Corporate & Securities Law

UK Legislation Would Impose Responsibility Tax on Financial Institutions

Posted on December 10, 2010
In order to reduce risk taking by financial institutions as part of the overall regulatory reform effort to reduce systemic risk, UK Treasury draft legislation would impose a financial responsibility tax, called a bank levy, on UK banking groups and some US and other foreign banking groups operating in the UK...

SEC Senior Official Advises Audit Firms on When to Seek Interim Commission Review of PCAOB Inspection Reports

Posted on December 10, 2010
A senior official in the SEC Office of Chief Accountant has cautioned that nothing about the Commission?s interim review process of the PCAOB?s inspection reports, codified in recently adopted Rule 140, changes the auditor?s responsibility to consider and address all of the Board?s findings in accordance with Board standards...

Hong Kong Will Require Central Clearing and Trade Repositories for OTC Derivatives

Posted on December 10, 2010
Hong Kong regulatory authorities announced that they will implement a trade repository and central counterparty regime for OTC derivatives in line with G-20 principles and harmonized with the Dodd-Frank Act derivatives regulatory provisions and the derivatives legislation that emerges from the European Union...

SEC and CFTC Receive Funding Increase in House Resolution to Help Them Carry Out Dodd-Frank Mandates

Posted on December 09, 2010
A continuing resolution passed by the House to fund the government in FY 2011 provides a boost in SEC and CFTC funding so that the agencies can carry out the mandates of the Dodd-Frank Act. The Senate has yet to act on the continuing resolution. The House Appropriations Committee says that the SEC and CFTC will be provided with the resources necessary to combat the financial fraud and excessive risk-taking that provoked the 2008 financial crisis...

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European Commission Proposes Changes to MiFID to Require Exchange or Electronic Platform Trading of OTC Derivatives

Posted on December 08, 2010
As part of an overall reform of the Markets in Financial Instruments Directive, the European Commission proposes to require the trading of standardized and liquid OTC derivatives on exchanges or electronic trading platforms, or on a specific sub-regime of organized trading facilities to be defined by MiFID...

NASAA Defends Ninth Circuit's Ruling on Pleading Scienter

Posted on December 08, 2010
The North American Securities Administrators Association (NASAA) has asked the U.S. Supreme Court to uphold a recent ruling of the Ninth Circuit Court of Appeals regarding the requirements for pleading scienter in securities fraud actions. Filing a joint amicus brief with AARP in the case of Matrixx Initiatives, Inc...

Supreme Court Oral Argument in Fund Adviser Attribution Case Explores the Unique Fund-Adviser Relationship

Posted on December 07, 2010
The oral argument before the US Supreme Court in a case involving the attribution to a fund manager of allegedly fraudulent statements in the fund?s prospectus intensively explored the relationship between a fund and the investment adviser that created it...

Montana Delays Class Filing Requirement for Investment Companies

Posted on December 07, 2010
The following is a December 2, 2010 addendum to a Montana memo from October, 2010 that was published on the blog (and reprinted below the addendum).Addendum: Effective December 2, 2010 investment company issuers may continue to file at the PORTFOLIO level until a legal challenge to the Montana Commissioner of Insurance and Securities' (CSI) decision for issuers to file at the CLASS level is challenged in court by hearing in late January, 2011...

South Dakota Adopts Reg. D and Other Exemption, Registration Changes

Posted on December 07, 2010
Rule amendments adopted by the South Dakota Securities Division, effective December 9, 2010, include the following:* For Reg. D Rule 504, 505 and 506 offerings, an electronically or manually signed copy of Form D may be filed; the appendix and Form U-2 requirement were eliminated...

NASAA Supports Private Actions Against Fund Advisers

Posted on December 07, 2010
The North American Securities Administrators Association (NASAA) has filed a joint amicus brief with AARP in the case of Janus Capital Partners v. First Derivative Traders, urging the U.S. Supreme Court to affirm a Fourth Circuit decision that permitted mutual fund investors to go forward with a private action against the funds' adviser for allegedly fraudulent statements contained in the funds' prospectuses...

