument before the US Supreme Court on November 2...
UK Reaffirms Comply or Explain
Posted on August 27, 2009UK Reaffirms Comply or Explain Model for Corporate Governance as Financial Crisis RoilsDespite concerns that the comply or explain principle of corporate governance may not be robust enough in light of the financial crisis, the principle recently received a strong endorsement from the Walker Report on corporate governance, as well as from UK senior officials...
SEC Corp Fin Staff Examines Loan
Posted on August 25, 2009SEC Corp Fin Staff Examines Loan Loss MD&A Disclosure IssuesThe SEC's Division of Corporation Finance has released a sample of a letter sent to public companies' chief financial officers about the issues they may wish to disclose in Management's Discussion and Analysis given the current economic environment...
D.C. Circuit: Partnership Interests
Posted on August 24, 2009D.C. Circuit: Partnership Interests in "Family Feud" Were SecuritiesIn a complex case involving various affiliated business entities, a D.C. Circuit panel found over a dissent that certain limited partnership interests were "securities" under the Howey test...
Revised French Corporate Governance
Posted on August 21, 2009Revised French Corporate Governance Code Emphasizes Independent Audit CommitteesA revised French corporate governance code places the independent audit committee at the heart of effective governance and provides for the appointment of employee-shareholder directors...
CFTC Chair Gensler Asks Congress
Posted on August 20, 2009CFTC Chair Gensler Asks Congress for Changes to Administration's Draft Legislation Regulating DerivativesIn a letter to Congress, CFTC Chair Gary Gensler has asked for specific changes in the Obama Administration?s draft legislation to regulate the OTC derivatives markets...
Ninth Circuit Panel Overturns Criminal
Posted on August 19, 2009Ninth Circuit Panel Overturns Criminal Conviction for Stock Options BackdatingA Ninth Circuit panel has overturned the first criminal conviction for backdating stock options because the prosecutor made a false assertion of material fact to the jury in closing argument...
Constitutional Law Professors Contend
Posted on August 18, 2009Constitutional Law Professors Contend that PCAOB's Creation Violated the Appointments ClausePCAOB members are superior officers of the United States who must be constitutionally appointed by the President and confirmed by the Senate, argued a consortium of constitutional law professors in an amicus brief filed with the Supreme Court in a case challenging the PCAOB?s constitutionality...
Rhode Island Increases BD, Agent,
Posted on August 17, 2009Rhode Island Increases BD, Agent, IA and IA Rep. FeesThe following fees were increased in Rhode Island, effective July 1, 2009:Broker-dealers, $300, from $250Agents, $60, from $50Investment Advisers, $300, from $250Investment Adviser Representatives, $60, from $50Please seehttp://www...
5th Circuit Remains Hostile Terrain
Posted on August 14, 20095th Circuit Remains Hostile Terrain for Class ActionsIn Fener v. Belo Corp., a 5th Circuit panel continued that circuit's narrow view of securities class action pleading. Initially, the court rejected claims that that the Supreme Court's Stoneridge decision effectively overruled the 5th Circuit's 2007 decision in Oscar Private Equity Investments v...
Hedge Fund Industry Seeks IRS Guidance
Posted on August 13, 2009Hedge Fund Industry Seeks IRS Guidance on FBAR's Application to Private FundsThe hedge fund industry has asked the Internal Revenue Service for official guidance on the application of the duty to file the Report of Foreign Bank and Financial Accounts (FBAR) for investments in hedge funds and other private investment funds...
UK FSA Adopts Remuneration Code for Financial Institutions
Posted on August 12, 2009The UK Financial Services Authority has adopted a remuneration code for financial institutions, including broker dealers. The code takes effect on January 1, 2010; but by the end of October the firms must submit a remuneration policy statement providing the FSA with the information that it needs to verify that the firm?s remuneration policies and practices will be compliant with new code...
Obama Administration Unveils Legislation
Posted on August 11, 2009Obama Administration Unveils Legislation to Regulate Derivatives, Including Credit Default SwapsThe Administration has proposed detailed legislation regulating the OTC derivatives markets. As part of the first-time federal regulation, credit default swap markets and all other OTC derivative markets would be subject to comprehensive regulation in order to guard against activities in those markets posing excessive risk to the financial system and promote the transparency and efficiency of those markets...
Lord Myners Defends UK Proposed
Posted on August 10, 2009Lord Myners Defends UK Proposed Council of Financial StabilityAs debate in the US rages over whether the central bank or a council of financial regulators should be the new systemic risk regulator, the UK Financial Services Minister Paul Myners defended the government?s proposed Council of Financial Stability in testimony before the Treasury Committee...
Merits Brief Challenging Constitutionality
Posted on August 08, 2009Merits Brief Challenging Constitutionality of PCAOB Focuses on Separation of Powers and Appointments Clause ViolationsThe audit firm challenging the constitutionality of the PCAOB has taken direct aim at the Board?s constitutional status in its merits brief filed with the US Supreme Court...
Federal Judge Withholds Approval
Posted on August 07, 2009Federal Judge Withholds Approval of SEC-Bank of America SettlementDespite acknowledging the public importance of an SEC enforcement action against Bank of America, a federal judge (SD NY) said that the proposed consent judgment would leave uncertain the truth of the very serious SEC allegations...
House Floor Colloquy Sheds Light
Posted on August 06, 2009House Floor Colloquy Sheds Light on Frank Amendment to Corporate Governance LegislationA colloquy on the House floor between Financial Services Chair Barney Frank and Rep. Tom Price illuminated a provision inserted on the floor by the Chair into the Corporate and Financial Institution Compensation Fairness Act (HR 3269)...
Japan FSA Extends Restrictions
Posted on August 05, 2009Japan FSA Extends Restrictions on Short SellingThe Japanese Financial Services Agency extended its restrictions on short selling until October 31, 2009. The restrictions were to have expired on July 31, 2009. Thus, the regulatory measures on short selling currently in place will continue with regard to all listed stocks in Japan...
SEC Chair Tells Senator Schumer
Posted on August 04, 2009SEC Chair Tells Senator Schumer that Commission Will Ban Flash TradingSenator Charles Schumer (D-NY) announced that SEC Chair Mary Schapiro has assured him that the Commission plans to ban the practice of flash trading that gives advance knowledge of stock orders to certain traders...
Fed Regional Presidents Criticize
Posted on August 03, 2009Fed Regional Presidents Criticize Treasury Reform Plan for Not Addressing Too Big to FailWhile acknowledging that financial regulation reform is needed now, two regional Federal Reserve Bank presidents said that the Treasury legislative reform proposal fails to come to grips with the doctrine of too big to fail (TBTF)...
UK Appeals Court Rules Company
Posted on August 02, 2009UK Appeals Court Rules Company Engaged in Fraud Could Not Claim Losses Against Its AuditorA divided UK high court of appeals has ruled that it would be against public policy to allow a company that was used by its beneficial owner as a vehicle to defraud banks to recover losses against the audit firm that failed to detect the fraud...
Senator Schumer Urges SEC to Prohibit
Posted on August 01, 2009Senator Schumer Urges SEC to Prohibit Flash OrdersIn a letter to SEC Chair Mary Schapiro, Senator Charles Schumer (D-NY) urged the Commission to ban the practice of flash trading that gives advance knowledge of stock orders to certain traders or he would consider introducing legislation to ban the practice in connection with optional pre-routing programs in order to ensure that trading in the capital markets is fair and transparent for all market participants...
Wisconsin Announces Annual Rules
Posted on July 31, 2009Wisconsin Announces Annual Rules RevisionWisconsin's 2009 annual rules revision is partly to make nonsubstantive changes to statutory cross references to align the rules with the new Wisconsin Securities Act that took effect January 1, 2009, along with proposing more substantive rule changes (see below)...
House Financial Services and Ag
Posted on July 30, 2009House Financial Services and Ag Committee Chairs Reach Agreement in Principle on Derivatives LegislationThe important derivatives regulation piece of the Obama Administration?s proposed legislation to overhaul regulation of the financial markets came closer to fruition as the Chairs of the House Financial Services and the Agriculture Committees agreed on the basic principles of derivatives legislation...
Expert Testimony Not Needed to
Posted on July 29, 2009Expert Testimony Not Needed to Show Accountant Acted UnreasonablyThe SEC acted properly in suspending a former audit firm partner from practice before the Commission under Rule 102(e). Gregory Dearlove was the engagement partner in charge of the 2000 audit of Adelphia Communications Corp...
IASB Proposes New Fair Value Standard,
Posted on July 28, 2009IASB Proposes New Fair Value Standard, While FCAG Says Fair Value Not Pro-CyclicalThe IASB has proposed significant changes to its fair value accounting standard that would essentially require all financial instruments that do not have basic loan features to be measured at fair value...
German Bundestag Approves Legislation
Posted on July 27, 2009German Bundestag Approves Legislation Reforming Executive CompensationAs the US House of Representaives prepares to pass corporate governance reform, the German federal parliament, Deutshcr Bundestag, has approved legislation reforming corporate executive compensation...
Entire 1st Circuit Will Re-Consider
Posted on July 25, 2009Entire 1st Circuit Will Re-Consider the Issue of What Constitutes a "Statement" Under 10b-5The 1st Circuit vacated a panel finding in favor of the SEC in SEC v. Tambone. The enforcement action concerned misrepresentations made by two senior executives of the primary underwriter of a mutual fund to investors about excessive trading and market timing...
Senate Legislation Would Align
Posted on July 24, 2009Senate Legislation Would Align Option Accounting Standards with Tax Code and Make Options Part of 162(m) Salary CapBipartisan Senate draft legislation would bring stock option accounting rules and the federal tax code into alignment by requiring that the stock option tax deduction be no greater than the stock option expenses shown on the corporate books each year...
UK Regulator Rejects Using Financial
Posted on July 23, 2009UK Regulator Rejects Using Financial Accounting Standards to Promote StabilityIn an effort to refute the growing global consensus that financial accounting must change because its pro-cyclicality contributed to the financial crisis, the UK accounting overseer said that people proposing to amend accounting rules to make them less pro-cyclical must believe that investors cannot be trusted with the unadjusted numbers produced by the application of accounting standards...
UK Walker Report Urges Limits on
Posted on July 22, 2009UK Walker Report Urges Limits on Variable Compensation and Stronger Board OversightA blue ribbon committee empanelled by the UK Treasury has recommended sweeping and fundamental changes in executive compensation at financial institutions. While falling short of capping executive pay, the eagerly awaited report of Sir David Walker recommended the significant deferral of bonus schemes and increased public disclosure about the compensation of highly-paid executives...
Global Governance Group Supports
Posted on July 21, 2009Global Governance Group Supports SEC Shareholder Access ProposalA global corporate governance consortium broadly supports the SEC?s recent proposal to facilitate shareholder director nominations, which the group believes will spur boards and shareholders to engage more actively with one another on board composition and effectiveness...
SEC Investment Management Director
Posted on July 20, 2009SEC Investment Management Director Lauds Hedge Fund LegislationAgainst the backdrop of pending legislation to require the SEC registration of hedge fund advisers, Andrew Donohue, the director of the Division of Investment Management, told the Senate Subcommittee on Securities that the Commission strongly believes that legislative action is needed to increase regulation of hedge funds and other private investment pools...
In SEC Enforcement Action: Federal
Posted on July 19, 2009In SEC Enforcement Action: Federal Court Rules that Agreement Supporting Misappropriation Theory Must Have a Non-Use ComponentIn an SEC enforcement action, a federal judge ruled that the agreement required to invoke the misappropriation theory of insider trading liability must include both an obligation to maintain the confidentiality of the inside information and not to trade on or otherwise use the information...
Obama Administration Introduces
Posted on July 16, 2009Obama Administration Introduces Legislation Regulating Hedge Fund AdvisersFollowing up on its plan for overhauling US financial regulation, the Obama Administration has proposed specific legislation requiring advisers to hedge funds and other private investment funds with more than $30 million under management to register with the SEC and be subject to significant disclosure and other requirements...
NASAA Urges Extension of Treasury's
Posted on July 15, 2009NASAA Urges Extension of Treasury's Fiduciary Duty ProposalThe North American Securities Administrators Association (NASAA) has joined several other public interest organizations in expressing strong support for the proposal in the Obama Administration's White Paper on financial regulatory reform to subject all those who provide investment advice to a fiduciary duty to act in their clients' best interests...
Liquidating GM Entity Receives
Posted on July 13, 2009Liquidating GM Entity Receives Reporting ReliefThe corporate entity formerly known as GM has been granted relief from its Exchange Act reporting requirements on Forms 10-K and 10-Q. During the pendency of its reorganization, the company, described as "Old GM" in the request and staff reply, must file any financial reports required to be filed with the bankruptcy court and make disclosures regarding material events relating to the liquidation under cover of Form 8-K...
California IOUs are Securities,
Posted on July 10, 2009California IOUs are Securities, Says SEC StaffInstruments issued by the state of California during its current budget crisis are securities, advised the SEC staff in an advisory statement. The state issued the instruments, commonly referred to as "IOUs," to individuals who were entitled to a tax refund or vendors who were entitled to payments...
Virginia Adopts Securities Rule
Posted on July 09, 2009Virginia Adopts Securities Rule ChangesRule revisions were adopted by the Virginia Division of Securities and Retail Franchising, effective July 1, 2009. One amendment eliminates the Form U-2 filing requirement for Rule 505 and 506 offerings but mandates issuers to submit as their notice to the Division the same Form D filed with the SEC...
District Court: Deposition Testimony
Posted on July 08, 2009District Court: Deposition Testimony Did Not Waive PrivilegeIndividual defendants in a class action suit against Sprint Corp. did not waive the attorney-client privilege by partially disclosing legal advice during their depositions. Magistrate Judge James P...
UK Financial Services Secretary
Posted on July 07, 2009UK Financial Services Secretary Criticizes EU Fund Manager Directive ProposalPaul Myners, the UK Financial Services Secretary to the Treasury, said that European Commission?s Alternative Investment Fund Managers draft directive is a "flawed" document that requires "major surgery...
Annuities Were Securities, Foundation
Posted on July 06, 2009Annuities Were Securities, Foundation Was Not ExemptBy Rodney TonkovicAssociate Writer-Analyst, CCH Federal Securities Law ReporterA 9th Circuit panel affirmed a district court's judgment that charitable gift annuities were investment contracts and therefore securities under federal law...
NASAA Opens Registration for Annual
Posted on July 05, 2009NASAA Opens Registration for Annual Conference in DenverThe North American Securities Administrators Association (NASAA) will convene its 92nd Annual Conference at the Sheraton Denver Downtown Hotel in Denver, Colorado from September 13–15, 2009...
NASAA Supports Judicial Scrutiny
Posted on July 03, 2009NASAA Supports Judicial Scrutiny of Fund Advisory FeesNASAA has filed an amicus brief with the United States Supreme Court in Jones v. Harris Associates, L.P., urging the high court to reverse a decision of the Seventh Circuit and permit the petitioners to pursue claims against a fund's investment adviser for charging excessive fees in breach of the fiduciary duty under Section 36(b) of the Investment Company Act of 1940...
SEC Inspector General Asks Congress
Posted on July 02, 2009SEC Inspector General Asks Congress to Expand PCAOB Reach and Broaden Whistleblower ProgramAs the House Financial Services Committee prepares financial regulatory reform legislation, the SEC?s Inspector General has suggested the implementation of a number of specific reforms...
SEC Proposes Enhanced Compensation Disclosure and Faster Disclosure of Voting Results
Posted on July 02, 2009The SEC has proposed a broad package of corporate disclosure improvements and proxy solicitation enhancements designed to provide shareholders with access to important information about company compensation policies and procedures and their impact on risk-taking, director qualifications, and compensation consultants...
SEC Approves NYSE Proposal Eliminating Broker Discretionary Voting for Directors
Posted on July 02, 2009The SEC has approved an NYSE proposal eliminating broker discretionary voting for all elections of directors, whether contested or not. Currently, NYSE Rule 452 and corresponding Listed Company Manual Section 401.08 permit brokers to vote on behalf of their beneficial owner customers in uncontested elections of directors if the customers have not returned voting instructions...
Senate Bill Would Nullify SEC Rule
Posted on July 01, 2009Senate Bill Would Nullify SEC Rule 151AAs the US Court of Appeals for the District of Columbia considers the future of SEC Rule 151A, bi-partisan legislation introduced by Senator Ben Nelson would nullify the Commission?s adoption of Rule 151A before it has a chance to take effect...
SEC Proposes Rules to Implement Legislative Say-on-Pay Mandate
Posted on July 01, 2009The SEC has proposed changes to the federal proxy rules implementing the Dodd Amendment in the stimulus legislation requiring that TARP recipients provide a separate shareholder advisory vote to approve the compensation of executives. The Dodd Amendment is codified in Section 111(e) of the Emergency Economic Stabilization Act (EESA)...
SEC Commissioner Calls Corporate Secretaries Gatekeepers of Corporate Governance
Posted on July 01, 2009Corporate secretaries are the gatekeepers of corporate governance for their companies, declared SEC Commissioner Elisse Walter, and as such they can ensure that their boards have the advice and resources necessary to discharge their fiduciary duties. In remarks at the annual seminar of the Society of Corporate Secretaries and Governance Professionals, the commissioner also said that sound corporate governance demands that shareholders have a real say in determining who will oversee management of the companies that they own...
FASB Codification of US GAAP Takes Effect
Posted on July 01, 2009The FASB Accounting Standards Codification became effective July 1, 2009. Going forward, it will be the source of authoritative U.S. GAAP. Rules and interpretive releases of the SEC under authority of the federal securities laws are also sources of authoritative GAAP for SEC registrants...
Draft Legislation Creating Consumer
Posted on June 30, 2009Draft Legislation Creating Consumer Financial Protection Agency Mandates Coordination with SEC but Excepts SEC-Registered Brokers and AdvisersThe Obama Administration has sent draft legislation to Congress that would create a new federal Consumer Financial Protection Agency to protect consumers across the financial sector from unfair, deceptive, and abusive practices...
SEC Defends Gartenberg Ruling in
Posted on June 29, 2009SEC Defends Gartenberg Ruling in Amicus Brief Filed with Supreme CourtThe SEC defended the venerable 1982 Gartenberg ruling in an amicus brief filed with the US Supreme Court in a case involving the fiduciary duty imposed on mutual fund advisers under Section 36(b) of the Investment Company Act...
Japan FSA Endorses Obama Administration
Posted on June 28, 2009Japan FSA Endorses Obama Administration Call for Systemic Risk Regulation, Including Hedge Funds and DerivativesA senior official of the Japanese Financial Services Agency has endorsed the Obama Administration?s call for systemic risk regulation and international consistency in the regulatory reform through the offices of the Financial Stability Board...
Nebraska Issues Electronic Form
Posted on June 25, 2009Nebraska Issues Electronic Form D Policy for Rule 506 IssuersIssuers offering securities under Rule 506 of federal Regulation D must file with the Nebraska Department of Banking and Finance an authenticated paper copy of the Form D filed electronically with the SEC, beginning March 16, 2009...
Tennessee Sets Forth Electronic
Posted on June 24, 2009Tennessee Sets Forth Electronic Form D Filing Requirements for Rule 505 and 506 OfferingsRule 505. Beginning March 16, 2009, issuers intending to make a securities offering in Tennessee under Rule 505 of federal Regulation D must file with the Securities Division a printed copy of the Form D electronically filed with the SEC, manually signed by the issuer's authorized person...
Illinois Updates Electronic Form
Posted on June 23, 2009Illinois Updates Electronic Form D Policy for Rule 504, 505 and 506 OfferingsBeginning March 16, 2009 issuers intending to make an offering under Rule 504 in Illnois may use Section 4.G of the Illinois Securites Law to file SEC Form D or Illinois Form 4...
SEC Chair Presents Plan for Regulation
Posted on June 22, 2009SEC Chair Presents Plan for Regulation of OTC Derivatives to CongressAgainst the backdrop of the Obama Administration?s call for federal regulation of the OTC derivatives markets, SEC Chair Mary Schapiro has asked Congress to pass legislation subjecting securities-related OTC derivatives to the federal securities laws and Commission regulation...
Senator Shelby Skeptical of Fed as Systemic Risk Regulator
Posted on June 21, 2009As the Senate Banking Committee begins to craft legislation overhauling the US financial regulatory system, Senator Richard Shelby (R-Alabama), the Committee?s Ranking Member, has cast doubt on whether the Fed can fill the macro prudential role envisioned for it by the Obama Administration...
EU Endorses Systemic Risk Board as Part of Regulatory Reform
Posted on June 19, 2009While Congress debates the Obama?s Administration?s proposal that the Fed be the systemic risk regulator, the European Union Council has endorsed the creation of a European Systemic Risk Board to monitor and assess potential threats to financial stability and, where necessary, issue risk warnings and recommendations for action and monitor their implementation...
