Posts Tagged ‘Securities Regulation’

Liabilities Under the Federal Securities Laws

Posted by Paul Vizcarrondo, Wachtell, Lipton, Rosen & Katz, on Saturday September 13, 2014 at 9:00 am
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Editor’s Note: Paul Vizcarrondo is a partner in the Litigation Department of Wachtell, Lipton, Rosen & Katz specializing in corporate and securities litigation and regulatory and white collar criminal matters. This post is based on the introduction of a Wachtell Lipton memorandum by Mr. Vizcarrondo; the complete publication is available here.

This post deals with certain of the liability provisions of the federal securities laws: §§ 11, 12, 15 and 17 of the Securities Act of 1933 (the “Securities Act”), and §§ 10, 18 and 20 of the Securities Exchange Act of 1934 (the “Exchange Act”). It does not address other potential sources of liability and sanction, such as federal mail and wire fraud statutes, state fraud statutes and common law remedies, RICO and the United States Securities and Exchange Commission’s (“SEC”) disciplinary powers.

On December 22, 1995, the Private Securities Litigation Reform Act of 1995 (the “Reform Act” or “PSLRA”) became law after the Senate overrode President Clinton’s veto. Pub. L. No. 104-67, 109 Stat. 737 (1995). Where relevant, this post discusses changes and additions that the PSLRA made to the liability provisions of the Securities Act and the Exchange Act.

…continue reading: Liabilities Under the Federal Securities Laws

Cyber Security and Cyber Governance: Federal Regulation and Oversight—Today and Tomorrow

Posted by Paul Ferrillo, Weil, Gotshal & Manges LLP, on Wednesday September 10, 2014 at 9:00 am
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Editor’s Note: Paul A. Ferrillo is counsel at Weil, Gotshal & Manges LLP specializing in complex securities and business litigation. This post is based on an article authored by Mr. Ferrillo and David J. Schwartz.

In our June 4, 2014 article on cyber security and cyber governance [1] we noted that for many reasons, boards of directors and executives of U.S. companies needed to reexamine how they protect (and respond to the successful hacking of) their most critical intellectual property and customer information. One of the reasons was that all signs out of Washington, D.C. pointed towards increasing federal regulation and oversight of cyber security for public and private companies, and particularly for those in the financial services sector. Further, we foresaw not only heightened scrutiny from regulators, but increasing class action litigation, with plaintiffs accusing boards and management of not taking the appropriate steps to protect company and client data. Our predictions were correct on all fronts.

…continue reading: Cyber Security and Cyber Governance: Federal Regulation and Oversight—Today and Tomorrow

Correcting Some of the Flaws in the ABS Market

Posted by Luis A. Aguilar, Commissioner, U.S. Securities and Exchange Commission, on Tuesday September 9, 2014 at 9:07 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.

Today [August 27, 2014] the Commission takes an important step to protect investors and promote capital formation, by enhancing the transparency of asset-backed securities (“ABS”) and by increasing the accountability of issuers of these securities. The securitization market is critical to our economy and can provide liquidity to nearly all the major economic sectors, including the automobile industry, the consumer credit industry, the leasing industry, and the commercial lending and credit markets.

Given the importance of this market, let’s also remember why we are here and the magnitude of the crisis in the ABS market. At the end of 2007, the ABS market consisted of more than $7 trillion of mortgage-backed securities and nearly $2.5 trillion of other outstanding ABS. However, by the fall of 2008, the securitization market had completely seized up. For example, in 2006 and 2007, new issuances of private-label residential mortgage-backed securities (“RMBS”) totaled $686 billion and $507 billion, respectively. In 2008, private-label RMBS issuance dropped to $9 billion, and flat-lined in 2009.

…continue reading: Correcting Some of the Flaws in the ABS Market

Commissioner Gallagher Offers Advice to Public Companies on Handling Proxy Advisors

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday September 7, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Yafit Cohn, Associate at Simpson Thacher & Bartlett LLP, and is based on a Simpson Thacher memorandum.

