Downgrading Rating Agency Reform

The financial crisis starkly exposed the need for rating agency reform, yet the most important questions of how to enhance rating agency competition, accuracy, and accountability remain largely unanswered.  My article,  Downgrading Rating Agency Reform, assesses the shortcomings in the design and implementation of the Dodd-Frank Act reforms.  It suggests how regulators can promote competition and heighten rating agency accountability by using regulatory incentives to break up the three leading rating agencies that account for 96% of the market.  It argues exposing rating agencies to investor suits for grossly negligent conduct coupled with caps on damages would balance the … Read more

Chapman and Cutler discuss CFTC No-Action Relief for End-Users from the Swaps Clearing Requirement

The Division of Clearing and Risk (the “Division”) of the Commodity Futures Trading Commission (the “CFTC”) recently issued no-action relief for certain treasury affiliates within non-financial companies from the clearing requirements of Section 2(h)(1) of the Commodity Exchange Act (“CEA”). In CFTC Letter No. 13-22 (the “No- Action Letter”), the Division indicated that it was issuing the relief in response to a number of comments received from non-financial companies with wholly-owned treasury affiliates that hedge risks for the entire non-financial company group. Absent the no-action relief, many such entities would have been required to clear swaps subject to the CEA

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Editor's Tweet: Chapman and Cutler discuss CFTC No-Action Relief for End-Users from the Swaps Clearing Requirement http://wp.me/p2Xx5U-15y

Paul Weiss discusses ISDA’s March 2013 Dodd-Frank Protocol

Since the effectiveness of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), the Commodity Futures Trading Commission (the “CFTC”) has finalized many of the rules that implement the detailed regulatory regime outlined by the Dodd-Frank Act. A number of these rules require market participants to update their swap trading documentation to comply with this new regulatory regime. This client alert outlines coverage and adherence mechanisms of the ISDA March 2013 Dodd-Frank Protocol (the “March Protocol”), the newest installment of ISDA’s well-tested mechanism aimed at facilitating the multilateral and standardized amendment of swap trading documentation.

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CFTC Adopts Long-Awaited Rule on Swap Execution Facilities (SEFs) and Other Swaps Trading Rules

The US Commodity Futures Trading Commission (CFTC), on May 16, 2013, took long-awaited action to approve four separate rules and guidance.  The rulemakings, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) concern:

• Core principles and other requirements for swap execution facilities (SEFs);
• The process for a designated contract market (DCM) or SEF to make a swap available to trade under Section 2(h)(8) of the Commodity Exchange Act (CEA); and
• Procedures to establish the appropriate minimum block size for large notional off-facility swaps and block trades.

That same day, the CFTC also … Read more

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Editor's Tweet: Latham discusses CFTC Adoption of Long-Awaited Rule on Swap Execution Facilities (SEFs) and Other Swaps Trading Rules

Sullivan & Cromwell on Dodd-Frank Stress Tests

[In May], the Board of Governors of the Federal Reserve System (the “Federal Reserve”) issued summary instructions for the 2013 company-run, mid-year stress tests required by Section 165(i)(2)(A) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Under applicable Federal Reserve regulations, bank holding companies with total consolidated assets of $50 billion or more are required to conduct these mid-year stress tests using company-generated baseline, adverse and severely adverse macroeconomic scenarios. For the 2013 mid-year cycle, however, only the 18 bank holding companies that participated in the Federal Reserve’s 2009 Supervisory Capital Assessment Program are required to conduct … Read more

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Editor's Tweet: Sullivan & Cromwell on Dodd-Frank Stress Tests

SEC Proposes Cross-Border Security-Based Swap Rules

On May 1, 2013, the Securities and Exchange Commission took long-awaited action to propose rules governing cross-border activities in security-based swaps. The SEC’s proposal, developed over the course of more than two years, reflects a holistic approach that differs in key respects from that taken by the Commodity Futures Trading Commission with respect to transnational swap activities (the “CFTC Proposal”). In light of the far-ranging significance of its cross-border proposal, the SEC has reopened comment periods for many of its previously proposed security- based swap regulations and its policy statement on the sequencing of compliance with these rules.

The comment … Read more

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Editor's Tweet: Annette Nazareth discusses the SEC's Proposed Cross-Border Security-Based Swap Rules

Cross-Border at the Crossroads: The SEC’s “Middle Ground”

The following post comes from a speech delivered by John Ramsay, Acting Director of the Division of Trading and Markets at the SEC. These remarks were delivered at the New York City Bar Association on May 15, 2013. 

Thank you for inviting me to join you here today.