Obama Administration Seeks Federal
Posted on June 18, 2009Obama Administration Seeks Federal Regulation of Hedge FundsThe Obama Administration has asked Congress to pass legislation requiring SEC registration of advisers to hedge funds and other private pools of capital, including private equity funds and venture capital funds, with assets under management over a certain threshold...
Obama Administration Proposes Vast
Posted on June 17, 2009Obama Administration Proposes Vast Overhaul of US Financial RegulationThe Obama Administration has proposed to Congress the most sweeping and fundamental regulatory reform of the US financial and securities markets since President Franklin D. Roosevelt?s New Deal...
Treasury Rules for TARP Firms Give
Posted on June 15, 2009Treasury Rules for TARP Firms Give Central Role to Compensation Committees and CertificationsThe Treasury has issued special executive compensation and corporate governance rules for firms receiving funds under the troubled assets relief program (TARP)...
IASB Chair: Board Will Produce
Posted on June 14, 2009IASB Chair: Board Will Produce New Fair Value Standard This YearIASB Chair David Tweedie said that the Board will adopt a new standard on fair value accounting this year for use in 2009 financial statements. In remarks to ECOFIN, he pledged that the comprehensive revision of IAS 39 will be done in a transparent manner after open consultation with stakeholders, including the European Commission and other regulators...
Indiana To Hold Public Hearing
Posted on June 12, 2009Indiana To Hold Public Hearing on USA 2002 Model Act RulesPreviously proposed rules and rule changes by the Indiana Securities Division to coordinate the rules with the Indiana Uniform Securities Act that took effect July 1, 2008 will be subject to a public hearing on September 22, 2009 at 1 p...
NASAA Commends Presidential Directive
Posted on June 11, 2009NASAA Commends Presidential Directive on PreemptionIn a letter this week to President Obama, the North American Securities Administrators Association (NASAA) praised the chief executive's recent directive setting limits on regulatory preemption by federal agencies...
President Obama Issues Memorandum
Posted on June 10, 2009President Obama Issues Memorandum on Federal Preemption of State LawsPresident Barak Obama sent the heads of all executive departments and agencies a memorandum on May 20, 2009 advising them that it is his Administration's general policy "that preemption of State law by executive departments and agencies should be undertaken only with full consideration of the legitimate prerogatives of the States and with a sufficient legal basis for preemption...
House Passes Legislation Elevating
Posted on June 09, 2009House Passes Legislation Elevating Independence of SEC and CFTC Inspectors GeneralThe House had passed legislation enhancing the independence of the SEC and CFTC Inspectors General by requiring that they be appointed by the President and confirmed by the Senate...
Full Court Reviews First Circuit Panel Ruling Protecting Tax Accrual Work Papers Produced for Dual Purpose of Anticipating IRS Litigation and Filing S
Posted on June 08, 2009In a case of intense interest to independent auditors, the en banc First Circuit Court of Appeals has reviewed a split First Circuit panel ruling that the work-product doctrine protects from an IRS subpoena tax accrual work papers prepared by a company for the purpose of calculating tax reserve liability even though the work papers were also prepared in conjunction with the independent audit of the company?s SEC-filed financial statements...
German Corporate Governance Code
Posted on June 07, 2009German Corporate Governance Code to Promote Long-Term GoalsIn line with executive compensation principles endorsed by the G-20, the German Corporate Governance Code Commission proposed changes to the code to align executive compensation at German companies with long-term corporate performance...
Swiss Regulator Proposes Remuneration
Posted on June 05, 2009Swiss Regulator Proposes Remuneration Regime Delinked from Excessive Risk TakingThe Swiss Financial Markets Supervisory Authority proposes to regulate the remuneration of all financial institutions, not just systemically relevant ones, in a way that delinks excessive risk from bonuses and other variable compensation...
NASAA Advocates Creation of Systemic
Posted on June 03, 2009NASAA Advocates Creation of Systemic Risk CouncilThe North American Securities Administrators Association (NASAA) has joined the Conference of State Bank Supervisors and the National Association of Insurance Commissioners in calling upon Congress to establish a council of regulators to identify and manage systemic risk in the financial markets...
US Supreme Court Invites SEC Input
Posted on June 02, 2009US Supreme Court Invites SEC Input on Extraterritorial Reach of Federal Securities LawsThe US Supreme Court has asked the Government to file a brief in a private action involving the always vexing issue of the international reach of the federal securities laws...
UK Treasury Committee Says Auditors
Posted on June 01, 2009UK Treasury Committee Says Auditors of Company's Financials Should Neither Perform Non-Audit Work Nor Give Assurances on Risk ManagementConcerned about auditor independence, the UK Treasury Committee recommended that the firm that audits a company?s financial statements should be prohibited from doing non-audit work for the company...
UK Corporate Secretaries Suggest
Posted on May 31, 2009UK Corporate Secretaries Suggest Revision of Combined Code to Make Risk Management a Board DutyThe UK corporate secretaries have recommended that the Combined Code, the UK?s corporate governance code, be amended to ensure that risk management is a collective board responsibility at the core of effective corporate governance...
Committee on Capital Markets Regulation
Posted on May 28, 2009Committee on Capital Markets Regulation Issues Broad Reform Framework Centered on Unitary RegulatorThe blue ribbon Committee on Capital Markets Regulation has recommended a consolidated unitary regulator approach for the US, modeled on the UK Financial Services Authority, plus naming the Federal Reserve Board as systemic risk regulator...
SEC Rule 151A Challenged in Federal Appeals Court
Posted on May 27, 2009SEC Rule 151A defining indexed annuities as not being exempt annuity contracts under Section 3(a)(8) of the Securities Act is being challenged in federal court by issuers of fixed indexed annuities that will be subject to SEC regulation as a consequence of the rule...
Supreme Court Takes Inquiry Notice
Posted on May 27, 2009Supreme Court Takes Inquiry Notice CaseThe high court seems to have a renewed interest in securities cases. The court had already agreed to hear Jones v. Harris Associates L.P., a case involving excessive fee claims under Section 36(b) of the Investment Company Act, and the Free Enterprise Fund case on the constitutionality of the PCAOB...
Senate Leader Introduces Legislation
Posted on May 26, 2009Senate Leader Introduces Legislation to Curb Excessive CompensationSenator Richard Durbin, Assistant Majority Leader, has introduced two pieces of legislation to curb excessive executive compensation by requiring a super majority shareholder vote approving excessive compensation and denying companies a tax deduction under IRC ¶162 with regard to excessive compensation...
ECB Official Says Systemic Risk
Posted on May 25, 2009ECB Official Says Systemic Risk Regulation Must be Cross-BorderNoting that the financial crisis has shaken markets to their foundations and revealed gaps in risk management and the geographical reach of regulation, an Austrian Member of the European Central Bank called for cross-border systemic risk regulation in order to prevent regulatory arbitrage...
President Signs Legislation Strengthening
Posted on May 22, 2009President Signs Legislation Strengthening Securities and Financial Fraud Enforcement and Creating Commission to Examine Causes of CrisisPresident Obama has signed the Fraud Enforcement and Recovery Act (FERA) improving the enforcement of securities and commodities fraud and financial institution fraud involving asset-backed securities and fraud related to federal assistance and relief programs...
Financial Industry Groups Ask Congress
Posted on May 21, 2009Financial Industry Groups Ask Congress to Redefine and Improve Fair Value AccountingNoting that when there is no market, market value does not provide relevant, useful information about a securitized asset, the financial industry told Congress that the fair value accounting mark-to-market standard still needs additional improvement even in the wake of FASB?s recent guidance...
FINRA Adopts Member Private Offering
Posted on May 20, 2009FINRA Adopts Member Private Offering RuleThe Financial Industry Regulatory Authority's (FINRA) Rule 5122 regulating private offerings of securities issued by a FINRA member on the member's "control entity" ( a "Member Private Offering") takes effect June 17, 2009...
Congress Passes Legislation Strengthening
Posted on May 19, 2009Congress Passes Legislation Strengthening Securities Fraud and Financial Fraud EnforcementCongress has passed and cleared for the President legislation improving enforcement of securities fraud and financial institution fraud involving asset-backed securities and fraud related to federal assistance and relief programs...
Supreme Court Will Decide Constitutionality
Posted on May 18, 2009Supreme Court Will Decide Constitutionality of PCAOBThe US Supreme Court has agreed to hear an audit firm?s challenge to the constitutionality of the PCAOB. The audit firm asked the Supreme Court to declare the PCAOB unconstitutional because Sarbanes-Oxley Act provisions creating the Board violate the separations of powers and Appointments Clause by essentially stripping the President of all powers to appoint or remove Board members...
Chinese Central Bank Chief Identifies
Posted on May 17, 2009Chinese Central Bank Chief Identifies Ratings Agencies and Fair Value Accounting as Driving Pro-Cylicality in CrisisThe Governor of the People?s Bank of China has identified two pro-cylical factors that worked to exacerbate the financial crisis: credit rating agencies and fair value accounting...
German Government Proposes Legislation
Posted on May 15, 2009German Government Proposes Legislation to Take Toxic Securities Off Bank Balance SheetsThe German government has proposed legislation to transfer toxic securities from the balance sheets of financial instructions to specific purpose vehicles, colloquially called ``bad banks,?? which will not have to be licensed...
Panelists at ICI Conference Focus
Posted on May 14, 2009Panelists at ICI Conference Focus on Market Crisis and Regulatory ReformThe below post is courtesy of my colleague Amy Leisinger, who attended the below conference.As the fund industry has evolved to meet the demands of recent economic events and to attempt to calm increasing investor anxiety, perspectives have been forced to change, Director of the SEC's Division of Investment Management Andrew Donohue explained in his keynote address at the Investment Company Institute's ("ICI") annual mutual funds conference...
SEC Chair Schapiro Details Reforms
Posted on May 13, 2009SEC Chair Schapiro Details Reforms Taken in Response to Senate ReportIn a letter to Senator Charles Grassley, SEC Chair Mary Schapiro detailed actions taken by the Commission in response to a Senate report vetted by Senator Grassley. According to Senator Grassley, the reforms implemented by the SEC will benefit investors and the market by standardizing procedures, prioritizing resources, increasing the transparency of external Commission communications and internal recusals, establishing guidelines for handling employee complaints and dismissals, protecting whistleblowers inside the agency and recognizing the independence of the SEC ?s Inspector General...
Obama Tax Reform Proposals Would
Posted on May 12, 2009Obama Tax Reform Proposals Would Repeal LIFO to Conform to IFRS; and Increase Taxes on Securities and Commodities DealersAnticipating SEC adoption of international financial reporting standards (IFRS), the Obama Administration proposed to repeal the last-in, first-out (LIFO) method of accounting for inventories...
Legislation Requiring SEC Registration
Posted on May 11, 2009Legislation Requiring SEC Registration of Hedge Fund Advisers Will be Narrowly Crafted Says House LeaderDuring House hearings on legislation to regulate hedge fund advisers, Rep. Paul Kanjorski said that hedge funds deserve a narrowly tailored regulatory treatment...
US Hedge Fund Industry Supports
Posted on May 10, 2009US Hedge Fund Industry Supports Proposed EC Directive on Hedge Fund RegulationThe US hedge fund industry has expressed qualified support for the European Commission?s proposed Directive regulating hedge fund managers and private equity fund managers. The Managed Funds Association particularly praised the Commission?s rejection of direct regulation of the hedge funds themselves in favor of regulating hedge fund managers...
IASB US Member Urges Timely US
Posted on May 09, 2009IASB US Member Urges Timely US Adoption of IFRS; Agrees with FASB on Fair ValueBucking a growing trend to delay the US adoption of IFRS, one of the three American members on the IASB has urged the US to adopt IFRS within the next five years. In remarks at a recent European Commission seminar, John Smith said the over 100 countries that have already adopted IFRSs would not accept a situation where the United States remains outside the system indefinitely, yet also has a seat at the table...
House Passes Senate Bill Strengthening
Posted on May 08, 2009House Passes Senate Bill Strengthening Securities Fraud and Financial Fraud EnforcementThe House passed, as amended, a Senate bill to improve enforcement of securities fraud and financial institution fraud involving asset-backed securities and fraud related to federal assistance and relief programs...
Regional Director Addresses Enforcement
Posted on May 07, 2009Regional Director Addresses Enforcement IssuesThe SEC must speed up its investigative process, said Merri Jo Gillette, regional director of the SEC's Chicago regional office. According to Ms. Gillette, the Enforcement Division must bring more meaningful cases in a timely fashion to maximize the impact of the division's limited resources...
European Commission Proposes Directive
Posted on May 06, 2009European Commission Proposes Directive on Hedge Funds and Private Equity Funds under Strong Disclosure and Risk Management RegimeIn a move that is the first of its kind in the world, and anticipates similar legislation in the US, the European Commission has proposed the broad regulation of managers of hedge funds and all private equity funds with 100 million euros of assets under management...
Eight Days a Week is Not Enough
Posted on May 05, 2009Eight Days a Week is Not Enough to Show I Care ScienterAccording to a 5th Circuit panel, statements and alleged omissions made by a company CEO prior to and during an issuer tender offer were not fraudulent. The CEO stated shortly before commencement of the offer that the company did not anticipate a dividend increase for nearly two years, but that the dividend policy remained "under review...
Kansas Increases Investment Company
Posted on May 01, 2009Kansas Increases Investment Company FeesThe notice filing fee for an investment company is increased to $750, from $500, and the notice filing fee for a unit investment trust is increased to $500, from $200, effective May 15, 2009.
Senate Passes Measure Strengthening
Posted on April 30, 2009Senate Passes Measure Strengthening Securities Fraud and Financial Fraud Enforcement; Creating Financial Markets Commission A bill to improve enforcement of securities fraud and financial institution fraud involving asset-backed securities and fraud related to federal assistance and relief programs has passed the US Senate...
Utah To Increase Mutual Fund and
Posted on April 28, 2009Utah To Increase Mutual Fund and Rule 506 FeesThe mutual fund/unit investment trust notice filing fee will increase to $600, from $500, and the Rule 506 notice filing fee will increase to $100, from $60, for filings received by the Utah Securities Division on or after July 1, 2009...
Fraud Claim Could Not Rest on Omissions
Posted on April 23, 2009Fraud Claim Could Not Rest on Omissions from Martin Act DisclosuresThe New York Court of Appeals has held that the purchaser of a condominium could not bring a claim for common law fraud based solely on alleged material omissions from disclosures mandated by the New York Blue Sky Law (Martin Act)...
US Supreme Court Will Conference
Posted on April 22, 2009US Supreme Court Will Conference on PCAOB Case in MayThe US Supreme Court will hold a conference on May 14, 2009 to decide if the Court wants to hear a case challenging the constitutionality of the PCAOB. Four Justices have to vote in conference to hear the case in order for the Court to take the PCAOB case and ultimately decide the Board?s constitutionality...
Basel Guidance Links Sound Corporate
Posted on April 21, 2009Basel Guidance Links Sound Corporate Governance to Proper Fair Value AccountingIn the wake of FASB?s recent guidance on fair value accounting, the Basel Committee for Banking Supervision has issued guidance to financial institutions and their regulators designed to strengthen their valuation processes for financial instruments...
SEC Defends Adoption of Rule 151A
Posted on April 20, 2009SEC Defends Adoption of Rule 151A on Indexed Annuities against Federal Appeals Court ChallengeThe SEC vigorously defended its adoption of Rule 151A defining indexed annuities as not being exempt annuity contracts under Section 3(a)(8) of the Securities Act against a federal court challenge to the rule...
Government Urges US Supreme Court
Posted on April 17, 2009Government Urges US Supreme Court to Reject Constitutional Challenge to PCAOBThe US Government has asked the Supreme Court to reject an audit firm?s petition to rule on the constitutionality of the PCAOB. The main government argument is that the audit firm failed to exhaust its administrative remedies before the SEC; and thus the federal district court lacked jurisdiction to entertain the claim that the creation of the Board was unconstitutional...
IOSCO Recommends Hedge Fund Regulation
Posted on April 16, 2009IOSCO Recommends Hedge Fund Regulation as Part of Systemic Risk OversightThe IOSCO technical committee has set forth recommendations for hedge fund regulation embodying a consistent global approach to addressing hedge fund risk. SEC Commissioner Kathleen Casey, Chair of the committee, noted that the financial crisis is not a hedge fund crisis, and that hedge funds contribute to market liquidity, price efficiency, risk distribution and global market integration...
Hong Kong Court Approves PCCW Going
Posted on April 15, 2009Hong Kong Court Approves PCCW Going Private Scheme Despite SFC Concerns over Share SplittingA Hong Kong court approved the takeover and privatization of a major telecommunications company despite serious allegations of impropriety by the Securities and Futures Commission involving share splitting and the coercion of minority shareholders...
Public Comments Support European
Posted on April 13, 2009Public Comments Support European Commission Proposal on Hedge Fund RegulationThere is a general consensus that hedge funds should be regulated as part of systemic risk regulation, according to public comments on the European Commission?s proposal to regulate hedge funds, but there is also a fear of regulatory arbitrage if such regulation is not global...
German Regulator (BaFin) Extends
Posted on April 11, 2009German Regulator (BaFin) Extends Ban on Naked Short SellingThe German Federal Financial Supervisory Authority (BaFin) has extended its ban on naked short selling in the shares of eleven financial companies to May 31, 2009. This is BaFin?s second extension of the prohibition, which was adopted in September of 2008...
SEC Chair Schapiro Details Bold
Posted on April 09, 2009SEC Chair Schapiro Details Bold Corporate Governance InitiativesSEC Chair Mary Schapiro outlined a bold corporate governance initiative to ensure that shareholders fully understand how compensation structures and practices drive an executive's risk-taking...
SEC Set to Propose Modified Uptick
Posted on April 08, 2009SEC Set to Propose Modified Uptick and Circuit Breaker RulesWith Congress readying legislation directing the SEC to reinstate the uptick rule, Rule 10a-1, the Commission will consider proposing two approaches to restrictions on short selling. One would apply a modified uptick rule on a market wide and permanent basis, while the other would apply a circuit breaker to a particular security during severe market declines in that securityThe proposed modified uptick rule would be based on the national best bid, similar to the former Nasdaq ?bid? test...
Executive Compensation Reform Legislation Should Be Guided by Financial Stability Board Principles
Posted on April 07, 2009Based on the final communiqué of the G-20 leaders and their pledge to pass legislation reforming compensation regimes as part of financial regulatory reform, it is very probable that US legislation reforming executive compensation will be based on principles concomitantly set forth by the Financial Stability Board...
Six US Senators Ask SEC to Adopt
Posted on April 06, 2009Six US Senators Ask SEC to Adopt Regulations Ending Abusive Naked Short SellingSix US Senators have written a letter to SEC Chair Mary Schapiro urging the Commission to adopt and enforce regulations putting an end to naked short selling. At a minimum, those regulations should address the need for an uptick rule, as well as a pre-borrow requirement to prevent naked short sellers from artificially depressing or diluting stock values...
G-20 Endoses Consistent Systemic
Posted on April 05, 2009G-20 Endoses Consistent Systemic Financial Regulatory Reform; Financial Stability Board Given Crucial RoleIn their final communiqué, the G-20 leaders pledged to pass legislation reforming the financial regulatory system that is consistent across borders and based on high international standards...
FASB Adopts Mark-to-Market Guidance
Posted on April 02, 2009FASB Adopts Mark-to-Market Guidance in Reaction to Congress' DesireUnder intense pressure from Congress to ameliorate the application of mark-to-market accounting in asset-backed securities in illiquid markets, the FASB adopted guidance on whether a market is not active and a transaction is not distressed...
G-20 Working Group Proposes Systemic
Posted on April 01, 2009G-20 Working Group Proposes Systemic Risk Regulation, Including Hedge Funds, and Reform of Executive CompensationA G-20 working group has issued a report proposing a massive overhaul of financial regulation involving the creation of a systemic risk regulator and the regulation of all systemically important financial institutions, markets and instruments, including hedge funds, derivatives, and structured securitization vehicles...
Target Company Directors Satisfied
Posted on March 31, 2009Target Company Directors Satisfied Their Duty of Loyalty in Merger ApprovalDirectors of a target company satisfied their duty of loyalty and discharged their Revlon duties to maximize shareholder value in a merger situation, ruled the full Delaware Supreme Court...
State Securities Officials Bid
Posted on March 30, 2009State Securities Officials Bid to Readjust State-Federal Regulation as Part of Legislative Reform EffortState securities regulators have asked for increased authority over investment advisers and the general ability to address fraud in its earlier stages as part of financial regulatory reform legislation, effectively asking Congress to revisit the SEC-state model established by the National Securities Markets Improvements Act of 1996...
