1. On 10 April 2014 some of the legislation that provides for the extraterritorial effect of the European Markets Infrastructure Regulation (“EMIR”) came into force. The remaining legislation will come into force on 10 October 2014. This post considers this legislation and the counterparties to which it applies. It also considers whether some counterparties might be able to avoid the extraterritorial effect as a result of the European Commission making an equivalence decision in respect of third country jurisdictions. It considers the European Securities and Market Authority (“ESMA”) advice to date on the equivalence of the regulatory regimes in the US, Japan, Australia, Canada, Hong Kong, India, Singapore, South Korea and Switzerland and notes that even in the US ESMA did not find full equivalence. Finally this post also considers the requirements that third country central counterparties (“CCPs”) and trade repositories must meet in order respectively to provide clearing services to their EU clearing members and to provide reporting services to EU counterparties which enable those counterparties to satisfy their clearing reporting requirements under EMIR.
Posts Tagged ‘Mayer Brown’
Following the publication of Michael Lewis’ new book, Flash Boys: A Wall Street Revolt (“Flash Boys”), plaintiffs’ lawyers and US government regulators have increasingly focused their attention on financial institutions participating in high-frequency trading (“HFT”). Less than three weeks after the release of Flash Boys, private plaintiffs’ lawyers filed a class action lawsuit against 27 financial services firms and 14 national securities exchanges (with additional defendants likely to be named later) alleging that the defendants’ HFT practices in the US equities markets violated the anti-fraud provisions of the federal securities laws. Plaintiffs’ lawyers filed a separate action against The CME Group, Inc. (“CME”) and The Board of Trade of the City of Chicago (“CBOT”) containing similar allegations in US derivatives markets.
On March 5, 2014, the US Court of Appeals for the Federal Circuit agreed to constitute an en banc panel to reconsider a decision issued by the court in Trek Leather Inc. et al. v. United States.  The entire court will reconsider a July 30, 2013 decision issued by a three-judge panel holding that the government had to prove officers and/or shareholders had aided or abetted fraud, or otherwise took actions that justified piercing the corporate veil, in order to hold them personally liable for US customs law violations committed by a corporate entity.  If the full court overrules the three-judge panel, the benefits of incorporation would be mitigated with respect to an officer or shareholder’s actions that result in US customs law violations.
EU proposal for a regulation on structural measures improving the resilience of EU credit institutions
1. On 29 January 2014 the European Commission published a proposal for a regulation of the European Parliament and of the Council “on structural measures improving the resilience of EU credit institutions”. This proposed legislation is the EU’s equivalent of Volcker and Vickers. It was initiated by the Liikanen report published on 2 October 2012 but the legislative proposal departs in a number of ways from the report’s conclusions. There are two significant departures: the legislative proposal contains a Volcker-style prohibition, which also departs from the individual EU Member States’ approach, and, although the proposal contains provisions which mirror the Vickers “ring-fencing” approach they are not, in direct contradiction to Liikanen’s recommendation, mandatory.
Forum-selection clauses are common, and highly useful, features of commercial contracts because they help make any future litigation on a contract more predictable for the parties and, in some cases, less expensive. But what procedure should a defendant use to enforce a forum-selection clause when the defendant is sued in a court that is not the contractually selected forum?
On December 3, 2013, the US Supreme Court issued a decision in Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas that answers this question. The Court held that, if the parties’ contract specifies one federal district court as the forum for litigating any disputes between the parties, but the plaintiff files suit in a different federal district court that lawfully has venue (and therefore could be a proper place for the parties to litigate), the defendant should seek to transfer the case to the court specified in the forum-selection clause by invoking the federal statute that permits transfers of venue “[f]or the convenience of the parties and witnesses, in the interest of justice.” If the contract’s forum-selection clause instead specifies a state court as the forum for litigating disputes, the defendant may invoke a different federal statute that requires dismissal or transfer of the case.
On September 30, 2013, the Division of Market Oversight of the US Commodity Futures Trading Commission (CFTC) released responses to Frequently Asked Questions regarding Commodity Options (FAQ). While intended to be provide non-binding guidance to affected market participants, the FAQ also serves to highlight the significant complexity of the current analysis required for commodity options.
