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

By Luke Burton, J.D. Candidate 2015 | Posted on

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

By Davis Polk & Wardwell LLP | Posted on

[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

By Sarah G. Nowland, J.D. Candidate 2014 | Posted on

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

By Kirkland & Ellis LLP | Posted on

[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

By Luke Burton, J.D. Candidate 2015 | Posted on

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

By Arnold & Porter LLP | Posted on

[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…)

SCOTUS Delivers Judicial Victory to Agriculture Giant Monsanto, Limits Holding as Court Charts New Territory in Patents and Self-Replicating Technology

By Luke Burton, J.D. Candidate 2015 | Posted on

The patentability of self-replicating products has been presented to the Supreme Court in two recent cases that have been closely watched by biotechnology companies and their investors.

In the first of the two cases, Bowman v. Monsanto, the Court handed down a 9-0 opinion, authored by Justice Elena Kagan, giving a clear victory to Plaintiff Monsanto. At the heart of the case was how to reconcile the exhaustion doctrine with a self-replicating product. The exhaustion doctrine serves to end the patentee’s monopoly in an item, giving the “purchaser, or any subsequent owner, ‘the right to use [or] sell the thing as he sees fit.’” However, there are limits to the exhaustion doctrine, and purchasers are prohibited from engaging in certain activities that could undermine the patentee’s patent. The exhaustion doctrine extends only to the “particular item” that is purchased, and does not protect buyers who seek to create copies of the original product. (more…)

Apple eBooks Price Fixing Case

By Luke Burton, J.D. Candidate 2015 | Posted on

The trial for United States v. Apple Inc. begins on June 3rd, with some saying that the case will “effectively set the rules for internet commerce.” The Government alleges that Apple conspired with five publishing companies to increase prices while simultaneously plotting to increase market share vis-à-vis Amazon. The five publishing companies originally named in the suit have since reached a settlement with the Justice Department in which they will pay a collective $164 million to recompense consumers harmed by the price-fixing scheme. (more…)

Custom (Go-) Shopping

By Kirkland & Ellis LLP | Posted on

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

The Delaware courts have often repeated the bedrock principle that there is no one path or blueprint for the board of a target company to fulfill its Revlon duties of seeking the highest value reasonably available in a sale transaction. The courts have usually deferred to the judgment of the directors as to whether the requisite market-check is best achieved by a limited pre-signing process, a full-blown pre-signing auction or a post-signing fiduciary out. However, as evidenced in the recent decision by VC Glasscock in NetSpend, it is equally true that the courts will also not automatically bless a sale process simply because the deal protection provisions fall with- in the range of “market” terms. Especially in a single-bidder sale process, the courts will continue to seek evidence of a fully informed and thoughtful approach by the target board to the sale process and deal protection terms with the goal of maximizing value for shareholders. (more…)

Weekly News Update: SEC Warns Mutual Fund Directors and Announces More Charges in Venezuelan Bank Kickback Scheme

By James Kollar | Posted on

Recently, the Securities and Exchange Commission settled charges against eight former directors of Morgan Keegan bond mutual funds for failing to control the portfolio managers they administered, allowing for mortgage assets to be overvalued prior to the 2007 financial crisis. Under federal securities laws, fund directors are responsible for determining the fair value of portfolio securities for which market quotations are not readily available. In addition, fund directors must determine the methodologies to be used to fair value securities and must periodically reevaluate the appropriateness of those methodologies. The SEC order finds that the eight directors failed to make a diligent effort to understand how fair values were being determined. Furthermore, the directors delegated this responsibility to a valuation committee without providing adequate guidance on how fair-valuation determinations should be made, resulting in the funds having overstated value of their securities. While no fines were imposed on the former directors, the SEC order required that the eight men, cease and desist from committing or causing any future violations. “Our settlement sends a clear warning of our commitment to enforce the duty of mutual fund directors and trustees to closely oversee the process of valuing securities held by their funds,” said George S. Canellos, Co-Director of the SEC’s Division of Enforcement.

In May, the SEC announced charges against four individuals in an alleged “pay-to-play” scheme in which the global markets group from brokerage firm Direct Access Partners (DAP) executed fixed-income trades for customers in foreign sovereign debt. This generated $66 million in revenue from transaction fees related to fraudulent trades they executed for state-owned Venezuelan bank Banco de Desarrollo Económico y Social de Venezuela (Bandes). Recently, the SEC has charged the former head of DAP’s Miami office, Ernesto Lujan, for his integral role in the massive scheme to secure the bond trading business of Bandes. According to the SEC, Lujan and others allegedly deceived DAP’s clearing brokers, executed internal wash trades, positioned another broker-dealer in the trades to conceal their role in the transactions, and engaged in massive roundtrip trades to pad their revenue. In a parallel action, Mr. Lujan was recently arrested for felony charges related to the conspiracy to bribe the Vice President of Finance at Bandes, according to the U.S. Attorney’s Office for the Southern District of New York. The SEC’s amended complaint filed in federal court in Manhattan charges Lujan and the other defendants with fraud and seeks final judgments that would require them to return ill-gotten gains with interest and pay financial penalties.