UK Parliamentary Committee Hears Testimony on Audit Concentration and Joint Audits from the Big Four

Posted on December 06, 2010
Audit concentration in the Big Four global audit firms is not likely to change any time soon and mandating joint audits is not the answer, according to testimony by Big Four senior officers before a UK Parliamentary select committee. There is also a growing global consensus on the beneficiality of the UK Audit Firm Governance Code...

House Legislation Would Require State and Local Governments to Report on Pension Plans or Lose Ability to Sell Federally Tax Exempt Bonds

Posted on December 06, 2010
Legislation introduced by three prominent Republican House members would require state and local governments to report their pension liabilities to Treasury using a uniform accounting standard providing realistic rates of return and tying assets to more reasonable fair market valuations or risk losing their ability to market federally tax exempt bonds...

CAQ Amicus Brief Says that Supreme Court Case on Attributing Funds? Statements to Investment Adviser Has Great Impact on Outside Auditor Community

Posted on December 06, 2010
With its keen interest in legal rules affecting independent auditors of financial statements, the Center for Audit Quality has filed an amicus brief in a private securities fraud case before the US Supreme Court concerning whether an investment adviser to a family of funds can be liable under Rule 10b-5 for statements that are made by and attributed to the funds if the adviser participated in the drafting and dissemination of the statements and if a court infers that interested investors would attribute the statements to the adviser...

UK Supreme Court Explains Fiduciary Duty Limits of De Facto Directors

Posted on November 25, 2010
The UK Supreme Court has ruled that a person who created 42 companies to service the tax and business needs of IT contractors, and also created a company to be the sole director of each of the 42 companies with himself as the director of that corporate director, was not the de facto director of each of the 42 companies...

Bachus Asks for SEC-Like Transparency in Setting Up Bureau of Consumer Financial Protection

Posted on November 25, 2010
The incoming Chair of the House Financial Services Committee wants to see more transparency and accountability in the process of establishing the new Bureau of Consumer Financial Protection mandated by the Dodd-Frank Act. In a letter to Treasury officials, Rep...

UK Financial Minister Hails Passage of Non-Protectionist Legislation Regulating Hedge Funds

Posted on November 24, 2010
Recently enacted non-protectionist EU hedge fund legislation is an achievement that looked doubtful six months ago, said UK Financial Services Secretary Mark Hoban, but he hailed the Alternative Funds Managers Directive as a signal success for the free cross-border movement of capital...

Florida Adopts Discliplinary Guidelines for Dealers, Investment Advisers and Associated Persons

Posted on November 24, 2010
Disciplinary guidelines applicable to each ground for which disciplinary action may be taken against an individual or firm were adopted by the Florida Office of Financial Regulation, effective November 22, 2010. The guidelines as contained in the "Office of Financial Regulation, Division of Securities, Disciplinary Guidelines for Dealers, Investment Advisers and Associated Persons" specify a range of penalties based on the severity and repetition of specific offenses, and distinguish minor violations from violations that endanger the public health, safety or welfare, provide reasonable notice to the public of the penalties imposed for proscribed conduct and ensure that the penalties are imposed in a consistent manner, but listed mitigating or aggravating circumstances allow the Office to impose penalties other than those specified in the guidelines...

Indiana Extends Deadline for Filing New Part 2 of Form ADV

Posted on November 23, 2010
The deadline for filing new Part 2 of Form ADV was extended from December 31, 2010 to February 28, 2011 by the Indiana Securities Division. Investment advisers are cautioned, however, that the date for filing Part 1 and paying the renewal fees remains at December 31, 2010.

FSOC Issues ANPR in Effort to Determine Which Securities Clearance and Settlement Utilities Are Systemically Important

Posted on November 23, 2010
As envisioned by the Dodd-Frank Act, the Financial Stability Oversight Council has issued an advanced notice of proposed rulemaking (ANPR) as a precursor of adopting regulations governing a determination when a financial market utility is systemically important...

