Volcker Rule Update #2: Comment Period Extended; Analysis of the Hedging Exemption

By Peter Benesch, J.D. Class of 2013 | Posted on

The deadline for submitting comments regarding the proposed regulations implementing the Volcker Rule has been extended from January 13 to February 13. As we noted in our previous update on the Volcker Rule, the timeline was already very tight if regulators intended to meet the implementation deadline of July 2012, and this postponement only makes that timeline even tighter and less feasible.

Putting this logistical problem to a side, one major provision in the proposal we have yet to discuss in-depth is the exemption provided in the Volcker Rule for risk-mitigating hedging transactions. The current proposal would allow banks to maintain, purchase, or sell hedging positions with commercial deposits provided that these positions arise from and are related to specific risks involved in the bank’s other legitimate positions, contracts, or holdings. These other risks include market risk, counterparty/credit risk, currency/foreign exchange risk, and interest rate risk (among others). Additionally, the hedged positions taken by the bank must be “reasonably correlated” (or, to be more precise, reasonably negatively correlated) with the risks purportedly being mitigated.

(more…)

Reactions Against Currency Manipulation: More Than A Chinese Whisper?

By By Vibhooti Malhotra, L.L.M Class of 2012 | Posted on

The trade balance between United States and China has been heavily in favor of the People’s Republic for a long time. An often-cited reason for this phenomenon is the de facto pegging of the Renminbi (‘RMB’) to the US Dollar. It is believed that the Chinese Government actively purchases American dollars with the aim of artificially undervaluing its own currency. The result of this exercise is that even cheaper Chinese goods reach the American markets.

(more…)

Delaware Chancery Court Suggests That Reverse Triangular Mergers May Trigger Anti-Assignment Provisions

By By Charles Rogerson, J.D. Class of 2013 | Posted on

In April the Delaware Chancery Court refused to grant plaintiff’s motion to dismiss in Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, C.A. No. 5589-VCP (Del. Ch. Apr. 8, 2011), finding that, as a matter of law, a reverse triangular merger may trigger anti-assignment provisions. The decision casts doubt on the widely held belief amongst practitioners that a reverse triangular merger is not a form of assignment, and thus does not trigger anti-assignment provisions in contracts. The decision is likely to add uncertainty as to the implications of a reverse triangular mergers.

(more…)

Flexible Purpose Corporation: California’s New Corporate Form

By Angelica Salceda, J.D. Class of 2013 | Posted on

Beginning January 1, 2012, California will be the first state in the country to authorize Flexible Purpose Corporations (FPC)— a new corporate form that will allow a corporation to integrate the for-profit philosophy of the traditional corporation with a special purpose mission that is similar to a charitable purpose.  As authorized through the Corporate Flexibility Act of 2011 (SB 201), California companies will have greater flexibility to combine profitability with a broader social or environmental purpose.  Entrepreneurs and investors will have the opportunity to organize a company to pursue both economic and social objectives, allowing investors to have multiple or blended objectives. (more…)

Three Is The Magic Number: District Court Preserves Tax-Prep Triumvirate, Permanently Enjoins H&R Block Merger

By By Michael Young, J.D. Class of 2012 | Posted on

The Justice Department’s antitrust division has prevailed in its first trial opposing a merger since its defeat by Bay Area giant Oracle in 2004.  In an order issued on October 31, D.C. District Court Judge Beryl Howell granted the government’s motion to enjoin H&R Block’s $287.5 million acquisition of 2SS Holdings Inc., the maker of TaxAct, a popular do-it-yourself (“DIY”) software program.

(more…)

Op-Ed: Why Corporations Should Think Twice About Plans To Lower Taxes

By By Evan Roberts, J.D. Class of 2012 | Posted on

At first blush, advocating for lower corporate taxes like Republican candidates Herman Cain and Rick Perry looks like the kind of policy that corporations would salivate over. As conservative pundits like to point out, the United States already has the second-highest statutory corporate tax rate of all developed countries and that it stands alone in its attempt to impose taxes on the global income of its own corporations. The complexities of our tax code also encourage American multinational companies to shift more of their business abroad. And as businesses move away, American jobs move with them. Lowering corporate taxes would keep those jobs here at home and invigorate our economy. Everyone would win, right?

(more…)

Seasoning Requirements: Regulating Chinese Companies And Reverse Mergers

By By Andrew Sioson, J.D. Class of 2013 | Posted on

On October 26th the SEC closed debate on a proposal to adopt “seasoning” requirements for companies listed on public exchanges, such as NASDAQ and NYSE. The proposed seasoning requirements aim to protect investors from a rash of accounting scandals perpetrated by companies that have avoided normal reporting and auditing requirements through the strategic use of reverse mergers. Many of the companies that have been engaging in reverse mergers and perpetrating these accounting scandals have been based in China, which have caused US investors to flee from Chinese equities.

(more…)

The Network Lecture Series: Carl E. Walter’s Do China’s Stock Markets Matter?

By By Juno Hautekiet, J.D. Class of 2012 | Posted on

On November 1st, 2011, Carl E. Walter delivered a lecture titled “Do China’s Stock Markets Matter?” at the U.C. Berkeley School of Law. The lecture addressed the role and significance of stock markets in China, and described the influence of western legal, accounting and financial concepts on the Chinese economic landscape.

Mr. Walter was one of the first students to go to China when the border opened in 1979. He has spent a large part of his career working in the financial sector in China and is a co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise”. After living in China for 20 years, Mr. Walters recently returned to the U.S.

(more…)

FTC Revisits Online Privacy Rules For Businesses Targeting Children

By By Michael Young, J.D. Class of 2012 | Posted on

Appealing to children can help to ensure lifetime brand loyalty, as well as provide a fairly direct means of accessing parents’ disposable income.  But the interactive environment of the internet creates incentives for businesses not only to transmit messages to children, but also to collect information from them.  To counteract the perceived threat to the privacy of children targeted by commercial sites, Congress enacted the Children’s Online Privacy Protection Act (COPPA) in 1998.  Now, the FTC is revisiting the Rule implementing the Act, accepting public comment on the proposed changes until November 28, 2011.

(more…)

Europe’s Debt Crisis – Reasons, Solutions, Perspectives

By By Anne-Marie Weber, J.D. Class of 2012 | Posted on

Parallel to the downgrade of America’s credit rating and its aftermath, there has been another predominant topic in the recent economic news: the European sovereign debt crisis. What appeared to be an internal Greek problem at first glance in early 2010 has now transformed into a serious European issue calling out for a diligent denouement. Considering that continental boundaries are not an obstacle to the spread of a financial crisis, the effects of Europe’s recent struggle on the U.S economy should be considered. (more…)