Dodd-Frank Progress Report

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

The Davis Polk Dodd-Frank Progress Report is a monthly publication that uses empirical data to help market participants and policymakers assess the progress of the rulemaking and other work that has been done by regulators under the Dodd-Frank Act.

State of Play to Date

In the past month, no rulemaking requirements were due, no new rules were proposed to meet rulemaking requirements and one rulemaking requirement was finalized. (more…)

CFTC Wins Fund Registration Court Appeal

The U.S. Court of Appeals for the District of Columbia Circuit decided in favor of the Commodity Futures Trading Commission (CFTC) on June 25, upholding a 2012 rule that imposed new registration and reporting requirements on certain commodity pool operators and commodity trading advisers.

Under the rule, advisers to mutual funds and exchange-traded funds need to register with the CFTC if their commodity trades, including futures, swaps and options, exceed certain thresholds, with the exclusion of pure hedges.


Supreme Court Finds Arbitration Agreements Waiving Class Actions Preclude Antitrust Class Actions Even Where Individual Claims Are Small

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

On June 20, 2013, the Supreme Court issued its opinion in American Express Co. v. Italian Colors Restaurant (“Italian Colors”), significantly strengthening the application of arbitration clauses in class action cases. The Court held that arbitration clauses with class action waivers, including in antitrust cases, are enforceable regardless of whether the value of an individual plaintiff’s claim was exceeded by the cost to arbitrate. In the 5-3 decision, authored by Justice Scalia, the Court continued two trends its decisions have featured the last few years: constricting class action litigation and enforcing arbitration agreements, even those that prohibit class actions. (more…)

Ponzi Scheme Results in SEC Charges for Two Dallas-Based Broker-Dealers

Recently the SEC charged two executives of a medical insurance company with operating a $10 million Ponzi scheme that victimized at least 80 investors.

The SEC alleges that Duncan J. MacDonald and Gloria Solomon solicited investments for Global Corporate Alliance (GCA) by falsely promoting the company as a proven business with strong revenue. In reality, the business had no operating history and virtually no sales.

In a Policy Shift, SEC Considers Forcing Offenders to Admit Wrong-Doing; Critics Worry that the Result Will Prove Counter-Productive for Enforcement

In a change of course, the Securities and Exchange Commission has begun to discuss the idea of requiring admissions of guilt in civil cases. The possibility of forcing firms to admit guilt has drawn criticism from some circles, as opponents say that the proposal may produce adverse results in enforcement.

In recent times, the SEC has chosen not to force firms to admit guilt, and has instead opted to levy fines as its primary method of enforcement. Proponents of this model say that it helps the SEC avoid protracted litigation and keeps enforcement out of the courts. The SEC itself has previously advocated for no-admission settlements, touting as benefits the avoidance of court costs and a reduction of the risks associated with litigation. The SEC also noted that having fewer trials allows the agency to pursue more enforcement actions, rather than focusing the majority of their resources into a handful of cases. (more…)

OCC Lending Limits Final Rule: Credit Exposures from Derivatives and Securities Financing Transactions

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

The OCC has issued a final rule specifying the methods for calculating credit exposure arising from derivatives and securities financing transactions for purposes of the federal lending limits that apply to national banks, federal and state branches and agencies of foreign banks and federal and state savings associations. The final rule, like the June 2012 OCC interim final rule that it revises, implements Section 610 of the Dodd-Frank Act, which requires federal lending limits to take into account credit exposure arising from derivatives and securities financing transactions. (more…)

New Regulatory Framework Suggested for ETF Market

Yesterday, the International Organization of Securities Commissions (IOSC) published a report calling for increased regulation of the Exchange Traded Funds (ETFs) market.  ETFs are “open ended collective investment schemes” that are traded like stocks.  ETFs “seek to replicate the performance of a target index and are structured and operate in a similar way.”  ETFs are becoming increasingly popular for their low cost and liquidity, so the IOSC believes they require increased regulation to protect consumers and investors. (more…)

U.S. Sanctions Update: New U.S. Sanctions Expand Targeting of Non-U.S. Companies Doing Business with Iran

[Editor’s Note: The following update is authored by Kirkland & Ellis LLP]

U.S. sanctions targeting non-U.S. companies’ business with Iran have greatly expanded in recent years, but have focused in significant respects on Iran’s energy sector, including, in particular, Iran’s petroleum and petrochemical sectors. Non-U.S. companies engaged in activities involving other sectors of the Iranian economy have felt somewhat secure from the reach of U.S. sanctions. Effective July 1, 2013, a new Executive Order and law may put an end to the sense of security of many such non- U.S. companies. Moreover, U.S. companies may be affected by these expanded sanctions because of the risk that their non-U.S. business partners could be sanctioned and become parties with which U.S. companies are prohibited from dealing. Companies, including those in the automotive, maritime and insurance industries, engaged in business activities involving Iran, as well as foreign financial institutions that may support such transactions, should be aware of these expanded sanctions and evaluate whether their activities could now be sanctionable. (more…)

Biotech Companies and Investors Receive the Supreme Court’s Much-Anticipated Decision in Myriad; Decision Could Reshape the Patent Landscape

In Part One of this series, we looked at the Court’s decision in Monsanto, where the court rejected the applicability of the exhaustion doctrine to self-replicating products. Today, we will look at the court’s recently released opinion in Myriad, in which the Court held that naturally occurring human genes are not patentable. The case was brought by the American Civil Liberties Union in an effort to block the patenting of human genes, a strategy many hope will lower costs of genetic testing, making it more accessible to the general public. (more…)

Supreme Court Opts for Rule of Reason Analysis in Andro-Gel Reverse Payment Decision

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

On Monday, June 17, the Supreme Court handed down a decision in FTC v. Actavis, Inc., bringing some clarity to the antitrust treatment of so-called reverse payment patent settlements between brand-name drug manufacturers and would-be generic competitors, but leaving many open questions as well. In an opinion written by Justice Breyer, the Court reversed the Eleventh Circuit’s decision by a vote of 5-3 and rejected both the respondents’ proposed “scope of the patent” test that had immunized most settlements from antitrust challenge and the “presumptively unlawful” standard endorsed by the FTC. The Court instead opted for a rule of reason analysis, leaving it to the lower courts to sort out the specifics. The decision is unlikely to reduce the number of investigations or lawsuits related to such settlements, and ensures that both will be complex and protracted. (more…)