The Single Resolution Mechanism in the European Banking Union

With the adoption of the Single Resolution Mechanism (SRM) the European Union (EU) established the second crucial pillar of the European Banking Union (EBU), further promoting the financial stability and efficiency of the European banking system. The EU made this significant progress not by design but by the force of necessity – the crisis rendered compelling the centralization of powers for the supervision and resolution of banks at the EU (‘federal’) level. This article briefly introduces the structural components of SRM, as well as discusses the decision-making process for the placement of a bank … Read more

Morrison & Foerster discusses EU Bank Recovery and Resolution Directive and European Single Resolution Mechanism

2014 was a very active year for financial regulation in the European Union (EU). There was a push to finalise much of the outstanding primary legislation on the regulatory reform agenda in advance of the European Parliamentary elections in May 2014. This resulted in the adoption of many EU Regulations and Directives in the first half of the year. However, much still remains in the in-box of EU legislators and regulators. Most of the legislation that has been adopted envisages a significant amount of further legislation and rulemaking regulation in the form of delegated regulations to be adopted

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Michelle Harner Headshot

Chapter 11 Reform:  Refining the Tools Available to Rehabilitate Distressed Businesses

Chapter 11 of the U.S. Bankruptcy Code strives to rehabilitate distressed companies and maximize creditors’ recoveries. After its enactment in 1978, the Code served those purposes well, saving companies such as Federated Department Stores, Laidlaw International, Texaco, and multiple U.S. airlines. In the process of those reorganizations, secured and unsecured creditors received distributions on their claims, employees retained their jobs, and revenue streams continued for local, state, and federal governments.

Nevertheless, today’s financial landscape is very different. The testimony from almost three years of public hearings before the American Bankruptcy Institute Commission to Study the Reform of Chapter 11 suggests … Read more

Marketplace of Ideas: United States v. Newman

Yesterday and today, we are running a number of posts related to the recent United States v. Newman decision in which the Second Circuit overturned the convictions for insider trading and conspiracy to commit insider trading of Todd Newman and Anthony Chiasson.  Messrs. Newman and Chiasson were hedge fund portfolio managers at Diamondback Capital Management, LLC and Level Global Investors, L.P., respectively.  The government alleged that a cohort of analysts at various hedge funds and investment firms obtained material, nonpublic information from employees of Dell and NVIDIA—two publicly traded technology companies—shared it amongst each other, and subsequently passed it on … Read more

Jill Fisch Headshot

Newman Reins in Criminal Prosecution of Remote Tippees for Insider Trading

In its recent decision in United States v. Newman,[1] the United States Court of Appeals for the Second Circuit provided important guidance on the scope of insider trading liability. The case concerned the liability of two hedge fund managers, Anthony Chiasson and Todd Newman, who were alleged to be members of a group of financial analysts who shared information about various publicly-traded companies. Chiasson and Newman were so-called “remote tippees” in that they were each multiple levels removed from the sources of the information – insiders at Dell and Nvidia. Neither defendant was alleged to have had direct … Read more


The Newman-Chiasson Insider Trading Case Reinforces the Need for Change

The recent reversal of convictions of hedge fund managers Todd Newman and Anthony Chiasson highlights the weakness of using a common law approach when interpreting Rule 10b-5 to reach remote tippees accused of insider trading. The decision reinforces the need for a statutory approach to bar insider trading. A statutory approach is not a novel idea. Most jurisdictions around the world, including the UK and the other member states of the EU, have made insider trading a statutory offense that captures a wider range of conduct than does the US regime in its reliance upon Rule 10b-5. However, the introduction … Read more

Don Langevoort Headshot

Newman and Selective Disclosure

If someone had asked me back in the mid-1980s whether an insider trading case required proof that the tippee was aware that the tipper was acting for personal gain, I would have said yes without much hesitation, because that’s what the Supreme Court had said in Dirks. To be sure, awareness has a great deal of elasticity, because Dirks used the phrase “knows or should know,” and personal benefit can come in a variety of soft forms. But one big implication from this common understanding was that selective disclosure to investment analysts would ordinarily not constitute insider tipping, because … Read more

