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…)
[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…)
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…)
[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…)
[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…)
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…)
[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…)
[Editor’s Note: The following update is authored by Kirkland & Ellis LLP]
The Foreign Account Tax Compliance Act (FATCA), enacted in 2010, imposed burdensome federal income tax reporting and withholding obligations on many business enterprises (including private funds and their portfolio companies), intended to prevent U.S. citizens and residents from avoiding U.S. income tax by hiding ownership of U.S. assets overseas. (more…)
Recently the SEC charged a Texas man with defrauding investors in a Ponzi scheme involving Bitcoin, a peer-to-peer payments system that allows people to pay each other from virtual accounts.
According to the SEC complaint, 30-year-old Trendon T. Shavers operated a sham investment scheme called Bitcoin Savings and Trust, or BTCST, based on promises to investors of weekly returns of up to 7 percent.
Using the monikers “Pirate” and “pirateat40,” Shavers allegedly raised a total of 700,000 Bitcoin in 2011 and 2012, then worth about $4.5 million, through his scheme. Today, the SEC says the value of 700,000 Bitcoin exceeds $60 million. (more…)
[Editor’s Note: The following post is authored by Arnold & Porter LLP]
On July 10, 2013, the Securities and Exchange Commission (SEC) adopted final rules (Final Rules) eliminating the ban on general solicitation and general advertising for private securities offerings under Rule 506 of Regulation D under the Securities Act (Regulation D) and Rule 144A under the Securities Act (Rule 144A). The Final Rules also make Rule 506 unavailable for offerings if the issuer or any related “covered person” is a “bad actor” (i.e., has engaged in a “disqualifying event”). The adoption of these rules by the SEC was required under Section 201(a) of the Jumpstart Our Business Startups Act (JOBS Act) and Section 926 of the Dodd- Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), respectively. The Final Rules will go into effect 60 days after publication in the Federal Register. (more…)