D.C. Circuit’s Rail Freight Decision Reflects Greater Scrutiny of Antitrust Class Certification in the Wake of Supreme Court’s Comcast Ruling

By Christopher Hammond, J.D. Candidate 2015 | Posted on

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

Earlier this month, the influential U.S. Court of Appeals for the D.C. Circuit issued an important decision on the standards for certifying antitrust class actions. Taking its cue from the Supreme Court’s decision this past March in Comcast Corp. v. Behrend, the D.C. Circuit vacated a lower court decision certifying a class of shippers in an antitrust case against railroads alleging collusion on fuel surcharges. The ruling in In re: Rail Freight Fuel Surcharge Antitrust Litigation is significant as the first known decision to apply Comcast to reject a proposed antitrust class. Companies facing overreaching class action suits may be able to take comfort that, after a few lower court decisions sidestepping Comcast, the principles set forth in that decision are now catching on in the lower courts. (more…)

New Guidance on Advisers Act Custody Rule Treatment of Certain Private Certificated Securities

By Goodwin Procter LLP | Posted on

[Editor’s Note: The following post is authored by Goodwin Procter LLP]

The staff of the SEC’s Division of Investment Management provided guidance allowing certain certificated privately offered securities held by private funds to be treated in the same manner as uncertificated privately offered securities they hold.  The guidance describes conditions under which an adviser would not have to maintain with a qualified custodian an instrument evidencing ownership of a privately placed security (a “private stock certificate”) held by a pooled investment vehicle (a “pool”) in order to comply with Rule 206(4)-2 under the Investment Advisers Act of 1940 (generally referred to as the “custody rule”).  As a general matter under the custody rule, an adviser that has custody (as defined by the rule) of a pool’s funds and securities must maintain them with a qualified custodian.  However, if the pool meets the conditions described in paragraph (b)(4) of the rule regarding the distribution of its audited annual financial statements, the rule already provides an exception to the qualified custodian requirement with respect to certain uncertificated privately offered securities (“Exempt Privately Offered Securities”).  The custody rule provides that to be an Exempt Privately Offered Security, the security must: (more…)

U.S. Sanctions and Export Controls Update: Amended Regulations Expand Opportunities for Companies to Export and Reexport to Syria and Iran

By Christopher Hammond, J.D. Candidate 2015 | Posted on

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

At the end of July, U.S. administering authorities for economic sanctions and export control regulations took actions to expand the potential for U.S. and other companies to export and reexport certain items to Syria and Iran. Such actions are particularly notable in the current political environment in which U.S. authorities have continuously expanded sanctions and other restrictions with regard to exports and other transactions related to these two countries. U.S. authorities, however, have described the recent liberalization as consistent with U.S. national security and other policy aims. These actions are intended to allow the provision of important assistance to the ordinary people of these countries who have suffered under the current governmental regimes, which are primary targets of U.S. punitive international trade measures. U.S. and other companies in numerous sectors have the potential to benefit from these latest actions. (more…)

SEC Adopts Amendments to Broker-Dealer Financial Responsibility, Reporting and Audit Requirements

By Christopher Hammond, J.D. Candidate 2015 | Posted on

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

The SEC recently adopted amendments to its financial responsibility, reporting and audit rules applicable to registered broker-dealers.  While some of the amendments will affect all firms, the amendments are particularly significant for those that carry customer accounts or act as clearing brokers.

The amendments to the broker-dealer financial responsibility rules (the “Financial Responsibility Rules Amendments”) were originally proposed in March 2007, prior to the financial crisis. The amendments address a number of technical issues, including protections associated with “sweep programs” for customer free credit balances, proprietary accounts of broker-dealers that are held at other broker- dealers and limitations on banks eligible to hold special reserve accounts.