Ilya Beylin Headshot (small)

Why Newman Leaves Me With a Queasy Feeling, or Deregulating the Demand for Insider Information

Among several independent holdings stated by the court on its way to reversing the convictions of Todd Newman and Anthony Chiasson, the Newman court declared that: “in order to sustain a conviction for insider trading [against a remote tippee], the Government must prove beyond a reasonable doubt that [the remote] tippee knew that an insider disclosed confidential information and that he did so in exchange for a personal benefit.”[1] My musings leave aside whether from a doctrinal standpoint, this statement is incorrect, within a range of holdings that the court could have come to, or simply necessitated by the … Read more

Samuel Buell Headshot

Insider Trading Law in Deeper Waters

Everyone can thank Preet Bharara for one thing. His swath of insider trading prosecutions is forcing amplification of the law, especially the criminal law of insider trading. That body of law has been underdeveloped and at times stagnant. The Second Circuit’s important decision in United States v. Newman, however, shows that the common law process doesn’t necessarily lead to calmer waters.

Part of this is inevitable. The law of insider trading never had the intellectual heft to withstand sustained pressure in the form of large numbers of criminal prosecutions, which place special demands on the law because of their … Read more

John Coffee Headshot

IGNORANCE IS NOW BLISS: But What Can the Government Do?

United States. v. Newman[1] represents the most serious defeat for the DOJ and the SEC in their campaign against insider trading since Dirks v. SEC[2] in 1983. In both cases, mistakes were made, and the Government did not at the time appreciate the difficulty of its position. Indeed, in Dirks, the SEC sued the hero of the Equity Funding scandal (Ray Dirks), not the villain. In Newman, the U.S. Attorney was prosecuting far more remote tippees than those in any other Second Circuit case. If the Government were to seek certiorari and take this case to … Read more

Jim Cox Headshot

Giving Tippers a Pass: U.S. v. Newman

The Second Circuit, in U.S. v. Newman raises likely insurmountable burdens for prosecutors to pursue remote tippees. Newman causes even greater harm to the public interest in fair capital markets by making it impossible to pursue the true violator, the tipper. To understand this conclusion, consider the following hypothetical that is intended to illustrate the Supreme Court’s reasoning in Dirks v. Securities and Exchange Commission.

Kenneth Darke, a geologist with Texas Gulf Sulphur Company, rode into history as one of a large group of corporate insiders who purchased TGS shares on their advance knowledge of a unparalleled visual assay … Read more

John Coffee Headshot

Federal Preemption and Fee-Shifting

All eyes are on Delaware, where soon the Delaware Bar Association will recommend to the state legislature whether or not to curb the Delaware Supreme Court’s decision last year to uphold the facial validity of a board-approved bylaw that shifted the attorneys’ fees of defendants to the unsuccessful (or less than completely successful) plaintiff. Much commentary has already focused on the merits of that decision, ATP Tours, Inc. v. Deutscher Tennis Bund,[1] and this column will not go there. That furrow has already been well plowed.[2]

Although this columnist agrees with the majority who believe the ATP Read more

BCG discusses the “Brave New Era” of Comprehensively Regulated Banks

Global banking has entered a new era in which every region, product, and legal entity is going to be closely regulated.

To assess the current status and future effects of regulatory reform, we have classified the entire spectrum of regulatory reforms, grouping them into three clusters: financial stability, prudent operations, and resolution and separation. (See Exhibit 1.)

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Financial Stability: Expectations Exceed Regulators’ Intent

Since the crisis began, establishing and safeguarding global and local financial stability have been regulators’ highest priorities. As a result, financial stability is the most developed area of reform. Fundamental requirements have been revised or reinstated, primarily … Read more


Just How Scary is the Fed?

