On May 23, ISDA published a discussion paper on the purposes, function and issues associated with central clearing of over-the-counter (OTC) derivatives. ISDA Release.
Month: May 2011
SEC Proposed Rule Disqualifying Felons and Bad Actors from Securities Offerings
On May 25, the SEC proposed a rule to deny the Rule 506 registration exemption for securities offerings where the issuer or another covered person (such as a director, officer, 10% beneficial owner, or person compensated for soliciting investors) had, within a certain amount of time before the offering, a “disqualifying event” such as: (i) a criminal conviction or court injunction in connection with the purchase or sale of securities; (ii) a final order from a regulator barring the issuer from certain actions; (iii) certain SEC disciplinary orders; (iv) suspension or expulsion from membership in a self-regulatory organization; (v) SEC stop orders; or (vi) U.S. postal servicer false representation orders. Comments must be submitted by July 14. SEC Release. Proposed Rule.
SEC Whistleblower Program
On May 25, pursuant to Section 922 of the Dodd-Frank Act, the SEC adopted final rules implementing a new whistleblower program. Under the program, the SEC will reward whistleblowers who voluntarily provide original information concerning violations of the U.S. securities laws. In order to qualify for a reward, such information must lead to a successful enforcement action resulting in a monetary sanction exceeding $1 million. The final rules will be effective 60 days after they are submitted to Congress or published in the Federal Register. SEC Release. Final Rules.
OCC Proposed Rule Implementing Dodd-Frank Act Provisions
On May 25, the OCC proposed a rule implementing several provisions of the Dodd-Frank Act, including the transfer of functions from the Office of Thrift Supervision to the OCC and changes to national bank preemption and the OCC’s visitorial powers rule. Comments must be submitted by June 27. OCC Release. Proposed Rule.
Orrick’s Annual Financial Services Roundtable
June 14, 2011 – Orrick’s Global Employment Law Group and in-house counsel will host an interactive discussion of critical employment law issues impacting the financial services industry. Please click here for more information and to RSVP.
Life Settlements Breakfast Briefing
May 26, 2011 – Orrick and Maple Life Financial will be discussing the recent developments in the life settlement market and how the changes are affecting business. Please click here for more information and to RSVP.
Court Declines to Consider U.S. Senate Report on Financial Crisis in Deciding Motion to Dismiss
On May 18, 2011, Judge Jones of the Southern District of New York rejected plaintiff’s request that the Court consider a U.S. Senate report entitled “Wall Street and the Financial Crisis: Anatomy of a Financial Collapse” in deciding defendants’ motion to dismiss. The plaintiff’s complaint alleges that Goldman Sachs committed fraud in connection with the sale of a collateralized debt obligation (“CDO”) with collateral consisting of subprime mortgage-backed securities. Plaintiff asserted that the Senate report contains an extensive discussion of the CDO sale at issue as well as citations to internal Goldman emails that, according to plaintiff, call into question defendants’ assertions on the motion to dismiss. The Court held that the Senate report went beyond what the Court could consider on a motion to dismiss and that plaintiff also failed to provide the Court with any basis for taking judicial notice of the report. Decision. Senate Report.
Court Dismisses Shareholder Derivative Action Against Citigroup Officers and Directors for Inadequate Pleading of Demand Futility
On May 17, 2011, Judge Stein of the Southern District of New York granted defendants’ motion to dismiss with prejudice this consolidated shareholder derivative action against current and former Citigroup officers and directors. Plaintiffs alleged that defendants breached their fiduciary duties of care and loyalty by allowing Citigroup to invest in mortgage-backed securities; concealing Citigroup’s exposure to those securities; committing securities fraud by making misleading statements regarding those securities; wasting corporate assets on the repurchase of Citigroup stock at inflated prices and the retirement package of the departing CEO; engaging in insider trading; and unjustly enriching themselves. The court granted defendants’ motion to dismiss, noting that plaintiffs had failed to demand that Citigroup pursue the claims itself before filing suit and holding that plaintiffs failed to adequately plead that such a demand would have been futile. Decision.
Rating Agency Developments
On May 16, Moody’s released its U.S. RMBS surveillance methodology for Scratch and Dent transactions. Moody’s Methodology.
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MSRB Transparency Standard for Municipal Variable Rate Securities
On May 16, the MSRB announced a new transparency standard for municipal variable rate securities. Under this standard, information will be made publicly available on EMMA that will allow investors to assess the level of demand, liquidity provisions, and auction procedures for such securities. MSRB Release.