SEC Focused on Compliance Programs
The Securities and Exchange Commission (SEC) continues to be very focused on compliance programs, and is bringing more enforcement actions to drive home the importance of maintaining a good compliance program. This means the relationship between a board of directors and the fund’s chief compliance officer is of utmost importance.
On Thursday, November 21, the U.S. Department of the Treasury (“Treasury”) announced its third major sale of General Motors (“GM”) common stock since the 2009 bailout, this time unloading 70.2 million shares. The sale, part of Treasury’s pre-defined written trading plan, further reduced Treasury’s GM holdings to 31.1 million shares, or approximately 2.2 percent of GM’s outstanding shares.
The Libor scandal continues unfolding as British prosecutors have identified twenty-two individuals as potential co-conspirators in an investigation of suspected London Interbank Offered Rate (“Libor”) manipulation. Libor, the estimated average interest rate charged by London banks for inter-bank borrowing, is linked to over $300 trillion in loans, financial products and contracts.
The individuals, who were also named in criminal charges brought earlier this year against former Citigroup trader Tom A.W. Hayes and two former brokers at RP Martin Holdings, were notified of the investigation in mid-October. Some of the individuals identified could face additional criminal charges in the United States.
On November 12, 2013, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) published an advance notice of proposed rulemaking (“ANPR”) in the Federal Register seeking information from the public about the operations, disclosures and practices used by debt collectors as well as creditors selling and collecting on their own consumer debts. The ANPR follows the CFPB’s July 2013 issuance of two guidance bulletins (“July 2013 Bulletins”) that address debt collection practices. The CFPB continues to explore ways to uniformly apply federal debt collection requirements to both creditors and debt holders—which are generally exempted from the requirements of the Fair Debt Collection Practices Act (“FDCPA”) when collecting on their own debts—and third- party debt collectors.
As described in our Client Newsflash entitled “SEC Proposes Crowdfunding Rules under JOBS Act,” the Securities and Exchange Commission (“SEC”) recently proposed rules under the JOBS Act (the “Proposed SEC Rules”) that would permit certain private issuers to raise investment capital through “crowdfunding”—a process of enabling a large number of investors to each make relatively small investments in an issuer via the Internet.
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Introduction
The proposed merger of the bankrupt AMR Corporation (parent company of American Airlines – hereinafter American) with US Airways Group, Inc. (parent company of US Airways – hereinafter US Airways) to create the new American Airlines was announced in February 2013. Despite the European Commission’s (EC) August 5 clearance of the merger with minimal commitments, the Antitrust Division of the U.S. Department of Justice (DOJ), joined by seven states and the District of Columbia, brought suit to permanently enjoin the merger on August 13. United States v. US Airways Group, Inc., 1:13-cv-01236 (D.D.C. Filed Aug. 13, 2013). The content of the DOJ’s complaint (Complaint) demonstrate the DOJ’s modus operandi for litigating a merger.
The Obama Administration has expressed support for a bipartisan bill to wind down government-controlled mortgage companies, Fannie Mae and Freddie Mac. The proposed bill will eliminate or greatly reduce the size of these companies while retaining the federal government’s role in backing mortgage lending. However, lawmakers seem unlikely to produce a bill by the end of the year as planned.
Dodd Frank Act Definition of “Municipal Advisor”
A “municipal advisor” is a person (including a firm or an associated person) (but not including a municipal entity or an employee of a municipal entity) who (1) provides “advice” to “municipal entities” or “obligated persons” on the “issuance of municipal securities” or “municipal financial products,” or (2) undertakes a “solicitation of a municipal entity.”
In an attempt to prevent future liquidity issues similar to those that occurred during the financial crisis of 2008, the Federal Reserve System—together with the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation—has proposed a minimum liquidity requirement on large and international banks with over $250 billion in assets or $10 billion or more in on-balance sheet foreign exposure. Pursuant to this requirement, the banks must hold high quality liquid assets (HQLAs) that are easily convertible into cash. Each bank shall be obligated to maintain a liquidity coverage ratio of 1-to-1 on the day with the highest projected net cash outflows during each 30-day stress period. In other words, the bank is required to hold enough HQLAs to cover its projected cash outflows minus its projected cash inflows on the most expensive day within the 30-day period. Additionally, a modified (light) version of the US LCR Proposal shall apply to specific domestic non-banking financial companies that hold assets in excess of $50 billion but less than $250 billion.
On November 7, Salix Pharmaceuticals Ltd., a leading manufacturer of gastrointestinal disorder drugs and devices announced its proposed acquisition of Santarus Inc., a specialty biopharmaceutical company. The all cash acquisition of common stock was offered at $2.6 billion at $32 dollars per stock. According to a press release obtained from the Santarus website, the $32.00 per share price represents an approximately 36% premium over Santarus’ November 6, 2013 closing price of $23.53 per share and an approximately 39% premium over Santarus’ average closing stock price for the prior 30-day trading period. The proposed transaction has been unanimously approved by both the Boards of Directors of Salix and Santarus, and it is expected that the transaction will close in the first quarter of 2014.