“There is an old saw that the Fed chair is the second most powerful person in government. In the aftermath of the financial crisis, that may actually be an understatement.” Nicholas Lemann, The New Yorker:

America has a long and conflicted relationship with central banking. The controversial actions taken by the Federal Reserve during and since the 2007-2009 financial crisis reignited longstanding concerns about vesting so much authority in the hands of a few unelected officials. The Fed’s creative and aggressive use of its authority likely helped to reduce the size of the financial crisis and the magnitude of … Read more

sarah paterson

Rethinking the Role of the Law of Corporate Distress in the Twenty-First Century

Thomas Jackson famously described the role of all bankruptcy law as reducing the incentive for individual enforcement against the assets of a distressed company.[1] Although scholars have debated other aspects of Jackson’s thesis, most have continued to identify with this as a central tenet of bankruptcy law. In a recent working paper, Rethinking the Role of the Law of Corporate Distress in the Twenty-First Century, I propose a new taxonomy: the law of corporate distress comprised of insolvency law and restructuring law. I suggest that Thomas Jackson’s description remains apt for part of that taxonomy but draw a distinction … Read more

Darian Ibrahim

Equity Crowdfunding: A Market for Lemons?

In the paper “Equity Crowdfunding: A Market for Lemons?”, recently made publicly available on SSRN, I take a comprehensive look at crowdfunding’s place in entrepreneurial finance. I begin by observing that angel investors and venture capitalists (VCs) have funded Google, Facebook, and virtually every technological success of the last thirty years, and that these investors operate in tight geographic networks which mitigates uncertainty, information asymmetry, and agency costs both pre- and post-investment. It follows, then, that a major concern with equity crowdfunding (the sale of securities over the Internet) is that the very thing touted about it – the democratization … Read more

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RMBS Put-Back Litigations and the Efficient Allocation of Endogenous Risk Over Time

In many cases pending around the country, purchasers of residential mortgage-backed securities (RMBSs) are suing the financial institutions that created and sold the RMBSs, alleging that representations and warranties made by these institutions concerning the quality of the underlying mortgage loans were false in various respects. Because the agreements memorializing the securitization transactions that created the RMBSs generally provide that, if a loan fails to conform to the seller’s representations, the seller will repurchase the loan at full value, these cases are generally referred to as the RMBS Put-Back Litigations. A key issue in many of these cases, including cases … Read more


How King v. Burwell Creates Tax Problems for Federal Health Insurance Exchanges and Consumers

In King v. Burwell, the Supreme Court will address whether Section 36B of the tax code grants a tax credit to persons who purchase health insurance policies on federally established health insurance exchanges.  The government says yes, but the challengers argue that tax credits are allowable only for consumers who purchase health insurance policies on state established exchanges. Commentators have expressed concern that the Court’s acceptance of the challenger’s argument would cripple the Obamacare legislation, whose success depends on robust consumer enrollment in health care plans. The RAND Corporation, for example, predicts that a government-adverse decision in King will … Read more

Latham & Watkins discusses Pumping Up For Proxy Season: Supplemental and Amended Proxy Materials

In connection with a meeting of stockholders, many companies face the decision of whether and how to prepare and file supplemental or amended proxy materials.

The decision to supplement or amend, and how to deliver the message, is guided as much by developed practices over time as it is by the law. Since the proxy solicitation rules only permit discussions with stockholders and other attempts to influence the vote of stockholders based on what has been disclosed in filed proxy soliciting material, it is critical that such disclosure is correct and complete throughout the solicitation process. In light of the … Read more

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How Twitter Is Disrupting Shareholder Activism

Shareholders are organizing and mobilizing on new social media platforms like Twitter. This changes the dynamics of shareholder proxy contests to favor small shareholders over management. Disruptive technology may bring about a shareholder revolution, which may not be in all shareholders’ best interests, at least from the perspective of shareholder wealth maximization, and it also has powerful implications for the future of corporate social responsibility.