(more…)

CFTC Compliance Obligation Harmonization

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

Yesterday the CFTC adopted final regulations harmonizing the compliance obligations of registered investment companies (RICs) that are also required to register as commodity pool operators (CPOs).  Harmonization of the CFTC’s regulatory regime with that of the SEC is “grounded in the concept of substituted compliance” in that “CPOS or RICs that maintain compliance under the SEC regime would be deemed to fulfill their obligations” under CFTC regulations.  Harmonization eliminates discrepant reporting instructions and reduces unnecessary costs for investors.  (more…)

New Government Cybersecurity Standards Could Impact Many Companies

By Christopher Hammond, J.D. Candidate 2015 | Posted on

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

The National Institute of Standards and Technology (NIST) is not a household name, particularly outside the I-495 Beltway surrounding Washington, D.C., but companies across the country may soon be impacted by NIST’s growing role in cybersecurity. President Obama has charged NIST, an agency in the Department of Commerce, with developing a new Cybersecurity Framework for private sector owners and operators of critical infrastructure and new Senate legislation would cement NIST’s cybersecurity role. On August 6, 2013, the White House released a list of potential incentives the government may offer to encourage companies to adopt NIST’s Cybersecurity Framework, including liability protections, cybersecurity insurance, and cybersecurity conditions in government grants. (more…)

European Regulatory Snapshot: Remuneration in the Financial Services Industry

By Christopher Hammond, J.D. Candidate 2015 | Posted on

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

Introduction

The move toward stricter regulation of remuneration in the financial services industry in the European Union has resulted in a confusing web of overlapping European Directives and local EU Member State law and regulation, each of which seeks to place limits on remuneration. This client memorandum aims to assist in navigating the new European labyrinth by providing a snapshot of the three main European Directives that regulate remuneration:

  • Capital Requirements Directive IV (CRD IV)
  • Alternative Investment Fund Managers Directive (AIFMD); and
  • Fifth Undertakings for Collective investment in Transferable Securities Directive (UCITS V).

In addition, this memorandum discusses the European Securities Market Authority’s (ESMA) recent Markets in Financial Instruments Directive (MiFID) Guidelines on remuneration policies and practices. The memorandum then considers the additional requirements on remuneration that the UK is planning to impose in relation to the financial services industry. (more…)

SEC Issues Staff Guidance on Real Estate Acquisitions

By Goodwin Procter LLP | Posted on

[Editor’s Note: The following update is authored by Goodwin Procter LLP]

On July 16, 2013, the staff of the SEC’s Division of Corporation Finance (the “Staff”) posted an updated Financial Reporting Manual on the SEC’s website. The Financial Reporting Manual contains a number of substantive updates to the Staff’s guidance on real estate acquisitions, including updates regarding the application of Rule 3-14 of Regulation S-X (“Rule 3-14”), which will be of interest to REITs that are SEC reporting companies. (more…)

Guidance Update for Default on Tri-Party Repos

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

The SEC Financial Stability Oversight Council (FSOC) recently issued a guidance update on counterparty risk management practices for Tri-Party Repurchase Agreements.  The update “provides the Staff’s views on the types of legal and operational considerations that a MMF and its investment advisor should consider if a counterparty fails and defaults on its obligations under a Tri-Party Repo.”  The update stresses the importance of advance planning in case of default.  (more…)

UK Financial Conduct Authority Proposes New Rules For Pooling and Distribution of Assets Held by Failed Investment Firms

By Goodwin Procter LLP | Posted on

[Editor’s Note: The following update is authored by Goodwin Procter LLP]

The United Kingdom’s Financial Conduct Authority (FCA) has issued a Consultation Paper proposing new rules intended to streamline the process for recovering assets from a failed investment firm (the “Proposed Rules”).  The Proposed Rules are far-reaching in scope, and, if enacted, will have a significant impact on the segregation of assets within an institution’s various custodial accounts and the priority of recovery in the event of failure.  The Proposed Rules would apply to approximately 1,500 investment management firms authorized to hold client assets and regulated by the FCA.  Given London’s position as a leading market for investment management, the Proposed Rules should be of interest to investment firms and clients around the world. (more…)