Before I launch into my remarks, I need to note that, as a matter of policy, the SEC disclaims responsibility for the private statements of SEC employees. The views I express today are my own, and do not necessarily reflect the views of the SEC, the Commissioners, or my colleagues on the … Read more

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Editor's Tweet: The SEC's John Ramsay discusses Cross-Border at the Crossroads: The SEC’s “Middle Ground"

Taking Gatekeeping Seriously: Financial Product Approval as a Form of Systemic Risk Regulation

One of the key lessons of the recent financial crisis, and the greatest challenge facing post-crisis regulatory reforms, is the need to control and reduce systemic risk associated with financial innovation, complexity, and the growing interconnectedness of global financial markets. The centerpiece of the U.S. reform effort, the Dodd-Frank Act explicitly targets systemic risk in the financial sector through a variety of measures, including enhanced disclosure of market data, greater standardization and central clearing of derivatives, higher minimum capital standards for financial institutions, and even controversial attempts to restrict trading activities of insured banks and their affiliates.

Despite its sweeping … Read more

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Editor's Tweet: UNC Professor Saule Omarova discusses Financial Product Approval as a Form of Systemic Risk Regulation

Sullivan & Cromwell discusses Foreign Banks and the Swap-Push Out Rule

Federal Reserve Issues Rule to Classify Uninsured U.S. Branches and Agencies of Foreign Banks as Insured Depository Institutions for Purposes of the Swaps Push-out Provision of the Dodd-Frank Act and Explain the Process for Obtaining Transition Period Relief

On June 5, 2013, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) issued an interim final rule (the “Interim Final Rule”) that places U.S. branches and agencies of foreign banks on an equal footing with U.S. banks with respect to the so-called “swaps push-out” provision of Section 716 of the Dodd-Frank Wall Street Reform and Consumer Protection Act

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Editor's Tweet: Sullivan & Cromwell discusses Foreign Banks and the Swap-Push Out Rule http://wp.me/p2Xx5U-144

Morrison and Foerster Summarizes the Status of Dodd-Frank as it approaches three years

If Aesop were still in the fable-writing business, and he had been watching the last three years of Dodd-Frank Act rulemaking, we would probably be reading the Snail and the Tortoise to our kids. In this issue of Dodd-Frank at Three, we are, once again, inclined to direct your attention to the tortoise. At each milestone since enactment of the Act, we have noted that slow and steady implementation progress was being made by the banking agencies, the SEC and the CFTC, and we were beginning to see a new regulatory framework for financial institutions take shape. On this third … Read more

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Editor's Tweet: Morrison and Foerster Summarizes the Status of Dodd-Frank as it approaches three years

Shearman & Sterling Discusses how the FSOC’s Annual Report Suggests Potential Paths Forward

The recently issued annual report of the Financial Stability Oversight Council (“FSOC” or “Council”) indicates that the members continue to review the major unfinished business of financial regulatory reform and ramp up the process by which they determine where to focus their collective efforts going forward. While progress has been slow, the financial industry should monitor the Council’s activities to see where new hot buttons might emerge, and ideally have some input while the efforts continue.

The FSOC’s 2013 annual report may be most notable for what it is missing.1 On two of the most significant issues facing the FSOC, … Read more

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Editor's Tweet: Shearman & Sterling Discusses how the FSOC’s Annual Report Suggests Potential Paths Forward

Davis Polk’s Dodd-Frank Progress Report June 2013

On June 3, Davis Polk & Wardwell LLP released its June 2013 Dodd-Frank Progress Report, which can be found here. Davis Polk issues these Progress Reports monthly to update the market on the progress of the rulemaking required under Dodd-Frank.

  • No New Deadlines, 0 Requirements Met, 1 Proposed. No rulemaking requirements were due in May and no unmet rulemaking requirements were met with finalized rules. One new rule was proposed to meet rulemaking requirements.
  • Although the CFTC released final rules governing the registration and regulation of swap execution facilities (SEFs) pursuant to required rulemaking authority, these rules have

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Editor's Tweet: Davis Polk's Dodd-Frank Progress Report June 2013

Financial Services in 2013 and Beyond: Adapting to the New Regulatory Climate

The following comes to us from Charles M. Horn, a partner at Morrison & Foerster LLP. 

The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act,” or “Dodd-Frank”) in 2010 was a watershed moment in the history of U.S. financial services regulation. As we move through 2013 with many key regulatory actions still hanging in the balance, it has become apparent that Dodd-Frank has catalyzed fundamental changes in the financial regulatory environment, and that banking organizations and other regulated firms will need to understand and respond to these changes in order to manage the new environment.… Read more

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Editor's Tweet: Financial Services in 2013 and Beyond: Adapting to the New Regulatory Climate http://wp.me/p2Xx5U-Y3

Approaching Deadline for Nasdaq-Listed Companies to Implement New Compensation Committee Standards

As annual meeting season approaches, so too does the first deadline for companies listed on the NASDAQ Stock Market (Nasdaq) to comply with amended compensation committee rules. Traditionally, evaluation of director independence of Nasdaq-listed companies differed for purposes of serving on an audit committee as compared to a compensation committee. Earlier this year, the Securities and Exchange Commission (SEC) approved Nasdaq’s proposed rule amendments to comply with certain requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), including changes intended to conform the compensation committee independence standard to the existing audit committee standard. The first … Read more

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Editor's Tweet: Arnold & Porter Discusses Approaching Deadline for Nasdaq-Listed Companies to Implement New Compensation Committee Standards

Davis Polk’s Dodd-Frank Progress Report May 2013

On May 1, Davis Polk & Wardwell LLP released its May 2013 Dodd-Frank Progress Report, which can be found here. Davis Polk issues these Progress Reports monthly to update the market on the progress of the rulemaking required under Dodd-Frank.