Twitter and other social media are platforms for global social interaction. A twitter user can send a “tweet,” which is a sort of 140-character text message, to the world. About 500 million tweets are sent … Read more


Short Selling Reporting Rules in the EU and the US: A Greenfield Area

The following post comes from Elizabeth Howell, a doctoral student in law at the University of Oxford and a visiting scholar at Columbia Law School in the Fall Semester 2014. It is related to her paper, ‘Short Selling Reporting Rules in the EU and the US: A Greenfield Area’ that is forthcoming in the European Company Law Journal. Further details are available here

Short selling reporting obligations can be helpful to regulators, particularly in relation to deterring abusive behavior. Following the recent financial crisis, the European Short Selling Regulation (the ‘Regulation’)[1] introduced a common framework for short … Read more

Gibson Dunn discusses Important New Guidance on Revlon Duties

On December 19, 2014, the Delaware Supreme Court issued a ruling reversing an order of the Court of Chancery granting a preliminary injunction that would have enjoined an agreed-to merger and required a mandatory post-signing 30-day go-shop period.  In C&J Energy Services, Inc. v. City of Miami General Employees’ and Sanitation Employees’ Retirement Trust, No. 655/657 (Del. Dec. 19, 2014), the Supreme Court held, among other things, that the Court of Chancery had imposed a non-existent requirement that a selling company must engage in an active market process as a matter of law.

The Transaction.  The transaction that … Read more

mary jo white

Public Service: An Obligation and Opportunity for Lawyers

These remarks were made by SEC Chair Mary Jo White before the Association of American Law Schools Annual Meeting on January 3, 2015.

Thank you, for that excellent introduction.

I am truly honored to have been asked to be the inaugural speaker in your Showcase Speaker Program.  This is an impressive forum for a serious discussion of the most important issues affecting law schools and the legal profession.  And the theme of this year’s annual meeting – “Legal Education at the Crossroads” – is an apt description of the critical juncture we are facing in 2015.

Many of the challenges … Read more


Reclaiming the General Counsel’s Role as Advisor on Organizational Ethics

This post comes from Michael W. Peregrine, a partner in McDermott Will & Emery.  Mr. Peregrine advises corporations, officers and directors on matters relating to corporate governance, fiduciary duties and officer/director liability issues. His views do not necessarily reflect the views of McDermott Will & Emery or its clients. Mr. Peregrine wishes to thank his colleague, Kelsey Leingang, for her assistance in the preparation of his post.

The general counsel should be proactive in reclaiming her traditional role as an adviser on organizational ethics, in addition to her accepted roles as legal counselor and business partner. Legal scholars, industry observers … Read more

PwC discusses Ten Key Points from the FDIC’s Resolution Plan Guidance

On December 17th, the FDIC issued guidance for the 2015 resolution plans of the covered insured depository institutions (CIDIs) of large bank holding companies (BHCs). The guidance (applicable to 36 CIDIs) adds welcome clarification around regulatory expectations, but also raises the bar – in some cases quite significantly – on the nature and depth of required plan content.

In addition to the BHC resolution plans required under Dodd Frank Section 165(d) [1], the FDIC requires a separate CIDI resolution plan for US insured depositories with assets of $50 billion or more. Most of the largest, most complex BHCs are subject … Read more

Weil Gotshal discusses SEC Proposal to Implement JOBS Act Mandate for Exchange Act Registration

[Two weeks ago], the Securities and Exchange Commission (SEC) proposed rules to implement Title V and Title VI of the Jumpstart Our Business Startups Act (the JOBS Act). [1] Specifically, the SEC proposed to revise the rules governing registration, termination of registration and suspension of reporting under the Securities Exchange Act of 1934 (the Exchange Act) to reflect the new thresholds set forth in the JOBS Act.[2]

Background:  Title V and Title VI of the JOBS Act

The JOBS Act amended Sections 12(g) and 15(d) of the Exchange Act to adjust the thresholds for registration, termination of registration and suspension … Read more

Cleary discusses American Bankruptcy Institute’s Proposed Chapter 11 Reforms

On December 8, 2014, the American Bankruptcy Institute (“ABI”) Commission to Study the Reform of Chapter 11 (the “Commission”) issued its Final Report and Recommendations (the “Report”). The Report proposes a number of important changes to Chapter 11.[1]

The Commission was formed in 2012 to respond to shifts in the financial markets, corporate structures and credit and derivatives products since the Bankruptcy Code’s adoption in 1978 and is comprised of leading bankruptcy practitioners, professors and judges. The Report is the result of an in-depth, two-year review of Chapter 11 by the Commission and 13 separate Advisory Committees. The “Recommended Principles” … Read more

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Burdens of Production and Persuasion on Price Impact After Halliburton II

The following post comes to us from Wendy Gerwick Couture, Associate Professor at the University of Idaho College of Law.  It is based on her recent paper entitled “Answering Halliburton II’s Unanswered Question: Burdens of Production and Persuasion on Price Impact,” which is forthcoming in the Securities Regulation Law Journal and is available here.