Andrew K. Soto, Senior Managing Counsel for Regulatory Affairs of the American Gas Association (AGA), in written testimony before the US House of Representatives Committee on Agriculture Subcommittee on General Farm Commodities and Risk Management at a recent hearing regarding the Future of the CFTC: End-User Perspectives effectively summarized this complexity as follows:
While the proxy and annual reporting season for calendar year public companies typically heats up in the winter, by autumn preparations for the 2014 season should be underway. The following key issues for the upcoming season are discussed below:
- Current Say-on-Pay Considerations
- Compensation Committee Independence and Compensation Consultants
- NYSE Quorum Requirement Change
- Pending Dodd-Frank Regulation
- Proxy Access
- Specialized Disclosures
- SEC Interpretations Impacting Reporting
- Iran Sanctions Disclosure
- PCAOB Audit Committee Communications Requirements
- Director and Officer Questionnaires
The Delaware Chancery Court has issued three decisions in 2013 that demonstrate the court’s willingness to rein in the excessive and often frivolous litigation challenging public M&A transactions.
Recent trends in shareholder litigation illustrate the magnitude of the litigation issues facing corporations in public M&A transactions. Of the public company acquisition transactions with a value over $500 million that were announced in 2007, 53% were challenged in shareholder litigation. By 2012, 96% of such transactions were subject to shareholder suits, with an average of 5.4 suits filed for each deal. In addition, for Delaware target corporations valued at over $100 million, 65% of the M&A deals announced in 2012 were subject to litigation in Delaware and in at least one other jurisdiction (usually the jurisdiction where the corporation’s principal place of business is located). Finally, for shareholder suits in deals over $100 million that were announced in 2012 and ultimately settled, shareholders received only supplemental disclosures in 81% of such settlements (so-called “disclosure-only settlements”), with plaintiffs’ attorneys fees and expenses being the only cash paid out by defendants in such suits.
On July 5, 2013, the German Federal Council (Bundesrat) decided to raise no objection against the CRD IV Implementation Act passed by the German Federal Parliament (Bundestag) on June 27, 2013. The legislative procedure for this Act, which implements Directive 2013/36/EU (Capital Requirements Directive IV, “CRD IV”) into German law, is thus completed.
Together with Regulation (EU) No. 575/2013 (Capital Requirements Regulation, “CRR”), the CRD IV is part of the so-called “Single Rule Book”. The Single Rule Book enhances the capital adequacy of credit institutions and other institutions regulated by the German Banking Act (“Institutions”), provides for liquidity requirements harmonised throughout the EU, and harmonises the European banking supervisory legislation. Unlike the CRD IV, the CRR does not require implementation; it has a direct and immediate effect on the Institutions.
The Act implementing the requirements of CRD IV will enter into force on January 1, 2014. The German Banking Act (Kreditwesengesetz, “KWG”) will be changed, and a revision of the German Remuneration Regulation for Institutions (InstitutsVergütungsverordnung, “InstitutsVergV”) is expected. Under employment law aspects, the new regulations on bonus caps are of particular importance. This Legal Update outlines the main new regulations and their employment law implications.
On July 12, 2013, the US Commodity Futures Trading Commission (“CFTC”) approved the issuance of an interpretive guidance and policy statement (the “Guidance”) regarding the cross-border application of the swaps provisions of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Although the CFTC may continue to refine its approach to the cross-border regulation of swaps, the Guidance is intended to finalize the proposed interpretive guidance and policy statement issued on July 12, 2012 (the “Proposed Guidance”). Like the Proposed Guidance before it, the Guidance represents the CFTC’s attempt to meet its statutory mandate to (1) regulate swaps that “have a direct and significant connection with activities in, or effect on, commerce of the United States” and (2) prevent the evasion of the swaps provisions of the Dodd-Frank Act.
In brief, the Guidance: (1) defines “US person” and “non-US person,” which are key for applying the CFTC’s extraterritorial framework; (2) establishes the calculation and aggregation methodologies used for determining whether non-US persons engage in swap transactions at levels that trigger swap dealer (“SD”) or major swap participant (“MSP”) registration; (3) categorizes “Entity-Level Requirements” and “Transaction-Level Requirements” and describes their extraterritorial application; (4) discusses the “substituted compliance” framework; and (5) describes the requirements applicable to nonregistered swap participants (“Non-Registrants”).
The CFTC also issued an exemptive order (the “Order”) that effectively provides for the phased implementation of certain aspects of the Guidance. The Order, in many respects, builds upon relief granted in prior CFTC exemptive orders.