Corporate & Securities Law

Hong Kong Courts Support SFC?s Corporate Governance Actions

Posted on January 27, 2011
Hong Kong courts have issued rulings backing the Securities and Futures Commission actions against company directors and thereby enhancing the corporate governance of listed companies. Recently, the SFC achieved a breakthrough in investor protection by obtaining orders in the High Court to disqualify company directors on new grounds, namely the failure to make timely disclosure of material information to shareholders...

SEC and CFTC Propose Joint Form for Hedge Fund Advisers and CPOs to Report Systemic Risk Information

Posted on January 26, 2011
Advisers to hedge funds and other private funds would be required to report information for use by the Financial Stability Oversight Council in monitoring risk to the financial system under rules jointly proposed by the SEC and CFTC. The proposed rules would implement Sections 404 and 406 of the Dodd-Frank Act by creating a new Form PF to be filed periodically by SEC-registered investment advisers who manage one or more private funds...

Key Witness Urges Congress to Fund SEC to Properly Implement the Dodd-Frank Act, While Urging Legislative Changes to D-F

Posted on January 26, 2011
It is unwise to cut the budgets of the SEC and other federal financial regulators in an attempt to control or derail the regulatory reforms prompted by Dodd-Frank, said Hal Scott, Chairman of the Committee of Capital Markets Regulation, in testimony before the House Financial Services Committee...

New FASB Chair Reaffirms Commitment to Global Accounting Standards and Supports SEC Financial Reporting Roundtables

Posted on January 25, 2011
Leslie Seidman, new Chair of FASB, said that the Board is very committed to achieving a consistent set of global accounting standards with the IASB. An intensive effort is ongoing to work with the IASB to arrive at a common solution. An example of this approach is the impairment project...

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Hedge Funds Cannot Bring Rule 10b-5 Action in US Federal Court Based on Swap Agreements Referencing Stock of German Company

Posted on January 25, 2011
Global hedge funds managed by US investment managers could not bring a Rule 10b-5 action in a US federal court against a German car manufacturer (Porsche) based on securities-based swap agreements referencing the share price of another German car company (VW)...

Washington State Accredited Investor Definition Further Excludes Indebtedness Secured by Primary Residence

Posted on January 25, 2011
The part of the "accredited investor" definition from the Dodd-Frank Wall Street Reform and Consumer Protection Act that excludes the value of a natural person's primary residence from that person's more than $1 million in net worth at the time of the purchase was adopted by the Washington State Securities Division on January 21, 2011, along with the SEC's further exclusion for the related amount of indebtedness secured by the primary residence up to its fair market value...

Japan FSA Extends Restrictions on Short Selling Until End of April

Posted on January 25, 2011
The Japanese Financial Services Agency has extended its restrictions on short selling until April 30, 2011. The restrictions were to have expired on January 31, 2011. Thus, the regulatory measures on short selling currently in place will continue with regard to all listed stocks in Japan...

SEC Study Mandated by Dodd-Frank Recommends Uniform Federal Fiduciary Standard for Brokers and Advisers; Divided Commission Sends Study to Congress

Posted on January 24, 2011
Based on its review of the broker-dealer and investment adviser industries pursuant to a study mandated by Dodd-Frank Section 913, the SEC staff recommended the adoption of a uniform federal fiduciary standard for brokers and advisers that would be no less stringent than the standard currently applied to investment advisers under Advisers Act Sections 206(1) and (2)...

European Commission Declares US and Nine Other non-EU Countries Equivalent for Inspections of Auditors

Posted on January 24, 2011
The European Commission paved the way for the PCAOB and other non-EU audit overseers and EU audit oversight bodies to mutually rely on each others? inspections of audit firms by recognizing the equivalence of audit oversight regimes in the US and nine other countries...

UK Commission Considers Volcker-Type Structural Reforms for UK Financial Institutions

Posted on January 24, 2011
The UK should consider ring-fencing the retail banking activities of systemically-important financial institutions from their investment banking activities and require them to be capitalized on a stand-alone basis, said Sir John Vickers, Chair of the Independent Commission on Banking...