UK FSA Says that We have Crossed
Posted on March 29, 2009UK FSA Says that We have Crossed the Financial Regulatory RubiconAs the legislative overhaul of the regulation of the financial markers looms, there is a growing consensus that the global financial system has crossed the Rubicon and there will be no return to the world of Glass-Steagall separation of securities and banking activities and the days of originate and hold before securitization...
SEC Must Have Role in Systemic
Posted on March 27, 2009SEC Must Have Role in Systemic Risk Regulation Says SEC Chair SchapiroAs Congress considers legislation to create a systemic risk regulator with consolidated power over large financial institutions, SEC Chair Mary Schapiro emphasized that the SEC must have a role in the areas of systemic risk that are part of its investor protection mandate...
FINRA Proposes Amendments to Form
Posted on March 26, 2009FINRA Proposes Amendments to Form U4, U5 and FINRA Rule 8312The Financial Industry Regulatory Authority ("FINRA") proposed rule changes to Form U4 , Uniform Application for Securities Industry Registration or Transfer, Form U5, Uniform Termination Notice for Securities Industry Registration, and FINRA Rule 8312 ("Broker-Dealer Disclosure)...
Administration Unveils Draft Legislation
Posted on March 25, 2009Administration Unveils Draft Legislation Authorizing Federal Takeover of Systemically Risky Securities and Commodities FirmsPresaged by testimony before the House Financial Services Committee in which Treasury Secretary Tim Geithner and Fed Chair Ben Bernanke asked Congress to pass legislation allowing the government to take control and unwind non-bank financial institutions such as securities and commodities firms, the Obama Administration unveiled draft legislation empowering a federal regulator to manage the resolution of such firms efficiently and effectively in a manner that limits systemic risk with the least cost to the taxpayer, in conjunction with the primary regulator of the affected institution...
SEC Would Be Part of Systemic Risk
Posted on March 24, 2009SEC Would Be Part of Systemic Risk Regulator in Senate Reform BillA bill introduced by Senator Susan Collins would create a new federal systemic risk regulator to monitor the financial markets and oversee financial regulatory activities. Eschewing the Federal Reserve Board for such a role, the Financial System Stabilization and Reform Act, S 664, would create an independent Financial Stability Council to serve as systemic-risk regulator...
SEC Approves FINRA Rule 5122 re
Posted on March 23, 2009SEC Approves FINRA Rule 5122 re Private Placements of Securities Issued by MembersThe SEC approved FINRA's proposal to adopt new FINRA Rule 5122, that will require a member offering or selling any security in a private placement issued by the member or a "control entity" to:(1) disclose to investors in a private placement memorandum, term sheet or other offering document the intended use of offering proceeds and the offering expenses;(2) file the offering document with FINRA; and(3) commit that at least 85% of the offering proceeds will be used for business purposes, that will not include offering costs, discounts, commissions and any other cash or non-cash sales incentives...
UK FSA Sets Out Blueprint for Massive
Posted on March 22, 2009UK FSA Sets Out Blueprint for Massive Financial Regulatory ReformUK Financial Services Authority Chair Adair Turner has set out a broad plan for overhauling financial regulation that envisions increased reporting requirements for unregulated financial institutions such as hedge funds as part of a pan-European systemic risk regulator...
Ag Committee Reports Out Gensler
Posted on March 20, 2009Ag Committee Reports Out Gensler Nomination for CFTC Chair to Full SenaterThe Senate Agriculture Committee has favorably reported out to the full Senate the nomination of Gary Gensler to be the new CFTC Chair. Mr. Gensler is a former Treasury Under Secretary for Domestic Affairs...
House Bill Would Impose 90 Percent
Posted on March 19, 2009House Bill Would Impose 90 Percent Tax on TARP BonusesA House bill, HR 1586, placed on a fast track, would impose a 90 percent tax on bonuses paid after December 31, 2008, by companies that have received over $5 billion in TARP funds. The tax would also apply to bonuses paid by entities affiliated with these companies...
SEC Receiver Opposes Investor Efforts to Intervene in Commission Action Against Stanford Firm
Posted on March 18, 2009The SEC?s court-appointed receiver opposes an effort by investors to intervene in the SEC?s enforcement action alleging a multi-billion dollar fraudulent scheme by the Stanford investment firm. Allowing investor intervention would be wasteful, said the receiver, because they will soon have available an effective claim certification process...
SEC Charges Madoff Firm?s Auditors with Securities Fraud
Posted on March 18, 2009An SEC enforcement action alleges that the outside auditors of Bernard Madoff Investment Securities LLC committed securities fraud by representing that they had conducted legitimate audits, when in fact they had not. The SEC had previously charged the Madoff firm with committing securities fraud through a multi-billion dollar Ponzi scheme perpetrated on advisory and brokerage customers...
Senate Bill Strengthening Securities Fraud and Financial Fraud Enforcement Clears Judiciary Committee
Posted on March 18, 2009A bill to improve enforcement of securities fraud and financial institution fraud involving asset-backed securities and fraud related to federal assistance and relief programs has been reported out of the Senate Judiciary Committee. The bill was introduced by Senator Patrick Leahy, chair of the Judiciary Committee, and Senator Charles Grassley...
Senate Finance Committee Preparing Legislation on Executive Compensation
Posted on March 18, 2009The leaders of the Senate Finance Committee set forth the principles for draft legislation designed to discourage excessive compensation at companies that have taken taxpayer funds, including executives at recipient institutions of TARP funds. The core principles are a federal excise tax on excessive compensation and a $1 million cap on deferred compensation...
Senate Bill Would Order SEC to Reinstate Uptick Rule
Posted on March 17, 2009A bi-partisan bill, S 605, ordering the SEC to reinstate the uptick rule has been introduced by Senators Ted Kaufman (D-DE) and Johnny Isakson (R-GA). Since the uptick rule?s repeal in July 2007, said the senators, the abuse of naked short-selling, which is the selling of stock that the trader does not own, has added fuel to the fire of distressed stocks and markets...
IRS Issues Guidance for Investors in Ponzi Schemes
Posted on March 17, 2009The IRS issued two guidance items to assist taxpayers victimized by losses in Ponzi investment schemes. While the guidance will cover investors in the Bernard Madoff investment firm, the IRS guidance is not specific to the Madoff fraud. The first item is a revenue ruling clarifying federal tax law governing the treatment of losses in such schemes...
IMF and G-20 See Hedge Fund Regulation
Posted on March 16, 2009IMF and G-20 See Hedge Fund Regulation as Component of Overall ReformThe International Monetary Fund has recommended the regulation of hedge funds that pose a systemic threat to the financial markets as part of the overhaul of financial regulation being planned in the US and the European Union...
SEC Will Confirm Assets of Investors in Hedge Funds Managed by Registered Investment Advisers
Posted on March 13, 2009SEC Will Confirm Assets of Investors in Hedge Funds Managed by Registered Investment Advisers as Part of Adviser Examinations Senior SEC officials announced at a recent Managed Funds Association seminar that as part of the routine examinations of registered investment advisers the SEC staff will seek confirmations from investors in hedge funds managed by the advisers of cash and securities held by advised clients...
NASAA Opposes OCC's Assertion of
Posted on March 13, 2009NASAA Opposes OCC's Assertion of Regulatory PreemptionThe North American Securities Administrators Association (NASAA) has filed an amicus brief in the case of Cuomo v. Clearing House Assn., L.L.C., urging the United States Supreme Court to reverse a ruling of the Second Circuit that enjoined the New York Attorney General from investigating racially discriminatory lending practices by several national banks and their operating subsidiaries...
First Batch of Amicus Briefs Support Petitioner in PCAOB Supreme Court Test
Posted on March 13, 2009The three amicus briefs filed so far with the US Supreme Court in an action testing the PCAOB?s constitutionality have all supported the audit firm seeking to have the Board declared unconstitutional. The audit firm has asked the Court to hear an appeal from a panel of the US Court of Appeals for the District of Columbia that ruled the Board was constitutional...
House Bill Would Provide Tax Relief
Posted on March 12, 2009House Bill Would Provide Tax Relief to Defrauded Madoff InvestorsRep. Gary Ackerman a senior member of the House Financial Services Committee, has introduced legislation that would allow victims of Bernie Madoff?s Ponzi scheme to receive refunds for the taxes they paid on phantom profits; revenue they thought they earned which in reality never existed due to the fraud...
EDGAR Access Code Applicants May
Posted on March 11, 2009EDGAR Access Code Applicants May Submit Authenticating Documents as PDF AttachmentsApplicants for EDGAR access codes may submit authenticating documents as PDF attachments to their online Form ID applications rather than submitting them by fax, under SEC Release No...
Legislation Reforming Financial
Posted on March 10, 2009Legislation Reforming Financial Regulation Will be Dual Tracked for Systemic Risk and Investor ProtectionCongress plans to complete the reform of regulation of the financial markets this year in two separate steps involving the regulation of systemic risk and restoring investor confidence...
IOSCO Urges Transparency in Futures
Posted on March 09, 2009IOSCO Urges Transparency in Futures and Derivatives MarketsFutures markets must become more transparent and regulators must be given enhanced enforcement powers, concluded a report by IOSCO?s Task Force on Commodity Futures Markets. The task force, which was formed following concerns about volatility in energy commodities in 2008, focused on whether the regulation of futures markets is effective in light of recent market developments...
Key Senators Call for Select Committe
Posted on March 06, 2009Key Senators Call for Select Committe to Investigate Financial CrisisSenators John McCain (R-AZ) and Byron Dorgan (D-ND) yesterday introduced legislation that would establish a Senate select committee to investigate the causes of the financial crisis and to make recommendations to ensure that a similar crisis never occurs again...
President Obama Sets Forth Principles
Posted on February 26, 2009President Obama Sets Forth Principles to Guide Reform of Financial RegulationPresident Obama has outlined seven broad key principles involving transparency, systemic risk management, and investor protection that will guide Congress in passing legislation to reform the financial and securities markets...
Kentucky Issues Stop Order Against
Posted on February 25, 2009Kentucky Issues Stop Order Against Rule 506 OfferingThe Kentucky Department of Financial Institutions (DFI) has issued a stop order against a Rule 506 offering based on inaccurate and inconsistent information contained in the issuer's notice filing with the state...
SEC Says Canadian Company and Finance
Posted on February 23, 2009SEC Says Canadian Company and Finance Officers Misled Outside Auditors in Options Backdating SchemeAn SEC enforcement action charges a Canadian company and four of its senior officers with misleading the company?s independent auditors about a stock option backdating scheme...
McCreevy Vets Counterparty Clearing
Posted on February 22, 2009McCreevy Vets Counterparty Clearing Facility for Credit Default SwapsHeeding the urgent call of European Commissioner for the Internal Market Charlie McCreevy, the derivatives industry has committed to implement the clearing of credit default swaps on a European central counterparty (CCP), pending a more complete review of the whole derivatives area...
NASAA Seeks Comments on Proposal
Posted on February 20, 2009NASAA Seeks Comments on Proposal Regarding Multi-State Review of Requests for Interpretive Opinions and No-Action LettersThe Coordinated Interpretations Project Group of the North American Securities Administrators Association (NASAA) has requested public comments on the adoption of a new Statement of Policy Regarding Multi-State Review of Requests for Interpretative Opinions and No-Action Letters...
SEC Corporate Finance Division
Posted on February 19, 2009SEC Corporate Finance Division Provides Guidance for Form D Filers The SEC's Corporate Finance Division provides the following guidance to new filers and Form D filers.Until March 15, 2009, Form D filers may submit their filings in either paper or electronic form...
House Bill Would Tax Securities
Posted on February 17, 2009House Bill Would Tax Securities Transactions to Pay for TARPA House bill would impose a securities transfer tax to pay for the cost of the troubled asset relief program (TARP). The Let Wall Street Pay for Wall Street's Bailout Act of 2009 (HR 1068) would add a new Section 4475 to the Internal Revenue Code to impose a tax on each covered securities transaction in an amount equal to the applicable percentage of the value of the security involved in the transaction...
House Agriculture Committee Reports
Posted on February 16, 2009House Agriculture Committee Reports Out Derivatives Oversight BillThe House Agriculture Committee has approved legislation to increase the transparency of and strengthen the oversight of futures, options and over-the-counter (OTC) markets. By voice vote, the Committee approved the Derivatives Markets Transparency and Accountability Act of 2009 as amended, a bill sponsored by Committee Chair Collin Peterson...
Congress Passes Stimulus Act with
Posted on February 15, 2009Congress Passes Stimulus Act with Stringent Executive Compensation Rules and Strong Corporate Governance MandatesCongress has passed and cleared for the President the American Recovery and Reinvestment Act of 2009, imposing stringent executive compensation limits on companies participating in the troubled assets relief program (TARP) and setting up a conflict between legislative mandates and less restrictive Treasury regulations...
Tide Shifts in Federal Preemption
Posted on February 13, 2009Tide Shifts in Federal Preemption of State Securities Cases Involving Rule 506 TransactionsThe National Securities Markets Improvement Act of 1996 (NSMIA) was designed, among other things, to curtail over-regulation of securities at the state level and, hence, increase capital formation, by preempting the states from regulating securities in transactions considered to belong exclusively to federal regulators such as the SEC...
Whistleblower Claim Fails, 1st
Posted on February 11, 2009Whistleblower Claim Fails, 1st Circuit Finds Fraud Belief Not ReasonableA former employee seeking Sarbanes-Oxley Act whistleblower protection acted in good faith, concluded a 1st Circuit panel, but under an objective analysis, his belief that the company was engaged in fraud was not reasonable (Day v...
Geither Announces Transparent Regime
Posted on February 10, 2009Geither Announces Transparent Regime to Remove Toxic Securities from Bank Balance SheetsUS Treasury Secretary Tim Geithner unveiled a Financial Stability Plan based on transparency and accountability and risk management. With many financial institutions burdened with illiquid asset-backed securities, the Financial Stability Plan will respond to the uncertainty about the real value of these illiquid instruments through increased transparency and disclosure...
Action Alleges that Auditor of
Posted on February 09, 2009Action Alleges that Auditor of Feeder Fund to Madoff Breached Fiduciary DutyInvestors in a feeder fund to the Madoff fund have alleged that the Big Four independentauditor of the feeder fund violated GAAS and breached its duty of care by ignoring red flags and failing to identify the risk of loss associated with its client fund entrusting its investment capital to the Madoff fund...
Senate Bill (Leahy) Would Strengthen
Posted on February 06, 2009Senate Bill (Leahy) Would Strengthen Securities Fraud and Financial Fraud EnforcementA bill to improve enforcement of securities fraud and financial institution fraud involving asset-backed securities and fraud related to federal assistance and relief programs was introduced by Senator Patrick Leahy, chair of the Judiciary Committee...
Treasury and SEC Aim to Align Executive
Posted on February 05, 2009Treasury and SEC Aim to Align Executive Compensation with Risk ManagementNew Treasury guidance on executive compensation includes immediate restrictions on companies receiving exceptional financial recovery assistance, such as limiting the total amount of compensation to no more than $500,000 for senior executives except for restricted stock awards...
UK Hedge Fund Standards Board Relies
Posted on February 04, 2009UK Hedge Fund Standards Board Relies on Investor Due Diligence and FSA InvolvementThe UK Hedge Fund Standards Board has promulgated standards on a comply or explain basis and relies on investor due diligence and the active involvement of the Financial Services Authority...
SEC Adopts Credit Rating Agency
Posted on February 03, 2009SEC Adopts Credit Rating Agency Reforms Including Differentiation of Asset-Backed Securities ProductsAainst the backdrop of a financial crisis partially caused by a lack of confidence in the accuracy of credit ratings, the SEC has adopted rules reforming the credit rating agency process...
SEC Official Endorses Central Counterparty
Posted on February 02, 2009SEC Official Endorses Central Counterparty for Credit Default Swaps as Global Consensus GrowsAgainst the backdrop of a growing global consensus favoring a central counterparty for credit default swaps, Elizabeth King, SEC Associate Director for Trading and Markets, said that a well-regulated and prudently managed central counterparty for credit default swaps has the potential to significantly reduce counterparty credit risks to market participants...
Second Part of Obama Reform Will
Posted on February 01, 2009Second Part of Obama Reform Will Remove Toxic Securities from Books of Financial InstitutionsThe second phase of President Obama?s reform initiative will soon begin to take shape, which is the unfreezing of lending and securitization by removing illiquid asset-backed securities from the books of complex financial institutions...
Senior Senators Introduce Hedge
Posted on January 29, 2009Senior Senators Introduce Hedge Fund SEC Registration BillA bill requiring hedge funds to register with the SEC has been introduced by Senators Carl Levin and Charles Grassley. The Hedge Fund Transparency Act would make hedge funds subject to SEC regulation and oversight by requiring them to register with the SEC, to file an annual public disclosure form with basic information, to maintain books and records required by the SEC, and to cooperate with any SEC information request or examination...
UK FSA Chair Outlines Proposal
Posted on January 28, 2009UK FSA Chair Outlines Proposal for Broad Regulatory ReformUK Financial Services Chair Adair Turner laid out a sweeping financial regulatory reform plan centered on a macro-prudential systemic risk regulator and a safer and more transparent securitization process...
Geithner Promises Congress to Review
Posted on January 27, 2009Geithner Promises Congress to Review IRS Ruling 2008-83 Favoring Bank AcquisitionsAt his Senate confirmation hearings, Treasury Secretary Tim Geithner acknowledged that IRS Ruling 2008-83 favoring bank acquisitions raised complex issues about Treasury?sauthority and differential treatment of the financial services industry...
European Commission Seeks Public
Posted on January 26, 2009European Commission Seeks Public Comment on Prospectus DirectiveWe are indebted to my colleague John Filar Atwood for the below post.The European Commission has issued a consultation paper on proposals to improve and simplify the prospectus directive...
Geithner Will Direct IRS to Examine
Posted on January 24, 2009Geithner Will Direct IRS to Examine Legislation Repealing IRC 162(m) Exemption for Performance-Based Executive CompensationAt his confirmation hearings, Treasury Secretary Tim Geithner agreed to consider legislation to amend section 162(m) of the Internal Revenue Code to eliminate the deduction of commissions and performance-based pay for a company?s most highly paid exexutives...
Michigan Adopts Uniform Securities
Posted on January 23, 2009Michigan Adopts Uniform Securities Act of 2002Michigan adopted Act 551, which can be cited as the "Michigan Uniform Securities Act (2002)." This Act replaces the existing Michigan Securities Act, and is effective October 1, 2009. Although differences occur, this new Act adopts a large part of the Uniform Securities Act of 2002 (USA 2002) verbatim...
House Passes TARP Reform Bill Emphasizing
Posted on January 22, 2009House Passes TARP Reform Bill Emphasizing Oversight and Executive Compensation ReformThe House passed a bill to reform the Troubled Assets Relief Program (TARP) provisions of the Emergency Economic Stabilization Act of 2008. The vote was 260-166. The TARP Reform and Accountability Act, HR 384, would strengthen accountability, close loopholes, increase transparency, and require Treasury to take significant steps on foreclosure mitigation...
Minnesota Proposes Securities Rules
Posted on January 21, 2009Minnesota Proposes Securities Rules to Coordinate with New ActNew securities rules to coordinate with the Minnesota Uniform Securities Act adopted in 2007 were proposed by the State's Department of Commerce.The proposed rules can be found at http://www...
President's Working Group on Financial
Posted on January 20, 2009President's Working Group on Financial Markets Issues Best Practices for Hedge Fund ManagersAgainst the backdrop of market turmoil, two committees established by the President's Working Group on Financial Markets have issued complementary sets of best practices for hedge fund investors and asset managers in the most comprehensive effort yet to increase accountability for participants in this industry...
President Obama Brings Winds of
Posted on January 19, 2009President Obama Brings Winds of Securities Regulatory ChangeIt is fitting that President Obama will take the oath of office today on the bible used by President Lincoln because, like Lincoln, he comes into office with a full blown crisis well underway...
Treasury Amends TARP Executive
Posted on January 18, 2009Treasury Amends TARP Executive Compensation Rules to Drop CD&A Disclosure and Clarify Duties of SEC Smaller Reporting CompaniesThe Treasury regulations for financial institutions participating in the troubled asset relief program (TARP) under the Emergency Economic Stabilization Act have been amended to require that the compensation committee?s certification be included in the committee?s report rather than in the Compensation Discussion & Analysis portion of SEC filings...
Using SEC Data, GAO Finds that
Posted on January 17, 2009Using SEC Data, GAO Finds that TARP Recipients Have Subsidiaries in Offshore Tax Havens; Legislation LikelyA new GAO study reveals that an overwhelming majority of the 100 largest U.S. corporations in terms of 2007 revenue reported to the SEC have multiple subsidiaries in offshore tax havens...