Chinese Auditing Standards Board Is in Full Convergence with International Financial Auditing Standards

Posted on November 23, 2010
The Chinese Auditing Standards Board has adopted financial auditing standards that are in full convergence with the clarified international auditing standards promulgated by the IAASB. The standards will take effect for audits of financial statements for periods beginning on or after January 1, 2011...

Securities Industry Seeks Nuanced Approach to Uniform Federal Fiduciary Standard for Advisers and Brokers

Posted on November 23, 2010
While generally supporting SEC regulations implementing a uniform federal fiduciary standard for investment advisers and brokers, the securities industry asks the Commission to adopt a nuanced approach to the standard recognizing that broker-dealers play an important role in retail brokerage, which cannot be easily replicated with alternative service models...

Securities Industry Urges Supreme Court to Apply FRCP Rule 9(b) Standard to Materiality Element of Rule 10b-5

Posted on November 23, 2010
As the US Supreme Court considers the materiality element of Rule 10b-5 for the first time since 1988, the securities industry asks the Court to rule that materiality,like all other elements of a securities fraud, is subject to the heightened pleading standard of Federal Rule of Civil Procedure 9(b) and must pled with particularity...

TEXAS Does Not Adopt But Encourages IAs to Use New Part 2 of Form ADV

Posted on November 22, 2010
New Part 2 of Form ADV is not yet adopted in Texas for use by either investment adviser applicants or registrants but the Securities Board encourages new and currently registered firms to use new Part 2. New investment adviser applicants must file Form ADV Part 1B electronically through IARD, beginning January 1, 2011, and the Securities Board encourages applicants to begin the process by importing new Part 2 instead of old Part II onto IARD...

Ohio Sets Forth Policy on IAs Filing New Part 2 of Form ADV

Posted on November 22, 2010
Investment adviser initial applicants and currently licensed investment advisers filing Form ADV may, between October 12 and December 31, 2010, use either old Part II or new Part 2 of Form ADV. Beginning January 1, 2011, investment adviser initial applicants must file new Part 2A of Form ADV electronically through the IARD, and currently licensed investment advisers must incorporate new Part 2 with their next amended filing of Form ADV...

ether a plaintiff can state a claim

Posted on November 21, 2010
ether a plaintiff can state a claim under § 10(b) of the Securities Exchange Act and SEC Rule 10b-5 based on a pharmaceutical company?s nondisclosure of ?adverse event? reports even though the reports are not alleged to be statistically significant.

SEC Proposes Regulations Implementing Dodd-Frank Mandated Hedge and Private Equity Fund Reporting Regime

Posted on November 20, 2010
The SEC has proposed regulations implementing the regulatory regime for hedge funds and private equity funds mandated by the Dodd-Frank Act. Under the proposed rules, advisers to hedge funds and private funds would have to register with the SEC and provide information on the basic organizational and operational information about the funds they manage, such as information about the amount of assets held by the fund, the types of investors in the fund, and the adviser's services to the fund...

UK Corporate Governance Regulator Updates Guidance for Audit Committees in Light of Financial Crisis

Posted on November 20, 2010
In light of the recent financial crisis and the ongoing economic climate, the UK corporate governance regulator, the Financial Reporting Council, has issued updated guidance for audit committees that focuses on accounting valuations and creating an environment in which the outside auditor can question management with professional skepticism...

Hedge Fund Industry Urges Flexible Volcker Regulations on Market Making and Feeder Funds

Posted on November 18, 2010
In a letter to the SEC and other federal financial regulators, the hedge fund industry said that the regulations implementing Section 619 of Dodd-Frank should not impede two important intermediary functions of banks and brokerage firms: market making and distribution platforms for customers to invest in third-party private funds...

Posted on November 17, 2010

Treasury Official Outlines Role for Office of Financial Research

Posted on November 17, 2010
Mandated by Dodd-Frank to assist the Financial Stability Oversight Council in its work , the Office of Financial Research is working with regulators and industry, laying the groundwork to standardize financial reporting and develop reference data that will identify and describe financial contracts and institutions...

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