SEC Proposes Amendments to Money Market Fund Rates

By Davis Polk & Wardwell LLP | Posted on

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

On June 5, 2013, the Securities and Exchange Commission (the “SEC”) proposed amendments to rules under the Investment Company Act of 1940 (the “Investment Company Act”) and related requirements that govern money market funds (“MMFs”). The SEC’s proposal is the latest action taken by U.S. regulators as part of the ongoing debate about systemic risks posed by MMFs and the extent to which previous reform efforts have addressed these concerns. (more…)

Revlon Settles SEC Charge Regarding a “Going Private Transaction”

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

Recently the SEC investigated Revlon, Inc., and found that Revlon “engaged in various acts described as ‘ring-fencing’ . . . to avoid receiving an opinion from a third-party financial advisor who ultimately found that the terms of Revlon’s proposed ‘going-private’ transaction did not provide for adequate consideration.”  Without admitting or denying guilt, Revlon is settling the charge by paying an $850,000 penalty.  (more…)

FTO Analysis Necessary for Crowdfunding

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

Financing through crowdfunding is an attractive way for startups and small businesses to raise capital by receiving small amounts from a large number of investors.  The method will only increase in popularity after the SEC finalizes the provisions for equity-based crowdfunding.  There are, however, potential IP problems inherent in crowdfunding.  In order to attract investors, companies have to publicly disclose detailed information about their business.  Competitors can then use this information to find IP violations and sue the budding business.  In order to prevent or prepare for this situation, companies using crowdfunding should conduct a thorough freedom to operate (FTO) analysis. (more…)

Reform of the German Competition Law: Overview of Relevant Changes

By Arnold & Porter LLP | Posted on

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

On June 5, 2013, a committee of the two Houses of the German Parliament reached a long- awaited compromise on the reform of the German competition law. The 8th Amendment Bill of the German Act against Restraints of Competition (ARC) is now expected to be formally adopted and enter into force in the month of July this year. (more…)

Swaps Pushout Rule: Federal Reserve Clarifies Treatment of U.S. Branches of Foreign Banks

By Davis Polk & Wardwell LLP | Posted on

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

The Federal Reserve has issued an interim final rule clarifying the treatment of uninsured U.S. branches and agencies of foreign banks under Section 716 of the Dodd-Frank Act (“Swaps Pushout Rule”). The interim final rule clarifies that, for purposes of the Swaps Pushout Rule, all uninsured U.S. branches and agencies of foreign banks are treated as insured depository institutions. Accordingly, a foreign bank swap dealer’s uninsured U.S. branch or agency will benefit from the Swaps Pushout Rule’s exemptions, transition period and grandfathering provisions to the same extent as an insured depository institution. The interim final rule also establishes a process for uninsured state branches and agencies of foreign banks and state member banks to apply to the Federal Reserve for a transition period from the July 16, 2013 effective date of the Swaps Pushout Rule. The interim final rule became effective on June 5, 2013, and comments on the rule are due on August 4, 2013. (more…)

Stock Dilution as Derivative or Direct Claim?

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

In Carsanaro v. Bloodhound Technologies, Inc., the Vice Chancellor of the Delaware Court of Chancery held that stock dilution claims can be direct when there is a breach of the duty of loyalty by the rest of the board.  This decision expands stockholder’s rights to bring claims since derivative claims can only be brought in the name of a corporation and are subject to stricter pleading rules.

Carsanaro also helps reconcile the distinction between direct and derivative claims.  Previously, the two main tests came from Tooley and Gentile.  Under Tooley’s special injury test, the stock dilution claim can be both derivative and direct; however, the Gentile decision takes the traditional view that stock dilution is characterized as a derivative claim.  (more…)

CFPB Finalizes Rule on Mortgage Loan Originator Compensation and Qualifications

By Arnold & Porter LLP | Posted on

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

I. BACKGROUND

On January 20, 2013, the Consumer Financial Protection Bureau (CFPB) issued its final rule (the Final Rule) regarding mortgage loan originator compensation and qualification requirements1 under the Truth in Lending Act (TILA), as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). The Final Rule modifies existing compensation and qualification requirements under Regulation Z. It prohibits a creditor from compensating a loan originator based on a term of a transaction or a “proxy” for a term of a transaction. It also codifies the existing ban on “dual compensation,” in which a loan originator receives compensation from the consumer and an additional party other than the originator’s organization, but creates an exception allowing a loan originator organization to pay its employees or contractors a commission provided that the commission is not based on a term of a loan. The Final Rule provides a complete exemption from the statutory ban on the consumer payment of upfront points and fees. The Final Rule also includes requirements regarding loan originator qualifications, licensing, and recordkeeping, and implements statutory provisions regarding mandatory dispute resolution and the financing of credit insurance in connection with a residential mortgage loan. (more…)

CFTC Asked to Extend Cross-Border Exemption

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

Several trade groups, including the Futures Industry Association (FIA), have asked the Commodity Futures Trading Commission (CFTC) for a six month extension of an Exemptive Order from the Dodd-Frank cross-border derivatives rules.  The request points out three benefits of a possible extension.

First, the extension would give swap market participants more time to consider the SEC’s “recent proposals relating to its regulation of cross-border security-based swap activities.”  Second, “failing to extend the Exemptive Order in the absence of final cross-border guidance could increase uncertainty for international market participants.”  Third, an earlier expiration of the Exemptive Order “could jeopardize the productive and cooperative efforts underway towards meeting G20 commitments on an international basis.”  (more…)

Self-Regulatory Organization Rule Changes Part 2

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

This week, four proposed rule changes became effective for self-regulatory organizations. The Miami International Securities Exchange LLC (MIAX) filed two of the adopted rule changes: 1) permitting the listing of additional strikes until the closing of trading on the second business day prior to expiration in unusual market conditions; and 2) expanding the number of expirations available under the Short Term Option Series Program.  The NASDAQ OMX PHLX LLC (Phlx) filed the other two adopted rule changes: 1) adopting a strategy fee cap applicable to jelly rolls; and 2) amending the Permit Fee and certain Options Trading Floor Fees, including a technical amendment to the Pricing Schedule.

The third rule change adopts a strategy fee cap applicable to jelly rolls, which are “transactions created by entering into two separate positions simultaneously.”*  The two positions are buying a put and selling a call that have the same price and expiration, and selling a put and buying a call with the same price but a different expiration.  (more…)

Delaware Court Applies Business Judgment Rule to Going-Private Merger with Controlling Stockholder

By Davis Polk & Wardwell LLP | Posted on

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

In a recent, landmark Delaware decision in In re MFW Shareholders Litigation, C.A. No. 6566-CS (Del. Ch. May 29, 2013), Chancellor Leo E. Strine, Jr. answered a frequently debated (but unresolved) question of whether a going-private merger with a controlling stockholder could be structured to invoke the business judgment rule, and not the entire fairness standard of review. Resolving this issue of first impression, the Court held that the business judgment rule will apply “when a controlling stockholder merger has, from the time of the controller’s first overture, been subject to (i) negotiation and approval by a special committee of independent directors fully empowered to say no, and (ii) approval by an uncoerced, fully informed vote of a majority of the minority investors.” (more…)