Swaps Pushout Rule: Federal Reserve Banks Revise Discount Window Documentation

Effective July 16, 2013, the Federal Reserve Banks’ Operating Circular No. 10 (“OC-10”) has been amended to include a new appendix entitledProhibition Against Federal Assistance to Any Swaps Entity (“Appendix 6”).  Appendix 6 is intended to ensure that the Federal Reserve Banks comply with the requirements of Section 716 of the Dodd-Frank Act (“Swaps Pushout Rule”) when making discount window advances under OC-10.  OC-10 sets forth the terms and conditions under which an entity may obtain advances from, incur obligations to, or pledge collateral to a Federal Reserve Bank.

The Swaps Pushout Rule … Read more

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Editor's Tweet: Davis Polk on the Swaps Pushout Rule: Federal Reserve Banks Revise Discount Window Documentation http://wp.me/p2Xx5U-1fO

Davis Polk on CFTC Finalization of Cross-Border Swaps Guidance and Establishment of Phase-in Compliance Schedule

On July 12, 2013, the CFTC adopted long-anticipated final cross-border guidance (the “Final Guidance”) that provides guidelines for the application of the CFTC’s swap regulatory regime to cross-border swap activities. At the same time, the CFTC adopted a phase-in compliance schedule (the “Exemptive Order”)[1] that extends, with material changes, the cross-border exemptive order issued by the CFTC in January 2013 (the “January Order”).[2]

The Final Guidance and the Exemptive Order address several important topics, including:

  • the final definition of U.S. person for purposes of the CFTC’s swap regulatory regime;
  • guidance on which swaps a non-U.S. person must include in, and

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Editor's Tweet: Davis Polk on CFTC Finalization of Cross-Border Swaps Guidance and Establishment of Phase-in Compliance Schedule http://wp.me/p2Xx5U-1gU

The Marketplace of Ideas: Rethinking the Disclosure of Beneficial Ownership under Section 13(d)

The CLS Blue Sky Blog presents the third installment of our series,  “The Marketplace of Ideas.”  Earlier installments are available here and here.  The intent is to present different perspectives on the same subject by two or more authors.

Today, the subject is how the SEC should respond to Dodd Frank’s invitation to rethink the disclosure of beneficial ownership under Section 13(d).  We have asked a number of experts for their views.

Our first release, Proposals to “Reform” the Section 13D Rules:  Getting it Precisely Backwards, comes to us from Professors Ronald J. Gilson of Columbia and Stanford … Read more

Proposals to “Reform” the Section 13D Rules: Getting it Precisely Backwards

The current proposals to accelerate the timing of beneficial ownership disclosure under Section 13(d) of the 1934 Securities Exchange Act and to broaden the definition of beneficial ownership to include derivative positions that provide economic exposure to stock price movement but not a right to vote or acquire stock, gets the problem precisely backwards.  The mismatch of problem and solution is apparent when we focus on two dates:  1968, when the Williams Act adding Section 13 was adopted, and 2010, when Section 766 of the Dodd-Frank legislation gave the SEC the authority, but not the obligation, to consider whether derivative … Read more

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Editor's Tweet: Profs. Gilson and Gordon on Proposals to “Reform” the Section 13D Rules: Getting it Precisely Backwards

Disclosure Is Still the Best Policeman!

In a delightful essay, Ron Gilson and Jeff Gordon remind us that the times have changed and the Williams Act belongs in their view to the era of the Beatles. (Personally, I have trouble believing that Sgt. Pepper was really that long ago.  Next, they will try to tell me that John Lennon is dead).  Even if they are right, I must respond with a counter-truism.  Plus ca change, plus la meme chose.  And I will raise their bid, by invoking two other familiar maxims:  First, power corrupts, and absolute power is at least within view for institutional … Read more

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Editor's Tweet: John Coffee on why Disclosure Is Still the Best Policeman in the 13(d) Debate

Pepper Hamilton on Round Two of Shareholder Say-on-Pay Litigation

The third proxy season of the Dodd-Frank Act’s mandatory shareholder “say-on-pay” advisory votes is well underway, and “round two” of shareholder say-on-pay litigation is in full swing. Unlike the first round of say-on-pay lawsuits, which were based on negative advisory votes that had already occurred, this second wave of shareholder litigation, which began in 2012, seeks to enjoin advisory votes on executive compensation based on allegedly deficient proxy disclosures. Some cases seek also to enjoin binding shareholder votes on proposals to issue additional shares of stock for equity incentive plans.

Because these lawyer-driven suits do not allege an actual violation … Read more

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Editor's Tweet: Pepper Hamilton on Round Two of Shareholder Say-on-Pay Litigation http://wp.me/p2Xx5U-17R

The Marketplace of Ideas: Concluding Remarks on the Legal Theory of Finance (LTF)

The CLS Blue Sky Blog presents the final part of the second installment of our new series, entitled “The Marketplace of Ideas.”  Parts I, II,  III, and IV can be found hereherehere, and here.  Earlier installments are available here.  The intent is to present different perspectives on the same subject by two or more authors.

