Securities Regulation

2011 Mid-Year Securities Enforcement Update

July 18, 2011 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Securities Regulation

I. Overview of the First Half of 2011

Robert Khuzami, the Director of the Division of Enforcement (the “Division”) of the SEC, recently took stock of the SEC’s accomplishments in the two years since he began his term. Specifically, he focused on the Division’s restructuring, calling it the “most significant” since the Division’s creation almost 40 years ago.[1] In describing the restructuring, he noted that it was composed of many initiatives that were intended to achieve a series of common goals including: achieving a better understanding of the products, markets, transactions and practices policed by the Commission; identifying and terminating fraud and misconduct more quickly; increasing efficiency in the use of resources; and maximizing the Division’s deterrent impact by swiftly addressing threats as they develop and before they can permeate entire business lines or industries.[2]

With One Month to Spare, the SEC Will Consider Final Private Fund Adviser Registration Rules

June 9, 2011 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Investment Act/Investment Advisors Act; Securities Regulation

On June 22, the SEC will meet to consider adopting final rules and rule amendments to implement the requirements of Title IV of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Commission’s press release is available at http://sec.gov/news/openmeetings/2011/ssamtg062211.htm.

Directors and Shareholders of Indian Companies are Permitted to Attend Board Meetings and Shareholder Meetings via Video Conference

June 6, 2011 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Corporate Governance; India Regulation; Securities Regulation

On May 20, 2011, the Ministry of Corporate Affairs, Government of India ("Corporate Affairs Ministry"), issued two general circulars ("Circulars") permitting attendance of meetings of the Board of Directors ("Board") and general meetings of the shareholders of an Indian company by using an electronic mode of communication. The Circulars were issued by the Corporate Affairs Ministry as part of its "green initiative in corporate governance" and are a long-awaited change to the means of attending Board and shareholder meetings. The first circular[1] ("Circular 1") clarified that shareholders of an Indian company can participate in general meetings of the shareholders by using video conferencing facilities. The second circular[2] ("Circular 2") clarified that directors of an Indian company can participate in meetings of the Board using video conferencing facilities and also clarified that directors who participate via video conferencing facilities will be counted towards the quorum of such Board meetings.

The Securities and Exchange Board of India Takes the View that Put/Call Options and Rights of First Refusal are Unenforceable

June 2, 2011 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Corporate Governance; India Regulation; Securities Regulation

In an unpublished letter dated March 18, 2011, the Securities and Exchange Board of India ("SEBI") has taken the view that put and call option arrangements and rights of first refusal are not enforceable in India. Although the law on this question is far from settled, the view taken by SEBI may potentially impact several public M&A transactions in India where such clauses are frequently included in transaction documents. Please note that this discussion is based on an unpublished letter and that the analysis should therefore not be taken to be final law on the subject.

The Government of India Issues a New Consolidated Foreign Direct Investment Circular

April 27, 2011 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Corporate Governance; India Regulation; Securities Regulation

On March 31, 2011, the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India ("DIPP"), issued a new consolidated foreign direct investment policy, Circular 1 of 2011 ("Circular"), which supersedes all prior press notes, press releases and clarifications issued by the DIPP relating to foreign direct investment in India. The Circular reflects the current policy of the Indian Government with respect to foreign direct investment in India, and has the force of law.

Budget Impasse May Lead to SEC Shutdown

April 6, 2011 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Securities Regulation

UPDATE: On Friday, April 8, 2011, the SEC published its contingency Plan of Operations on its federal government shutdown page in preparation of a federal government shutdown due to the budget impasse. All updates and announcements regarding SEC operations during the potential shutdown will be posted on the same page. Gibson Dunn’s client alert originally distributed on April 6 follows below. On Tuesday, April 5, 2011, the Obama administration and Congressional leaders announced that they had failed to reach a budget agreement, which could lead to a partial shutdown of the federal government if no budget bill or continuing resolution is approved by the close of business on Friday, April 8, 2011. The U.S. Securities and Exchange Commission (“SEC”) is likely to be significantly affected by any shutdown due to the budget impasse.

Social Media and the Federal Securities Laws

April 4, 2011 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Securities Regulation

New York partner Lois Herzeca is the author of "Social Media and the Federal Securities Laws" [PDF] published in the April 4, 2011 issue of BNA’s Securities Regulation & Law Report.

SEC Proposes to Readopt Existing Beneficial Ownership Rules as They Apply to Swaps

March 22, 2011 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Securities Regulation

Last week the U.S. Securities and Exchange Commission (the "SEC") proposed to maintain–for now, at least–the current reporting rules under Sections 13(d) and 16 of the Securities Exchange Act of 1934 (the "Exchange Act") as they apply to security-based swap transactions. The SEC issued the proposal to preempt any uncertainty that may arise when Section 13(o)–which was added to the Exchange Act by Section 766 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act")–becomes effective on July 16, 2011. Specifically, because new Section 13(o) may require the SEC to adopt new rules to regulate security-based swaps, the SEC has proposed readopting the portions of Rules 13d-3 and 16a-1 that apply to security-based swaps to maintain the regulatory status quo. The SEC’s proposed rules are the same as the existing rules in all respects.

SEC Targets Directors Who Ignore Red Flags

March 14, 2011 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Corporate Governance; Securities Regulation

In the past two weeks, the U.S. Securities and Exchange Commission (“Commission”) announced enforcement actions against four independent directors at two publicly traded companies. While these actions reflect the Commission’s interest in bringing actions against these types of directors, they are consistent with the Commission’s historical practice of pursuing cases against independent directors only when it believes that they personally have engaged in violative conduct or have repeatedly ignored significant red flags One of the actions was brought as an administrative proceeding instead of as a complaint in federal court and illustrates how the Commission will choose to use some of its new enforcement powers under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).

Germany to Ban “Stealth Takeover” Strategies

February 18, 2011 | Posted by Gibson, Dunn & Crutcher LLP Topic(s): Securities Regulation

On February 11, 2011, the German Parliament approved the bill for the so-called "Investor Protection and Capital Markets Improvement Act" (Anlegerschutz- und Funktionsverbesserungsgesetz) which is part of the ongoing legislative activity responding to the financial crisis. The bill is now referred to the second chamber of the Parliament and is expected to enter into force in April.