House Stimulus Bill Would Repeal
Posted on January 15, 2009House Stimulus Bill Would Repeal IRS Ruling 2008-83 Favoring Bank Acquisitions; Exclude TARP Recipients from 5-Year Loss CarrybackThe economic stimulus bill unveiled by the House today would prospectively repeal IRS Notice 2008-83 that interprets Section 382 of the Internal Revenue Code to allow banks and other financial institutions pursuing acquisitions to write-off acquired losses stemming from takeovers of other banks to offset future income...
Auditors Advised on Going Concern
Posted on January 14, 2009Auditors Advised on Going Concern Issues Spawned by Financial CrisisIn light of the impact of the current crisis on financial statements, the European Federation of Accountants has advised auditors on issues ranging from fairly valuing securities to going concern considerations...
US Supreme Court Asked to Rule
Posted on January 13, 2009US Supreme Court Asked to Rule PCAOB UnconstitutionalA small audit firm has asked the US Supreme Court to declare the PCAOB unconstitutional because Sarbanes-Oxley Act provisions creating the Board violated the separations of powers and Appointments Clause by stripping the President of all powers to appoint or remove or otherwise supervise Board members...
Financial Crisis Advisory Group
Posted on January 12, 2009Financial Crisis Advisory Group Members Named; First Meeting ScheduledThe first meeting of the joint IASB-FASB advisory group created to consider financial reporting issues arising from the global financial crisis will occur this month. The group is co-chaired by Hans Hoogervorst, Chairman of the Netherlands Authority for the Financial Markets and former SEC Commissioner Harvey Goldschmid...
ABA's Blue Sky Bugle Newsletter
Posted on January 09, 2009ABA's Blue Sky Bugle Newsletter for Blue Sky LawyersThe ABA's Committee of State Securities Regulation publishes an online newsletter of articles of interest to Blue Sky lawyers. This newsletter, called the "Blue Sky Bugle," is published around major holidays about four times per year...
European Commission Launches Review
Posted on January 08, 2009European Commission Launches Review of Hedge Fund Regulation in Light of Financial Crisis The European Commission has launched a wide-ranging consultation on the regulation of hedge funds in light of the financial crisis. The consultation will examine issues dealing with transparency, market integrity, risk management at the hedge funds, and any systemic risks that the funds may impose...
Bogus Account Statements Admissible
Posted on January 07, 2009Bogus Account Statements Admissible Against BrokerThe 2nd Circuit affirmed a broker's fraud conviction, rejecting the defendant's objection to the introduction into evidence at trial of phony account statements issued to customers. The broker claimed the statements should not have been considered at trial because the statements were sent after the purchases of the securities and were not made in connection with the purchase or sale of securities...
Senate Banking Committee Requests
Posted on January 06, 2009Senate Banking Committee Requests Range of Documents from SEC Regarding the Madoff FirmThe Senate Banking Committee has requested a broad range of documents from the SEC as part of its examination of the reported fraud at the Bernard Madoff firm. In a letter to SEC Chair Christopher Cox, Committee Chair Chris Dodd and Ranking Member Richard Shelby asked for a complete list of SEC and FINRA examinations of the firm, the full examination reports, any deficiency letters, and correspondence from the Madoff firm related to the examination, and any resulting recommendations made to the Division of Enforcement...
French Central Bank Head Sets Out
Posted on January 05, 2009French Central Bank Head Sets Out Broad Principles for Regulatory Reform, Including Fair Value AccountingIn a series of speeches at the end of 2008, French Central Bank President Christian Noyer set forth a bold plan for financial regulation reform involving three levels of regulation, ranging from most restrictive to least restrictive...
Historic Securities Regulation
Posted on January 01, 2009Historic Securities Regulation Reform Coming in 2009; But Will it be Globally IntegratedThe year 2009 promises to be a year for massive and possibly revolutionary reform of federal securities and commodities regulation, and more broadly reform of domestic and global financial regulation...
Illinois Sets Forth Electronic
Posted on December 30, 2008Illinois Sets Forth Electronic Form D Filing ProceduresIllinois' electronic Form D filing procedures apply to Rules 504, 505 and 506 of federal Regulation D. Between September 15, 2008 and March 15, 2009, the Illinois Securities Department will accept either a copy of the electronic version of new Form D or the SEC-filed existing ("Temporary") Form D...
Alabama Administrator Advocates
Posted on December 27, 2008Alabama Administrator Advocates Steps to Close "Gap" in Regulatory Information SharingIn remarks delivered at NASAA's Regulatory Reform Roundtable, Alabama Securities Director Joseph Borg stated that we must close the vacuum, or "gap," in financial regulation that led to the current financial crisis...
SEC Action Allows Central Counterparty
Posted on December 24, 2008SEC Action Allows Central Counterparty for Credit Default SwapsThe SEC approved temporary exemptions allowing LCH.Clearnet Ltd. to operate as a central counterparty for credit default swaps. The Commission acted to reduce counterparty risk and promote efficiency in the credit default swap market...
Massachusetts White Paper Argues
Posted on December 23, 2008Massachusetts White Paper Argues Against Erosion of State AuthorityInvestors and other consumers of financial services would be severely damaged by any further preemption of state enforcement authority, argues Massachusetts Secretary of the Commonwealth William F...
Connecticut Sets Forth Electronic
Posted on December 19, 2008Connecticut Sets Forth Electronic Form D Filing ProceduresElectronic Form D filing procedures in Connecticut apply to securities offerings made in reliance on Rules 504, 505 or 506 of federal Regulation D, as well in reliance on Section 4(6) of the Securities Act of 1933...
Obama Choice of Schapiro for SEC
Posted on December 18, 2008Obama Choice of Schapiro for SEC Chair Should Facilitate SEC-CFTC Mergerbr /br /President-Elect Obama's choice of Mary Schapiro for the ncxt SEC Chair is almost certain to increase the chances for the merger of the SEC and CFTC that so many heavyweights, including former SEC Chair Arthur Levitt, are calling for...
a href="http://photos1.blogger.com/blogger/3226/1283/1600/wklbcch.1.jpg"img
Posted on December 16, 2008a href="http://photos1.blogger.com/blogger/3226/1283/1600/wklbcch.1.jpg"img style="FLOAT: left; MARGIN: 0px 10px 10px 0px; CURSOR: hand" alt="" src="http://photos1.blogger.com/blogger/3226/1283/320/wklbcch.1.jpg" border="0" //abr /span style="font-family:arial;font-size:130%;color:#3333ff;"strong/strong/spanbr /span style="font-family:arial;font-size:130%;color:#3333ff;"strong/strong/spanbr /span style="font-family:arial;font-size:130%;color:#3333ff;"strongCiting Madoff Firm, SEC Chair Cox Orders Broad Review of SEC Internal Policies; SIPC Begins Liquidation/strong/spanbr /span style="font-family:arial;"/spanbr /Noting that the SEC was informed of the Madoff investigation last week despite the fact that credible allegations of wrongdoing were brought to the staff?s attention as early as 1999, Chairman Christopher Cox a href="http://www...
Chair of Dutch Financial Markets
Posted on December 15, 2008Chair of Dutch Financial Markets Authority Says Reform Must be Global; Demands Regulation of Credit Default SwapsA global response to the financial crisis is critical in order to prevent regulatory arbitrage and a regulatory race to the bottom, in the view of Hans Hoogervorst, Chair of the Netherlands Authority for the Financial Markets and Vice Chair of the IOSCOI Technical Committee...
SEC Corp Fin Official Details Best
Posted on December 14, 2008SEC Corp Fin Official Details Best Practices for Fair Value AccountingAt a recent AICPA seminar on SEC and PCAOB developments, Stephanie Hunsaker, Associate Chief Accountant in the SEC?s Division of Corporation Finance, listed a number of best practices that would help investors understand the how and why fair value accounting was applied...
EU Internal Market Commissioner
Posted on December 12, 2008EU Internal Market Commissioner McCreevy Says Self Regulation Still Open to Private Equity Firms under Codes of Conduct.Fearing that private equity firms could get swept up in a wide-ranging and indiscriminate regulatory rethink, European Commissioner for the Internal Market Charlie McCreevy said that private equity may still be a candidate for self regulation under codes of conduct like the UK Walker Guidelines...
IASB Members Say Fair Value Not
Posted on December 11, 2008IASB Members Say Fair Value Not to Blame for Financial Crisis; Will not Include FIN 48 in IFRS Tax Standard ProposalIASB Chair David Tweedie and Board Member James Leisenring both said at a recent AICPA seminar that fair value accounting was not the cause of the current financial crisis and should not be suspended...
PCAOB Issues Audit Practice Alert
Posted on December 10, 2008PCAOB Issues Audit Practice Alert on Economic Crisis Highlighting Fair Value and DerivativesThe PCAOB staff has issued an audit practice alert dealing with a number of issues spawned by the ongoing financial crisis, including the adequacy of disclosures, auditing accounting estimates, going concern considerations, and fair value accounting and derivatives...
Vermont 506 Offering Rule Adopted
Posted on December 09, 2008Vermont 506 Offering Rule Adopted to Accommodate Electronic Form DVermont's 506 offering rule was adopted, effective January 1, 2009, to accommodate electronic Form D that issuers have the option of filing electronically through March 15, 2009 but will be required to file electronically with EDGAR starting March 16, 2009...
SEC Adopts Credit Rating Agency
Posted on December 08, 2008SEC Adopts Credit Rating Agency Reform; Differentiation for Future ActionThe SEC approved a series of measures to increase transparency and accountability at credit rating agencies, and ensure that firms provide more meaningful ratings and greater disclosure to investors...
German Central Bank Chief Outlines
Posted on December 07, 2008German Central Bank Chief Outlines Vision of Financial Regulation Reform The coming reform of financial regulation must enhance transparency concerning unregulated business areas and markets, including hedge funds, OTC traded derivatives and off-balance-sheet vehicles, emphasized Axel Weber, President of the Deutsche Bundesbank...
Indenture did not Require Timely
Posted on December 03, 2008Indenture did not Require Timely SEC FilingBy Rodney TonkovicAssociate Writer-AnalystCCH Federal Securities Law ReporterIn a case of first impression, an Eighth Circuit panel affirmed a district court judgment that a company had no obligation under an indenture to file timely reports with the SEC...
9th Circuit Rejects Collective
Posted on December 01, 20089th Circuit Rejects Collective ScienterMust a fraud plaintiff plead facts showing that the particular individual who made allegedly actionable misstatements acted with scienter in order to recover against a corporate defendant? The 9th Circuit, in Glazer Capital Management LP v...
LLC Managers Not Subject to Florida
Posted on November 29, 2008LLC Managers Not Subject to Florida Long Arm JurisdictionA Florida appellate court has ruled that the non-resident managers of a limited liability company were not subject to personal jurisdiction in Florida for the LLC's violations of the Florida Blue Sky Law...
NASAA to Host Regulatory Reform
Posted on November 26, 2008NASAA to Host Regulatory Reform RoundtableThe North American Securities Administrators Association (NASAA) has announced that it will host a Regulatory Reform Roundtable on December 11 to outline the essential elements that the incoming administration and Congress should consider in the ongoing debate over the future of the nation?s financial services regulatory structure...
Missouri Implements Electronic
Posted on November 24, 2008Missouri Implements Electronic Form D Filing ProceduresIssuers intending to make a Rule 506 securities offering in Missouri during the electronic Form D transition period--September 15, 2008 to March 15, 2009--must paper file directly with the Missouri Securities Division: (1) One manually signed copy of the SEC-filed Form D (including the appendix); (2) a Form U-2, Uniform Consent to Service of Process; and (3) $100...
Probable Treasury Pick Called for
Posted on November 22, 2008Probable Treasury Pick Called for Reform of Securitization Earlier This YearNY Fed President Timothy Geithner, who is the likely Treasury Secretary under President Obama, called for the reform of securitization in the first quarter of this year based on strongly enhanced risk management...
Fund Disclosure, Money Market Redemption
Posted on November 21, 2008Fund Disclosure, Money Market Redemption Rules AdoptedThe SEC adopted rule amendments designed to improve mutual fund disclosure by providing investors with a summary prospectus containing key information in plain English in a clear and concise format, and by enhancing the availability on the Internet of more detailed information to investors...
Sixth Circuit's "Most Plausible"
Posted on November 20, 2008Sixth Circuit's "Most Plausible" Standard Did Not Survive TellabsA 6th Circuit panel recognized that the law in that circuit, that plaintiffs are "only to the most plausible of competing inferences," was no longer valid after the U.S. Supreme Court's Tellabs decision...
European Commission Proposes Methods
Posted on November 19, 2008European Commission Proposes Methods to Add to Big Four Audit FirmsIn an effort to increase the number of global audit firms, the European Commission has embarked on a consultation presenting two possible ways forward: the deregulation of the capitalization of audit firms and lowering other non-capital barriers to access...
DC Circuit Denies Full Review of
Posted on November 18, 2008DC Circuit Denies Full Review of PCAOB Constitutional Challenge by 5-4 VoteThe US Court of Appeals for the DC Circuit has denied full or en banc review of a split panel decision upholding the PCAOB as constitutional by a 5-4 vote. Given that four circuit judges wanted a full review of the constitutional issues surrounding the Board?s creation makes it almost certain that Supreme Court review will be sought...
North Dakota Implements Temporary
Posted on November 17, 2008North Dakota Implements Temporary Form D For Rule 506 OfferingsIssuers intending to make an offering under Rule 506 of federal Regulation D must file Temporary Form D (including the state appendix), a Form U-2, Uniform Consent to Service of Process, and $100 fee within 15 days after the first sale of the securities in North Dakota...
G20 Sets Forth Goal of Massive
Posted on November 15, 2008G20 Sets Forth Goal of Massive Global Reform of Financial RegulationThe G20 has proposed a massive overhaul of the entire system of financial regulation based on transparency, risk management, the convergence of accounting standards, and the global sharing of information among regulators...
SEC Urged Not to Suspend Fair Value
Posted on November 14, 2008SEC Urged Not to Suspend Fair Value Accounting; but Rather Use MD&A to Help Investors Understand FAS 157 in Illiquid MarketsIn a letter to the SEC giving input on the Commission?s study of mark-to-market accounting mandated by the Emergency Economic Stabilization Act, the Center for Audit Quality said that the current use of fair value measurements for financial instruments under FASB Standard No...
Ohio Proposes Electronic Filing
Posted on November 13, 2008Ohio Proposes Electronic Filing Rule for Investment Company and Rule 506 Offerings and Prohibition Against Senior-Specific Professional DesignationsRule changes proposed bythe Ohio Securities Division would permit investment companies andRule 506 issuers to make electronic filings, prohibit industry personsfrom using certain senior-specific professional designations, requireinvestment advisers to file Part II of Form ADV, clarify an investmentadviser's use of the IARD and CRD, retitle the NASDAQ to be consistentwith federal nomenclature, add the NASDAQ to the exchange listing exemption and substitute "FINRA" for "NASD...
Delaware Court Applies Business
Posted on November 12, 2008Delaware Court Applies Business Judgment Rule to Merger Driven by Financial CrisisTaking judicial notice of the roiling market crisis, the Delaware Chancery Court applied the business judgment rule to a merger effectuated over a weekend and found that a shareholder challenging the deal stated a colorable claim for violation of the directors? duty of care...
French Central Bank Head Calls
Posted on November 11, 2008French Central Bank Head Calls for Macro Prudential Regulation and Securitization ReformEchoing the call of the US Treasury blueprint and other policy makers, French central bank governor Christian Noyer said that macro prudential must be an essential component of reforming financial regulation...
European Commission Says IASB Must
Posted on November 10, 2008European Commission Says IASB Must Urgently Provide Guidance on Embedded Derivatives in CDOs and Reclassification Out of Fair ValueThe European Commission has endorsed the IASB?s recent ameliorating changes to fair value accounting standards. The IASB standards are consistent with changes made to fair value accounting by FASB and the SEC?s Office of the Chief Accountant...
Cox Pledges Greater International
Posted on November 09, 2008Cox Pledges Greater International Enforcement Efforts; SEC Developed Enhanced MOUAgainst the backdrop of impending financial market reform, which many policy makers say must be global, SEC Chairman Christopher Cox committed the Commission to greater international enforcement actions on top of recent efforts...
Dodd Will Remain Senate Banking
Posted on November 07, 2008Dodd Will Remain Senate Banking Committee Chair to Guide Legislative Reform of Financial RegulationNoting that he is remaining chair of the Banking Committee in the upcoming 111th Congress, Senator Christopher Dodd said that the first order of business will be to erect a new financial regulatory regime in order to restore investor confidence in the securities markets...
Vermont's Proposed 506 Offering
Posted on November 06, 2008Vermont's Proposed 506 Offering Rule Modified to Accommodate Electronic Form DVermont's 506 offering rule, recently proposed by the Department of Banking, Insurance, Securities and Health Care Administration, was modified to accommodate electronic Form D that issuers have the option of filing electronically through March 15, 2009 but will be required to file electronically with EDGAR starting March 16, 2009...
NY Fed Welcomes Industry Effort
Posted on November 05, 2008NY Fed Welcomes Industry Effort on OTC Derivatives InfrastructureThe Federal Reserve Bank of New York has praised the initiative of hedge fund industry groups and major market participants to further strengthen the operational infrastructure for OTC derivatives...
Fed Chair Bernanke Sets Out Three
Posted on November 04, 2008Fed Chair Bernanke Sets Out Three Scenarios for Reforming the Securitization of MortgagesNoting that no mortgage securitization is occurring today in the absence of a government guarantee, Federal Reserve Board Chairman Ben Bernanke set forth three alternative ways to reform securitization so that mortgage-backed securities can regain the confidence of investors: privatize Fannie Mae and Freddie Mac, tie them closer to the federal government, or introduce covered bonds...
Eleventh Circuit: SLUSA Dismissal
Posted on November 03, 2008Eleventh Circuit: SLUSA Dismissal of Claims Against Merrill Lynch ProperState law claims brought by the Instituto de Prevision Militar, a Guatemalan agency charged with administering benefits for the country's military personnel, against Merrill Lynch were preempted by the Securities Litigation Uniform Standards Act, concluded an 11th Circuit panel...
Financial Crisis Adds Impetus to
Posted on November 02, 2008Financial Crisis Adds Impetus to Shareholder Advisory Vote on Executive Compensation; Obama Favors LegislationAs it becomes apparent that executive compensation, particularly the structure of incentive compensation, played a role in the unfolding global financial crisis, the efficacy of requiring a shareholder advisory vote on executive pay is back at the forefront of corporate governance reform...
Senator Schumer Questions IRS and
Posted on November 01, 2008Senator Schumer Questions IRS and Treasury on Notice 2008-83 Allowing Bank Write-Offs of Acquired Losses from Acquisitions of Troubled BanksIn a letter to Treasury and the IRS, Senator Charles Schumer demanded to know why the IRS issued a notice allowing financial institutions pursuing acquisitions to write-off acquired losses stemming from takeovers of other banks to offset future income...
Compensation Committee Given Duties
Posted on October 31, 2008Compensation Committee Given Duties under TARP Regime set up by Emergency Economic Stabilization ActThe Treasury regulations for financial institutions participating in the troubled asset relief program (TARP) under the Emergency Economic Stabilization Act require compensation committees to meet, within 90 days after a purchase under the program, with senior risk officers to ensure that the firm?s incentive compensation arrangements do not encourage senior executive officers to take unnecessary and excessive risks that might threaten the value of the financial institution...
House Leaders Demand Hedge Funds
Posted on October 30, 2008House Leaders Demand Hedge Funds Drop Opposition to Foreclosure PreventionIn a letter to two hedge funds and the Managed Funds Association, House Financial Services Committee leaders, led by Chairman Barney Frank, expressed their outrage at a report that at least two hedge funds have warned companies servicing mortgages that they should not take advantage of the American Housing Rescue and Foreclosure Prevention Act...
Congress May Form Select Committee
Posted on October 29, 2008Congress May Form Select Committee to Reform Financial RegulationThe idea of forming a special Congressional committee to reform the entire spectrum of financial regulation is gaining ground as the 110th Congress moves towards a close. In addition to a recent Wall Street Journal piece espousing this idea, in testimony before the House Financial Services Committee, Joel Seligman urged each house of Congress to create a Select Committee to provide a focused and less contentious review of what should be done...
House Leaders Outline Principles
Posted on October 28, 2008House Leaders Outline Principles for Regulatory OverhaulIn recent House hearings on the future of financial regulation, leaders of the Financial Services Committee set forth principles for the complete overhaul of the regulatory regime. Rep. Paul Kanjorski, a senior committee member, laid down broad principles to guide reform...
FSA CEO Examines Hedge Fund Valuations
Posted on October 27, 2008FSA CEO Examines Hedge Fund Valuations and TransparencyWhile noting that hedge funds were not the catalyst of the market crisis, UK Financial Services CEO Hector Sants said that reform of hedge fund valuations and transparency will be needed to restore investor confidence...