The subject is Professor Katharina Pistor’s Legal Theory of Finance (LTF).  For a short description of her theory and the format of the commentary we are releasing, please see here.  In the final release,  LTF – The Read more

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Editor's Tweet: The Marketplace of Ideas: Concluding Remarks on the Legal Theory of Finance (LTF)

LTF – The Work Ahead

Discussing the Legal Theory of Finance (LTF) on the Marketplace of Ideas has been a great experience. I want to thank my colleague Kathryn Judge for coming up with the idea and for writing an inspiring blog post that raises important questions about the content and boundaries of the theory’s core features. The response to the call for blog posts from practitioners and academics was equally uplifting – and I am extremely grateful to the contributors for their engagement with LTF and the critiques they offered. Thanks also to Jason Parsont who manages the CLS Blue Sky Blog and kept … Read more

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Editor's Tweet: Katharina Pistor delivers closing remarks on the Marketplace of Idea Installment on LTF

Davis Polk discusses OCC’s Lending Limits Final Rule on Credit Exposure from Derivatives and Securities Financing Transaction

The OCC has issued a final rule specifying the methods for calculating credit exposure arising from derivatives and securities financing transactions for purposes of the federal lending limits that apply to national banks, federal and state branches and agencies of foreign banks and federal and state savings associations. The final rule reflects a further convergence in methods for measuring credit exposure from derivatives and securities financing transactions between bank capital rules and legal lending limits.

The final rule, like the June 2012 interim final rule that it revises, implements Section 610 of the Dodd-Frank Act, which is one of several … Read more

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Editor's Tweet: Davis Polk discusses OCC’s Lending Limits Final Rule on Credit Exposure from Derivatives and Securities Financing Transaction

The Marketplace of Ideas: Bruno Salama, Osny da Silva Filho, and Richard Shamos on Pistor’s Legal Theory of Finance

The CLS Blue Sky Blog presents Part IV of the second installment of our new series, entitled “The Marketplace of Ideas.”  Parts I, II, and III can be found here,  here, and here.  Earlier installments are available here.  The intent is to present different perspectives on the same subject by two or more authors.

The subject is Professor Katharina Pistor’s Legal Theory of Finance (LTF).  For a short description of her theory and the format of the commentary we are releasing, please see here.

Our sixth and seventh releases come to us from Professor Bruno Read more

Elasticity, Incompleteness, and Constitutive Rules

In A legal theory of finance, Katharina Pistor outlines a theory designed to deal with the law-finance paradox, that is, the observation that when “the full force of law is relaxed or suspended to take account of changes in circumstances” – precisely to avoid bringing down the financial system –, “the credibility law lends to finance in the first place is undermined” (Pistor, 2013: 323). In building her argument, Pistor advances the concept of law’s elasticity, which she defines as “the probability that ex ante legal commitments will be relaxed or suspended in the future” (2013: 320). The … Read more

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Editor's Tweet: Bruno Meyerhof Salama and Osny da Silva Filho on Elasticity, Incompleteness, and Constitutive Rules

Free Markets and the Legal Theory of Finance

Richard Shamos is an Associate in the Investment Management practice at Schulte Roth & Zabel LLP in New York.

The relationship between free markets and government is perhaps one of the most prominent economic issues of modern political economy.  In A Legal Theory of Finance, Katharina Pistor presents a powerful tool for analyzing this relationship by emphasizing the central role law plays in defining markets and market instruments.  This article examines Pistor’s mode of analysis and then explores how it may be applied within the investment fund context to draw on real world examples of the relationship between law … Read more

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Editor's Tweet: Richard Shamos of Schulte Roth discusses Free Markets and the Legal Theory of Finance

The Marketplace of Ideas: Professor Anna Gelpern and James P. Sweeney Weigh in on Pistor’s Legal Theory of Finance

The CLS Blue Sky Blog presents Part III of the second installment of our new series, entitled “The Marketplace of Ideas.”  Parts I and II can be found here and here.  Earlier installments are available here.  The intent is to present different perspectives on the same subject by two or more authors.

The subject is Professor Katharina Pistor’s Legal Theory of Finance (LTF).  For a short description of her theory and the format of the commentary we are releasing, please see here.

Our fourth and fifth releases comes to us from Professor Anna Gelpern of Georgetown Law … Read more

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Editor's Tweet: The Marketplace of Ideas: Professor Anna Gelpern and James P. Sweeney Weigh in on Pistor's Legal Theory of Finance

Rules, Institutions, and the Legal Theory of Finance

The International Monetary Fund (IMF) recently published its first major policy treatment of sovereign debt restructuring since 2003. It was prompted by the flawed restructuring in Greece, high profile litigation against Argentina, and recurring crises in smaller economies that failed to deliver needed relief in a timely way. The paper proposes a work program to bolster the Fund’s analytical and policy tools, as well as contract reform to expand countries’ restructuring capacity.

