On July 25, 2015, Judge Barbara Lynn of the Northern District of Texas issued a formative opinion in the class actions securities arena. The case, The Erica P. John Fund, Inc., et al. v. Halliburton Co., et al., No. 3:02-CV-1152-M, is viewed as a bellwether among securities class actions due to its treatment of novel issues regarding, among other things, a defendant’s ability to disprove reliance—i.e., a causal link between alleged misrepresentations and an eventual drop in stock prices upon correction—for purposes of class certification.
Rather than requiring plaintiffs to prove reliance for each individual shareholder, securities class action … Read more
The Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”), enacted in 2005, has been the subject of extensive commentary over the effects that the Act might have on the chapter 11 landscape and the debtor’s reorganization chances.
In my article, “Chapter 11 Duration, Preplanned Cases, and Refiling Rates: An Empirical Analysis in the Post-BAPCPA Era,” I use multivariate regression models to examine empirically and quantify, for the first time, BAPCPA’s effect on three distinct aspects of the chapter 11 process: (a) the duration of traditional chapter 11 cases; (b) the use of preplanned bankruptcies, that is, prepackaged … Read more
Sovereign debt markets have been on a rough ride recently. On the heels of Argentina’s 2014 default, a turbulent debt situation in Greece has threatened the integrity of the Eurozone. An ongoing debt crisis in Ukraine has stoked economic anxiety and raised geopolitical blood pressures. Meanwhile, Puerto Rico’s debt crisis poses unique challenges as a quasi-sovereign territory without access to bankruptcy.
These episodes highlight the broad and far-reaching effects of sovereign debt on the global financial system. While sovereignty limits the enforceability of their debt contracts, sovereigns lack a formal bankruptcy system. Nor is there a global sovereign debt regulator. … Read more
On May 20, 2015, the Securities and Exchange Commission (“SEC”) proposed a set of rules, forms and amendments to that would expand and update certain reporting and disclosure obligations of registered investment companies and registered investment advisers. The proposed rules seek to improve the quality of information available to investors, to allow the SEC to more effectively collect and utilize the data provided, and further, to enhance the SEC’s ability to monitor risks in the asset management industry.
Proposed new rule 30e-3 under the Investment Company Act of 1940, as amended (“1940 Act”), would provide registered investment … Read more
The role of money and business interests in politics continues to stir controversy. As the nation begins another presidential cycle that is expected to break spending records, we will likely hear analysts argue that the Supreme Court’s decision five years ago in Citizens United v. FEC opened the floodgates by allowing unlimited independent political expenditures from corporate treasuries. A series of calls for reform has followed the decision, including the recent open letter published by former SEC officials asking the agency to require disclosure of corporate political spending. These important issues of our time are rooted in a much … Read more
When a board of directors resolves to sell the corporation, it must structure the sale so as to obtain the highest price reasonably available. In the landmark case Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., the Delaware Supreme Court held that when a sale of the corporation becomes inevitable, the “directors’ role change[s] from defenders of the corporate bastion to auctioneers charged with getting the best price for the stockholders . . . .” Post-Revlon, auctions have become a pervasive feature of the modern takeover landscape. Indeed, a recent survey of four hundred large-scale takeovers with a … Read more
On July 2, 2015, in Hill International, Inc. v. Opportunity Partners L.P., No. 305, 2015, the Delaware Supreme Court affirmed a Court of Chancery decision that Opportunity Partnership L.P. (the “Fund”), a stockholder in Hill International, Inc. (“Hill” or the “Company”), had complied with the Company’s advance notice bylaws and thus timely submitted two business proposals for consideration and two nominees for election at Hill’s 2015 Annual Meeting (the “Notice”). Accordingly, the Supreme Court held that it was proper to enjoin the Company from conducting any business at the Annual Meeting other than convening the Meeting for the sole … Read more
The House is continuing Congress’ piecemeal rollback of the Dodd-Frank Act, a theme Alexander Sand and I explore in our recent article, Cutting Back: Revisions to Dodd-Frank Derivatives Rules. Although the House has targeted a number of Dodd-Frank provisions for regulatory relief, today I will focus on clearing and margin. At present, these requirements are not harmonized in that market participants that are exempt from clearing may nevertheless be forced to post margin when trading with swap dealers and major swap participants (the two types of market intermediaries that are subject to margin requirements under Dodd-Frank). Imposition of … Read more
On May 21, 2015, the United States Court of Appeals for the Third Circuit affirmed a decision of the United States Bankruptcy Court for the District of Delaware, which had approved the structured dismissal of the chapter 11 cases of Jevic Holding Corp., et al. The Court of Appeals first held that structured dismissals are not prohibited by the Bankruptcy Code, and then upheld the structured dismissal in the Jevic case, despite the fact that the settlement embodied in the structured dismissal order deviated from the Bankruptcy Code’s priority scheme.
Jevic Transportation, Inc. was acquired by a subsidiary of … Read more
The fourth and latest iteration of the EU’s anti-money laundering directive (AMLD IV) was published on June 5th, after clearing its last legislative stop at the European Parliament. The new directive brings the EU’s anti-money laundering laws more in line with the US’s, which is welcome news for financial institutions that are operating in both jurisdictions. However, in a few areas, the directive establishes requirements that go beyond US regulations and common market practices, and could be costly to implement.
