Posts Tagged ‘Capital markets’

Preparing for the Regulatory Challenges of the 21st Century

Editor’s Note: Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s recent remarks at the Georgia Law Review’s Annual Symposium, Financial Regulation: Reflections and Projections; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

During my tenure as an SEC Commissioner, our country’s economy has experienced extreme highs and lows. In fact, the country experienced the worst financial crisis since the Great Depression, followed by the current period of significant economic growth where the stock market has grown by around 165% from the low point of the financial crisis.

I have had a front-row seat to all of this, as I became an SEC Commissioner just weeks before the financial crisis hit our nation. As a result, I witnessed first-hand just how fragile our capital markets can be, and the need for a robust and effective SEC to protect them. First, let me provide a snapshot of what went on. I was sworn-in as an SEC Commissioner on July 31, 2008. Within a few weeks, on September 15, 2008, Lehman Brothers filed for bankruptcy. To give you a sense of its rapid decline, within 15 days, its share price went from $17.50 per share to virtually worthless. The demise of Lehman Brothers is often seen as the first in a rapid succession of events that led to an unimaginable market and liquidity crisis. These events included:

…continue reading: Preparing for the Regulatory Challenges of the 21st Century

The Role of Academics and Industry in Improving Equity Market Structure

Posted by Michael S. Piwowar, Commissioner, U.S. Securities and Exchange Commission, on Saturday March 21, 2015 at 9:29 am
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Editor’s Note: Michael S. Piwowar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Piwowar’s recent remarks at the University of Notre Dame, Mendoza College of Business, Center for the Study of Financial Regulation; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Piwowar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Today [March 13, 2015], I want to focus my remarks on the equities markets, and specifically equity market structure. Although it may be hard for some of you in this room to believe, in the 20 months since I began this job, some have suggested that I am a so-called “market structure expert.” While such comments are certainly flattering, I cannot accept the compliment. Of course, my academic research, my private and public sector experience, and my current role as a Commissioner at the Securities and Exchange Commission (“SEC” or the “Commission”) have all given me unique insights into the functioning of our equities markets. However, like many people in this room, I still consider myself a “student of markets.” With so many issues to examine and debate, and the continued evolution of the financial markets, I think we can agree there is more for all of us to observe and learn.

It has been fifteen months since I gave my first speech on equity market structure. Both before and since, my colleagues at the Commission have kept the issue of market structure in the forefront through their own public remarks. Congress also has been expressing keen interest in equity market structure, shining a bright light on the issue. And we have had some unsolicited prompting by a bestselling author, who, to put it lightly, does not have flattering things to say about the current state of the equity markets in what many refer to as simply “The Book.” Given all of this attention, I am frankly disappointed that we at the SEC have accomplished very little.

…continue reading: The Role of Academics and Industry in Improving Equity Market Structure

The Need for Greater Secondary Market Liquidity for Small Businesses

Editor’s Note: Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s public statement at a recent meeting of the SEC Advisory Committee on Small and Emerging Companies; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

I am delighted to see that today’s [March 4, 2015] meeting will discuss the secondary trading environment for the securities of small businesses. The lack of a fair, liquid, and transparent secondary market for these securities is a longstanding problem that needs an effective solution. Indeed, I’ve spoken publicly about this very issue on a number of occasions, most recently less than two weeks ago at the annual SEC Speaks conference. This topic is increasingly urgent in light of certain new, or anticipated, Commission rules required by the JOBS Act that would result in a far wider range of small business securities needing to find liquidity in the secondary markets. Specifically, proposed rules under Regulation A-plus and Crowdfunding, and final rules under Rule 506(c) of Regulation D, would permit wide distributions of securities and also allow such securities to be freely-traded by security holders immediately upon issuance, or after a one-year holding period. These registration exemptions also provide—or are expected to provide—for lesser on-going reporting requirements than is required for listed securities.

