WilmerHale reports ALJ Dismisses FTC’s LabMD Complaint for Lack of Actual or Probable Consumer Harm from Cybersecurity Incidents

On Friday, November 13, Federal Trade Commission (“FTC” or the “Commission”) Chief Administrative Law Judge (“ALJ”) D. Michael Chappell issued an Initial Decision in In the Matter of LabMD, Inc. (FTC Docket No. 9357), dismissing the Commission’s Complaint against LabMD, Inc. (“LabMD”), upon a finding that the FTC had failed to “demonstrate a likelihood that [LabMD’s] computer network will be breached in the future and cause substantial computer injury.”1 The ALJ held that showing consumer harm is merely possible is insufficient to prove unfairness under Section 5(n) of the FTC Act.


The FTC’s Administrative Complaint against LabMD alleged … Read more

Andrew Ceresney

SEC Director of Enforcement’s, Andrew Ceresney’s, Remarks on Market Structure Enforcement: Looking Back and Forward

At the outset, let me give the requisite reminder that the views I express today are my own and do not necessarily represent the views of the Commission or its staff.[1]

Today I thought I would speak about our path-breaking enforcement work in the past few years in connection with equity market structure.  Ten years ago, there was very little enforcement focus on market structure issues.  Equity trading was highly centralized at a small number of trading venues and much of the trading was conducted manually, by people, on the floor of an exchange.  Time was measured in seconds, not … Read more

Scott Shackelford

Seeking a Safe Harbor in a Widening Sea

In a move that could cost the EU up to 1.3 percent of its gross domestic product, according to the American Chamber of Commerce to the European Union, on Oct. 6 the European Court of Justice invalidated the 15-year old EU-US Safe Harbor Agreement in Schrems v. Data Protection Commissioner, causing some consternation among the more than 5,000 European and US firms that rely on the Agreement to transfer EU data to US servers. Given its potential impacts this case is important to consider on its own merits, but it should also be read as another step in a … Read more

Jo Braithwaite

Legal Perspectives on Client Clearing

In the immediate aftermath of the global financial crisis, the G20 quickly turned its attention to reforming the vast ‘over-the-counter’ (OTC) derivatives markets. The statement issued after the G20’s September 2009 meeting included the declaration that ‘[a]ll standardized OTC derivatives contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties by end-2012 at the latest.’

This was an ambitious use of political capital, with the objectives being to increase market resilience, tackle interconnectedness and promote transparency. In a recent paper I consider the implications of this reform program for the market infrastructure it … Read more

Dan Awrey

The Mechanisms of Derivatives Market Efficiency

In their influential 1984 article The Mechanisms of Market Efficiency[1], Ron Gilson and Reinier Kraakman put forward a causal framework for understanding how new information becomes incorporated into the price of publicly-traded equity securities. This framework was grounded in the observation that the efficiency of public equity markets is a function of the market for information: how costly it is to acquire, process, and verify and, accordingly, its distribution within the marketplace. For any initial distribution of information, this framework then offered an account of how the trading activities of one or more species of market participants serve … Read more

Emily Kadens

What Kept Pre-Modern Credit Networks Afloat?

Despite having become a cliché, the past is not always a foreign country. When Craig Muldrew wrote in his book, Economy of Obligation, “Increasing consumption and investment in the expansion of production meant that household debt loads grew to levels at which financial failure was an increasingly common experience” (pp. 16-17), he could have been writing about the modern economy. But he was not. He was describing sixteenth-century England. Pre-modern Europe was an economy built on credit. Fiat money did not exist, the supply of specie was insufficient to meet the daily needs of consumers and the trade of … Read more

Moro, Ferrando & Maresh

The Role of Creditor Protection and Judicial Enforcement on Credit Access

The quality of the legal system matters for firms’ access to bank loans: Strong creditor and property rights and a rigorous judicial enforcement system with short, cheap and simple proceedings create favourable conditions for bank lending.

Bank loans are a primary source of financing for firms. Banks will, however, only be willing to grant a loan if they can control the borrower risk and promptly recover on the loan in the case of a borrower default. The certainty of the law and the opportunity to enforce legal rights in court support banks in dealing with delinquent customers: Strong creditor rights … Read more

David McCaffrey

Considering the Transformation of the OTC Derivatives Market, 1984-2015

In my recent paper, “Private and Public Controls in the Over-the-Counter Derivatives Market, 1984-2015”, I study how private and public controls operated jointly in OTC derivatives over the period. A main conclusion is that private incentives especially shaped developments in the OTC markets, including after Dodd-Frank in 2010.