The Future of Securities Regulation
Posted on October 26, 2008The Future of Securities Regulation Must Be an Omnibus CodeJust as Generals are always said to fight the last war, regulators are always regulating reactively. The Generals in 1914 before WW I did not foresee that the machine gun would dominate the battlefield; and they had to adjust their strategy and tactics...
Grassley Asks for Strict Interpretation
Posted on October 24, 2008Grassley Asks for Strict Interpretation of Executive Travel Expenses under IRC 162Fearing that the executive compensation provisions of the Emergency Economic Stabilization Act are becoming window dressing rather than a legitimate attempt to prevent excessive compensation for failed leadership, Senator Charles Grassley has asked that additional restrictions be imposed on the ability of companies to deduct travel expenses under Section 162 of the Internal Revenue Code...
In Light of Market Turmoil, Nasdaq
Posted on October 23, 2008In Light of Market Turmoil, Nasdaq Would Suspend Closing Bid Deficiency TestNoting that the market turmoil has resulted in a number of securities trading below $1, Nasdaq proposes to suspend the bid price and market value of publicly held shares requirements through January 16, 2009...
Former SEC Chair Levitt Calls for
Posted on October 22, 2008Former SEC Chair Levitt Calls for Merging the SEC and CFTCIn a piece in today?s Wall Street Journal, former SEC Chair Arthur Levitt called for the merger of the SEC and CFTC into the Securities Futures Commission with enhanced authority over hedge funds, OTC products and rating agencies...
European Investors Consortium Says
Posted on October 21, 2008European Investors Consortium Says No More Carve Outs on Fair Value AccountingReacting to relief in fair value accounting granted by the IASB and FASB, a consortium of European investor groups said that any further changes in the fair value standard could severely undermine the confidence that users have in the company financial statements...
Former SEC Chair Levitt Calls for
Posted on October 19, 2008Former SEC Chair Levitt Calls for Expanded Fair Value Accounting as Part of Overall ReformAnticipating massive regulatory reform of financial market oversight, former SEC Chair Arthur Levitt called for the expansion of fair-value accounting to cover all of the financial instruments, the securities positions and loan commitments, of all financial institutions...
Congress Heeds SEC's Call for Regulation
Posted on October 18, 2008Congress Heeds SEC's Call for Regulation of Credit Default SwapsIn the wake of a call by SEC Chair Christopher Cox for the regulation of credit default swaps, Senator Tom Harkin will introduce legislation regulating swaps and other financial derivatives that are currently traded with virtually no regulation or transparency...
UK Legislation Would Set Up Special
Posted on October 17, 2008UK Legislation Would Set Up Special Resolution Regime for Failing Financial Institutions; FSA Has Central RoleA bill overhauling UK regulation of financial institutions may offer a preview of what US reform legislation may look like. The UK reform bill would, for the first time, establish a permanent special resolution regime, providing the Financial Services Authority with tools to deal with institutions that get into financial difficulties...
SEC Requires Disclosure of Hedge
Posted on October 16, 2008SEC Requires Disclosure of Hedge Fund and Other Institutional Investors Short Positions into 2009On an emergency basis, the SEC adopted a new disclosure rule requiring hedge funds and other large investors to disclose their short positions. Prepared by the staffs of the Divisions of Investment Management and Corporation Finance, the new rule was designed to ensure transparency in short selling...
Bailout Bill Curtails 162(m) Executive
Posted on October 15, 2008Bailout Bill Curtails 162(m) Executive Compensation Deductibility for Troubled EntitiesThe changes to IRC 162(m) worked by the Emergency Economic Stabilization Act curtail the deductibility of executive compensation for entities participating in the troubled asset purchase program, using SEC criteria, with one notable exception...
New FSA Chair Says Securitization
Posted on October 13, 2008New FSA Chair Says Securitization Here to Stay but Must Return to Its RootsSecuritization will survive the current market crisis, in the view of new UK Financial Services Authority Chair Adair Turner, but the process must be reformed back to the original idea of securitizing assets on bank balance sheets for sale to investors in transparent simple instruments held to maturity...
Reform of Financial Regulation
Posted on October 12, 2008Reform of Financial Regulation May Be Global but the Past Offers SolaceAs we speak of the complete overhaul of financial and securities regulation in the USA and even globally, and as many call for a first 100 days of a new President in 2009 analogous to the 100 days of President Franklin D...
Wisconsin Emergency Adopts Prohibition
Posted on October 10, 2008Wisconsin Emergency Adopts Prohibition Against Using Senior Certifications or Designations Persons in the securities industry such as broker-dealers, agents, investment advisers or investment adviser representatives are prohibited from using certain professional designations that state or imply specialized knowledge of the financial needs of senior citizen investors...
Bank of America, RBC Settle Auction
Posted on October 09, 2008Bank of America, RBC Settle Auction Rate Securities ClaimsThe SEC announced preliminary settlements in principle with Banc of America Securities LLC and Banc of America Investment Services, Inc., and with RBC Capital Markets Corp. The agreements will allow investors to sell back auction rate securities they purchased before the ARS market collapsed in February 2008...
Bailout Bill Gives SEC Oversight
Posted on October 06, 2008Bailout Bill Gives SEC Oversight Role; Uses SEC Executive Compensation RulesThe Emergency Economic Stabilization Act empowers the Secretary of the Treasury to purchase illiquid mortgage-backed securities under strong oversight by a board composed of the SEC and Fed Chairs, as well as the HUD Secretary...
House Passes Rescue Bill Despite
Posted on October 03, 2008House Passes Rescue Bill Despite Some MisgivingsBy Katalina M. Bianco, Law Analyst, Wolters Kluwer Banking and Finance GroupIn its second vote of the week, the House of Representatives passed the Emergency Economic Stabilization Act on October 30. The crucial vote was 263-171...
Commission Extends Temporary OrdersThe
Posted on October 02, 2008Commission Extends Temporary OrdersThe SEC announced that it was extending several of the emergency provisions ordered in response to the market crisis. The temporary prohibition of short selling in financial companies will now expire on the later of either 1) the third business day after enactment of the anticipated bailout legislation or 2) October 17, 2008...
SEC and FASB Guide on Fair Value
Posted on October 01, 2008SEC and FASB Guide on Fair Value Accounting under FAS 157As the market crisis continues, the SEC and FASB have issued joint guidance on the fair valuation of illiquid securities under FAS 157. Some commenters have said that the mark to market accounting demanded by FAS 157 contributed to the crisis...
Bailout Bill Mandates Report to
Posted on September 30, 2008Bailout Bill Mandates Report to Congress on Reforming Financial RegulationOne of the more forward looking and possibly mementous provisions in the Emergency Economic Stabilization Act is one mandating a report to Congress on modernizing financial regulation...
Bailout Bill Gives SEC Oversight
Posted on September 29, 2008Bailout Bill Gives SEC Oversight Role Amidst Extraordinary Power for TreasuryThe Emergency Economic Stabilization Act that failed to pass the House today, but which I expect to pass Congress by the end of the week, gives the SEC a crucial role in overseeing the Secretary of the Treasury as that cabinet member exercises extraordinary, but judicially reviewable power in purchasing illiquid mortgage-backed securities from financial institutions...
SEC's Consolidated Supervised Entities
Posted on September 28, 2008SEC's Consolidated Supervised Entities Program EndedSEC Chair Christopher Cox has ended the Consolidated Supervised Entities (CSE) program, created in 2004 as a way for global investment bank conglomerates that lack a supervisor under law to voluntarily submit to regulation...
As a probable bailout bill moves
Posted on September 27, 2008As a probable bailout bill moves through Congress, it may be a good time to assess some matters that impact federal securities regulation. It is too early to assees whether the financial regulatory regime we have labored under since the New Deal is broken beyond repair...
SEC Staff Issues Guidance on New
Posted on September 24, 2008SEC Staff Issues Guidance on New Short Positions Disclosure Form SHThe SEC has adopted a new disclosure rule requiring hedge funds and other large institutional investors to disclose their short positions. The new rule, designed to ensure transparency in short selling, applies to asset managers with more than $100 million invested in securities, who are required to promptly begin public reporting of their daily short positions on new Form SH...
IRS Says Treasury Program to Support
Posted on September 23, 2008IRS Says Treasury Program to Support Money Market Funds Does Not Run Afoul of Federal Guarantee of Tax Exempt Bonds under IRCThe IRS has found that the Treasury program to support tax-exempt money market funds during this period of market turmoil does not violate restrictions against federal guarantees of tax-exempt bonds under Section 149(b) of the Internal Revenue Code...
Form D Amendments--When to File
Posted on September 22, 2008Form D Amendments--When to File ThemEffective September 15, 2008, issuers must file amendments to a notice on Form D:1. Within 12 months of: (a) the initial Form D filing; or (b) within 12 months of the most recent Form D amendment filing, if the offering is continuing;2...
Bill Would Give Treasury Unparalled
Posted on September 20, 2008Bill Would Give Treasury Unparalled Authority to Purchase up to $700 Billion in Mortgage-Backed Securities A bill being readied by the Bush Administration would give the Treasury Secretary extraordinary and unreviewable discretion to purchase up to $700 billion of mortgage-backed securities and other mortgage-related assets from any US financial institution...
SEC Issues Emergency Order to Halt
Posted on September 19, 2008SEC Issues Emergency Order to Halt Short Selling in Stocks of Financial Institutions and Require Hedge Fund Managers to Report Short PositionsOn top of its actions earlier this week to curb abusive naked short selling, the SEC has temporarily prohibited short selling in financial companies to protect the integrity and quality of the securities market and strengthen investor confidence...
SEC Chair Cox Rejects Senator McCain's
Posted on September 18, 2008SEC Chair Cox Rejects Senator McCain's Call to ResignIn response to a call from the Republican presidential candidate for his resignation, SEC Chair Christopher Cox defended the Commission?s actions in the ongoing financial crisis. While expressing great respect for Senator McCain, Mr...
Short Selling Is One Aspect of
Posted on September 17, 2008Short Selling Is One Aspect of Market CrisisWith the SEC?s adoption of regulations to curb abusive naked short selling, the practice of short selling has come front and center into the regulatory consciousness.A short sale is the sale of a stock that the seller does not own or that the seller will borrow for delivery...
Center for Audit Quality Pushes
Posted on September 16, 2008Center for Audit Quality Pushes Treasury's Levitt Committee on Audit Profession to Limit Auditor LiabilityIn a comment letter to the Levitt Committee on the Auditing Profession, the Center for Audit Quality said that the committee?s second draft report still did not address the catastrophic litigation threat that, in CAQ?s view, is the single greatest threat to the auditing profession?s sustainability...
FASB and IASB Update Agreement
Posted on September 14, 2008FASB and IASB Update Agreement to Converge Accounting StandardsAs the world moves inexorably to IFRS as the global accounting standard, the FASB and IASB have updated their 2006 agreement to converge US GAAP and IFRS. The Norwalk Agreement committed the Boards to develop high quality compatible accounting standards for use in both domestic and cross border financial statements...
Colorado Proposes to Adopt Electronic
Posted on September 12, 2008Colorado Proposes to Adopt Electronic Form DColorado Proposes to amend its Securities Act of 1933 Rule at Section 11-51-3.7 to add the SEC requirement to file Form D electronically. Additionally, Rule 51-3-5 coordinating with the Colorado statutory investment company exemption at 11-51-307(1)(k) would be amended to change the filing requirements...
House Passes Securities Act of
Posted on September 11, 2008House Passes Securities Act of 2008 Enhancing SEC Enforcement PowersA bipartisan bill increasing the SEC?s enforcement powers and requiring increased attention to accounting and auditing matters has passed the House under a suspension of the rules. The Securities Act of 2008 (HR 6513) authorizes the SEC to impose monetary penalties in cease and desist proceedings...
Key Senators Dismayed by DOL's
Posted on September 10, 2008Key Senators Dismayed by DOL's Narrow Application of Sarbanes-Oxley Corporate Whistleblower ProvisionThe Senate authors of the corporate whistleblower protection provision in the Sarbanes-Oxley Act have sent a letter to Secretary of Labor Elaine Chao expressing concern regarding what they described as DOL?s overly restrictive interpretation of the provision that has resulted in the exclusion of the employees of corporate subsidiaries from the whistleblower protections...
NASAA Sets Agenda for 91st Annual
Posted on September 09, 2008NASAA Sets Agenda for 91st Annual Conference in Las VegasThe North American Securities Administrators Association, Inc. (NASAA) has released the preliminary agenda for its 91st Annual Conference, to be held from September 15 through 17, 2008 at Caesars Palace in Las Vegas, Nevada...
Grundfest and Beller Propose On-Line
Posted on September 08, 2008Grundfest and Beller Propose On-Line Questionnaire Driven Disclosure Regime as Part of SEC's 21st Century Disclosure InitiativeFormer SEC Commissioner Joseph Grundfest and former Corporation Finance Director Alan Beller have proposed reform of the SEC?s disclosure process that would replace the great majority of forms with an on-line questionnaire driven disclosure regime subject to mandatory updating according to a schedule defined by the Commission...
Revenue Ruling 2008-45 Says Company
Posted on September 07, 2008Revenue Ruling 2008-45 Says Company Cannot Transfer Frozen Defined Benefit Pension Plan to Independent Investment FirmTreasury and the Internal Revenue Service have issued Revenue Ruling 2008-45 stating that a transfer of sponsorship of a company?s frozen tax-qualified pension plan to an unrelated taxpayer, such as an investment firm, violates the exclusive benefit rule of Internal Revenue Code Section 401(a) when the transfer is not connected with a transfer of significant business assets...
Kansas City Fed President Urges
Posted on September 04, 2008Kansas City Fed President Urges Caution in Federal Reserve Board Being Financial Stability Regulator of Investment BanksAs the debate intensifies over the Federal Reserve Board?s role as financial stability regulator with enhanced power over investment banks, Kansas City Fed President Thomas Hoenig raised some caution flags to the Fed assuming such a role...
IMF Readies Code of Best Practices
Posted on September 03, 2008IMF Readies Code of Best Practices for Sovereign Wealth Funds; SEC Support LikelyA working group vetted by the IMF has agreed to a voluntary set of principles for sovereign wealth funds that embody sound governance, transparency, and risk management. The principles, called globally accepted principles and practices (GAPP) for sovereign wealth funds will be formally unveiled in October...
DOJ Issues New Guidelines Protecting
Posted on September 02, 2008DOJ Issues New Guidelines Protecting Attorney-Client and Work Product Privileges; Filip Replacing McNulty MemoIn an effort to counter impending legislation, the Department of Justice has revised the McNulty Memorandum to enhance protection of the attorney client and work product privileges in federal prosecutions for securities and other white collar crimes...
Revenue Ruling 2008-32 Says Director
Posted on September 01, 2008Revenue Ruling 2008-32 Says Director Who Served as Interim CEO Was Company Officer within Meaning of 162(m)IRS Revenue Ruling 2008-32 has declared that a company director who had served the company as interim chief executive officer was not an outside director for purposes of a Section 162(m) compensation committee because the director had been an officer of the company within the meaning of tax regulations defining an outside director...
SEC and Federal Reserve Board Issue
Posted on August 31, 2008SEC and Federal Reserve Board Issue Regulation R Guidance for Small EntitiesGuidance prepared by the staffs of the SEC and Federal Reserve Board has been issued for small entities. The guidance was prepared as a ?small entity compliance guide? under Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996...
Hedge Fund Industry Concerned with
Posted on August 30, 2008Hedge Fund Industry Concerned with Working Group FAS 157 Valuation Recommendations for Fund ManagersThe hedge fund industry has significant concerns with recent best practices recommended by the President's Working Group on Financial Markets regarding the disclosure of the valuation of managed assets centered on FAS 157 fair value accounting...
Hedge Funds and Private Equity
Posted on August 28, 2008Hedge Funds and Private Equity Funds Ask FASB for Exemptions from FIN 48A growing chorus of hedge fund and private equity groups has asked FASB for an exemption from FIN 48, a FASB interpretation of a standard on accounting for income taxes. In a letter to FASB, the Managed Funds Association said that the sophisticated investors that invest in hedge funds do not need the enhanced disclosures that FIN 48 was designed to provide...
Global Accounting and Auditing
Posted on August 27, 2008Global Accounting and Auditing Firms Raise Auditor Attestation Issues with SEC XBRL ProposalWhile expressing overall support for the SEC?s proposed move towards requiring interactive XBRL filings of financial statements, global accounting and auditing firms have concerns about auditor attestation and internal controls...
Vermont Adopts New Fees for Notice Filings, Securities Registrations, and Agents
Posted on August 26, 2008The Vermont Division of Securities and Retail Franchising changed the following fees, effective July 1, 2008:1. Notice filings. For offerings by investment companies under Section 18(b)(2) of the Securities Act of 1933 and for registrations of securities, the fee is now a flat $600...
Fed Chair Seeks Legislation on
Posted on August 25, 2008Fed Chair Seeks Legislation on Macro Prudential Regulation of Systemic Risk to Financial SystemCiting the Bear Stearns experience, Federal Reserve Board Chair Ben Bernanke asked Congress to adopt a regulatory macro-prudential regime capable of dealing with systemic risk to the financial markets...
Securities Regulators Must Scrutinize Mortgage Brokers
Posted on August 25, 2008Securities regulators need to provide more oversight over the licensing of mortgage brokers says some industry attorneys following the resignation of Don Saxon, the Florida Commissioner of Securities, amid reports published in the Miami Herald that his agency let many convicted criminals work in the mortgage business, including bank robbers and racketeers...
Federal Appeals Court Upholds Constitutionality
Posted on August 22, 2008Federal Appeals Court Upholds Constitutionality of PCAOBA split federal appeals court panel has ruled that the PCAOB is constitutional and rejected the claims of an audit firm inspected by the Board that SEC rather than presidential selection of Board members ran afoul of the Appointments Clause of the US Constitution...
Society of Corporate Secretaries
Posted on August 21, 2008Society of Corporate Secretaries and Governance Professionals Comment on SEC XBRL ProposalWith the SEC moving towards interactive XBRL filings of financial statements, the Society of Corporate Secretaries and Governance Professionals has voiced concerns with liability and the presentation of executive compensation information...
NYSE and Nasdaq Conform Director
Posted on August 20, 2008NYSE and Nasdaq Conform Director Independence Standards to SEC Regulation S-KThe NYSE and Nasdaq have both amended their listing standards to conform their director independence requirements to the related party transaction requirements of Item 404 of Regulation S-K...
SEC Approves BATS Exchange Conditioned
Posted on August 19, 2008SEC Approves BATS Exchange Conditioned on FINRA Performing Regulatory DutiesThe SEC has approved the registration of a new national securities exchange, BATS Exchange, conditioned on the further approval of the exchange?s contract with FINRA to perform examination, enforcement, and disciplinary functions...
MONTANA Proposes Rules on Senior Specific Certifications and on Requesting a Transactional Exemption
Posted on August 19, 2008Rules making the use of senior specific certifications by securities industry persons an unethical practice, together with a rule setting forth the procedure for requesting a transactional exemption, were proposed by the Montana Securities Department...
Cox Details SEC's Conditions for
Posted on August 18, 2008Cox Details SEC's Conditions for Mutual Recognition of Foreign Exchanges and BrokersAs at a time when US investors are demanding foreign investment opportunities and technological innovations have eliminated physical barriers to market access, SEC Chairman Christopher Cox believes that adopting a mutual recognition regime is absolutely urgent...
Japan Financial Services Agency
Posted on August 17, 2008Japan Financial Services Agency Firmly Responds to Subprime and Securitization CrisisJapan?s Financial Services Agency has firmly responded to the global subprime and securitization crisis with a series of initiatives on many fronts, including increased transparency, better risk management, and improved early warning systems...
SEC Supports Monitoring Group for
Posted on August 16, 2008SEC Supports Monitoring Group for IASB as Debate Rages on Role and CompositionIn an effort to deflect the criticism that the IFRS standard setter is not answerable to securities regulators, the oversight trustees of the International Accounting Standards Board have proposed a Monitoring Group composed of the SEC and other securities authorities...
Congress Wants the SEC to Reinstate
Posted on August 14, 2008Congress Wants the SEC to Reinstate the Uptick RuleIn the wake of the SEC?s emergency short sale order, there is growing congressional sentiment for the SEC to reinstate the uptick rule, which was rescinded in 2007. The uptick rule, Rule 10a-1, required all short sale stock transactions to be conducted at a price that was higher than the price of the previous trade...
Senate Readying Legislation on
Posted on August 13, 2008Senate Readying Legislation on Offshore Entities and Unrealized Business Income Tax; and Energy Commodities SpeculationLegislation ending the tax breaks that speculators in energy and other commodities enjoy is being readied in the Senate Finance Committee...