Taking initiative on sovereign debt is a risky move for the Fund. Between 2001 and 2003, IMF staff designed and lobbied for a treaty-based Sovereign Read more

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Editor's Tweet: Prof. Anna Gelpern discusses Rules, Institutions, and the Legal Theory of Finance

U.S. District Court Upholds the Conflict Minerals Rule, but Vacates the Resource Extraction Rule

The U.S. District Court for the District of Columbia has released two important rulings this month that speak to the SEC’s ability to promulgate rules.   On July 23rd, the court upheld the SEC’s conflict minerals rule (see here) and on July 2nd, the court vacated and remanded the SEC’s resource extraction payment rule (see here).  Both rules were implemented pursuant to the Dodd-Frank Act.

Covington & Burling has prepared useful summaries of each opinion available here and here.… Read more

Evaluating Dodd-Frank and International Approaches to Clearinghouses, Central Banks, and Swap Lines

On June 26, in a House Committee on Financial Services hearing, “Examining How the Dodd-Frank Act Could Result in More Taxpayer-Funded Bailouts,” former FDIC Chair Shelia Bair testified to being “surprised at the lack of concern over the designation of “financial market utilities,” and particularly Section 806 which permits the Federal Reserve to provide safety net access to designated financial market utilities.”

Indeed, these reforms in Dodd-Frank’s Title VIII have received little attention.  Related provisions in Dodd-Frank’s Title XI mandating disclosure of the use of the Federal Reserve’s currency swap line authority with nongovernmental third parties have similarly been largely … Read more

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The Marketplace of Ideas: Cathy M. Kaplan and Jeremiah S. Pam Weigh in on Pistor’s Legal Theory of Finance

The CLS Blue Sky Blog presents Part II of the second installment of our new series, entitled “The Marketplace of Ideas.”  Part I can be found here.  Earlier installments are available here.  The intent is to present different perspectives on the same subject by two or more authors.

The subject is Professor Katharina Pistor’s Legal Theory of Finance (LTF).  For a short description of her theory and the format of the commentary we are releasing, please see here.

Our second and third releases comes to us from Cathy M. Kaplan of Sidley Austin and Jeremiah S. Pam … Read more

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Editor's Tweet: The Marketplace of Ideas: Cathy M. Kaplan and Jeremiah S. Pam Weigh in on Pistor's Legal Theory of Finance http://wp.me/p2Xx5U-1cD

‘Neither Admit Nor Deny’: Practical Implications of SEC’s New Policy

In a move that appears at once to be shrewd, savvy and largely symbolic, the SEC has modified its longstanding policy that it will not require a defendant to admit or deny liability, or facts that might establish its liability, in a settlement with the SEC. Now, such an admission may be required “when appropriate.”1 Whatever the outcome in the SEC’s mandamus appeal of Judge Jed S. Rakoff’s Citigroup decision,2 Rakoff has effectively won the war, even if he loses the Citigroup battle. Although denying that Rakoff influenced them, the SEC conceded (effectively, if not formally) that its policy was

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Editor's Tweet: Prof. John C. Coffee, Jr. of Columbia Law School discusses 'Neither Admit Nor Deny': Practical Implications of SEC's New Policy

SEC Adopts Bad Actor Disqualifications for Private Placements under Regulation D

The following post comes to us from Bradley Berman, Of Counsel at Morrison & Foerster LLP.  

On July 10, 2013, the Securities and Exchange Commission (the “SEC” or “Commission”) adopted amendments to rules promulgated under Regulation D to implement Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).  The amendments add “bad actor” disqualification requirements to Rule 506 of the Securities Act of 1933 (the “Securities Act”), which prohibit issuers and others such as underwriters, placement agents, directors, executive officers, and certain shareholders of the issuer from participating in exempt securities offerings, if they … Read more

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Editor's Tweet: MoFo's Brad Berman discusses SEC Adoption of the Bad Actor Disqualifications for Private Placements under Regulation D

The Marketplace of Ideas: Kathryn Judge takes on Katharina Pistor’s Legal Theory of Finance

The CLS Blue Sky Blog presents the second installment of our new series, entitled “The Marketplace of Ideas.”  Earlier installments are available here.  The intent is to present different perspectives on the same subject by two or more authors.

Today, the subject is Professor Katharina Pistor’s Legal Theory of Finance (LTF).  Her theory grew out of a two year research project – the Global Finance and Law Initiative (further described here) – that set out to critique existing theories in economics and sociology on the relation of law to finance and developed an alternative approach.  It was distilled … Read more

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Editor's Tweet: The Marketplace of Ideas: Kathryn Judge takes on Katharina Pistor's Legal Theory of Finance