Treasury and Fed Respond to Chairman Bachus? Request for Information on new Bureau of Consumer Financial Protection

Posted on January 23, 2011
Responding to a request for transparency from House Financial Services Chair Spencer Bachus, Treasury and the Federal Reserve Board indicated that the new Bureau of Consumer Financial Protection plans to have three mission-related directorates: Education and Engagement; Supervision and Enforcement; and a Research, Markets, and Rules division with three components: a research team that studies consumer behavior and product risks; a rulemaking team that drafts rules, interpretations, and guidance; and a markets team that focuses on understanding and monitoring markets for individual products, such as mortgages, credit cards, and student loans...

SEC Enforcement Action Alleges that Senior Officers Misled Outside Auditors in Revenue Recognition Scheme

Posted on January 22, 2011
An SEC enforcement action alleged that senior corporate officials misled the company?s outside audit firm as part of a fraudulent accounting scheme to inflate revenues. The SEC alleged that the company overstated its sales revenues by booking false sales and engaging in improper revenue recognition practices...

Subprime-Fueled Financial Crisis Was Intervening Cause of Investors? Loss Thereby Precluding Rule 10b-5 Recovery

Posted on January 21, 2011
Shareholders of a failed bank alleging that the FDIC?s announcement that it was taking over the bank caused the value of their stock to decline did not adequately allege loss causation under Rule 10b-5, ruled a federal judge (ND GA), since they failed to distinguish losses caused by the bank?s alleged misrepresentations and the intervening subprime crisis that wreaked havoc on the banking industry as a whole...

Dodd-Frank Mandated SEC Study Offers Congress Choice of Users Fees or SROs to Enhance Investment Adviser Oversight

Posted on January 21, 2011
An SEC study mandated by the Dodd-Frank Act recommended users fees or an SRO as a way to enhance the effectiveness of the oversight of investment advisers. At a time when the Commission?s registered investment adviser examination program faces significant capacity challenges, the study recommended imposing user fees on SEC-registered investment advisers to fund an SEC examination program, authorizing one or more SROs to examine, subject to SEC supervision, all SEC-registered investment advisers, or authorizing FINRA to examine dual registrants for compliance with the Advisers Act...

In Letter to President, Banking Industry Seeks Increase in SEC 500-Shareholder Test and Repeal of Dodd-Frank Interchange Fee

Posted on January 20, 2011
In a letter to President Obama praising his Executive Order on repealing burdensome federal regulations, the American Bankers Association also asked that the SEC 500-shareholder threshold be raised and that the Dodd-Frank interchange fee provision be repealed...

Texas Proposes Form D Electronic Filing, Accredited Investor Definitions and IA Part 2 of Form ADV Requirement

Posted on January 20, 2011
The Electronic Form D (EFD) System being developed by the North American Securities Administrators Association (NASAA) for multi-state electronic filing of 2008-adopted Form D was proposed for use in Texas by the State Securities Board, along with new definitions for accredited investors, individual accredited investors and institutional accredited investors, and the use of new Part 2 of Form ADV by investment adviser applicants and registrants...

SEC Brief Defends Proxy Access Rule against Challenge in Federal Appeals Court

Posted on January 20, 2011
The SEC has defended its proxy access rule, Rule 14a-11, as squarely falling within the traditional realm of federal proxy regulation by enabling proxy voters to exercise their ownership rights through the proxy process as effectively as they might have by attending a shareholder meeting...

FSOC Study Begins the Regulatory Implementation of Dodd-Frank Volcker Provisions

Posted on January 19, 2011
The Financial Stability Oversight Council, including the SEC, CFTC and the Fed, has kicked off the rulemaking under the Volcker provisions of Dodd-Frank with a study and recommendations. Dodd-Frank commands that the federal financial regulators adopt final regulations implementing the Volcker provisions within nine months of the study and that they consider the recommendations of the Council in adopting such regulations...

NASAA Concurs With GAO's Financial Planner Study

Posted on January 19, 2011
David S. Massey, President of the North American Securities Administrators Association (NASAA), has issued a statement concurring with the recommendations made by the Government Accountability Office (GAO) in its report, "Regulatory Coverage Generally Exists for Financial Planners, but Consumer Protection Issues Remain...

