Corporate & Securities Law

SEC Official Defends Regulation

Posted on June 20, 2008
SEC Official Defends Regulation of Investment Banks; But Says Legislation NeededIn the wake of the collapse of Bear Stearns and in the face of calls for a market stability regulator, the SEC Director of Market Regulation Erik Sirri noted changes that the Commission has made to its consolidated supervised entity (CSE) regime for investment banks...

Fed Must Be Given Powers as Market

Posted on June 19, 2008
Fed Must Be Given Powers as Market Stability Regulator Says Treasury ChiefWith the Bear Stearns episode and current market turmoil placing in stark relief the outdated nature of the financial regulatory system, Treasury Secretary Henry Paulson said it is imperative to quickly consider how to give the Federal Reserve Board the authority it needs as the primary market stability regulator to access necessary information from complex financial institutions and the power to mitigate systemic risk in advance of a crisis...

Basel Committee Proposes Updated

Posted on June 18, 2008
Basel Committee Proposes Updated Guidance on Managing Liquidity RiskWith the ongoing crisis caused by the securitization of subprime assets, the Basel Committee for Banking Supervision has proposed updated guidance for managing liquidity risk. While the guidance issued in 2000 remains generally relevant, a Basel working group identified areas that need updating and strengthening...

SEC Staff Legal Bulletin Clarifies

Posted on June 18, 2008
SEC Staff Legal Bulletin Clarifies Registration Exemption for Securities Issued in ReorganizationsIn the first staff legal bulletin in almost three years, the SEC staff has clarified the registration exemption for securities issued in reorganizations...

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COSO Proposes Guidance on Monitoring

Posted on June 17, 2008
COSO Proposes Guidance on Monitoring Internal Controls Over Financial ReportingCOSO has proposed guidance on monitoring internal controls over financial reporting that relies heavily on tone at the top and risk assessment. According to COSO, monitoring is an integral part of internal control over financial reporting...

Company Breached Registration Rights

Posted on June 17, 2008
Company Breached Registration Rights AgreementBy Rodney TonkovicAssociate Writer-AnalystWolters Kluwer Law and BusinessA district court (SD NY) held that a company was obliged under the terms of an agreement to redeem an investor's shares. The action arose out of an alleged breach of a provision in the agreement that the company would redeem its convertible preferred stock for cash or an equivalent value of common stock...

Eurepean Commission Will Regulate

Posted on June 16, 2008
Eurepean Commission Will Regulate Credit Rating AgenciesIn the wake of the SEC?s proposed reform of the regulation of credit rating agencies, the European Commission said that credit rating agencies must be subjected to regulation since, in the words of Internal Market Commissioner Charlie McCreevy, the IOSCO code of conduct for rating agencies has been revealed as a ``toothless wonder...

Levitt Committee Proposes Major

Posted on June 15, 2008
Levitt Committee Proposes Major Changes to PCAOB-SEC Auditor OversightA blue-ribbon Treasury advisory committee has proposed significant and far reaching changes in SEC-PCAOB oversight of the outside auditors of public company financial statements. The Advisory Committee on the Auditing Profession, co-chaired by former SEC Chair Arthur Levitt, focused on improving audit quality and oversight, enhancing the ability of auditors to detect fraud, strengthening corporate governance at audit firms, and expanding the number of global audit firms...

IAASB Nears Completion of Redrafting

Posted on June 13, 2008
IAASB Nears Completion of Redrafting Project as Acceptance of Int'l Standards GrowsThe International Auditing and Assurance Standards Board is on target to complete the redrafting of all its 35 international auditing standards by the end of 2008, noted IFAC President Fermin del Valle at a recent IOSCO seminar, and these standards will be effective for financial periods beginning on or after December 15, 2009...

New Developments in SEC's Comment

Posted on June 12, 2008
New Developments in SEC's Comment Letter Process ReviewedThis post is courtesy of my colleague Mark Nelson, who intensely follows the SEC's comment letter process.This month, the Division of Corporation Finance posted a document titled "Filing Review Process" on its website http://www...

IOSCO to Examine Contingencies

Posted on June 12, 2008
IOSCO to Examine Contingencies for Failure of Global Audit FirmUnder the direction of SEC Chairman Christopher Cox, an IOSCO task force will examine financial audit plans as part of regulatory contingency plans for a disruption in audit services. Among other things, the task force will focus on transparency and governance of audit firms, including the intersection of governance with both firm viability and audit quality...

European Commission Proposes Options

Posted on June 11, 2008
European Commission Proposes Options to Limit Audit Firm LiabilityIn an effort to increase the number of global audit firms, and preserve the existing ones, the European Commission has proposed limitations on auditor liability. This effort is in response to the increasing trend of litigation and the lack of sufficient insurance coverage in the sector...

Insurance Agents Who Recommend the Sale of Securities to Individuals at Financial Planning Seminars

Posted on June 11, 2008
Kentucky has recently grappled with the issue of insurance agents unlicensed to sell or provide advice about securities, in fact, advising the sale of securities to the clients with whom they meet at financial planning seminars to discuss the respective clients' financial portfolio...

Buys and Sells of Promissory Notes a Consequence of Downturned Real Estate Market

Posted on June 11, 2008
One consequence of the downturn in the residential real estate market that is taking place in Missouri among other states is the escalation of offers and sales of promissory notes by promoters to investors. These entrepreneurs are: (1) asking investors to invest in an individual property in exchange for a promissory note secured by a deed of trust in the property; (2) buying a promissory note secured by a mortgage and then selling the note to a third party; (3) acting as an intermediary between people attempting to buy or sell a promissory note; or (4) investing in a company that itself invests in real estate or in a promissory note secured by a mortgage...