Recent enforcement actions against financial institutions highlight the importance of compliance with anti-money laundering (AML) and terrorism financing … Read more
The Iran sanctions landscape is poised to change in early 2016, but US persons and US companies will see far fewer opportunities than their European counterparts
On July 14, 2015, the P5+1 countries (the United States, United Kingdom, France, Russia, China and Germany) and Iran reached a historic nuclear non-proliferation agreement called the Joint Comprehensive Plan of Action (the Agreement). In line with the framework announced in April 2015 (as discussed in our previous client alert dated April 27, 2015), the Agreement provides for the termination of most European Union (EU) and UN sanctions and significantly more modest … Read more
Can stock exchanges adapt to the challenges of today’s capital markets? As “self-regulatory organizations,” U.S. stock exchanges once enjoyed a nearly exclusive role in coordinating information and trading through interwoven regulatory, mutual, and commercial arrangements with public companies, brokers, and dealers. Competitive and regulatory challenges have gradually chipped away at the mystique of self-regulation. While listing in the United States largely remains a duopoly shared by the NYSE and Nasdaq, primary exchanges no longer account for a majority of trading volume in their listed securities. Moreover, even as they continue to play an essential role in setting market prices, their … Read more
In United States v. Newman, 773 F.3d 438 (2nd Cir. 2014), the Second Circuit overturned the insider trading convictions of two hedge fund managers who received material nonpublic information from public companies via an extended tipping chain. The Newman court was required to interpret the Supreme Court’s decision in Dirks v. SEC, 463 U.S. 646 (1983), to answer the question: What must tippees know about the disclosure of non-public information by the tipping corporate insider in order to sustain a conviction?
Dirks, in an opinion written by Justice Lewis F. Powell, Jr., held that there was … Read more
On June 5, 2015, the Securities and Exchange Commission (“SEC”) entered into settled administrative cease-and-desist proceedings with Computer Sciences Corporation (“CSC”) and some of its former executives due to the company’s alleged manipulation of financial results and concealment of problems with the company’s largest contract. Among other things, CSC agreed to pay a $190 million penalty to settle the charges, and two of CSC’s former executives agreed to return a portion of their compensation to CSC pursuant to the clawback provision of the Sarbanes-Oxley Act of 2002. The SEC also charged former CSC finance executives for ignoring accounting standards … Read more
Our paper titled “The Power of Shareholder Votes: Evidence from Director Elections” aims to answer the question: Do shareholder votes matter in uncontested director elections? In principle, shareholders who own a firm should be free to pick the board members who represent them. However, in the U.S., for the most part, shareholder votes for director elections are non-binding, leading scholars to describe shareholder votes as “sham democracy”. Plenty of anecdotal evidence supports this view. For instance, in Cablevision Systems, shareholders repeatedly cast majority votes against re-electing three directors. The directors remained on the board.
Is the Cablevision election an isolated … Read more
Despite the recent drop in oil and natural gas prices, fossil fuels continue to flow out of U.S. wells at astounding rates. In just a few years, the United States has transitioned from a position of substantial dependence on foreign fuels to the status of a leading producer of both oil and gas. This is due largely to the combination of horizontal drilling and hydraulic fracturing deployed in shale formations around the United States. This rapid transition has greatly benefited parts of the country economically but also shows the perils of resource booms and the busts that follow. The current … Read more
On May 28, 2015, Chancellor Bouchard of the Delaware Court of Chancery issued an opinion clarifying and strengthening the rights of a former director and officer to receive mandatory advancement under a corporation’s charter. In Blankenship v. Alpha Appalachia Holdings, Inc., C.A. No. 10610-CB (Del. Ch. May 28, 2015), the Court held that, where a corporation has agreed to indemnify and advance defense costs to the fullest extent permitted by law, the corporation cannot later condition its advancement obligation on statements about an individual’s belief that he or she acted lawfully. Instead, the only condition for advancing defense costs … Read more
If there is one simple lesson from the crisis that we all can embrace, it is that no financial institution in America should be so big or complex that its failure would put the financial system at risk.1 Congress wrote that simple lesson into law as a core principle of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act).
Consequently, a fundamental change in our framework of regulation as a result of the crisis is to impose tougher rules on banking organizations that are so big or complex that their risk taking and distress could … Read more
This column will focus on two new and unrelated developments linked only by the fact that they both emanate from California: (1) the Ninth Circuit has handed down a significant decision on insider trading—United States v. Salman—that disagrees (at least marginally) with the Second Circuit’s important (but controversial) decision in United States v. Newman; and (2) the SEC’s Regional Office in California has issued Wells Notices to attorneys, taking the position that an attorney representing clients in immigration matters may be acting as a broker under the federal securities laws. The upshot is to place the … Read more
Since AIG’s bailout in September 2008, the role of large, complex insurance firms in the global financial system has received much attention. Concern about the global operations, interconnectedness, and non-traditional activities of these large firms prompted the Financial Stability Board to formally designate 9 life and full insurance firms in six countries as Global-Systemically Important Insurers (G-SII) in July 2013. In the US, where insurance industry assets equal roughly half the size of total assets held by all financial institutions covered by the Federal Deposit Insurance Corporation, the Financial Stability Oversight Council has confirmed the designation of AIG, MetLife and … Read more