On July 21, 2010, President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, the most sweeping financial reform legislation in over a generation. Gibson Dunn panelists discuss the regulatory initiatives in the bill that are likely to be of interest and concern to the wide range of companies affected by the bill.
Securities Regulation
FASB Extends by 30 Days the Period for Comment on Proposed Changes to U.S. Accounting Standards Governing Loss Contingencies
On August 18, 2010, the Financial Accounting Standards Board ("FASB") announced that it is extending by 30 days to September 20, 2010 the deadline for comments on the FASB’s proposed amendments to the U.S. accounting standards governing the disclosure of loss contingencies, including litigation-related contingencies. Given the broad scope of the FASB’s proposed modifications and the challenges they would pose to financial statement preparers, we encourage companies who have not already commented on the proposal to submit comments by the new deadline.
Financial Accounting Standards Board Issues Proposed Amendments to U.S. Accounting Standards Governing Loss Contingencies
On July 20, 2010, the Financial Accounting Standards Board ("FASB") issued an exposure draft (the "Exposure Draft") containing proposed amendments to Accounting Standards Codification Topic 450-20 (formerly Financial Accounting Standard No. 5), the U.S. Generally Accepted Accounting Principles ("U.S. GAAP") provision dealing with the disclosure of loss contingencies. The proposal would require enhanced disclosure of qualitative and quantitative information about loss contingencies, including litigation-related contingencies.
The Dodd-Frank Act Reinforces and Expands SEC Enforcement Powers
During the midst of the financial crisis, the continued existence, much less powers, of the Securities and Exchange Commission were in doubt. But in the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Commission emerged with expanded jurisdiction over hedge funds, credit ratings agencies, and governance of public companies, among other areas.
Executive Compensation, Corporate Governance and Other Securities Disclosure Provisions in the Dodd-Frank U.S. Financial Regulatory Reform Act
On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act," available here), the most far-reaching financial regulatory reform legislation in decades. The Act affects not only the financial services industry but also all public companies. This Memorandum focuses on the Act’s executive compensation, corporate governance and other securities disclosure provisions applicable to public companies. This Memorandum also discusses the steps that public companies should consider taking now in light of the Act’s provisions. We have included as Exhibit A a chart listing the provisions described in this Memorandum and as Exhibit B the statutory text of these provisions. [1]
Derivatives Regulation under the Dodd-Frank Wall Street Reform and Consumer Protection Act
Throughout the financial regulatory reform debate, designing a regulatory framework for the derivatives market has been one of the most contentious issues. While the business community has supported bringing transparency, accountability, and stability to the market, it has been concerned that Congress and regulators could impose burdens on derivatives trading that would disincent businesses from hedging their own risks. The derivatives title in the conference report, passed by the Senate on July 15, 2010, is generally opposed by business groups as applying many of the same costs and requirements on end-users as will be applied to swap dealers. How much the final position will burden companies depends largely on the implementation of the law by regulators.
Restructuring in SEC Division of Corporation Finance
On July 16, 2010, the U.S. Securities and Exchange Commission (the "SEC") announced that the Division of Corporation Finance (the "Division") will create three new specialized offices that are intended to focus the Division’s resources on critically important institutions and financial products.
2010 Mid Year Securities Enforcement Update
I. Overview of the First Half of 2010
Nearly a year and a half ago, Mary Schapiro took over as Chairman of the SEC with a promise to reinvigorate the Enforcement Division. Shortly thereafter, Robert Khuzami, the Director of the Division of Enforcement, announced a series of initiatives with the goal of making the Enforcement Division more effective. The first six months of this year have seen those initiatives take shape with a reorganization of the Enforcement Division into specialized units and the formal announcement of a cooperation initiative for individuals.
Triplets?. . . ‘No, I’d Rather Have Twins’ — The UK’s Blueprint for Financial Regulation
In a dramatic move, initially trailed this time last year, the Conservatives (now in coalition with the Liberal Democrats) have confirmed that they will in their term of service, abolish Britain’s tripartite financial services regime, to replace it with a form of "twin peaks" style of regulation.
Restrictions on Removal of Public Company Accounting Oversight Board Members Violate U.S. Constitution’s Separation of Powers Principle; Narrow Holding Excises For-Cause Removal Provision
Today, the United States Supreme Court issued its opinion in Free Enterprise Fund v. Public Company Accounting Oversight Board, No. 08-861. The Public Company Accounting Oversight Board ("Board") was created by the Sarbanes-Oxley Act of 2002 to regulate accounting firms that conduct audits of public companies. The five members of the Board are appointed by the Securities and Exchange Commission ("SEC"), and are removable by the SEC only "for good cause shown" and "in accordance with" certain procedures. This "dual for-cause" removal regime–wherein a Board member is only removable for good cause shown by the SEC, whose Commissioners the President may not remove at-will–was described by the Court as "novel" and "highly unusual."