Corporate & Securities Law

Vice-Chancellor Strine Distinguishes

Posted on March 09, 2008
Vice-Chancellor Strine Distinguishes Rulings Involving Delay of Shareholder VoteRecently, I blogged about a decision by Vice Chancellor Strine that a contested corporate election of directors was so tainted by management?s inequitable conduct that the Delaware Chancery Court set the results aside and ordered a new election...

Decision to Reject Merger and Deregister

Posted on March 09, 2008
Decision to Reject Merger and Deregister with SEC Protected by Business Judgment RuleA company board of director?s rejection of a merger offer and their termination of a process they had begun to sell the company was protected by the business judgment rule...

NY Fed President Calls for Broad

Posted on March 08, 2008
NY Fed President Calls for Broad Reform of Securitization ProcessNY Fed President Timothy Geithner has called for the comprehensive reform of the entire securitization process in light of the ongoing crisis in the financial markets. Improper valuations of complex securitized instruments and inadequate risk management significantly contributed to the problem, in his view...

UK Report on Financial Stability

Posted on March 05, 2008
UK Report on Financial Stability Targets FSA and Credit Rating AgenciesA seminal report by the UK Treasury Select Committee concluded that the framework by which the public authorities issue warnings of potential problems in financial markets is deficient and recommends that in future the Financial Services Authority and the Bank of England highlight the two or three most important risks in a short covering letter to financial institutions, for discussion at board level...

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Form D Electronic Filers Will Need CIK Code

Posted on March 05, 2008
Issuers will need to obtain a CIK code to file Form D electronically through EDGAR once the mandate for electronic filing takes effect March 16, 2009. Reporting companies have already been assigned CIK numbers by the SEC, along with many nonreporting companies, but all issuers will need to obtain a CIK code to file Form D electronically...

European Commission Supports Code

Posted on March 03, 2008
European Commission Supports Code of Conduct for Sovereign Wealth FundsThe European Commission has set forth core principles for sovereign wealth funds focusing on the twin pillars of governance and transparency. For now, the Commission is content to allow the IMF to develop a code of conduct for sovereign wealth funds and the OECD to develop best practices, presumably on a comply or explain basis...

Select Commitees Will Push for

Posted on March 02, 2008
Select Commitees Will Push for Auditor Professional Judgment RuleThere is a growing consensus that independent auditors of corporate financial statements need a professional judgment rule to protect them in the age of principles-based regulation. Two important committees formed by the Treasury Department and the SEC are coming to the conclusion that the adoption of a professional judgment framework or rule may be necessary for the success of principles-based standards, such as the PCAOB?s Auditing Standard No...

Corporate Governance Key to Sound

Posted on March 01, 2008
Corporate Governance Key to Sound Risk Management Says Fed's KrosznerSound risk management at financial institutions can be ensured only if directors and senior management establish overall governance that is credible, robust, and consistent throughout the firm, in the view of Federal Reserve Board Governor Randall S...

FASB Will Be Reduced to Five Members

Posted on February 28, 2008
FASB Will Be Reduced to Five Members and Chair Will Set AgendaThe FASB would be reduced from seven to five members on July 1, 2008, with simple majority voting retained, under changes approved by its overseer the Financial Accounting Foundation. It is envisioned that the new five-member FASB would be composed of an auditor, a preparer, an academic, a financial statement user, and one at-large, best-qualified member...

Management Conduct Taints Board

Posted on February 27, 2008
Management Conduct Taints Board Election, VC Strine Orders New OneA contested corporate election of directors was so tainted by management?s inequitable conduct that the Delaware Chancery Court set the results aside and ordered a new election. The court ruled that management failed to disclose an agreement to obtain the votes of one insurgent shareholder by promising to expand the board and let the insurgent name the new director...

GAO Report Finds Market Discipline

Posted on February 26, 2008
GAO Report Finds Market Discipline Alone Cannot Manage Hedge Fund RiskWhile market discipline is becoming more effective for managing hedge fund risk, concluded a GAO report, it may not be enough by itself since a number of factors limit its effectiveness and it is not always properly exercised...

IRS Revenue Ruling on Executive

Posted on February 23, 2008
IRS Revenue Ruling on Executive Comp Plans Appears to be ProspectiveThe Internal Revenue Service revenue ruling that cast doubt on the exclusion of some performance-based executive compensation from the $1 million pay cap mandated by IRC §162(m) if a company wants to deduct an executive?s pay from its income tax will apparently be applied prospectively...

IRS Revenue Ruling Impacts Executive

Posted on February 22, 2008
IRS Revenue Ruling Impacts Executive Compensation Plans and DisclosureIn response to a letter from 90 global securities law firms, the Internal Revenue Service issued a revenue ruling essentially backing up an earlier private letter made public by the IRS (LTR 200804004) that cast doubt on the exclusion of some performance-based executive compensation from the $1 million pay cap mandated by IRC §162(m) if a company wants to deduct an executive?s pay from its income tax...

McCreevy Urges Hedge and Private

Posted on February 21, 2008
McCreevy Urges Hedge and Private Equity Funds to Adhere to Codes of ConductThe continued light regulation approach to hedge and private equity funds is conditioned on these funds complying with the recent codes of conduct adopted by the Hedge Fund Working Group and the Walker Working Group, in the view of EU Commissioner for the Internal Market Charlie McCreevy...

ISDA Promotes MiFID for Harmonized

Posted on February 20, 2008
ISDA Promotes MiFID for Harmonized Regulation of Complex Structured SecuritiesAn ISDA led consortium told the European Commission the model provided by the Markets in Financial Instruments Directive (MiFID) is best adapted to the creation of a product-blind harmonized regulatory regime for complex structured securities products, The Commission is exploring the need for a harmonized legal framework regarding product transparency and distribution requirements for complex retail investment products...