Corrigan Counterparty Risk Management
Posted on August 12, 2008Corrigan Counterparty Risk Management Policy Group Issues Report on Reforming Global Markets; Examines Role of SEC Reg. ABThe Counterparty Risk Management Policy Group has issued report detailing a forward-looking integrated framework designed to advance the global reform of securitization in light of the recent market turmoil...
IASB to Adopt Global Standard for
Posted on August 10, 2008IASB to Adopt Global Standard for Fair Value Accounting Converged with FASB SFAS 157The IASB plans to propose a single fair value standard for IFRS by mid-2009 and adopt an IFRS for fair value accounting in 2010 that will be converged with FASB SFAS 157...
Final Report of SEC Advisory Committee
Posted on August 09, 2008Final Report of SEC Advisory Committee on Improvements to Financial Reporting Impacts PCAOBThe SEC Advisory Committee on Improvements to Financial Reporting has issued its final report recommending major changes to regulation and standard-setting involving financial statements and the independent audit of them...
IFAC Chief Says Professional Judgment
Posted on August 08, 2008IFAC Chief Says Professional Judgment Crucial to Principles-Based Global Audit StandardsEchoing a theme that an SEC advisory committee has examined, the President of the International Federal of Accountants said that the global adoption of principles-based auditing standards is linked to allowing the auditors of company financial statements to make professional judgments without fear of being second guessed...
SEC Guides on Use of Corporate
Posted on August 06, 2008SEC Guides on Use of Corporate Blogs; Entanglement and Adoption Liability PossibleFor the first time in eight years, the SEC has issued guidance on corporate electronic communications. This guidance is on areas where the convergence of the Internet and federal securities regulation intersect in ways that were unimaginable only a few years ago...
SEC Guidance: Company Internet
Posted on August 05, 2008SEC Guidance: Company Internet Websites Can be Used to Comply with Regulation FDThe SEC?s recent guidance that company websites could be used to comply with Regulation FD resolved a question that the Commission had left open since adopting FD eight years...
State/Federal Securities Committees Submit Form D Survey to SEC
Posted on August 05, 2008The State and Federal Securities Regulation Committees of the American Bar Association submitted a survey to the SEC on Electronic Form D, to distribute to law firms. The survey is designed to gleen information about a firm's use of Form D for Regulation D securities offerings so that the Committees can obtain interpretive guidance on Electronic Filing and Revision of Form D adopted in Release No...
SEC Approves Nasdaq Request to
Posted on August 04, 2008SEC Approves Nasdaq Request to List SPAC SecuritiesThe SEC has approved new interpretative material to Nasdaq Rule 4300 allowing the initial listing of securities of special purpose acquisition companies (SPACs). Release No. 34-58228. Due to their unique structure, SPACs do not have any prior financial history like operating companies...
Tax Bills Opposed by Hedge Fund
Posted on August 03, 2008Tax Bills Opposed by Hedge Fund Industry Do Not Advance as Congress RecessesCongress has recessed for August without taking up a bill that would temporarily extend many expiring tax provisions of the Internal Revenue Code. The bill is opposed by the hedge fund industry because it would wrongly pay for those extenders by increasing the tax obligations of the hedge fund industry, in the view of the Managed Funds Association...
Big Four Voice Strong Support for
Posted on August 02, 2008Big Four Voice Strong Support for Mandatory IFRS as SEC Roundtabe LoomsAs the SEC holds a roundtable on how IFRS performed during the recent market turmoil, there is a growing consensus that the Commission should allow US issuers to use IFRS in preparing their financial statements...
Global Financial Firms Propose
Posted on July 31, 2008Global Financial Firms Propose Recommendations in Light of Securitization CrisisA consortium of global financial institutions have proposed a code of conduct and best practices as part of reforming the securitization process in the wake of the subprime crisis...
Hedge Fund Groups File Amicus Briefs
Posted on July 30, 2008Hedge Fund Groups File Amicus Briefs in Federal Court Appeal of 13(d) CaseVarious hedge fund trade groups have filed amicus briefs in the appeal of a federal court ruling that activist hedge funds violated the Exchange Act in using equity swaps to amass a position in a target company...
UK Rejects Fannie Mae-Freddie Mac
Posted on July 29, 2008UK Rejects Fannie Mae-Freddie Mac Model for Mortgage-Backed Securities MarketA UK Treasury report rejects the Fannie Mae-Freddie Mac model for secondary markets in mortgage-backed securities. The Crosby Report also said that, because of a number of factors, the volume of mortgage-backed securities is not likely to return to the levels that existed before the crisis erupted...
Housing Bill Gives SEC Role in
Posted on July 27, 2008Housing Bill Gives SEC Role in Oversight of Fannie Mae and Freddie MacFannie Mae and Freddie Mac are now SEC reporting companies and also subject to Exchange Act proxy and insider reporting rules as part of the overhauled of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks...
Congress Overhauls Regulatory Regime
Posted on July 26, 2008Congress Overhauls Regulatory Regime for Fannie Mae and Freddie Mac; SEC Has RoleActing on a broad consensus that government sponsored enterprises need a strong well-funded and independent federal regulator, Congress has overhauled the regulatory oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks...
House Passes Broad Overhaul of
Posted on July 25, 2008House Passes Broad Overhaul of Regulation of Fannie Mae and Freddie Mac; SEC Has RoleActing on a broad consensus that government sponsored enterprises need a strong well-funded and independent federal regulator, the massive housing bill (HR 3221) overhauls the regulatory oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks...
IRS Revenue Ruling 2008-31 Says
Posted on July 24, 2008IRS Revenue Ruling 2008-31 Says Property Derivatives Contract on US Real Property Index Not Interest in Real Property Under Tax CodeAccording to the IRS, a property derivatives contract is not considered real property for purposes of the federal tax code...
European Commission Will Propose
Posted on July 23, 2008European Commission Will Propose Regulation of Credit Rating Agencies in OctoberIn October, the European Commission will propose a registration and external oversight regime for credit rating agencies under which regulators will supervise the policies and procedures followed by the rating agencies...
SEC-CFTC Task Force Finds Speculation
Posted on July 22, 2008SEC-CFTC Task Force Finds Speculation Did Not Contribute to Higher Energy PricesAgainst the backdrop of bills moving through Congress to curb speculation on energy derivatives, a task force of federal financial regulators, including the SEC, the Fed and the CFTC, has reported that preliminary analysis does not support the proposition that speculative activity has systematically driven changes in oil prices...
FASB Urged to Go Slow on Revising
Posted on July 21, 2008FASB Urged to Go Slow on Revising Standards for Off Balance Sheet VehiclesSecurities industry groups have asked FASB to be less hasty in its revisions to accounting standards for off balance sheet vehicles lest the Board?s actions have unintended deleterious consequences for financial institutions...
NASAA Requests Comments on IA Model Rules
Posted on July 21, 2008The Investment Adviser Regulatory Policy and Review Project Group of the North American Securities Administrators Association (NASAA) is soliciting public comments on two sets of model rules it created for investment advisers and investment adviser representatives...
As IFRS Goes Global, IASB Members
Posted on July 20, 2008As IFRS Goes Global, IASB Members Must Be More Globally Diverse and Funding Must Be Broad-BasedAs international financial reporting standards continue to gain ground as global accounting standards, the oversight committee of the IASB continues to reform its due process and funding mechanisms and drives to become more geographically diverse...
Hong Kong Records First Conviction
Posted on July 19, 2008Hong Kong Records First Conviction for Insider TradingA finance manager of a listed company became the first person convicted of insider trading under the Hong Kong 2003 Securities and Futures Ordinance. The finance manager engaged in insider trading in a company?s stock while employed with a wholly-owned subsidiary of the company...
Justice Douglas Presages Enron
Posted on July 18, 2008Justice Douglas Presages Enron and Doing the MinimumIf we look back, sometimes we can see that there is nothing really new under the securities regulation sun. In 1936, Commissioner William O. Douglas, later US Supreme Court Justice, said, in a speech at the Yale Club, that when disclosure of truth becomes an art and when avoidance of disclosure becomes a game, the essence and spirit of the new legislation will have become subverted although the formalities may have been fully satisfied...
Senate Report Finds Banks Used
Posted on July 17, 2008Senate Report Finds Banks Used Offshore Securities Accounts as Tax Havens to Evade US Tax LawA bipartisan Senate investigation has revealed that tax haven banks are assisting U.S. taxpayers in evading federal taxes by urging U.S. clients to open securities accounts in their offshore jurisdictions, assisting them in structuring those accounts to avoid disclosure to U...
SEC Issues Emergency Order to Stop
Posted on July 16, 2008SEC Issues Emergency Order to Stop Naked Short SellingIn an effort to end naked short selling contributing to the disruption in the securities markets, the SEC issued an emergency order requiring all persons to borrow or arrange to borrow the securities identified in certain issuers prior to effecting an order for a short sale of those securities...
SEC Advisory Committee on Improvements
Posted on July 15, 2008SEC Advisory Committee on Improvements to Financial Reporting (Pozen Committee) Issues Final ReportThe SEC Advisory Committee on Improvements to Financial Reporting (Pozen Committee) has issued its draft final report recommending major changes to regulation and standard-setting involving financial statements and the independent audit of them...
DOJ Will Revise McNulty Memo as
Posted on July 14, 2008DOJ Will Revise McNulty Memo as Specter Readies Legislation on Attorney-Client PrivilegeIn an effort to counter impending legislation, the Department of Justice announced that it would revise the McNulty Memorandum to enhance protection of the attorney client protections in federal prosecutions for securities and other white collar crimes...
IRS Revenue Ruling Says Fund of
Posted on July 13, 2008IRS Revenue Ruling Says Fund of Funds Management Fees Are Not Deductible as Business ExpensesIn a revenue ruling of import to hedge funds, the IRS said that the management fee of a fund of funds is not an ordinary and necessary expense and cannot be treated as a business expense and deducted under IRC Section 162...
Bernanke Asks Congress to Reform
Posted on July 12, 2008Bernanke Asks Congress to Reform SEC's Consolidated Supervised Entity Regime for Investment BanksLegislation is needed to authorize strong holding company oversight of large investment banks currently regulated under the SEC?s consolidated supervised entity regime, said Federal Reserve Board Chair Ben Bernanke in testimony before the House Financial Services Committee...
House Financial Services Committee
Posted on July 11, 2008House Financial Services Committee Marks Up Securities Act of 2008A bipartisan bill increasing the SEC?s enforcement powers and requiring increased attention to accounting and auditing matters has been marked up by the House Financial Services Committee...
UK Regulator Guides on Agreements
Posted on July 10, 2008UK Regulator Guides on Agreements Limiting Auditor LiabilityGuidance has been issued on the use of agreements limiting auditor liability between companies and the outside auditors of their financial statements. The UK Companies Act now permits such agreements; and the Financial Reporting Council has offered guidance to help companies assess whether to enter into an agreement with their auditor, and to help them implement the agreement if they decide to do so...
Key Senators Assert Oversight of
Posted on July 09, 2008Key Senators Assert Oversight of SEC-FED MOU on Investment BanksThe Chair and Ranking Member of the Senate Banking Committee admonished the SEC and the Federal Reserve Board not to implement their historic Memorandum of Understanding on regulating investment banks until the oversight committee can determine that the agreement is in the public interest...
SEC Report Finds Deficiencies in
Posted on July 08, 2008SEC Report Finds Deficiencies in Credit Ratings of Mortgage-Backed SecuritiesAgainst the backdrop of impending regulatory reform of credit rating agencies by the SEC and the European Commission, an SEC report found that the rating agencies did not properly manage conflicts of interest in rating asset-backed securities during the subprime era...
SEC-FED MOU Charts Cooperative
Posted on July 07, 2008SEC-FED MOU Charts Cooperative Regulation of Investment BanksAgainst the backdrop of an ongoing crisis in securitization and in the wake of the Bear Stearns bailout, the SEC and the Federal Reserve Board have executed an historic Memorandum of Understanding designed to enhance information sharing and cooperation in the regulation of investment banks and bank holding companies...
Treasury Official Says Private
Posted on July 06, 2008Treasury Official Says Private Sector Will Play Large Role in Reforming SecuritizationThe reform of the securitization process will involve a public-private partnership in which the private sector will have a critical role to play, in the view of Assistant Treasury Secretary Anthony Ryan...
House AMT Fix Would End Capital
Posted on July 05, 2008House AMT Fix Would End Capital Gains Treatment of Hedge Fund Managers Carried InterestA House bill protecting taxpayers from experiencing a tax increase under the alternative minimum tax would be primarily paid for by ending the capital gains treatment of carried interest earned by hedge fund and other asset managers...
European Central Bank Officials
Posted on July 03, 2008European Central Bank Officials Set Key Principles for Reforming SecuritizationRecent remarks by the two most senior officials of the European Central Bank reflect a growing consensus that the originate and distribute securitization model will be retained in the wake of the subprime crisis...
Delaware Supreme Court Will Answer
Posted on July 02, 2008Delaware Supreme Court Will Answer SEC Shareholder Proxy Proposal QuestionIn the first test of a new process allowing the SEC to certify questions to the Delaware Supreme Court, the Court quickly agreed to answer the question of whether a shareholder proxy proposal seeking to require the company to reimburse the reasonable expenses incurred by stockholders running a slate of director nominees for election is a proper subject for action by shareholders under Delaware law...
FINRA Proposes Rule 5122 on Private Placements Issued by Members
Posted on July 02, 2008The Financial Industry Regulation Authority (FINRA) formerly known as the National Association of Securities Dealers (NASD) filed a proposal rule with the SEC under Section 19(b)(1) of the Securities Exchange Act of 1934. Proposed FINRA Rule 5122 "Private Placements of Securities Issued by Members" would require a member engaging in a private placement of unregistered securities issued by a member or control entity to: (1) make certain disclosures to investors in a private placement memorandum ("PPM"); or (2) file the PPM with FINRA; and (3) commit that at least 85% of the offering proceeds will be used for the business purposes identified in the PPM...
ABA State Securities Committee Requests Uniformity for State Compensatory Benefit Plan Exemptions
Posted on July 02, 2008The ABA Committee of State Securities Regulation sent a letter on June 27th to Don Saxon, the Ombudsman for the North American Securities Administrators Association (NASAA) and Commissioner of the Florida Office of Financial Regulation, requesting that he speak with the various state securities commissioners about redrafting their compensatory benefit plan exemptions to make them uniform with each other...
Treasury Official Examines Hedge
Posted on July 01, 2008Treasury Official Examines Hedge Fund Best Practices EffortsThe committees charged by the President?s Working Groups on Financial Markets with setting best practices for hedge funds will be finalizing its proposals in the coming months, reported Treasury Under Secretary Robert Steel...
Big Four Object to Importing Legal
Posted on June 30, 2008Big Four Object to Importing Legal Rule into PCAOB Standard for Audit Engagement ReviewThe Big Four audit firms have serious concerns about the PCAOB?s proposed standard addressing the responsibility of the audit firm partner that reviews the work of the engagement partner on a public company audit...
SEC Commissioner Troy Paredes on
Posted on June 29, 2008SEC Commissioner Troy Paredes on Shareholder Access and Business Judgment RuleNew SEC Commissioner Troy Paredes has mentioned shareholder access to directly nominating directors in the context of exploring whether CEO overconfidence is the product of corporate governance...
Hedge Fund Standards Board Charts
Posted on June 27, 2008Hedge Fund Standards Board Charts Path to Int'l Best Practices The Hedge Fund Standards Board has named Antonio Borges as its first permanent chairman, with a goal to harmonize international standards for hedge funds. He is a former Vice Governor of the central bank of Portugal...
FSA Requires Enhanced Disclosure
Posted on June 26, 2008FSA Requires Enhanced Disclosure of Short Positions In a significant move, particularly for hedge funds, the UK Financial Services Authority adopted rules requiring the disclosure of significant short positions in stocks admitted to trading on markets which are undertaking rights issues...
House Bill Closes London and Swaps
Posted on June 24, 2008House Bill Closes London and Swaps Loopholes and Empowers CFTCA bill to firmly and finally close both the London and Swaps Dealers loopholes left open by the recently enacted Farm Bill has been introduced by Rep. Bart Stupak, chair of the a House energy subcommittee...
ABA Securities Committees Comment on SEC Form ADV Amendments
Posted on June 24, 2008On June 18, 2008 the ABA Committees on Federal and State Securities Regulation submitted comments to the SEC about the SEC?s proposed amendments to Form ADV and about rules under the Investment Advisers Act of 1940. Comments concerned electronic filing of Part 2 of Form ADV through the Investment Adviser Registration Depository (IARD) ["brochure delivery requirement"], as well as the brochure delivery requirements for investment advisers to their private fund clients, custodial fees, custody of client funds in Rule 206(4)-2 of the Investment Advisers Act of 1940 and disciplinary information requirements in Rule 206(4)-4...
Congress Moving to Close the London
Posted on June 23, 2008Congress Moving to Close the London Loophole Left Open by Farm BillCompanion bills have been introduced in the House and Senate to close a loophole allowing speculative energy trades by US traders on the London Exchange. The bills are designed to ensure that energy commodities traded on foreign exchanges using trading terminals located within the United States are subject to the same speculative trading limits and reporting requirements as energy commodities traded on U...
Obama Calls for Closing Part of
Posted on June 22, 2008Obama Calls for Closing Part of Enron Loophole Left Open by Farm BillIn a major development, Senator Barack Obama has endorsed efforts to fully close the Enron Loophole that many believe was partially left open by the recent fix embodied in the Farm Bill...
SEC Official Defends Regulation
Posted on June 20, 2008SEC Official Defends Regulation of Investment Banks; But Says Legislation NeededIn the wake of the collapse of Bear Stearns and in the face of calls for a market stability regulator, the SEC Director of Market Regulation Erik Sirri noted changes that the Commission has made to its consolidated supervised entity (CSE) regime for investment banks...
Fed Must Be Given Powers as Market
Posted on June 19, 2008Fed Must Be Given Powers as Market Stability Regulator Says Treasury ChiefWith the Bear Stearns episode and current market turmoil placing in stark relief the outdated nature of the financial regulatory system, Treasury Secretary Henry Paulson said it is imperative to quickly consider how to give the Federal Reserve Board the authority it needs as the primary market stability regulator to access necessary information from complex financial institutions and the power to mitigate systemic risk in advance of a crisis...
Basel Committee Proposes Updated
Posted on June 18, 2008Basel Committee Proposes Updated Guidance on Managing Liquidity RiskWith the ongoing crisis caused by the securitization of subprime assets, the Basel Committee for Banking Supervision has proposed updated guidance for managing liquidity risk. While the guidance issued in 2000 remains generally relevant, a Basel working group identified areas that need updating and strengthening...
COSO Proposes Guidance on Monitoring
Posted on June 17, 2008COSO Proposes Guidance on Monitoring Internal Controls Over Financial ReportingCOSO has proposed guidance on monitoring internal controls over financial reporting that relies heavily on tone at the top and risk assessment. According to COSO, monitoring is an integral part of internal control over financial reporting...
Eurepean Commission Will Regulate
Posted on June 16, 2008Eurepean Commission Will Regulate Credit Rating AgenciesIn the wake of the SEC?s proposed reform of the regulation of credit rating agencies, the European Commission said that credit rating agencies must be subjected to regulation since, in the words of Internal Market Commissioner Charlie McCreevy, the IOSCO code of conduct for rating agencies has been revealed as a ``toothless wonder...
Levitt Committee Proposes Major
Posted on June 15, 2008Levitt Committee Proposes Major Changes to PCAOB-SEC Auditor OversightA blue-ribbon Treasury advisory committee has proposed significant and far reaching changes in SEC-PCAOB oversight of the outside auditors of public company financial statements. The Advisory Committee on the Auditing Profession, co-chaired by former SEC Chair Arthur Levitt, focused on improving audit quality and oversight, enhancing the ability of auditors to detect fraud, strengthening corporate governance at audit firms, and expanding the number of global audit firms...
IAASB Nears Completion of Redrafting
Posted on June 13, 2008IAASB Nears Completion of Redrafting Project as Acceptance of Int'l Standards GrowsThe International Auditing and Assurance Standards Board is on target to complete the redrafting of all its 35 international auditing standards by the end of 2008, noted IFAC President Fermin del Valle at a recent IOSCO seminar, and these standards will be effective for financial periods beginning on or after December 15, 2009...
New Developments in SEC's Comment
Posted on June 12, 2008New Developments in SEC's Comment Letter Process ReviewedThis post is courtesy of my colleague Mark Nelson, who intensely follows the SEC's comment letter process.This month, the Division of Corporation Finance posted a document titled "Filing Review Process" on its website http://www...
European Commission Proposes Options
Posted on June 11, 2008European Commission Proposes Options to Limit Audit Firm LiabilityIn an effort to increase the number of global audit firms, and preserve the existing ones, the European Commission has proposed limitations on auditor liability. This effort is in response to the increasing trend of litigation and the lack of sufficient insurance coverage in the sector...