In Halliburton Co. v. Erica P. John Fund, Inc. (“Halliburton II”), 134 S. Ct. 2398, 2407 (2014), the Supreme Court held that a defendant can rebut the fraud-on-the-market presumption of reliance at class certification by showing the absence of price impact.  As Professor … Read more

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Structural Reform of Banking Systems: The Global Impact of Legal Fragmentation

One of the key issues in the on-going overhaul of the global financial system is the structural reform of banking systems. Legislatures in different states, e.g. the United States, France, Germany, and the United Kingdom, have all taken measures to protect individual depositors’ assets against losses from risky bank activities. On 29 January 2014, the European Commission joined the transnational effort by publishing its own proposal on the subject. Each measure is slightly different. There are good reasons to wonder about the effect that this type of legal fragmentation will have on the global financial system. In a recent paper … Read more

Fried Frank discusses In re Zhongpin

In In re Zhongpin Inc. Stockholders Litigation (Nov. 26, 2014), the Delaware Chancery Court found that the plaintiffs had pled sufficient facts to raise an inference that Xianfu Zhu, who was the company’s founder, Chairman and CEO, was a controlling stockholder, even though he owned only 17% of the company’s stock and had not controlled the directors’ decision relating to his going-private bid. Vice Chancellor Noble’s decision appears to have been based on a conclusion that the unusual degree to which Zhu was indispensable to the company as a practical matter precluded the special committee from functioning effectively because—without Zhu’s … Read more

Baker Botts discusses the Reach of the Sherman Act

In a decision that could have far-reaching implications for U.S. companies and consumers, the Seventh Circuit Court of Appeals recently reiterated that the U.S. antitrust laws stop at the border and do not reach conduct that causes damages in the first instance outside the United States.

In Motorola Mobility LLC v. AU Optronics Corp., No. 14-8003, 2014 WL 6678622 (7th Cir. Nov. 26, 2014), issued shortly before Thanksgiving, the Court dismissed a Sherman Act Section 1, 15 U.S.C. § 1, claim brought by Motorola against members of the liquid crystal display (“LCD”) cartel and affirmed summary judgment for defendants.… Read more

Arthur J. Gallagher & Co. discusses Incentive Trends in Executive Compensation

With Say on Pay (“SOP”) now entrenched in the psyche of compensation committees along with Institutional Shareholder Services’ (“ISS”) evolving standards, improving disclosure of short- and long-term incentive (“STIP” and “LTIP”, respectively) plans, including measures used, the values associated with those measures, and how they can be expected to drive performance, should continue to be a priority for all public companies.

In order to review incentive trends (particularly, the underlying incentive design), Arthur J. Gallagher & Co.’s Human Resources & Compensation Consulting Practice has conducted a study of 2013 compensation data as disclosed in 2014 annual proxy statements for 200 … Read more

Latham & Watkins discusses Volcker Rule Conformance Deadline Extension for Certain Funds

[On December 18, 2014] The Federal Reserve [] extended the Volcker Rule conformance period for legacy covered funds from July 21, 2015 to July 21, 2016, and also granted a further one year extension until July 21, 2017.

At 3 pm [on December 18, 2014], the Board of Governors of the Federal Reserve System (the Board) announced that it had exercised its statutory authority under section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Volcker Rule), to grant banking entities covered by the rule an extension until July 21, 2016 (from July 21, 2015) to conform … Read more

Gibson Dunn discusses Lien-Creditor Rights after Momentive

On October 14, 2014, the Bankruptcy Court for the Southern District of New York issued a bench ruling (as later modified, the “Bench Ruling“) in the In re MPM Silicones, LLC (“Momentive“) Chapter 11 cases (Case No. 14-22503-rdd, Adv. Proc. Nos. 14-08248 [Docket No. 50], 14-08247 [Docket No. 60]), which serves as a stark reminder of the function and importance of carefully drafted and negotiated intercreditor agreements in a Chapter 11 context.  Intercreditor agreements generally govern the rights of multiple classes of creditors vis à vis each other.  A typical intercreditor agreement directs future distributions post-default … Read more

