The "Dodd-Frank Wall Street Reform and Consumer Protection Act" ("Dodd-Frank") was approved by the U.S. House of Representatives on June 30, 2010 and is expected to be passed by the U.S. Senate in coming weeks. The bill contains a version of the "Volcker Rule" (the "Rule") — so named for former Federal Reserve Chairman Paul Volcker — that differs in material respects from the version originally introduced from the Senate bill into the House-Senate Conference. As in earlier versions, the Rule invokes Chairman Volcker’s core concept of separating certain risk activities from the federal bank subsidy.
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.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173) from the Broker-Dealer’s Perspective
Although still subject to Senate approval, the House of Representatives’ June 30, 2010 vote to approve the Bill* moves broker-dealers that much closer to sweeping changes to their business and operations. Only a limited number of provisions will be effective immediately upon the President’s signing of the Bill into law. Accordingly, the overall impact of financial regulatory reform cannot be fully determined until regulators undertake required rulemaking and also determine whether — and to what extent — to exercise delegated rulemaking authority.
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.
Executive Compensation and Corporate Governance Provisions in the Dodd-Frank U.S. Financial Regulatory Reform Bill
On June 30, 2010, the U.S. House of Representatives approved the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Bill," available here), the most far-reaching financial regulatory reform legislation in decades. This alert presents a chart on the corporate governance and executive compensation provisions contained in the Dodd-Frank Bill. In addition to summarizing each provision, the chart: (1) states whether the legislation requires rulemaking by the Securities and Exchange Commission ("SEC") to implement the provision (note that in many cases the SEC may adopt or amend its rules in response to a provision even if not required by the legislation); (2) provides the effective date of the provision; and (3) describes the types of companies to which the provision would apply.
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."
Amendments to the EU Prospectus Directive: Summary of Key Changes
This Alert summarizes certain key changes to the EU Prospectus Directive (2003/71/EC) which were approved by the EU Parliament on June 17, 2010 (the "Amending Directive"). These changes are the result of several months of discussions among the European Commission, the European Parliament and the European Council and various market participants. The Amending Directive will come into force 20 days from publication in the Official Journal, which is expected to occur in September or October of 2010. EU Member States are required to implement the Amending Directive into national law within 18 months following its entry into force (March or April 2012). Accordingly, issuers will have some time to consider the proposed changes for debt and equity offerings in the EU. However, issuers of wholesale debt securities with minimum denominations of EUR 50,000 (or equivalent) that are listed on an EU-regulated market should note that the Amending Directive increases the minimum denominations to EUR 100,000 both for purposes of the Prospectus Directive and the Transparency Directive (2004/109/EC). As a result, issuers wishing to continue to benefit from the exemption from periodic reporting for issuers of wholesale debt securities under the Transparency Directive will need to ensure that they issue in denominations of EUR 100,000 if issuing after the date of entry into force of the Amending Directive.
Delaware Chancery Court Addresses Standard for Evaluating Controlling Stockholder Tender Offers
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.
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.
Corporate Governance and Executive Compensation Provisions in Senate Financial Regulatory Reform Bill
On May 20, 2010, the U.S. Senate passed the Restoring American Financial Stability Act of 2010 (the “Senate Bill”), the most significant financial regulatory reform legislation in decades. This legislation impacts not only the financial services industry but also all public companies. This memorandum focuses on the corporate governance and executive compensation provisions that will apply to public companies if the Senate Bill is enacted, and points out how the Senate Bill differs from the financial regulatory reform bill passed by the House of Representatives in December 2009 (the “House Bill”; available here). This memorandum also addresses the steps that companies should consider taking now in order to be prepared to comply with these provisions and the implementing rules and regulations to be adopted by the Securities and Exchange Commission (“SEC”) and the exchanges.