Insurance Agents Who Recommend the Sale of Securities to Individuals at Financial Planning Seminars
Posted on June 11, 2008Kentucky has recently grappled with the issue of insurance agents unlicensed to sell or provide advice about securities, in fact, advising the sale of securities to the clients with whom they meet at financial planning seminars to discuss the respective clients' financial portfolio...
Buys and Sells of Promissory Notes a Consequence of Downturned Real Estate Market
Posted on June 11, 2008One consequence of the downturn in the residential real estate market that is taking place in Missouri among other states is the escalation of offers and sales of promissory notes by promoters to investors. These entrepreneurs are: (1) asking investors to invest in an individual property in exchange for a promissory note secured by a deed of trust in the property; (2) buying a promissory note secured by a mortgage and then selling the note to a third party; (3) acting as an intermediary between people attempting to buy or sell a promissory note; or (4) investing in a company that itself invests in real estate or in a promissory note secured by a mortgage...
SEC Commissioner Designate Paredes
Posted on June 10, 2008SEC Commissioner Designate Paredes Charts Middle Course for Hedge Fund RegulationSEC Commissioner designate Troy Paredes believes that there is a middle ground on hedge fund regulation between mandatory rules and doing nothing. He says that the Commission can adopt best practices for hedge funds or employ what he calls a default rule under which hedge funds would register with the SEC or explain to investors why they did not...
Geithner Seeks Fed-Centric Unified
Posted on June 09, 2008Geithner Seeks Fed-Centric Unified Regulation of Global Commercial and Investment BanksNY Fed President Timothy Geithner has called for the uniform and consolidated regulation of global commercial banks and investment banks with the Fed playing a central role in the new framework...
BIS Chief Outlines Plan to Reform
Posted on June 08, 2008BIS Chief Outlines Plan to Reform Securitization ProcessRecognizing that securitization remains essential to the global financial markets despite its role in the subprime crisis, Bank for International Settlement General Manager Malcolm Knight has set forth a reform plan focusing on better risk management, less reliance on rating agencies, and a fuller understanding of tranche exposures...
Senate Bill Would Close Foreign
Posted on June 06, 2008Senate Bill Would Close Foreign Energy Commodites Trading LoopholeA bill designed to ensure that energy commodities traded on foreign exchanges using trading terminals located within the United States are subject to the same speculative trading limits and reporting requirements as energy commodities traded on U...
Former CFTC Official Says the Way
Posted on June 05, 2008Former CFTC Official Says the Way Enron Loophole Closed Will Lead to Regulatory ArbitrageA former senior CFTC official maintains that the manner in which the recent Farm Bill closed the Enron Loophole will lead to further regulatory arbitrage. In testimony before the Senate Commerce Committee, former Director of the Trading and Markets divisionMichael Greenberger said that, rather than simply bringing all energy futures contracts within the full U...
Canadian Appeals Court Extends
Posted on June 04, 2008Canadian Appeals Court Extends Revlon Doctrine to BondholdersIn a significant and groundbreaking ruling, a Canadian appeals court said that the Delaware doctrine requiring directors to maximize shareholder value through an auction process when a company is in play also applies to bondholders...
PCAOB's Constitutionality Argued
Posted on June 02, 2008PCAOB's Constitutionality Argued Before DC Federal Appeals CourtAt oral argument before a panel of the federal appeals court for the District of Columbia in the action challenging the PCAOB?s constitutionality, one judge called the Board an independent agency within an independent agency which if upheld would be a ``green light for all sorts of new creations...
5th Circuit: No Private Money Damages
Posted on May 29, 20085th Circuit: No Private Money Damages Available for13(d) ViolationsA 5th Circuit panel followed the lead of earlier decisions from the 2nd and 11th Circuits and found that no private cause of action for money damages existed for violations of Exchange Act Section 13(d)...
States Propose Adding Senior Provisions to List of Unethical Practices for Broker-Dealers, Agents, IAs and IA Reps.
Posted on May 20, 2008Missouri, Virginia and Washington are among the first states to propose rules prohibiting state-registered broker-dealers, agents, investment advisers and investment adviser representatives from using certain professional designations that state or imply specialized knowledge of the financial needs of senior investors...
Fed Chair Details Regulatory Response
Posted on May 16, 2008Fed Chair Details Regulatory Response to Risk Management FailuresFederal Reserve Board Chair Ben Bernanke has concluded that a failure of effective enterprise-wide risk management was a major cause of the recent subprime market turmoil. A regulatory response is demanded, he noted, and the Fed is planning one involving additional guidance and joint international efforts...
Veto-Proof Farm Bill Terminates
Posted on May 15, 2008Veto-Proof Farm Bill Terminates Enron Loophole and Reforms Electronic Energy MarketsCongress has passed a veto-proof measure reauthorizing the CFTC and closing the Enron loophole as part of a massive Farm Bill. Provisions in the Food, Conservation and Energy Act (HR 2419) would end the Enron-inspired exemption from federal oversight now provided to electronic energy trading markets set up for large traders...
Three Former SEC Chairs Endorse
Posted on May 14, 2008Three Former SEC Chairs Endorse Obama Presidential BidThree former SEC chairs have endorse Democratic Sen. Barack Obama's bid for the presidency William Donaldson, Arthur Levitt and David Ruder, will join former Fed Chair Paul Volcker in endorsing Sen...
Provisions in Farm Bill Would Close
Posted on May 13, 2008Provisions in Farm Bill Would Close Enron LoopholeA measure reauthorizing the CFTC and closing the Enron loophole is included in the massive Farm Bill that has been reported out of a House-Senate conference and awaits congressional action, and a possible presidential veto...
SEC Proposes Major Revision to
Posted on May 12, 2008SEC Proposes Major Revision to Cross-Border Exemption RulesTaking notice of the increasing globalization of the securities markets, the SEC proposes to enhance and expand its cross-border exemptions to facilitation the participation of US shareholders in cross-border business transactions...
Canadian Banking Regulator Examines
Posted on May 10, 2008Canadian Banking Regulator Examines Fair Value Accounting from Investor AngleFair value accounting has been much in the news lately and, in my view, rightly so given the difficulty of valuing illiquid securities during the market turmoil. There is a need to get more clarity around the issue of fair value accounting in light of the ongoing market crisis, in the view of Julie Dickson, Canadian Superintendent of Financial Institutions...
IASB Chair Defends Fair Value Accounting;
Posted on May 09, 2008IASB Chair Defends Fair Value Accounting; Says IFRS Global by 2011Fair value accounting standards are not the cause of the current market crisis, declared IASB Chair David Tweedie in remarks to the Empire Club of Canada. While conceding the difficulty of valuing complex, illiquid securities and derivatives, he believes that showing the changes in values of these securities, even imperfectly, provides critical transparency and enables markets to adjust in a necessary albeit painful manner...
Volcker Examines Fair Value Accounting,
Posted on May 08, 2008Volcker Examines Fair Value Accounting, Hedge Funds, and Fed's RoleFormer Federal Reserve Board Chair Paul Volcker said that the market crisis has raised questions about the usefulness of mark-to-market accounting, particularly its extension in uncertain and illiquid markets to what is euphemistically known as fair value accounting...
Basel Chair and ECB Chief Say Basel
Posted on May 07, 2008Basel Chair and ECB Chief Say Basel II Key to Securitization ReformThe Basel II Accord will be a crucial element in controlling off-balance sheet entities and other risk exposures as the securitization process is reformed, in the view of Basel Committee Chair Nout Wellink and European Central Bank President Jean-Claude Trichet...
Failure to Disclose Receipt of
Posted on May 05, 2008Failure to Disclose Receipt of Wells Notice Does Not Support Demand Futility Applying Delaware law, a federal judge ruled that a shareholder derivative action alleging proxy fraud in the company?s failure to disclose its receipt of a Wells Notice from the SEC could not proceed because of a failure to show demand futility...
Directors Owe No Fiduciary Duty
Posted on May 03, 2008Directors Owe No Fiduciary Duty to Warrant Holders, But They Deserve Truthful AnswersDirectors did not have a fiduciary duty to holders of warrants in the company?s stock, ruled the Delaware Chancery court, and thus had no duty to give the warrant holders advance notice of dividend declarations...
Treasury Blueprint Envisions Fed
Posted on April 30, 2008Treasury Blueprint Envisions Fed as Macro-Prudential Regulator for Financial FirmsThe Treasury Blueprint?s role for the Federal Reserve Board as market stability regulator envisions macro-prudential regulation that may encompass the risk exposures of hedge funds and other financial firms, according to David Nason, Assistant Secretary for Financial Institutions...
Conference Board Proposes Best
Posted on April 29, 2008Conference Board Proposes Best Practices on Hedge Fund ActivismA Conference Board working group has issued proposed recommendations for companies and institutional investors facing hedge fund activism. The Hedge Fund Activism working group suggested a number of practices that could be employed by public companies and institutional investors that find themselves involved in activism campaigns mounted by hedge funds...
European Commission Working Group
Posted on April 28, 2008European Commission Working Group Sees US GAAP Equivalent to IFRSNoting that the convergence of US GAAP and IFRS is proceeding at an appropriate pace, a European Commission working group found that US GAAP is equivalent to IFRS for use in EU markets. In its report, the working group also praised the SEC for its recent elimination of the need for foreign private issuers to reconcile IFRS-driven financial statements to US GAAP...
FSA Director Says Due Diligence
Posted on April 26, 2008FSA Director Says Due Diligence and Risk Management Key to Reform of SecuritizationEnhanced investor due diligence and strengthened risk management are the keys to the future of originate and distribute securitization, in the view of a senior UK FSA official...
SEC Has Int'l Enforcement Ability
Posted on April 24, 2008SEC Has Int'l Enforcement Ability Regarding Sovereign Wealth FundsSeeking to allay the fears of Senate Banking Chair Christopher Dodd, an SEC senior official outlined the Commission?s enforcement capabilities with regard to sovereign wealth funds. Ethiopis Tafara, Director of the International Affairs Office, told the committee that an effective enforcement mechanism takes on heightened importance when sovereign wealth funds are involved since, while cross-border enforcement assistance involving private actors is readily honored, help may not as forthcoming when the subject is the government itself...
Washington First State to Propose Rules Chgs. to Accommodate SEC New Electronic Form D
Posted on April 24, 2008Washington became the first state to propose changes to its Regulation D rules to coordinate with the SEC's recent adoption of amendments to federal Regulation D authorizing electronic filing of Form D through EDGAR. The SEC adoption allows Form D to be submitted in print or electronic format for a six-month period from September 15, 2008 to March 15, 2009...
Blue Sky No-Action Letter: Fin. Mgmt. Advisory Co. Permits Retired Advisers to Participate in Fee-Based Program to Consult with Former Clients
Posted on April 24, 2008As often happens in Blue Sky law, a firm's request for a no-action letter in one state is granted so the firm makes the request in a number of states, resulting in the issue addressed in the no-action letter setting a new trend. Morever, the issue setting the trend typically arises out of a new condition in the business community taking place in the Country at the particular time...
McCreevy Praises Clearing and Settlement
Posted on April 22, 2008McCreevy Praises Clearing and Settlement Code; But Warns Last Chance for Private SolutionThe private sector Code of Conduct on clearing and settlement has been very positive, said EU Commissioner for the Internal Market Charlie McCreevy, but at the same time he called on all infrastructures to fully respect and apply the Code in order to show that it can deliver competition...
Fraud Claims Revived Under Tellabs
Posted on April 18, 2008Fraud Claims Revived Under Tellabs Analysis: 1st CircuitA securities fraud plaintiff pleaded "enough to give rise to inferences that are at least as strong as any competing inferences regarding scienter," wrote a 1st Circuit panel, as the court re-instituted one of four dismissed claims under a Tellabs analysis...
Corporate Officers Also Have Fiduciary
Posted on April 15, 2008Corporate Officers Also Have Fiduciary Duties under CaremarkA federal bankruptcy court has ruled that corporate officers, as well as directors, have fiduciary duties to the company under Delaware?s Caremark line of cases. While Delaware law does not impose fiduciary duty on employees generally, noted the court, it does impose failure of oversight fiduciary duty as to officers...
IAASB Revises Standard on Management
Posted on April 14, 2008IAASB Revises Standard on Management Written Representations to AuditorAs part of its ongoing project to revise and redraft auditing standards, the International Auditing and Assurance Standards Board revised the standard governing written statements that management provides to auditors to confirm certain matters or to support other audit evidence...
Treasury Study on Financial Restatements
Posted on April 13, 2008Treasury Study on Financial Restatements Focuses on Internal ControlsA new Treasury-sponsored study on financial restatements found that there was a significant increase in restatements by 2005 accelerated filers during the 2003-2005 implementation period for internal controls reporting under section 404 of the Sarbanes-Oxley Act...
Int'l Banking Group Urges IASB
Posted on April 09, 2008Int'l Banking Group Urges IASB and FASB to Replace Fair Value with Mixed Measurement ModelThe International Banking Federation has urged standard setters to implement a mixed measurement model in place of full fair value accounting. The FASB and IASB were advised that a mixed measurement model provides investors with better information for evaluating financial instruments...
Key Senator Questions Mutual Recognition;
Posted on April 08, 2008Key Senator Questions Mutual Recognition; While McCreevy Sees ProgressSenate Securities Subcommittee Chair Jack Reed has asked the SEC to conduct an analysis of the issues before embarking on a system of mutual recognition, which he called a radical departure from current policy...
Senate Leaders Ask GAO to Review
Posted on April 04, 2008Senate Leaders Ask GAO to Review SEC Enforcement; Question Mutual RecognitionNoting an almost 50% decrease in disgorgements in 2007, Senate Banking Committee Chair Christopher Dodd and Securities Subcommittee Chair Jack Reed have asked the GAO to review whether the SEC?s Division of Enforcement has sufficient staff and funds to perform its mission and whether there have been fundamental changes in operation to the way they handle cases...
Spring-Loading and Bullet-Dodging
Posted on April 02, 2008Spring-Loading and Bullet-Dodging of Stock Options Should Have Been DisclosedCompany directors who approved spring loaded and bullet dodged stock option grants may have breached their fiduciary duty and forfeited the protection of the business judgment rule, held the Delaware Chancery Court, since the spring-loading and bullet-dodging practices constituted material information that should have been disclosed...
Treasury Proposes Massive Overhaul
Posted on March 31, 2008Treasury Proposes Massive Overhaul of US Financial Services Regulation Affecting Fed, SEC, CFTCThe US Treasury has proposed the most complete overhaul of federal financial regulation since the current regulatory structure was erected in the 1930s. The proposal would create new federal regulators for market stability, business conduct, corporate finance and prudential finance...
SEC Allows Range of Values in Fair
Posted on March 29, 2008SEC Allows Range of Values in Fair Value Accounting MeasurementsIn a significant move given current market conditions, the SEC will allow issuers to provide in their MD&A a range of values for hard-to-value illiquid securities. In a letter to chief financial officers, the SEC staff also urged issuers to describe in the MD&A the technique or model they use to value the illiquid securities, as well as any changes to the model made during the reporting period...
Federal Examiner Finds Internal
Posted on March 28, 2008Federal Examiner Finds Internal Control and Audit Committee Failures at Mortgage CompanyA federal bankruptcy court examiner has found that a failure to establish and monitor internal controls over financial reporting substantially contributed to a company?s accounting errors and allowed those errors to go undetected...
Treasury Official Sees Reform of
Posted on March 27, 2008Treasury Official Sees Reform of Credit Rating Process and Enhanced DisclosureEchoing a recent UK Treasury Committee finding that securitization is here to stay, a US Treasury senior official called for broad reform of the securitization process, including reliable ratings of complex securities, better disclosure, and improved risk management Assistant Secretary Anthony Ryan told the Exchequer Club that securitization is a financial innovation that has expanded the availability of credit and reduced the cost of capital...
Fed Gov. Kroszner Gleans Lessons
Posted on March 26, 2008Fed Gov. Kroszner Gleans Lessons from Risk Management ReportIn the view of Federal Reserve Board Governor Randall S. Kroszner, the recent report on risk management by global regulators, including the Fed and the SEC, contains many valuable lessons for all levels of risk management...
ICI Mutual Funds Seminar Raises
Posted on March 25, 2008ICI Mutual Funds Seminar Raises issue of International RegulationThe Investment Company Institute held its annual Mutual Funds and Investment Management Conference this month in Phoenix. Fortunately, the CCH Mutual Funds Guide editor, Amy Leisinger, attended this very substantive seminar and filed a report...
SEC Moves Forward with Mutual Recognition
Posted on March 24, 2008SEC Moves Forward with Mutual Recognition FrameworkAgainst the backdrop of continuing cross-border exchange mergers, the SEC will accelerate its implementation of the concept of mutual recognition for high-quality non-US regulatory regimes. The Commission will explore initial agreements with foreign regulatory counterparts based on a comparability assessment by the SEC and by the foreign authority of one another's regulatory regimes...
Cox Praises Basel Committee Plan
Posted on March 23, 2008Cox Praises Basel Committee Plan to Update Guidance on Liquidity Risk ManagementSEC Chair Christopher Cox has praised the decision by the Basel Committee on Banking Supervision to update its guidance on liquidity risk management at financial institutions...
Rep. Frank Calls for Financial
Posted on March 20, 2008Rep. Frank Calls for Financial Services Risk RegulatorWith markets in turmoil primarily because of a failure to manage the risk of complex securitized financial instruments, House Financial Services Chair Barney Frank has called for the creation of a federal Financial Services Risk Regulator to assess risk across financial markets regardless of corporate form...
IASB Reaffirms Fair Value in Proposing
Posted on March 19, 2008IASB Reaffirms Fair Value in Proposing Revision of Standard for Measuring Financial InstrumentsWhile acknowledging concerns about volatility, the IASB said that fair value is the only measure appropriate for all types of financial instruments as it embarks on a major revision of IAS 39, the standard for measuring the value of financial instruments...
Canada Moving Towards One Securities
Posted on March 18, 2008Canada Moving Towards One Securities RegulatorCanada is the only industrialized country without a common securities regulator. And the present system of thirteen provincial regulators is seen by many as cumbersome, fragmented, and lacking the proper tools of enforcement...
Basel Committee Revisiting Basel
Posted on March 17, 2008Basel Committee Revisiting Basel II Accord in Light of Financial CrisisAs the market turmoil associated with securitization deepens, the Basel Committee is looking at making improvements to certain aspects of the Basel II Accord. In remarks, at a recent Basel II Implementation Summit in Singapore, Basel Committee Chair Nout Wellink said there are no simple measures that will capture the complex risks now facing global financial institutions...
PCAOB Chair Examines Double-Edged
Posted on March 16, 2008PCAOB Chair Examines Double-Edged Sword of Fair Value AccountingFair value accounting presents the promise of making financial statements more relevant, said PCAOB Chair Mark Olson, but at the same time poses heightened audit risk, especially in illiquid markets...
Senate Finance Committee Will Study
Posted on March 14, 2008Senate Finance Committee Will Study the Taxation of Sovereign Wealth FundsAs the assets controlled by sovereign wealth funds increase dramatically, leaders of the Senate Finance Committee have asked the Joint Committee on Taxation to analyze the current federal tax rules, and underlying policy, applicable to U...
Canada Overhauls Its Dealer and Adviser Registration/Exemption Rules
Posted on March 13, 2008The Canada Securities Administrators (CSA) have proposed amendments to a rule adopted February, 2007 that overhauled registration and exemption provisions for Canadian dealers, investment advisers and investment fund managers. The new round of proposals published February 29, 2008 will continue to pertain directly to Canadian dealers, investment advisers and investment fund managers but will also impact non-Canadian dealers, investment advisers and investment fund managers doing business in Canada on a registered or exempt basis, by affecting a number of capital market activities that include private placements, public and private fund offerings, and advisory activities...
President's Working Group Proposes
Posted on March 13, 2008President's Working Group Proposes Major Reforms to US Financial RegulationIn the wake of recent market turbulence, the President?s Working Group on Financial Markets has proposed broad and substantial changes to US financial regulation. The comprehensive reforms are nothing less than a complete overhaul of the securitization process and the concomitant mortgage origination process that relied on the sale of asset-backed securities...
Chevron Deference May Be Due Sarbanes-Oxley
Posted on March 12, 2008Chevron Deference May Be Due Sarbanes-Oxley Whistleblower RulingA Fifth Circuit panel has ruled that a securities analyst did not engage in protected activity under the Sarbanes-Oxley Act whistleblower provision when she refused to upgrade a company?s rating in her report since she never said that changing the rating would violate any securities laws and the employer did not express an intent to change the rating, but merely questioned her decision...
