SEC Issues Staff Guidance on Real Estate Acquisitions

[Editor’s Note: The following update is authored by Goodwin Procter LLP]

On July 16, 2013, the staff of the SEC’s Division of Corporation Finance (the “Staff”) posted an updated Financial Reporting Manual on the SEC’s website. The Financial Reporting Manual contains a number of substantive updates to the Staff’s guidance on real estate acquisitions, including updates regarding the application of Rule 3-14 of Regulation S-X (“Rule 3-14”), which will be of interest to REITs that are SEC reporting companies. (more…)

Guidance Update for Default on Tri-Party Repos

The SEC Financial Stability Oversight Council (FSOC) recently issued a guidance update on counterparty risk management practices for Tri-Party Repurchase Agreements.  The update “provides the Staff’s views on the types of legal and operational considerations that a MMF and its investment advisor should consider if a counterparty fails and defaults on its obligations under a Tri-Party Repo.”  The update stresses the importance of advance planning in case of default.  (more…)

UK Financial Conduct Authority Proposes New Rules For Pooling and Distribution of Assets Held by Failed Investment Firms

[Editor’s Note: The following update is authored by Goodwin Procter LLP]

The United Kingdom’s Financial Conduct Authority (FCA) has issued a Consultation Paper proposing new rules intended to streamline the process for recovering assets from a failed investment firm (the “Proposed Rules”).  The Proposed Rules are far-reaching in scope, and, if enacted, will have a significant impact on the segregation of assets within an institution’s various custodial accounts and the priority of recovery in the event of failure.  The Proposed Rules would apply to approximately 1,500 investment management firms authorized to hold client assets and regulated by the FCA.  Given London’s position as a leading market for investment management, the Proposed Rules should be of interest to investment firms and clients around the world. (more…)

SEC Adopts Tighter Regulations for Brokerage Firms

Recently, the SEC announced the adoption of new rules to protect clients with cash or securities at brokerage firms by requiring more disclosure and safeguards from securities brokers.

The new measures, which were approved in a split 3-2 vote by the commission, are part of regulators’ ongoing efforts to strengthen custody rules and prevent future fraud in the wake of Bernard Madoff’s long-running Ponzi scheme. (more…)

Appeals Court Decision Raises Controlled Group Pension Liability Concerns for the Private Equity Industry

[Editor’s Note: The following post is authored by Arnold & Porter LLP]

In a decision with significant implications for private equity funds and their investors, the First Circuit Court of Appeals held in Sun Capital that a Sun Capital Advisors private equity fund was a “trade or business” for purposes of ERISA’s Title IV controlled group rules. Under the court’s rationale, private equity funds would be exposed to joint and several liability for unpaid pension liabilities under Title IV of ERISA that apply on a controlled group basis where a sufficient ownership link exists between the fund and the portfolio company. Moreover, the rationale would expose one portfolio company to another portfolio company’s controlled group liabilities where sufficient common ownership is present. (more…)

OECD’s Top Three BEPS Priorities

This month the OECD released an action plan to reduce abusive base erosion and profit sharing (BEPS), which diminishes taxes paid in the world’s leading economies.  Yesterday the head of the OECD’s division for tax treaties, transfer pricing and financial transactions said that the OECD’s top three BEPS priorities are hybrid mismatches, interest deductibility, and transfer pricing.  (more…)

First Circuit Holds that Private Equity Fund May be Liable for Portfolio Company’s Multiemployer Plan Withdrawal Liability

[Editor’s Note: The following update is authored by Ropes & Gray LLP]

In a decision (Sun Capital) with important implications for private equity sponsors, the U.S. Court of Appeals for the First Circuit has concluded that a private equity fund can be held liable for ERISA liabilities incurred by portfolio companies in which the fund has a sufficient stake. While the First Circuit did not determine in this case whether the fund’s ownership stake in the portfolio company was sufficient to impose liability, under its decision a fund owning 80% or more of a portfolio company could be liable for the portfolio company’s unpaid ERISA Title IV defined benefit pension plan liabilities. (more…)

Private Offering Reform: Analysis and Implications

[Editor’s Note: The following update is authored by Davis Polk & Wardwell LLP]

On July 10, 2013, the SEC adopted amendments to the Regulation D and Rule 144A private-placement safe harbors, as mandated by the JOBS Act of 2012. The amendments, which will become effective on September 23, 2013, will eliminate the prohibition on widespread advertising and other forms of “general solicitation” or “general advertising” in private offerings under Rule 506 of Regulation D of the Securities Act of 1933 or under Rule 144A of the Securities Act of 1933, so long as all purchasers of the securities are reasonably believed to be accredited investors upon taking reasonable steps to verify as much (under Rule 506) or are reasonably believed to be qualified institutional buyers or “QIBs” (under Rule 144A). The amendments, however, did not extend the ability to engage in general solicitation to private placements that are not conducted in reliance on Rule 506 or Rule 144A, such as Section 4(a)(2) of the Securities Act of 1933. (more…)

IBM Settles With SEC Over Alleged FCPA Violations

Two years ago, the SEC alleged that IBM violated the Foreign Corrupt Practices Act (FCPA) by bribing government officials in South Korea and China.  Last week the District Court for the District of Columbia issued a final judgment against IBM in settlement of these allegations.  The settlement requires IBM to pay $10 million and satisfy reporting requirements for the next two years.  The final judgment was entered without IBM admitting or denying the allegations of FCPA violations.  (more…)

Federal District Court Denies Motion To Dismiss SEC Suit Alleging General Partnership Interests Were Securities

[Editor’s Note: The following post is authored by Goodwin Procter LLP]

A California federal court recently declined to dismiss an SEC lawsuit over alleged fraud and securities registration violations in the sale of general partnership interests. In denying the Defendants’ motion to dismiss, the court held that the SEC had pled sufficient facts to establish that the general partnership interests at issue in the case were securities under federal securities laws. (more…)