Commissioner Daniel M. Gallagher of the Securities and Exchange Commission (“SEC”) authored a working paper, published last month by the Washington Legal Foundation, regarding the outsized power and influence of proxy advisory firms. [1] In his paper, Commissioner Gallagher provides his view of the most important aspects of Staff Legal Bulletin No. 20 (“SLB 20”), in which the SEC staff recently “moved toward addressing some of the serious issues” resulting from the emergence of proxy advisory firms as a dominant player in American corporate governance. Notably, Gallagher also offers some critical advice to public companies engaging with proxy advisory firms.

…continue reading: Commissioner Gallagher Offers Advice to Public Companies on Handling Proxy Advisors

Outsized Power & Influence: The Role of Proxy Advisers

Posted by Daniel M. Gallagher, Commissioner, U.S. Securities and Exchange Commission, on Friday September 5, 2014 at 9:00 am
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Editor’s Note: Daniel M. Gallagher is a Commissioner at the U.S. Securities and Exchange Commission. The following post is based on a Washington Legal Foundation working paper by Mr. Gallagher; the complete publication, including footnotes, is available here.

Shareholder voting has undergone a remarkable transformation over the past few decades. Institutional ownership of shares was once negligible; now, it predominates. This is important because individual investors are generally rationally apathetic when it comes to shareholder voting: value potentially gained through voting is outweighed by the burden of determining how to vote and actually casting that vote. By contrast, institutional investors possess economies of scale, and so regularly vote billions of shares each year on thousands of ballot items for the thousands of companies in which they invest.

…continue reading: Outsized Power & Influence: The Role of Proxy Advisers

Statement on Asset-Backed Securities and Credit Rating Agencies

Posted by Mary Jo White, Chair, U.S. Securities and Exchange Commission, on Friday August 29, 2014 at 9:00 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 and 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 Commission will today [August 27, 2014] consider recommendations of the staff for adopting two very important final rules in different, but closely related, areas—asset-backed securities and credit rating agencies.

The reforms before us today will add critical protections for investors and strengthen our securities markets by targeting products, activities and practices that were at the center of the financial crisis. With these measures, investors will have powerful new tools for independently evaluating the quality of asset-backed securities and credit ratings. And ABS issuers and rating agencies will be held accountable under significant new rules governing their activities. These reforms will make a real difference to investors and to our financial markets.

We will first consider the recommendation related to asset-backed securities, and then we will consider the rules relating to credit rating agencies.

…continue reading: Statement on Asset-Backed Securities and Credit Rating Agencies

The Hidden Costs and Underpinnings of Debt Market Liquidity

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday August 26, 2014 at 9:08 am
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Editor’s Note: The following post comes to us from Amar Bhidé, Thomas Schmidheiny Professor at The Fletcher School.

Even as rabble rousers rail against financiers, the powers that be prize the breadth and liquidity of financial markets. Flash traders are investigated for unsettling stock markets and violators of securities laws receive jail sentences on par with violent criminals. The Federal Reserve has spent trillions with the avowed aim of pumping up the prices of traded securities, while expressing little more than the pious hope that this largesse might spill over into old-fashioned, illiquid loans.

…continue reading: The Hidden Costs and Underpinnings of Debt Market Liquidity

New ISDA 2014 Credit Derivatives Definitions

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday August 24, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Fabien Carruzzo, partner and head of the derivatives practice at Kramer Levin Naftalis & Frankel LLP, and is based on a Kramer Levin publication.

September 22, 2014 (the “Implementation Date”) will mark a new chapter in the credit derivatives market with the implementation of the new 2014 ISDA Credit Derivatives Definitions (the “New Definitions”). The New Definitions constitute a major reform of the terms governing credit derivatives products and address numerous issues identified this past decade with regard to credit and succession events and in the context of the Eurozone crisis. Most new credit derivatives trades entered into after the Implementation Date will follow the New Definitions, which are expected to ultimately fully replace the 2003 ISDA Credit Derivatives Definitions (the “Old Definitions”) in the market. Market participants will also have the opportunity to adopt the New Definitions for their portfolio of existing trades.

This post provides an overview of the most significant amendments made to the Old Definitions and describes how the market will migrate to the New Definitions.

…continue reading: New ISDA 2014 Credit Derivatives Definitions

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 by Ms. Ruiz, Nathan A. Howell, Kenneth A. Kopelman, and Michael S. Sackheim.

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

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