Posts Tagged ‘Dodd-Frank Act’

End-User Exception from Dodd-Frank Clearing Mandate and Trade Execution Requirement

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday August 23, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Michele Ruiz, partner in the Derivatives practice at Sidley Austin LLP, and is based on a Sidley publication.

For most commercial end-users of swaps, the mandatory clearing requirement under Dodd-Frank first became applicable on September 9, 2013. Since then, many commercial end-users have relied on the so called “end-user exception” from the clearing mandate to continue executing uncleared swaps with their dealer counterparties. The end-user exception is subject to several conditions, which for SEC filers include undertaking certain corporate governance steps. The generally applicable conditions include reporting of certain information including how the entity relying on the exception generally meets its financial obligations, which reporting may be done annually. In discussing the corporate governance steps that SEC filers must undertake to avail themselves of the exception, the CFTC noted that it expects policies governing the relevant entity’s use of swaps under the end-user exception to be reviewed at least annually (and more often upon triggering events). With the one year anniversary of the initial clearing mandate approaching, this post reviews the scope of the mandate as well as important related requirements and exceptions (including the annual reports and reviews that may be undertaken in the course of qualifying for the exception).

…continue reading: End-User Exception from Dodd-Frank Clearing Mandate and Trade Execution Requirement

Adoption of Cross-Border Securities-Based Swap Rules under the Dodd-Frank Act

Posted by Mary Jo White, Chair, U.S. Securities and Exchange Commission, on Thursday August 21, 2014 at 9:06 am
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Editor’s Note: Mary Jo White is Chair of the U.S. Securities and Exchange Commission. The following post is based on Chair White’s remarks at a recent open meeting of the SEC, 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.

Today [June 25, 2014], the Commission will consider a recommendation of the staff to adopt core rules and critical guidance on cross-border security-based swap activities under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Title VII of the Dodd-Frank Act created an important and entirely new regulatory framework for the over-the-counter derivatives market. Transforming this framework into a series of strong rules is one of the most important tasks remaining before the Commission in discharging our responsibility to address the lessons of the last financial crisis. The events of 2008 and 2009—and the significant role derivatives played in those events—still reverberate throughout our economy.

Properly constructed, the Commission’s rules under Title VII should mitigate significant risks to the U.S. financial system, bring transparency to previously opaque bilateral markets, and provide critical new protections for swap customers and counterparties. And the vital regulatory protections of Title VII are not confined to large multi-national banks and other market participants—they are also essential to preserving the stability of a financial system that is vital to all Americans.

…continue reading: Adoption of Cross-Border Securities-Based Swap Rules under the Dodd-Frank Act

Back-to-Back Court of Appeals Decisions Apply Morrison

Posted by John F. Savarese and George T. Conway III, Wachtell, Lipton, Rosen & Katz, on Tuesday August 19, 2014 at 4:08 pm
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Editor’s Note: John F. Savarese and George Conway are partners in the Litigation Department at Wachtell, Lipton, Rosen & Katz. The following post is based on a Wachtell Lipton firm memorandum by Mr. Savarese and Mr. Conway.

In a one-two punch illustrating the continuing vigor of the presumption against extraterritoriality, the United States Court of Appeals for the Second Circuit, on consecutive days last week, issued important decisions applying Morrison v. National Australia Bank in two disparate but significant contexts under the federal securities laws. Last Thursday, in Liu v. Siemens AG, No. 13-4385-cv (2d Cir. Aug. 14, 2014), the court rejected the extraterritorial application of the whistleblower anti-retaliation provision of the Dodd-Frank Act. And on the very next day, in Parkcentral Global Hub Ltd. v. Porsche Automobil Holdings SE, No. 11-397-cv (2d Cir. Aug. 15, 2014), the court rejected the extraterritorial application of Rule 10b-5 to claims seeking recovery of losses on swap agreements that reference foreign securities.

…continue reading: Back-to-Back Court of Appeals Decisions Apply Morrison

Nationalize the Clearinghouses!

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday August 8, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Stephen J. Lubben, Harvey Washington Wiley Chair in Corporate Governance & Business Ethic at Seton Hall University School of Law.

A clearinghouse reduces counterparty risks by acting as the hub for trades amongst the largest financial institutions. For this reason, Dodd-Frank’s seventh title, the heart of the law’s regulation of OTC derivatives, requires that most derivatives trade through clearinghouses.

The concentration of trades into a very small number of clearinghouses or CCPs has obvious risks. To maintain the vitality of clearinghouses, Congress thus enacted the eighth title of Dodd-Frank, which allows for the regulation of key “financial system utilities.” In plain English, a financial system utility is either a payment system—like FedWire or CHIPS—or a clearinghouse.

But given the vital place of clearinghouses in Dodd-Frank, it is perhaps surprising that Dodd-Frank makes no provision for the failure of a clearinghouse. Indeed, it is arguable that the United States is not in compliance with its commitment to the G-20 on this point.

…continue reading: Nationalize the Clearinghouses!

US Regulatory Outlook: The Beginning of the End

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday August 4, 2014 at 9:23 am
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Editor’s Note: The following post comes to us from Dan Ryan, Chairman of the Financial Services Regulatory Practice at PricewaterhouseCoopers LLP, and is based on a PwC publication. The complete publication, including appendix and footnotes, is available here.