Australian Regulator Adopts Principles

Posted on February 19, 2008
Australian Regulator Adopts Principles for Sovereign Wealth FundsAs the debate rages in the EU and US about the best way to achieve transparency for sovereign wealth funds, the Australian Treasurer has adopted principles for sovereign wealth fund investments...

FSA Chair Seeks Global Standards

Posted on February 18, 2008
FSA Chair Seeks Global Standards on Managing Liquidity RiskIn a major address to the Basel Committee on Banking Supervision, FSA Chair Callum McCarthy called for a uniform international policy on liquidity risk to provide clarity to global financial institutions and other market participants...

Chairman Cox Details SEC's Sub-Prime

Posted on February 18, 2008
Chairman Cox Details SEC's Sub-Prime Agenda for 2008Chairman Christopher Cox outlined the SEC's top priorities in 2008 in an appearance at the Practising Law Institute's "SEC Speaks" conference in Washington DC. A large part of the Commission?s agenda will be to examine the role of market participants in the recent financial markets turmoil...

Feinstein Amendment to Farm Bill

Posted on February 17, 2008
Feinstein Amendment to Farm Bill Would Close Enron LoopholeA measures reauthorizing the CFTC and closing the Enron loophole have been tacked on to a bipartisan Farm Bill and passed by the Senate. The bill is now in conference with a House-passed Farm Bill...

Federal Court Rules Sarbanes-Oxley

Posted on February 16, 2008
Federal Court Rules Sarbanes-Oxley Whistleblower Statute Applies Outside USIn a seminal ruling of broad application, a federal judge held that the Sarbanes-Oxley whistleblower protection statute embraced a US employee of a foreign company who worked in the firm?s French subsidiary and who alleged that US-based executives retaliated against her for questioning the firm?s fraudulent evasion of French social security taxes...

Southern District of New York Rejects

Posted on February 15, 2008
Southern District of New York Rejects Selective Privilege Waiver"I conclude that selective waiver is not in the long-term best interests of the government, the adversarial system, or litigants," wrote U.S. District Judge Shira Scheindlin of the Southern District of New York...

IRS Letter Ruling Impacts Executive

Posted on February 14, 2008
IRS Letter Ruling Impacts Executive Compensation DisclosureA private letter ruling recently made public by the IRS (LTR 200804004) cast doubt on the exclusion of some performance-based compensation from the $1 million pay cap mandated by IRC §162(m) if a company wants a deduction...

IOSCO: Tell Investors What Accounting

Posted on February 12, 2008
IOSCO: Tell Investors What Accounting Standards Used in FinancialsIOSCO urges companies to disclose to investors the accounting standards that were used to prepare their annual report and other financial statements. Michel Prada, Chairman of the IOSCO Technical Committee, expressed concern that, with the convergence of global accounting standards, investors may assume that all company accounts are generally comparable when that may not be the case...

SEC, FINRA and NASAA Create Senior Investor Initiative

Posted on February 11, 2008
SEC Chairman Christopher Cox, FINRA Chief Executive Officer Mary Schapiro and NASAA Present Karen Tyler signed onto an initiative to protect senior investors from fraud. The initiative is not an exam, sweep or survey but rather a voluntary opportunity for financial services firms to dialogue with the SEC, FINRA and NASAA about the effectiveness of the firms' current practices to serve seniors in the following areas: marketing and advertising; account opening; product and account review; ongoing review of the appropriateness of products; meeting the changing needs of customers as they age; surveillance and compliance reviews; and training for firm employees...

House Bill Would Mandate Study

Posted on February 11, 2008
House Bill Would Mandate Study of Tax Treatment of Hedge FundsA bill to create a commission of ten members to study the tax treatment of hedge funds and private equity has been introduced in the House by Rep. John Larson. Membership of the commission would be comprised of experts chosen by House and Senate leaders within thirty days of the bill?s enactment...

Cross-Border Insider Trading Action

Posted on February 06, 2008
Cross-Border Insider Trading Action Shows SEC Commitment to Protect Global MarketsFour Hong Kong residents have settled an SEC enforcement action charging them with illegal tipping and insider trading in the securities of a target company in the weeks before the public disclosure of an unsolicited $60 per share acquisition offer for the target...

Lagarde Report Emphasizes Enhanced

Posted on February 05, 2008
Lagarde Report Emphasizes Enhanced Internal ControlsA report by the French Finance Minister on the operational loss of 4.9 million euros at a global financial institution identified a number of internal control issues that could have been decisive in light of information provided by the company...

Atkins Supports Legislation to

Posted on February 04, 2008
Atkins Supports Legislation to Curb Agency Abuse of Attorney-Client PrivilegeIn light of pending legislation to stop the SEC and other federal agencies from conditioning a company?s cooperative efforts on waiving the attorney-client and work privileges, Commissioner Paul Atkins noted that the SEC is re-examining its policind procedures with respect to cooperation credit and penalties...

New York's State Securities "Martin Act" Used to Prosecute Mortgage Fraud

Posted on January 31, 2008
New York Attorney General Andrew Cuomo and his Staff have begun using the State's 1921 "Martin Act," i.e., the State's Securities Act, to go after Wall Street Firms for allegedly packaging and selling mortgage securities improperly to an unsuspecting public...

EU Leaders Look at Credit Rating

Posted on January 30, 2008
EU Leaders Look at Credit Rating Agencies; Praise Hedge Fund Working GroupEuropean Union political leaders have called for reform of the credit rating agency process and better risk management in the wake of the recent market turbulence triggered by the sub-prime crisis...

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