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