Commissioner Mark Wetjen

Ensuring the Promise of a Centrally Cleared, Global Swaps Market: Next Steps

These remarks were made by Commissioner Mark P. Wetjen before the Futures Industry Association Asia Derivatives Conference

Thank you for that kind introduction, and my thanks as well to the Futures Industry Association for having me here to speak at this year’s Asia Derivatives Conference. I am honored to be with you in Singapore. I want to give a special thanks to my good friend, Walt Lukken, who has shown tremendous leadership in his role at the FIA.

While traveling in Asia this week and meeting with members of the derivatives community, I’ve been struck by both the vastness and … Read more

Erica Gorga (Yale)

The Impact of the Financial Crisis on Nonfinancial Firms: The Case of Brazilian Corporations and the “Double Circularity” Problem in Transnational Securities Litigation

This Article discusses the impact of the international financial crisis on Brazilian capital markets. While the banking industry was not significantly affected, leading nonfinancial corporations experienced severe financial turmoil. Two Brazilian corporations cross-listed in the United States — Sadia S.A. and Aracruz Celulose S.A. — suffered billion-dollar losses when the Brazilian real unexpectedly plummeted in relation to the dollar. These great losses were found to be the result of their highly speculative trading in currency derivatives, despite earlier disclosure that these companies had engaged only in pure hedging activity. Consequently, several private lawsuits were filed both in the United States … Read more

Wachtell Lipton discusses Second Circuit Decision Overturning Insider Trading Convictions

[On December 10, 2014] the Second Circuit Court of Appeals issued an important decision overturning the insider trading convictions of two portfolio managers while clarifying what the government must prove to establish so-called “tippee liability.”  United States v. Newman, et al., Nos. 13-1837-cr, 13-1917-cr (2d Cir. Dec. 10, 2014).  The Court’s decision leaves undisturbed the well-established principles that a corporate insider is criminally liable when the government proves he breached fiduciary duties owed to the company’s shareholders by trading while in possession of material, non-public information, and that such a corporate insider can also be held liable if he … Read more


Current Issues in Securities Regulation: The ‘Hot’ Topics

The following speech was given by Commissioner Kara M. Stein of the U.S. Securities and Exchange Commission at Columbia Law School on November 21, 2014. A copy of the speech is also available here.

Thank you, John [Coffee], for your kind introduction.

Before I begin my remarks, I am required to tell you that the views I am expressing today are my own and do not necessarily reflect those of the Commission, my fellow Commissioners, or the staff of the Commission.

It is a pleasure to speak in front of an audience that cares so passionately about securities regulation. … Read more

Davis Polk discusses Suntech Bankruptcy Ruling

In an opinion entered on November 17, 2014, Judge Stuart M. Bernstein of the United States Bankruptcy Court for the Southern District of New York held that Suntech Power Holdings Co., Ltd. was eligible to be a chapter 15 debtor by virtue of a bank account opened in the U.S. specifically for the purposes of establishing U.S. jurisdiction under the Second Circuit’s controversial Barnet decision,[1] and that Suntech’s center of main interest (“COMI”) was the Cayman Islands despite conducting no business in the Cayman Islands prior to its filing of a winding-up proceeding there.  Under chapter  15, COMI is … Read more

Jackson_Rob_Teacher of the Year

The SEC’s Holiday Gift to High-Speed Traders

Last month, we released a new study, How the SEC Helps Speedy Traders, covered here by the Wall Street Journal, revealing that the Securities and Exchange Commission’s systems have been giving certain investors market-moving corporate filings before those same filings are made available to the investing public. In the days after the Journal published its article, the Senate Banking Committee issued a bipartisan letter to the SEC, “urg[ing] the SEC to quickly investigate this timing disparity for company filings and take the necessary steps to eliminate it.” Based on our subsequent research, the Journal later reported that the … Read more