The staff of the SEC’s Division of Investment Management (the “Staff”) issued IM Guidance Update No. 2014-5, which provides guidance on responding to selected items in Form N-8F, the from used to apply for deregistration under the Investment Company Act of 1940. Among other matters, the Guidance Update addresses issues particular to unit investment trusts and appropriate responses for different “Abandonment of Registration” scenarios. (more…)
SEC Staff Provides Guidance on Fund Deregistration Applications
New Compliance Regime For U.S. Banks: Asset-Based Leverage Ratios and Other Proposals
The financial crisis generated concern that banks were taking excessive risks and they did not have adequate capital to run their operations. It was not clear if the existing Basel framework demonstrated weakness to contain the crisis or if it was the framework that led to the liquidity crisis and ultimately to the financial crisis. The U.S. government, through the Federal Reserve used funds under TARP to inject liquidity in the financial system. Even today the printing of money (quantitative easing) is going unabated to prop up the economy. Given this background, the regulation of banks has become increasingly important. Under the new Basel III requirements, U.S. regulators are requiring stronger leverage ratios for major U.S. banks. This would restrict banks to limit their borrowing and force them to fund their operations through equity.
Regulation and the Future of Money: Mobile Payment and Virtual Currencies
What exactly is Bitcoin? You may have heard a great deal about this in the media. You may know that it is a virtual currency. You may have heard news that the evaluation of Bitcoin once skyrocketed to a record of $900. But you may not have heard an analysis of Bitcoin and other virtual currencies in the legal community.
Federal Regulators Issue Joint Guidance on Company-Run Stress Tests for Mid-sized Banks
On March 20, 2014, the Board of Governors of the Federal Reserve System announced the results of the annual company-run stress tests for the 30 largest banking institutions, concluding that the institutions have improved their capital positions and are now better positioned to endure conditions of extremely severe stress than they were five years ago. For Mid-sized Banks, this announcement offers a glimpse into the implementation of the stress-test public disclosure requirements, which such institutions are required to meet in 2015.
A Potentially Hostile Tax Environment for Private Equity Firms
On February 26, 2013, the House Ways & Means Committee Chair Dave Camp released a comprehensive tax reform proposal that would categorize private equity funds’ carried interest as ordinary income instead of capital gains. It contends that carried interest, the profit interest in the fund, is a partnership interest held in connection with the performance of a service and should be taxed as ordinary income, since private equity funds are in the active trade or business of developing and selling businesses.
Supreme Court To Reconsider “Fraud-on-the-Market” Presumption in Securities Fraud Class Actions
On March 5, 2014, the U.S. Supreme Court heard oral arguments in the much anticipated case of Halliburton Co. v. Erica P. John Fund, Inc., No. 13-317. The Halliburton case presents a critical issue regarding the viability of maintaining a private securities fraud lawsuit as a class action: whether the plaintiffs are permitted to invoke the “fraud-on-the-market” presumption to establish that there are common issues of reliance sufficient to certify a class.
Underfunded and Overwhelmed Swaps Regulator Devising New Plan for Data Reporting
The Commodity Futures Trading Commission (CFTC) is constructing a new plan to address the unmanageable flood of poor quality trading data that hamstrings its ability to properly monitor market risk. The Commission will release a draft of its plan next week, which seeks to improve the quality of this data, said Commissioner Scott O’Malia on Thursday.
Event Recap: Systemic Risk and the Financial Crisis
On February 25, 2014, the Berkeley Center for Law, Business and the Economy (BCLBE) hosted a lunchtime talk on Systemic Risk and the Financial Crisis by Prof. Steven L. Schwarcz. Prof. Schwarcz is a Professor of Law & Business at Duke University and is well known for his research and scholarship in the area of financial regulation and systemic risk. In his lecture, Prof. Schwarcz focused on how regulations should address systemic risk – “the risk that the failure of financial markets or firms harms the real economy by increasing the cost of capital or decreasing its availability.”
Chairman Camp’s Proposals Place REITs in the Crosshairs
On February 25, House Ways and Means Committee Chairman David Camp (R. Mich.) proposed a dramatic overhaul of the U.S. tax code (the Code). While the “Tax Reform Act of 2014,” (the Proposals) contains a number of previously released tax law changes, it also includes an unexpected and unwelcome strike on many public REITs.
Second Circuit Expands the SEC’s Disgorgement Authority in Insider Trading Cases
Can the SEC require an insider trader to disgorge more than he has personally “swallowed”? The United States Court of Appeals for the Second Circuit answered “yes,” thereby expanding the SEC’s disgorgement authority. Insider traders now have to worry about more than just the criminal and civil liability imposed for the profits they have personally realized: they can now be held responsible for what others have gained from their crimes.