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German Stock Market Development, 1870-1938

Posted by Brian R. Cheffins, University of Cambridge, on Monday March 9, 2015 at 9:01 am
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Editor’s Note: Brian Cheffins is Professor of Corporate Law at the University of Cambridge. The following post is based on an article co-authored by Professor Cheffins, David Chambers of Cambridge Judge Business School, and Carsten Burhop of Max Planck Institute for Research on Collective Goods.

Since World War II, Germany’s stock market has been mostly an after-thought, despite a highly successful economy. Why might this be the case? Explanations have included the power and influence of banks, the stakeholder-oriented nature of Germany’s economy and Germany’s civil law heritage. In Law, Politics and the Rise and Fall of German Stock Market Development, 1870-1938 we argue, based on statistical analysis of a hand-collected dataset of initial public offerings (IPOs), that a combination of law and politics during the late 19th and early 20th centuries played a significant role in the evolution of German equity markets. For most of this period Germany had, contrary to the present-day pattern, a stock market that was sizeable in comparative terms. The law helped to foster this trend but legal reforms during the Nazi era reversed matters in a way that had lasting consequences.

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A European Prospectus Revolution?

Editor’s Note: David M. Lynn is a partner and co-chair of the Corporate Finance practice at Morrison & Foerster LLP. The following post is based on a Morrison & Foerster publication by Jeremy C. Jennings-Mares and Peter J. Green.

The EU prospectus regime, based on Directive 2003/71/EC (the “Prospective Directive”) as amended, has been in place now for nearly 10 years and was due to be reviewed by the European Commission by 1 January 2016. However, the European Commission has moved forward its review, and on 18 February 2015 released a consultation [1] on possible reform of the current regime, in conjunction with its Green Paper on a possible EU Capital Markets Union, released on the same date.

The main focus of the proposed EU Capital Markets Union is on improving the access to capital markets for smaller business entities (“SMEs”), in order to broaden the range of funding without the need for bank intermediation. The European Commission considers that the review of the EU prospectus regime is a vital part of developing a Capital Markets Union and, as such, has accelerated the timing of the review by launching its consultation now.

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Keeping Pace with Digital Disruption in our Securities Marketplace

Posted by Kara M. Stein, U.S. Securities and Exchange Commission, on Friday March 6, 2015 at 9:04 am
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Editor’s Note: Kara M. Stein is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Stein’s recent address at the Practising Law Institute’s SEC Speaks in 2015 Conference, available here. The views expressed in the post are those of Commissioner Stein and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Before I begin my remarks, I would like to acknowledge the remarkable and dedicated career of Harvey Goldschmid. Just a few weeks ago, Harvey visited me to discuss his perspectives on a number of timely securities law issues. His superb intellect was reinforced by his engaging personality and skill as a teacher.

Harvey’s intense passion for the securities laws and investor protection was an inspiration to many of us. In authoring a tribute to Harvey Goldschmid in 2006, SEC historian Joel Seligman labeled him one of the most influential Commissioners. [1] I couldn’t agree more.

This conference provides us with an opportunity to look backward and to look forward. As I look back over the SEC’s history, I am always impressed by the rate and degree of change.

Picture Wall Street 80 years ago—the street was filled with dozens of young men—“runners”—carrying paper back and forth between various brokers and dealers and banks and exchanges and companies that made up the securities markets. Runners were the backbone of the securities market, delivering paperwork and stock certificates at a rate of $8 per day. Maybe the telephone would ring (the desk telephone was launched in 1932) or a telegram would arrive. And investors, would look to the newspaper to decide what stocks to buy or sell.