Regulatory delay is now the established norm, which continues to leave banks unsure about how to prepare for pending rulemakings and execute on strategic initiatives. With the “Too Big To Fail” (TBTF) debate about to hit the headlines again when the Government Accountability Office releases its long-awaited TBTF report, the rhetoric calling for the completion of these outstanding rules will once more sharpen.

This rhetoric should not be confused with reality, however. At about this time last summer, Treasury Secretary Lew stated that TBTF would be addressed by the end of 2013—a goal that resulted in heightened stress testing expectations and a vague final Volcker Rule in December, but little more. Since then, the slow progress has continued, with only two key rulemakings completed so far this year: the finalization of Enhanced Prudential Standards for large bank holding companies (BHCs) and a heightened supplementary leverage ratio for the eight largest BHCs (i.e., US G-SIBs).

…continue reading: US Regulatory Outlook: The Beginning of the End

Dodd-Frank At 4: Where Do We Go From Here?

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; the complete text, including appendix, is available here.

Where do we go from here? As we mark another milestone in regulatory reform with the fourth anniversary of the enactment of the Dodd-Frank Act, it strikes us that although most studies required to be undertaken by the Act have been released and final rules have been promulgated addressing many of the most important regulatory measures, we are still living with a great deal of regulatory uncertainty and extraordinary regulatory complexity.

…continue reading: Dodd-Frank At 4: Where Do We Go From Here?

Statement on the Anniversary of the Dodd-Frank Act

Posted by Mary Jo White, Chair, U.S. Securities and Exchange Commission, on Monday July 21, 2014 at 9:11 am
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Editor’s Note: Mary Jo White is Chair of the U.S. Securities and Exchange Commission. The following post is based on Chair White’s recent Public Statement, 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.

The fourth anniversary of the passage of the Dodd-Frank Act provides an opportunity to reflect on why the Act was passed, how the SEC has used the Act to promote financial stability and protect American investors, and what remains to be completed. The financial crisis was devastating, resulting in untold losses for American households and demonstrating the need for strong and effective regulatory action to prevent any recurrence.

…continue reading: Statement on the Anniversary of the Dodd-Frank Act

Delaware Court Denies Attorneys’ Fees for Alleged Dodd-Frank Disclosure Deficiencies

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday July 18, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Stewart D. Aaron, partner in the Securities Enforcement and Litigation practice at Arnold & Porter LLP, and is based on an Arnold & Porter publication by Mr. Aaron and Robert C. Azarow. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Under Delaware’s corporate benefit doctrine, a stockholder who presents a meritorious claim to a board of directors may be entitled to attorneys’ fees if the stockholder’s efforts result in the conferring of a corporate benefit. [1] On June 20, 2014, the Delaware Chancery Court considered in Raul v. Astoria Financial Corporation [2] whether attorneys’ fees are warranted under this doctrine when a stockholder identifies potential deficiencies in executive compensation disclosures required by the SEC pursuant to the Dodd-Frank Act “say on pay” provisions. [3] The court held that the alleged omissions at issue failed to demonstrate any breach of the Board of Directors’ fiduciary duties under Delaware law and accordingly the Plaintiff did not present a meritorious demand to the Board. This decision makes clear that the courts will not shift fees to a stockholder (and the stockholder’s law firm) who “has simply done the company a good turn by bringing to the attention of the board an action that it ultimately decides to take.” [4]

…continue reading: Delaware Court Denies Attorneys’ Fees for Alleged Dodd-Frank Disclosure Deficiencies

Defining Dealers and Major Participants in the Cross-Border Context

Posted by Luis A. Aguilar, Commissioner, U.S. Securities and Exchange Commission, on Sunday June 29, 2014 at 9:00 am
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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 remarks at a recent open meeting of the SEC; 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.

Dealers and major participants play a crucial role in the derivatives market, a market that has been estimated to exceed $710 trillion worldwide, of which more than $14 trillion represents transactions in security-based swaps. In the United States, the Commodity Futures Trading Commission (“CFTC”) and the SEC share responsibility for regulating the derivatives market. Out of the total derivatives market, the SEC is responsible for regulating security-based swaps. As evidenced in the most recent financial crisis, the unregulated derivatives market had devastating effects on our economy and U.S. investors. In response to this crisis, Congress enacted the Dodd-Frank Act and directed both the CFTC and SEC to promulgate an effective regulatory framework to oversee the derivatives market.

…continue reading: Defining Dealers and Major Participants in the Cross-Border Context

Recent Developments in Whistleblower Protections

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday June 26, 2014 at 9:11 am
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Editor’s Note: The following post comes to us from Edmond T. FitzGerald, partner and head of the Executive Compensation Group at Davis Polk & Wardwell LLP, and is based on a Davis Polk client memorandum by Linda C. Thomsen, Antonio Perez-Marques, and Kyoko T. Lin. The complete publication, including footnotes, is available here.

The Sarbanes-Oxley Act of 2002 (“SOX”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) and the Consumer Financial Protection Act (“CFPA”) impose overlapping anti-retaliation provisions that generally prohibit retaliation against corporate “whistleblowers.” Recent headlines of whistleblower awards granted to individuals, especially under Dodd-Frank, underscore the fact that, even if a company’s economic exposure arising from the alleged violation of these provisions may be relatively circumscribed—generally limited to amounts based on the compensation of the employee who is allegedly retaliated against—the “real world” exposure, in the form of reputational and regulatory risk, can be significantly greater.

…continue reading: Recent Developments in Whistleblower Protections

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