SEC Commissioner Designate Paredes

Posted on June 10, 2008
SEC Commissioner Designate Paredes Charts Middle Course for Hedge Fund RegulationSEC Commissioner designate Troy Paredes believes that there is a middle ground on hedge fund regulation between mandatory rules and doing nothing. He says that the Commission can adopt best practices for hedge funds or employ what he calls a default rule under which hedge funds would register with the SEC or explain to investors why they did not...

Geithner Seeks Fed-Centric Unified

Posted on June 09, 2008
Geithner Seeks Fed-Centric Unified Regulation of Global Commercial and Investment BanksNY Fed President Timothy Geithner has called for the uniform and consolidated regulation of global commercial banks and investment banks with the Fed playing a central role in the new framework...

BIS Chief Outlines Plan to Reform

Posted on June 08, 2008
BIS Chief Outlines Plan to Reform Securitization ProcessRecognizing that securitization remains essential to the global financial markets despite its role in the subprime crisis, Bank for International Settlement General Manager Malcolm Knight has set forth a reform plan focusing on better risk management, less reliance on rating agencies, and a fuller understanding of tranche exposures...

Geither Report Urges Enhanced Risk

Posted on June 08, 2008
Geither Report Urges Enhanced Risk Management in Cross-Border Clearance and SettlementThe globalization of the cross-border clearance and settlement system underpinning the financial markets has increased incentives for financial institutions to reduce the risks and costs of their payment and settlement activities, according to a report issued by the BIS Committee on Payment and Settlement Systems...

If Elected, Obama Would Make Say

Posted on June 08, 2008
If Elected, Obama Would Make Say on Pay Legislation a PriorityIt has become clear that Senator Barack Obama would make non-binding shareholder advisory votes on executive compensation a securities regulation legislative priority should he be elected President...

Senate Bill Would Close Foreign

Posted on June 06, 2008
Senate Bill Would Close Foreign Energy Commodites Trading LoopholeA bill designed to ensure that energy commodities traded on foreign exchanges using trading terminals located within the United States are subject to the same speculative trading limits and reporting requirements as energy commodities traded on U...

Former CFTC Official Says the Way

Posted on June 05, 2008
Former CFTC Official Says the Way Enron Loophole Closed Will Lead to Regulatory ArbitrageA former senior CFTC official maintains that the manner in which the recent Farm Bill closed the Enron Loophole will lead to further regulatory arbitrage. In testimony before the Senate Commerce Committee, former Director of the Trading and Markets divisionMichael Greenberger said that, rather than simply bringing all energy futures contracts within the full U...

UK Audit Regulator Proposes Regulation

Posted on June 05, 2008
UK Audit Regulator Proposes Regulation of non-UK Auditors as Equivalence Looms for EUAgainst the backdrop of the European Commission?s transitional equivalence arrangements for non-EU audit firms, the UK Professional Practices Board has proposed rules for non-UK audit firms falling within the arrangements...

Canadian Appeals Court Extends

Posted on June 04, 2008
Canadian Appeals Court Extends Revlon Doctrine to BondholdersIn a significant and groundbreaking ruling, a Canadian appeals court said that the Delaware doctrine requiring directors to maximize shareholder value through an auction process when a company is in play also applies to bondholders...

PCAOB's Constitutionality Argued

Posted on June 02, 2008
PCAOB's Constitutionality Argued Before DC Federal Appeals CourtAt oral argument before a panel of the federal appeals court for the District of Columbia in the action challenging the PCAOB?s constitutionality, one judge called the Board an independent agency within an independent agency which if upheld would be a ``green light for all sorts of new creations...

5th Circuit: No Private Money Damages

Posted on May 29, 2008
5th Circuit: No Private Money Damages Available for13(d) ViolationsA 5th Circuit panel followed the lead of earlier decisions from the 2nd and 11th Circuits and found that no private cause of action for money damages existed for violations of Exchange Act Section 13(d)...

States Propose Adding Senior Provisions to List of Unethical Practices for Broker-Dealers, Agents, IAs and IA Reps.

Posted on May 20, 2008
Missouri, Virginia and Washington are among the first states to propose rules prohibiting state-registered broker-dealers, agents, investment advisers and investment adviser representatives from using certain professional designations that state or imply specialized knowledge of the financial needs of senior investors...

Fed Chair Details Regulatory Response

Posted on May 16, 2008
Fed Chair Details Regulatory Response to Risk Management FailuresFederal Reserve Board Chair Ben Bernanke has concluded that a failure of effective enterprise-wide risk management was a major cause of the recent subprime market turmoil. A regulatory response is demanded, he noted, and the Fed is planning one involving additional guidance and joint international efforts...

With Enron Loophole Closed; Senate

Posted on May 16, 2008
With Enron Loophole Closed; Senate Looks to International MarketsWith the Enron Loophole closed by recent passage of the Farm Bill, key senators now want to ensure adequate market protections for the trading of U.S. energy future contracts on international markets...

Volcker Says Regulate Investment

Posted on May 16, 2008
Volcker Says Regulate Investment Banks Like Commercial Banks in Light of Subprime CrisisFormer Federal Reserve Board Chair Paul Volcker told Congress that the natural corollary of the Fed?s Bear Stearns action is that systemically important investment banks should be regulated along the same basic lines as the commercial banks that they closely resemble...

Veto-Proof Farm Bill Terminates

Posted on May 15, 2008
Veto-Proof Farm Bill Terminates Enron Loophole and Reforms Electronic Energy MarketsCongress has passed a veto-proof measure reauthorizing the CFTC and closing the Enron loophole as part of a massive Farm Bill. Provisions in the Food, Conservation and Energy Act (HR 2419) would end the Enron-inspired exemption from federal oversight now provided to electronic energy trading markets set up for large traders...

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