NASAA Opens Registration for 26th Annual Public Policy Conference

Posted on January 18, 2011
The North American Securities Administrators Association (NASAA) has now opened online registration for its 2011 Public Policy Conference. This year's conference - themed ?Will Washington Choose Investors?? - will be held at the Washington Court Hotel in Washington, D...

At SEC's Request, Supreme Court Will Review Loss Causation Element of Rule 10b-5 in Class Certification Context

Posted on January 18, 2011
In a case the SEC urged the Court to take, the US Supreme Court has agreed to decide if plaintiffs in securities fraud actions must satisfy not only the requirements to trigger a rebuttable presumption of fraud on the market, but must also establish loss causation at class certification by a preponderance of admissible evidence without merits discovery...

President Obama Orders Review to Identify and Repeal Outmoded and Burdensome Federal Regulations

Posted on January 18, 2011
President Obama has issued an Executive Order requiring the periodic review of existing significant federal regulations in order to identify rules that may be outmoded, ineffective or excessively burdensome, and to streamline, expand, or repeal them in accordance with what has been learned...

House Leader Plans Legislation to Bring Budget of Bureau of Consumer Financial Protection under Congressional Appropriations Process

Posted on January 18, 2011
In a letter to Professor Elizabeth Warren, Rep. Randy Neugebauer (R-TX) said that he would develop legislation to bring the operating budget of the Bureau of Consumer Financial Protection under the traditional Congressional appropriations process. The new Chair of the Oversight Subcommittee of the House Financial Services Committee also also seeks more transparency regarding Bureau staffs? meetings with financial industry executives and interactions with the SEC and Fed...

The Warmth of Their Own Suns Can Shine Because of Dr. King

Posted on January 17, 2011
I was taking a part of the South to transplant in alien soil. To see if I could respond to the warmth of other suns. Richard Wright.This is the faith that I go back to the South with, knowing that somehow this situation can and will be changed. Dr. Martin Luther King, Jr...

Global Hedge Fund Association Comments on Implementing EU Hedge Fund Legislation

Posted on January 17, 2011
A global hedge fund association has called for the national implementation of the EU hedge fund adviser legislation to be flexible and proportionate and based on the principles of openness and transparency. The Alternative Investment Fund Managers Directive was passed by the European Parliament last year...

UK FRC Proposes Expanded Independent Audit Reports as Part of Broad Reform of Financial Reporting

Posted on January 15, 2011
The UK Financial Reporting Council has proposed an expanded outside audit report on a company?s financial statements, including a new section on the efficacy of the audit committee report and the identification of matters in the annual report that the auditors believe are incorrect or in consistent with the financial statements or obtained in the course of their audit...

Department of Labor Working with Federal Financial Agencies to Set Up Dodd-Frank Mandated Office

Posted on January 14, 2011
Tucked within the broad package of financial industry reforms contained in the Dodd-Frank Act is a provision mandating that each of over a dozen covered federal financial agencies establish, including the SEC and the FDIC, no later than six months after the law's enactment, an Office of Minority and Women Inclusion (OMWI) to "be responsible for all agency matters relating to diversity in management, employment and business activities...

Eight Senators Ask CFTC to Use Dodd-Frank Powers to Reduce Commodities Speculation

Posted on January 13, 2011
In a letter to CFTC Chair Gary Gensler, Senators Bill Nelson (D-FL) and Maria Cantwell (D-Wash) urged the CFTC to use the power bestowed on it by the Dodd-Frank Act to quickly and aggressively impose position limits on the amount of speculative investment in oil, wheat and other commodities and to reject industry entreaties to delay or weaken the regulations...

Business Judgment Rule Protects Equity Incentive Plan for Directors from Shareholder Challenge

Posted on January 11, 2011
The business judgment rule protected a banking company?s equity incentive plan for directors since the plan was properly approved by the company?s shareholders after consultation with outside advisers and was consistent with equity awards for similarly situated financial institutions, ruled a New Jersey appeals court...

Delaware Adopts Amendments to Limited Offering/Reg D Exemptions and Administrative Hearing, Investigation and Division Organization/Function Rules

Posted on January 11, 2011
Amendments to limited offering and Reg. D exemptions were adopted by the Delaware Division of Securities, together with changes to certain registration, administrative hearing, investigation and Division organization/structure rules. The rule changes take effect January 14, 2011...

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