Securities Regulation and Corporate Governance Monitor

European Parliament and Council Back New Alternative Investment Fund Rules

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

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.

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German Securities Regulator Prohibits Uncovered Short-Selling Transactions and Uncovered CDS in Government Bonds of Euro Zone Effective as of Today

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

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.

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Restoring American Financial Stability Act of 2010 – A Comprehensive Review of the U.S. Senate Banking Reform Bill

| Posted by Gibson, Dunn & Crutcher LLP Topic(s): Corporate Governance; Dodd Frank; Executive Compensation; Securities Regulation; Whistleblower Rules

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. 

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U.S. Sentencing Commission Amends Requirements for an Effective Compliance and Ethics Program

| Posted by Gibson, Dunn & Crutcher LLP Topic(s): Corporate Governance

The United States Sentencing Commission voted unanimously on April 7, 2010 to modify the Federal Sentencing Guidelines for organizations, including the provisions that set forth the attributes of an effective compliance and ethics program.  After considering a number of proposed changes to these Guidelines, the Commission voted to:

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A Summary of the Financial Reporting and Disclosure Implications of the Health Care Reform Legislation

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

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.

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The Four ‘Ds’: Deterrence, Discipline, Disgorgement … and Dawn Raids — Latest on the UK Financial Services Authority’s Enforcement Regime

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

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:

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Supreme Court Clarifies Standards for Judicial Review of Mutual Fund Fees

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

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. 

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Financial Regulatory Reform: Chairman Dodd Releases New Legislation to Reform Financial Services Industry Regulation and Enhance Consumer Protection

| Posted by Gibson, Dunn & Crutcher LLP Topic(s): Corporate Governance; Dodd Frank; Executive Compensation; Securities Regulation; Whistleblower Rules

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.

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Delaware Court of Chancery Validates Use of a Net Operating Loss Poison Pill

| Posted by Gibson, Dunn & Crutcher LLP Topic(s): Corporate Governance

On February 26, 2010, the Court of Chancery of the State of Delaware issued an important opinion validating the use of a net operating loss (NOL) shareholder rights plan or poison pill.[1]  The case, Selectica, Inc. v. Versata, Inc.,[2] arose out of the intentional triggering of Selectica’s NOL rights plan in December 2008 by its competitor Trilogy and Trilogy’s subsidiary, Versata Enterprises.  The decision provides boards of directors of Delaware corporations with guidance as to the steps they should take in adopting and implementing an NOL rights plan.  It also reflects Delaware courts’ continuing deference to well-informed boards that run a methodical and well-reasoned process, even in the face of the so-called Unocal enhanced standard of review.

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