In a recent ruling with important implications for parties structuring minority freeze-out transactions, Vice Chancellor Travis Laster of the Delaware Court of Chancery embraced a unified standard for reviewing such transactions, regardless of whether they are effected by means of a negotiated merger or a unilateral tender offer. In In re CNX Gas Corp. Shareholders Litig., C.A. No. 5377-VCL (Del. Ch. May 25, 2010), V.C. Laster held that a proposed two-step freeze-out transaction — a unilateral tender offer followed by a short-form merger — is subject to the strict entire fairness standard, rather than the deferential business judgment rule, unless the tender offer is both (1) recommended by a special committee of independent directors with the authority to negotiate with the controlling stockholder, and (2) subject to a majority-of-the-minority tender condition. V.C. Laster concluded that, because the Special Committee of CNX Gas had not recommended that stockholders tender, the transaction should be reviewed for entire fairness.
Securities Regulation
Preparing for the Conference: A Comprehensive Review of the Senate Financial Reform Bill
On May 20, 2010, after three weeks of floor debate, five cloture votes, and nearly a year of development, the "Restoring American Financial Stability Act of 2010" passed the Senate by a vote of 59-39. Three Republicans (Sens. Collins, Grassley and Snowe) voted with all but one present Democrat (Sen. Feingold) to pass the bill and move the center of the debate on to conference.
German Securities Regulator Prohibits Uncovered Short-Selling Transactions and Uncovered CDS in Government Bonds of Euro Zone Effective as of Today
On May 18, 2010, and with effect as of May 19, 2010, 00:00 hrs CET, the German Federal Financial Supervisory Authority ("BaFin") temporarily prohibited uncovered short sales of debt securities of euro zone countries admitted on a German exchange to trading on the regulated market. These countries are (in alphabetical order) Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, The Netherlands, Austria, Portugal, Slovakia, Slovenia, Spain and Cyprus.
European Parliament and Council Back New Alternative Investment Fund Rules
The continuing saga of the Alternative Investment Fund Managers Directive (the Directive) of the European Union is causing heartburn throughout the world’s financial capitals.
Despite strong rhetoric from the Conservative Party whilst in opposition, the UK’s newly elected Conservative-Liberal coalition government quietly agreed to the next phase of the implementation of the Directive, perhaps aware that it could not assemble enough votes to block adoption of positions on the Directive using the Qualified Majority Vote system.
Restoring American Financial Stability Act of 2010 – A Comprehensive Review of the U.S. Senate Banking Reform Bill
On March 22, 2010, a bill seeking general reform of financial industry regulation in response to the recent financial crisis was adopted on a party-line vote by the Senate Banking Committee as the "Restoring American Financial Stability Act of 2010." It subsequently was reported to the Senate as Senate Bill 3217 (posted on the Committee’s website on April 15, 2010). The Senate Bill has been, and will continue in the near term to be, the subject of much public debate and partisan negotiation.
A Summary of the Financial Reporting and Disclosure Implications of the Health Care Reform Legislation
On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act. Seven days later, the president signed into law a reconciliation measure, the Health Care and Education Reconciliation Act of 2010. The passage of the Patient Protection and Affordable Care Act and the reconciliation measure (collectively, the "Act") has resulted in comprehensive health care reform legislation. The effects of the Act on the U.S. economy could be as sweeping as those resulting from the passage of Medicare and Social Security.
The Four ‘Ds’: Deterrence, Discipline, Disgorgement … and Dawn Raids — Latest on the UK Financial Services Authority’s Enforcement Regime
On 1 March, the UK Financial Services Authority ("FSA") published its new framework for financial penalty-setting. Explaining the tri-partite objectives of the new policy of deterrence, discipline and disgorgement, Margaret Cole (Director of Enforcement and Financial Crime) said:
Supreme Court Clarifies Standards for Judicial Review of Mutual Fund Fees
On March 30, 2010, the Supreme Court issued its decision in Jones v. Harris Associates L.P., No. 08-586. The Court construed Section 36(b) of the Investment Company Act of 1940, which states that investment advisers to mutual funds are deemed to have a fiduciary duty with respect to the receipt of compensation for services and provides a private cause of action for breach of that duty.
Financial Regulatory Reform: Chairman Dodd Releases New Legislation to Reform Financial Services Industry Regulation and Enhance Consumer Protection
Gibson Dunn is closely tracking government responses to the recent turmoil that has catalyzed a dramatic and rapid reshaping of our capital and credit markets. We are providing updates on key regulatory and legislative issues, as well as information on legal and oversight issues that we believe could prove useful as firms and other entities navigate these changing times.
SEC Amends E-Proxy Rules
The Securities and Exchange Commission ("SEC") recently approved amendments to its notice and access (e-proxy) rules that are designed to increase participation in the e-proxy process. Under the prior e-proxy rules, the SEC mandated the exact form and content that had to appear on the Notice of Internet Availability (the "Notice"). Concerns have been expressed that the Notice rules limited the ability of issuers to communicate effectively about the e-proxy process, which resulted in lower shareholder participation rates for e-proxy, particularly among retail investors.