House Bill Would Make Securities
Posted on March 11, 2008House Bill Would Make Securities Litigation More TransparentA bill fostering transparency and accountability of attorneys in private securities litigation has been introduced in the House. The Securities Litigation Attorney Accountability and Transparency Act (HR 5463) would provide that, in any private securities action in which the court enters a final judgment against plaintiff, the court must determine whether the position of the plaintiff was not substantially justified; whether the imposition of fees and expenses on the plaintiff's attorney would be just; and whether the cost of such fees and expenses to the defendant is substantially burdensome or unjust...
Vice-Chancellor Strine Distinguishes
Posted on March 09, 2008Vice-Chancellor Strine Distinguishes Rulings Involving Delay of Shareholder VoteRecently, I blogged about a decision by Vice Chancellor Strine that a contested corporate election of directors was so tainted by management?s inequitable conduct that the Delaware Chancery Court set the results aside and ordered a new election...
NY Fed President Calls for Broad
Posted on March 08, 2008NY Fed President Calls for Broad Reform of Securitization ProcessNY Fed President Timothy Geithner has called for the comprehensive reform of the entire securitization process in light of the ongoing crisis in the financial markets. Improper valuations of complex securitized instruments and inadequate risk management significantly contributed to the problem, in his view...
UK Report on Financial Stability
Posted on March 05, 2008UK Report on Financial Stability Targets FSA and Credit Rating AgenciesA seminal report by the UK Treasury Select Committee concluded that the framework by which the public authorities issue warnings of potential problems in financial markets is deficient and recommends that in future the Financial Services Authority and the Bank of England highlight the two or three most important risks in a short covering letter to financial institutions, for discussion at board level...
Form D Electronic Filers Will Need CIK Code
Posted on March 05, 2008Issuers will need to obtain a CIK code to file Form D electronically through EDGAR once the mandate for electronic filing takes effect March 16, 2009. Reporting companies have already been assigned CIK numbers by the SEC, along with many nonreporting companies, but all issuers will need to obtain a CIK code to file Form D electronically...
European Commission Supports Code
Posted on March 03, 2008European Commission Supports Code of Conduct for Sovereign Wealth FundsThe European Commission has set forth core principles for sovereign wealth funds focusing on the twin pillars of governance and transparency. For now, the Commission is content to allow the IMF to develop a code of conduct for sovereign wealth funds and the OECD to develop best practices, presumably on a comply or explain basis...
Select Commitees Will Push for
Posted on March 02, 2008Select Commitees Will Push for Auditor Professional Judgment RuleThere is a growing consensus that independent auditors of corporate financial statements need a professional judgment rule to protect them in the age of principles-based regulation. Two important committees formed by the Treasury Department and the SEC are coming to the conclusion that the adoption of a professional judgment framework or rule may be necessary for the success of principles-based standards, such as the PCAOB?s Auditing Standard No...
Corporate Governance Key to Sound
Posted on March 01, 2008Corporate Governance Key to Sound Risk Management Says Fed's KrosznerSound risk management at financial institutions can be ensured only if directors and senior management establish overall governance that is credible, robust, and consistent throughout the firm, in the view of Federal Reserve Board Governor Randall S...
FASB Will Be Reduced to Five Members
Posted on February 28, 2008FASB Will Be Reduced to Five Members and Chair Will Set AgendaThe FASB would be reduced from seven to five members on July 1, 2008, with simple majority voting retained, under changes approved by its overseer the Financial Accounting Foundation. It is envisioned that the new five-member FASB would be composed of an auditor, a preparer, an academic, a financial statement user, and one at-large, best-qualified member...
Management Conduct Taints Board
Posted on February 27, 2008Management Conduct Taints Board Election, VC Strine Orders New OneA contested corporate election of directors was so tainted by management?s inequitable conduct that the Delaware Chancery Court set the results aside and ordered a new election. The court ruled that management failed to disclose an agreement to obtain the votes of one insurgent shareholder by promising to expand the board and let the insurgent name the new director...
GAO Report Finds Market Discipline
Posted on February 26, 2008GAO Report Finds Market Discipline Alone Cannot Manage Hedge Fund RiskWhile market discipline is becoming more effective for managing hedge fund risk, concluded a GAO report, it may not be enough by itself since a number of factors limit its effectiveness and it is not always properly exercised...
IRS Revenue Ruling on Executive
Posted on February 23, 2008IRS Revenue Ruling on Executive Comp Plans Appears to be ProspectiveThe Internal Revenue Service revenue ruling that cast doubt on the exclusion of some performance-based executive compensation from the $1 million pay cap mandated by IRC §162(m) if a company wants to deduct an executive?s pay from its income tax will apparently be applied prospectively...
IRS Revenue Ruling Impacts Executive
Posted on February 22, 2008IRS Revenue Ruling Impacts Executive Compensation Plans and DisclosureIn response to a letter from 90 global securities law firms, the Internal Revenue Service issued a revenue ruling essentially backing up an earlier private letter made public by the IRS (LTR 200804004) that cast doubt on the exclusion of some performance-based executive compensation from the $1 million pay cap mandated by IRC §162(m) if a company wants to deduct an executive?s pay from its income tax...
McCreevy Urges Hedge and Private
Posted on February 21, 2008McCreevy Urges Hedge and Private Equity Funds to Adhere to Codes of ConductThe continued light regulation approach to hedge and private equity funds is conditioned on these funds complying with the recent codes of conduct adopted by the Hedge Fund Working Group and the Walker Working Group, in the view of EU Commissioner for the Internal Market Charlie McCreevy...
ISDA Promotes MiFID for Harmonized
Posted on February 20, 2008ISDA Promotes MiFID for Harmonized Regulation of Complex Structured SecuritiesAn ISDA led consortium told the European Commission the model provided by the Markets in Financial Instruments Directive (MiFID) is best adapted to the creation of a product-blind harmonized regulatory regime for complex structured securities products, The Commission is exploring the need for a harmonized legal framework regarding product transparency and distribution requirements for complex retail investment products...
Australian Regulator Adopts Principles
Posted on February 19, 2008Australian Regulator Adopts Principles for Sovereign Wealth FundsAs the debate rages in the EU and US about the best way to achieve transparency for sovereign wealth funds, the Australian Treasurer has adopted principles for sovereign wealth fund investments...
FSA Chair Seeks Global Standards
Posted on February 18, 2008FSA Chair Seeks Global Standards on Managing Liquidity RiskIn a major address to the Basel Committee on Banking Supervision, FSA Chair Callum McCarthy called for a uniform international policy on liquidity risk to provide clarity to global financial institutions and other market participants...
Feinstein Amendment to Farm Bill
Posted on February 17, 2008Feinstein Amendment to Farm Bill Would Close Enron LoopholeA measures reauthorizing the CFTC and closing the Enron loophole have been tacked on to a bipartisan Farm Bill and passed by the Senate. The bill is now in conference with a House-passed Farm Bill...
Federal Court Rules Sarbanes-Oxley
Posted on February 16, 2008Federal Court Rules Sarbanes-Oxley Whistleblower Statute Applies Outside USIn a seminal ruling of broad application, a federal judge held that the Sarbanes-Oxley whistleblower protection statute embraced a US employee of a foreign company who worked in the firm?s French subsidiary and who alleged that US-based executives retaliated against her for questioning the firm?s fraudulent evasion of French social security taxes...
Southern District of New York Rejects
Posted on February 15, 2008Southern District of New York Rejects Selective Privilege Waiver"I conclude that selective waiver is not in the long-term best interests of the government, the adversarial system, or litigants," wrote U.S. District Judge Shira Scheindlin of the Southern District of New York...
IRS Letter Ruling Impacts Executive
Posted on February 14, 2008IRS Letter Ruling Impacts Executive Compensation DisclosureA private letter ruling recently made public by the IRS (LTR 200804004) cast doubt on the exclusion of some performance-based compensation from the $1 million pay cap mandated by IRC §162(m) if a company wants a deduction...
IOSCO: Tell Investors What Accounting
Posted on February 12, 2008IOSCO: Tell Investors What Accounting Standards Used in FinancialsIOSCO urges companies to disclose to investors the accounting standards that were used to prepare their annual report and other financial statements. Michel Prada, Chairman of the IOSCO Technical Committee, expressed concern that, with the convergence of global accounting standards, investors may assume that all company accounts are generally comparable when that may not be the case...
SEC, FINRA and NASAA Create Senior Investor Initiative
Posted on February 11, 2008SEC Chairman Christopher Cox, FINRA Chief Executive Officer Mary Schapiro and NASAA Present Karen Tyler signed onto an initiative to protect senior investors from fraud. The initiative is not an exam, sweep or survey but rather a voluntary opportunity for financial services firms to dialogue with the SEC, FINRA and NASAA about the effectiveness of the firms' current practices to serve seniors in the following areas: marketing and advertising; account opening; product and account review; ongoing review of the appropriateness of products; meeting the changing needs of customers as they age; surveillance and compliance reviews; and training for firm employees...
House Bill Would Mandate Study
Posted on February 11, 2008House Bill Would Mandate Study of Tax Treatment of Hedge FundsA bill to create a commission of ten members to study the tax treatment of hedge funds and private equity has been introduced in the House by Rep. John Larson. Membership of the commission would be comprised of experts chosen by House and Senate leaders within thirty days of the bill?s enactment...
Cross-Border Insider Trading Action
Posted on February 06, 2008Cross-Border Insider Trading Action Shows SEC Commitment to Protect Global MarketsFour Hong Kong residents have settled an SEC enforcement action charging them with illegal tipping and insider trading in the securities of a target company in the weeks before the public disclosure of an unsolicited $60 per share acquisition offer for the target...
Lagarde Report Emphasizes Enhanced
Posted on February 05, 2008Lagarde Report Emphasizes Enhanced Internal ControlsA report by the French Finance Minister on the operational loss of 4.9 million euros at a global financial institution identified a number of internal control issues that could have been decisive in light of information provided by the company...
Atkins Supports Legislation to
Posted on February 04, 2008Atkins Supports Legislation to Curb Agency Abuse of Attorney-Client PrivilegeIn light of pending legislation to stop the SEC and other federal agencies from conditioning a company?s cooperative efforts on waiving the attorney-client and work privileges, Commissioner Paul Atkins noted that the SEC is re-examining its policind procedures with respect to cooperation credit and penalties...
New York's State Securities "Martin Act" Used to Prosecute Mortgage Fraud
Posted on January 31, 2008New York Attorney General Andrew Cuomo and his Staff have begun using the State's 1921 "Martin Act," i.e., the State's Securities Act, to go after Wall Street Firms for allegedly packaging and selling mortgage securities improperly to an unsuspecting public...
EU Leaders Look at Credit Rating
Posted on January 30, 2008EU Leaders Look at Credit Rating Agencies; Praise Hedge Fund Working GroupEuropean Union political leaders have called for reform of the credit rating agency process and better risk management in the wake of the recent market turbulence triggered by the sub-prime crisis...
Panelists Consider Stonebridge,
Posted on January 29, 2008Panelists Consider Stonebridge, Tellabs CasesThe Supreme Court's recent decision in Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc. (CCH Federal Securities Law Reporter ¶94,556) will have a profound impact on private class action process, noted a panel at the Securities Regulation Institute sponsored by Northwestern University Law School...
Rep. Baker to Lead Hedge Fund AssociationRep.
Posted on January 27, 2008Rep. Baker to Lead Hedge Fund AssociationRep. Richard Baker (R-LA) will become CEO of the Managed Funds Association (MFA), the primary trade association of the hedge fund industry. He will succeed John. Gaine, who will move into a special advisor role and undertake the expansion of MFA?s global outreach with regulators, policy makers and market participants...
SEC Corp Fin Director Examines
Posted on January 24, 2008SEC Corp Fin Director Examines Executive Compensation and Shareholder AccessAs the SEC staff?s review of the new executive compensation disclosures in companies' proxy statements is winding down, Corporation Finance Director John White urged companies and their counsel to focus on the idea that disclosure in this area can be clear and understandable yet not meaningful or responsive to the new SEC disclosure regime for executive compensation...
UK Hedge Fund Working Group Sets
Posted on January 23, 2008UK Hedge Fund Working Group Sets Standands for Fund ManagersThe UK Hedge Fund Working Group has adopted voluntary standards and best practices for hedge fund managers. The standards are on a comply or explain basis and include valuation, disclosure, and risk management guidelines...
SEC Official Reaffirms Mutual Fund
Posted on January 21, 2008SEC Official Reaffirms Mutual Fund Advisory Contract Approval ProcessAndrew Donohue, the SEC?s Director of Investment Management has strongly praised the mandated process by which a mutual fund?s independent directors approve the fund?s investment advisory contract...
Corp Fin Director Would Vet Foreign
Posted on January 18, 2008Corp Fin Director Would Vet Foreign Companies whose Shares Sold Through Mutual RecognitionThese remarks by John White struck me as somewhat revolutionary. As part of mutual recognition of brokers and exchanges, he proposes that the SEC vet the foreign companies whose securities the foreign brokers would bring to the US market and US investors...
White Paper Out on Supreme Court
Posted on January 17, 2008White Paper Out on Supreme Court Scheme Liability RulingI have prepared a white paper on the Supreme Court?s decision in Stoneridge rejecting scheme liability under Rule 10b-5. Click here for white paper.The opinion has broad implications for the business community and for securities professionals...
Supreme Court Rejects Scheme Liability
Posted on January 15, 2008Supreme Court Rejects Scheme Liability Theory Under Rule 10b-5Secondary non-speaking actors said to have participated with a company in a securities fraud scheme were not liable in a private action under Rule 10b-5 since the acts of suppliers said to have participated in the fraud were too remote to satisfy the antifraud rule?s reliance requirement...
SEC Claim Against Hedge Fund Manager
Posted on January 11, 2008SEC Claim Against Hedge Fund Manager for Illegal PIPES Transactions FailsIn an SEC enforcement action, a federal judge has ruled that a hedge fund manager and the managed funds did not violate Securities Act registration provisions in connection with PIPES transactions...
FASB and IASB Issue First Converged
Posted on January 10, 2008FASB and IASB Issue First Converged Standard: It's on M&A AccountingIn a significant milestone towards international accounting standards, the FASB and the IASB have issued their first converged accounting standard as part of their long-range convergence initiative...
Basel II Helps Japanese Banks Manage
Posted on January 09, 2008Basel II Helps Japanese Banks Manage Risks of SecuritizationThe implementation of Basel II has helped Japanese financial institutions to better manage the risk associated with derivatives and other the complex financial products engineered by securitization...
SEC Official Examines IOSCO Accounting
Posted on January 08, 2008SEC Official Examines IOSCO Accounting and Auditing InitiativesAn SEC official who represents the Commission on IOSCO?s Accounting Subcommittee said that the organization is committed to the development of high quality international auditing standards and uniform international financial reporting standards...
Guidance Proposed on Limiting Auditor
Posted on January 07, 2008Guidance Proposed on Limiting Auditor LiabilityA very significant event will occur on April 6, 2008. The UK Companies Act will come into force; and with it there will be provisions allowing outside auditors of financial statements to negotiate limits on their liability with client companies...
Euro Central Bank Chief Urges More
Posted on January 06, 2008Euro Central Bank Chief Urges More Disclosure on SecuritizationIn light of recent market turmoil, European Central Bank President Jean-Claude Trichet has called on the financial industry to provide more public information about securitization. As part of this effort, he emphasized the need for the consistent valuation of complex derivatives and adequate disclosure by banks of their exposures...
Senate Colloquy Clarifies CFTC-FERC
Posted on January 04, 2008Senate Colloquy Clarifies CFTC-FERC Jurisdiction in Reauthorization BillA colloquy between Sen. Bingaman, Chair of the Energy Committee, and Senators Levin, Harkin and Feinstein clarified the respective jurisdictions of the FERC and the CFTC in the CFTC Reauthorization Act passed last month by the Senate as part of the Farm Bill...
Senate Passes Bill to Close Enron
Posted on January 03, 2008Senate Passes Bill to Close Enron LoopholeA measure reauthorizing the CFTC and closing the Enron loophole has been tacked on to a bipartisan Farm Bill and passed by the Senate. The Feinstein amendment to the Farm Bill regulates energy transactions that perform a significant price discovery function...
Maine?s Take on Investment Adviser Hedge Clauses and Assets Under Management
Posted on January 03, 2008Recently, an investment adviser queried the Maine Office of Securities whether a hedge clause such as the following placed in a client?s contract was appropriate:"Except for negligence or malfeasance, or violation of applicable law, neither you nor any of your officers, directors or employees shall be liable hereunder for any action performed or omitted to be performed or for any errors of judgment in managing the account...
Companies Urged to Dialogue with
Posted on January 01, 2008Companies Urged to Dialogue with SEC Staff on Accounting JudgmentsWith the coming of judgment-driven principles-based standards, the SEC staff urges companies to engage in continuing upward dialogue regarding their accounting judgments made while preparing financial statements...
Walker Report Looks At Private
Posted on December 30, 2007Walker Report Looks At Private Equity Duties to StakeholdersNoting that business leadership represents the largest concentration of power that is not derived from or accountable to an elected body, the recent Walker report on private equity transparency discusses the legitimizing of corporate power with regard to stakeholders such as employees and suppliers...
Japanese Regulator Proposes Broad
Posted on December 29, 2007Japanese Regulator Proposes Broad Market ReformsThe Japanese Financial Services Authority has proposed wide-ranging reforms of the markets with a package of securities, banking and taxation changes. The reforms are designed to increase the global competitiveness of Japanese financial markets and increase the diversity of financial products while ensuring market fairness and transparency...
SEC Official Outlines MD&A
Posted on December 27, 2007SEC Official Outlines MD&A Disclosure on Fair Value in Wake of Sub-Prime CrisisAs negative news about the current credit environment multiples, the MD&A must give investors information about companies' exposure to sub-prime securities or other higher risk loans, noted an SEC official, risks related to off-balance structures which have the potential to become on-balance sheet structures, and exposure to investments that are not easily valued...
SEC and European Commission Seek
Posted on December 25, 2007SEC and European Commission Seek More Transparency for Sovereign Wealth FundsAs sovereign wealth funds grow larger than all of the world's hedge funds combined, the SEC and European Commission are trying to increase the transparency in the funds while avoiding protectionism...
Treasury and SEC Call for Best
Posted on December 24, 2007Treasury and SEC Call for Best Practices for Sovereign Wealth FundsSovereign wealth funds have exploded into the regulatory consciousness and the result has been a call from the Treasury and the SEC for best practices for these opaque vehicles. US regulators will work through the vehicle of the President's Working Group on Financial Markts to develop bi-lateral and multilateral initiatives to achieve greater transparency for these sovereign investment pools...
SEC Senior Official Examines Auditor
Posted on December 22, 2007SEC Senior Official Examines Auditor Independence IssuesAt a recent conference, a senior SEC accounting official made some interesting remarks on the ever-popular issue of auditor independence, particularly on the factors the SEC considers when deciding on what is a network firm and on what advice outside auditors could give a company client without impairing their independence...
Key Senator Calls on SEC to Fully
Posted on December 20, 2007Key Senator Calls on SEC to Fully Use SRO Audits and ResourcesIn a letter to SEC Chairman Christopher Cox, Senator Charles Grassley asked the Commission to remedy its failure to tap investigative resources provided by the SROs by implementing a plan allowing the SEC to consider such information as part of its work to safeguard market integrity...
4th Circuit Finds Venue Proper
Posted on December 18, 20074th Circuit Finds Venue Proper Through EDGAR ServerA fraud defendant who did business in Las Vegas will have to defend criminal charges in the Eastern District of Virginia based on the filing of allegedly false Form 10-Q reports. In a December 14, 2007, decision, a 4th Circuit panel found that venue was proper in the Eastern District, even though, as the court acknowledged, the defendant's "lone contact with the Eastern District for the purposes of this offense" was the fact that "EDGAR?s Management Office of Information and Technology and the system?s computer servers, which store the transmitted files and make them publicly available through the EDGAR website, are located in Alexandria, Virginia, in the Eastern District of Virginia...
House Report Finds Deficiencies
Posted on December 16, 2007House Report Finds Deficiencies in Disclosure of Exec Comp ConsultantsA House oversight committee report found widespread and pervasive conflicts of interest among executive compensation consultants. Indeed, over 100 large public companies hired compensation consultants with substantial conflicts of interest in 2006...
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I feel everyone should be treated equal in this world, but in a lot of cases that doesn't happen. I live in a white community with only 2 to 3 African American families. I belong to one of them. A week after getting into
I would call the courthouse and ask for the judges assistant, and ask them why t...
I live in Sarasota, FL and am appalled at the apartment living conditions in this area. How in the world do they get away with building these apartments with no insulation to keep the noise down between floors (and walls
Talk to your local political representatives to see if you can find somebody sym...
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Bar issues include constant trash in front of my business, left over open containers of alcohol and broken beer bottles in parking lot. Overnight parking in front of my business from bar customers who drank too much and
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