  • No New Deadlines, 5 Requirements Met, 0 Proposed. No rulemaking requirements were due in April and 5 rulemaking requirements were met with finalized rules. No new rules were proposed to meet rulemaking requirements.
  • Current Status.  As of May 1, 2013, a total of 279 Dodd-Frank rulemaking requirement deadlines have passed. Of these 279 passed deadlines, 175 (62.7%) have

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Europe’s OTC Derivatives Regulation: An Overview of the New Framework

The “European Market Infrastructure Regulation,” known as EMIR, was adopted on July 4, 2012, as the Regulation on OTC Derivatives, Central Counterparties and Trade Repositories (EU 648/2012), and took effect in all EU Member States on August 16, 2012. As an EU Regulation, EMIR is effective in EU Member States without the need for national regulations or legislation.

The EMIR regulatory framework is made up of Regulation EU 648/2012 (the “Regulation”) and several European Commission Implementing Regulations and Delegated Regulations which set out technical standards addressing matters of detail under the Regulation. The Implementing Regulations and Delegated Regulations were published … Read more

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Editor's Tweet: Europe's OTC Derivatives Regulation: An Overview of the New Framework http://wp.me/p2Xx5U-T4

Shareholder Activism and Ethics: Are Shareholder Bonuses Incentives or Bribes?

This is the heyday of institutional investor activism in proxy contests.  Insurgents are running more slates and targeting larger companies.  They are also enjoying a higher rate of success:  66% of proxy contexts this year have been at least partially successful.  The reason is probably the support that activists have received from the principal proxy advisors:  Institutional Shareholder Services (“ISS”) and Glass Lewis & Company.  According to a recent N.Y. Times Dealbook survey, ISS has backed the insurgent slate in 73% of the cases so far in 2013.

All this may be well and good.  Shareholders certainly have the right … Read more

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Editor's Tweet: Professor John C. Coffee Jr. of Columbia Law School discusses whether bonuses from shareholder activists are incentives or bribes?

Irredeemably Inefficient Acts: A Threat to Markets, Firms, and the Fisc

My forthcoming article, Irredeemably Inefficient Acts: A Threat to Markets, Firms, and the Fisc, identifies a category of acts that clearly and inevitably reduce social welfare.  These acts—which I call irredeemably inefficient—have not been expressly recognized in previous work.  Yet the distinction I draw reflects a fundamental feature of the U.S. antitrust law, justifies several recent Delaware Chancery Court decisions, and suggests substantial rethinking of some important aspects of securities and commodities regulation.

Irredeemably inefficient acts have remained outside of the standard theory of public enforcement of law.  That theory holds that inefficient conduct may be converted into … Read more

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Editor's Tweet: Professor Alex Raskolnikov of Columbia Law School discusses his new paper on Irredeemably Inefficient Acts.

Sullivan & Cromwell discusses the CFTC’s final rules on the Inter-Affiliate Swap Clearing Exemption

On April 1, 2013, the Commodity Futures Trading Commission (the “CFTC”) voted four to one to adopt final rules implementing an exemption from the mandatory clearing requirement (the “Clearing Mandate”) under section 2(h) of the Commodity Exchange Act, as amended (the “CEA”), for transactions between certain affiliated parties (the “Inter-Affiliate Exemption”).  The Inter-Affiliate Exemption finalized previously proposed rules published on August 21, 2012 (the “Proposed Rules”).

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) amended the CEA to require clearing of any swap that the CFTC determines should be subject to mandatory clearing. However, the Dodd-Frank amendments to … Read more

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Editor's Tweet: Sullivan & Cromwell discusses the CFTC's final rules on the Inter-Affiliate Swap Clearing Exemption:

Davis Polk’s Dodd-Frank Progress Report April 2013

On April 1, Davis Polk & Wardwell LLP released its April 2013 Dodd-Frank Progress Report, which can be found here. Davis Polk issues these Progress Reports monthly to update the market on the progress of the rulemaking required under Dodd-Frank.

  • No New Deadlines, Requirements Met or Requirements Proposed. No rulemaking requirements were due in March and no new rules were adopted or proposed to meet rulemaking requirements.
  • Current Status.  As of April 1, 2013, a total of 279 Dodd-Frank rulemaking requirement deadlines have passed. Of these 279 passed deadlines, 176 (63.1%) have been missed and 103 (36.9%) have

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Editor's Tweet: Davis Polk’s releases its Dodd-Frank Progress Report for April 2013