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Chairman’s Address at SEC Speaks 2015

Posted by Mary Jo White, Chair, U.S. Securities and Exchange Commission, on Wednesday February 25, 2015 at 9:04 am
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Editor’s Note: Mary Jo White is Chair of the U.S. Securities and Exchange Commission. This post is based on Chair White’s recent address at the Practising Law Institute’s SEC Speaks in 2015 Conference; the full text, including footnotes, is available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

By every meaningful measure, 2014 was a year of significant accomplishment across all of the agency’s areas of responsibility. The year was highlighted by the completion of several transformative rulemakings, including new policy reforms to address faults exposed during the financial crisis and initiatives to better address vulnerabilities in the resiliency and integrity of our markets. It was also an unprecedented year in enforcement, in terms of the number of cases and, more importantly, their subject matter. We made important strides in our review and action plans for optimizing the structure of our equity and fixed income markets, enhancing our risk supervision of the asset management industry and bolstering the effectiveness of public company disclosure. We also significantly strengthened our examination coverage of market participants. But, as always, we have more to do and expect a very busy 2015.

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Financial Market Utilities: Is the System Safer?

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday February 21, 2015 at 9:24 am
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Editor’s Note: The following post comes to us from Dan Ryan, Leader of the Financial Services Advisory Practice at PricewaterhouseCoopers LLP, and is based on a PwC publication.

It has been two and a half years since the Financial Stability Oversight Council (FSOC) designated select financial market utilities (FMUs) as “systemically important.” These entities’ respective primary supervisory agencies have since increased scrutiny of these organizations’ operations and issued rules to enhance their resilience.

As a result, systemically important FMUs (SIFMUs) have been challenged by a significant increase in regulatory on-site presence, data requests, and overall supervisory expectations. Further, they are now subject to heightened and often entirely new regulatory requirements. Given the breadth and evolving nature of these requirements, regulators have prioritized compliance with requirements deemed most critical to the safety and soundness of financial markets. These include certain areas within corporate governance and risk management such as liquidity risk management, participant default management, and recovery and wind-down planning.

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Acquisition Financing 2015: the Year Behind and the Year Ahead

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday February 4, 2015 at 9:02 am
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Editor’s Note: The following post comes to us from Eric M. Rosof, partner focusing on financing for corporate transactions at Wachtell, Lipton, Rosen & Katz, and is based on a Wachtell Lipton memorandum.

Acquisition financing activity was robust in 2014, as the credit markets accommodated increased demand from rising M&A activity. At over $749 billion, global 2014 M&A loan issuance was up approximately 40 percent year over year, the highest total since before the Great Recession. While the aggregate figures suggest a borrower-friendly market, the actual picture is more nuanced. Investment grade acquirors benefited from a consistently strong financing environment throughout 2014 and finished the year with a flourish (including a $36 billion commitment backing Actavis’ acquisition of Allergan), while leveraged acquirors encountered more volatility, as lenders responded quickly to regulatory changes and market conditions, and both high-yield commitments and debt became more costly.

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SEC Adopts Regulation SCI to Strengthen Securities Market Infrastructure

Posted by Annette L. Nazareth, Davis Polk & Wardwell LLP, on Wednesday January 7, 2015 at 8:50 am
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Editor’s Note: Annette Nazareth is a partner in the Financial Institutions Group at Davis Polk & Wardwell LLP, and a former commissioner at the U.S. Securities and Exchange Commission. The following post is based on a Davis Polk client memorandum by Ms. Nazareth, Lanny A. Schwartz, Jeffrey T. Dinwoodie, and Zachary J. Zweihorn.

On November 19, 2014, the Securities and Exchange Commission unanimously voted to adopt Regulation Systems Compliance and Integrity (“Regulation SCI”), a set of rules designed to strengthen the technology infrastructure of the U.S. securities markets. Regulation SCI replaces and builds on the SEC’s voluntary Automation Review Policy, which is currently mainly applicable to national securities exchanges, expanding upon existing practices and making them mandatory. Regulation SCI will apply to operators of certain alternative trading systems (“ATSs”), market data information providers and clearing agencies, in addition to national securities exchanges, subjecting these entities and, indirectly, certain officers to extensive new compliance obligations, with the goals of reducing the occurrence of technical issues that disrupt the securities markets and improving recovery time when disruptions occur.

…continue reading: SEC Adopts Regulation SCI to Strengthen Securities Market Infrastructure

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