Securities Regulation

2010 Year-End Securities Enforcement Update

January 10, 2011 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Securities Regulation

I. Overview of 2010

The year 2010 has been a watershed year for securities enforcement. The Dodd-Frank Wall Street Reform and Consumer Protection Act gave the SEC additional enforcement powers, while also bringing additional market participants under SEC registration and potentially elevating the standards of conduct for other securities professionals. At the same time, the SEC, working closely with criminal prosecutors, continued to pursue insider trading investigations based on recorded conversations and cooperating witnesses. In addition, the reorganization of the Enforcement Division into specialized units has started to yield enforcement actions in areas of priority. By all accounts, the heightened enforcement reflected this year will continue for the foreseeable future, putting a premium on the ability of in-house compliance programs to adapt to the changing regulatory landscape.

SEC Proposes Disclosure Rules for Conflict Minerals, Mine Safety and Payments by Resource Extraction Issuers

December 15, 2010 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Securities Regulation

On December 15, 2010, the Securities and Exchange Commission (the "SEC") proposed rules to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") relating to: (1) conflict minerals; (2) mine safety matters; and (3) resource extraction issuer payments to governments. Each of the proposed rules was approved by the SEC without questions. Comments on the proposed rules must be submitted to the SEC by January 31, 2011.

UK Government Publishes Consultation Paper on Proposed New Regulatory Landscape

November 1, 2010 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Corporate Governance; Securities Regulation; UK Regulation

In a previous alert published in July, The UK’s Blueprint for Financial Regulation, we looked at the UK Government’s proposals for an overhaul of the UK financial regulatory infrastructure. These proposals were issued upon the initiation of the new Government, aimed at addressing a systemic failure in the UK domestic regime to recognise and respond in a timely and adequate manner to the global financial crisis.

FASB Announces Deferral of Plan to Adopt Changes to Loss Contingency Disclosure Standard

October 27, 2010 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Securities Regulation

In an important development for U.S. public companies, the Financial Accounting Standards Board (the "FASB") announced at a meeting today that it is deferring plans to adopt proposed amendments to the accounting standards governing the disclosure of loss contingencies, including litigation-related contingencies. The FASB issued an exposure draft on July 20, 2010 (the "Exposure Draft") that contained its proposed modifications to the standards. With its Exposure Draft, the FASB had indicated that it planned to adopt the final standard so that it would be effective for periods ending after December 15, 2010. As a result of today’s action, however, the proposed effective date for the modifications contained in the Exposure Draft has been deferred, pending further deliberations. The FASB suggested that it will revisit the effective date and the Exposure Draft generally after the staff has completed its comment letter review and any revisions to the project plan; the FASB noted that it planned to conduct its additional deliberations before the end of 2010.

EU AIFM Directive – An Update

October 21, 2010 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): EU Regulation; Securities Regulation

The curtain is slowly closing on the era of (relatively) light regulation of Alternative Investment Funds in Europe. Key developments flowing from a meeting of European Finance Ministers on 19 October to discuss the ‘AIFM Directive’ include agreement on a slightly less onerous regime for depositaries and confirmation that there will eventually be a ‘passport’ regime allowing marketing of non-EU Funds on a pan-European basis. Although progress has been made, we are nonetheless concerned that the overall effect of the Directive will be to render meaningless over time the distinction between alternative funds marketed to professional investors and the (higher cost) retail funds established under the UCITS regime.

French Banking and Financial Regulation Bill: Summary of Main Provisions

October 19, 2010 | Posted by James J. Moloney Topic(s): EU Regulation; Securities Regulation

On October 11, 2010, the French Parliament adopted the French Banking and Financial Regulation Statute (loi de regulation bancaire et financière).

The 100 page long Statute contains provisions significantly amending existing laws and regulations regarding, inter alia, (i) the activities and liabilities of credit rating agencies, (ii) short selling and naked short sales, (iii) temporary holding of shares before shareholders’ meetings, and (iv) mandatory takeovers.

Bombay High Court Holds That Public Listed Company Shares Can Be Subjected to Preemptive Rights

October 15, 2010 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): India Regulation; Securities Regulation

On September 1, 2010, a division bench of the Bombay High Court held that consensual preemptive arrangements between shareholders in a public listed company do not violate the principle of free transferability of shares enshrined in section 111A of the Indian Companies Act, 1956 (“Companies Act“). In its 103-page opinion in the case of Messer Holdings Limited v. Shyam Ruia (Appeal No. 855 of 2003), the High Court overruled its previous decision in the case of Western Maharashtra Development Corporation v. Bajaj Auto [2010] 154 CompCas 593 (Bom) where it had taken a contrary view.

Repeal of Credit Ratings Agency Exemption from Regulation FD

October 11, 2010 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Securities Regulation

On September 29, 2010, the SEC amended Regulation FD to remove the express exemption for disclosures of material non-public information to credit rating agencies (former Rule 100(b)(2)(iii) of Regulation FD), as required under Section 939B of the Dodd-Frank Act. This amendment became effective upon its publication in the Federal Register on October 4, 2010.

Disclosure of Adviser Conflicts — When Is It Enough?

October 1, 2010 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Investment Act/Investment Advisors Act; Securities Regulation

Investment advisers have a duty to disclose material conflicts of interest to clients. The more difficult question is: "how much disclosure is enough?" In a recent settled enforcement action, the SEC suggests that disclosure of material facts alone may not be sufficient, and that more explicit disclosure is needed when investment advice may result in additional compensation to the adviser. The case is Matter of Valentine Capital Asset Management.

Prospectus Directive amendments – discussion of key changes

September 27, 2010 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Securities Regulation

London partner Dorothee Fischer-Appelt is the author of "Prospectus Directive amendments – discussion of key changes" [PDF] published in the September 2010 issue of Law and Financial Markets Review (pp. 490-498).