The over-the-counter (OTC) market in financial derivatives evolved from the 1980s to 2010 mainly under private controls designed by market participants, particularly the International Swaps and Derivatives Association (ISDA). Banking and other regulators frequently pushed market participants, informally, to remedy emerging problems. ISDA and others responded to these interventions to … Read more

Morrison & Foerster explains ECJ Safe Harbor Opinion’s Implications for all Data Transfers out of Europe

The European Court of Justice (ECJ) followed the core of the Opinion of the Advocate General (AG) (see our Privacy Minute dated October 3, 2015) in Schrems v. Data Protection Commissioner (Case No. C-362/14).


In sum, the ECJ held that:

  1. Member State Data Protection Authorities (DPA) must be allowed to:
    • examine complaints from individuals regarding the treatment of their personal information by other countries;
    • bring cases to court to question the validity of adequacy decisions; and
    • suspend the transfer of personal information to other countries when they believe it is appropriate.
  2. The Safe Harbor Decision is invalid because:

Read more

Armour & Cheffins

Stock Market Prices and the Market for Corporate Control

Stock market prices and the market for corporate control are both crucial elements of the corporate governance matrix within which public companies operate. Share prices constitute highly visible signals of investor perceptions of corporate performance that provide cues for governance responses by directors, managers and shareholders. If not neutered by defensive tactics, the market for corporate control can be a potent corrective mechanism in circumstances where the incumbent management team is failing to create shareholder value, with potential acquirers seeking to obtain control on the assumption they can improve matters. Share prices in turn play an important role in the … Read more

Beaver, Cascino, Correia and McNichols

Bankruptcy in Groups

Group bankruptcies tend to be large (e.g., Global Crossing, Maxwell, MG Rover, Parmalat) and affect a significant number of stakeholders. Business groups constitute a common way for ultimate owners to exercise control over a large number of companies while containing their risk exposure to different parts of the business through limited liability. In countries with underdeveloped financial infrastructures, business groups overcome difficulties in accessing external finance by reshuffling funds within the corporate structure. The bankruptcy of business groups can be extremely complex, especially if the group’s assets are spread over multiple jurisdictions. The nature of business group structure and operations … Read more

Richard Berner

Remarks by OFR Director Richard Berner at the Third Annual Workshop on Financial Interconnectedness

Thank you to the organizers and BIS for the opportunity to address this research conference on “Global Financial Interconnectedness.” The OFR was established to identify, monitor, and assess threats to financial stability, so improving our collective understanding of the interconnectedness of the global financial system is essential for achieving the OFR mission.

The financial crisis exposed critical gaps in our analysis and understanding of the financial system, in the data used to measure and monitor financial activities, and in the policy tools available to mitigate potential threats to financial stability. These gaps in analysis, data, and policy tools contributed to … Read more

Fried Frank Analyzes In re: Barclays Liquidity Cross and High Frequency Trading Litigation

Last week, a federal district court judge in New York overseeing several multidistrict litigation (“MDL”) proceedings dismissed all claims against Barclays PLC, Barclays Capital Inc., and several major U.S. stock exchanges (the “Exchanges”), including NASDAQ, the New York Stock Exchange, BATS Global Markets, and the Chicago Stock Exchange, brought by pension funds and other investors accusing the Exchanges of manipulation and other market abuse in connection with high frequency trading (“HFT”). This alert briefly analyses the court’s decision in In re: Barclays Liquidity Cross and High Frequency Trading Litigation and other recent legal developments relating to HFT in the U.S. … Read more

Ian Ramsey

Takeover Dispute Resolution in Australia and the United States – Takeovers Panel or Courts?

Takeover disputes can be fiercely contested. Given this, there is an important question about the forum for these disputes. Traditionally, takeover disputes were resolved by the courts. However, in recent years, there has been a trend to have these disputes resolved by Takeovers Panels. The countries with these Panels include Australia, the United Kingdom, Hong Kong, Singapore, India, Ireland, New Zealand, Switzerland and South Africa.

Takeover dispute resolution in the United States is undertaken by the courts. According to Cornerstone Research, in 2014, 93% of all mergers and acquisitions deals in the United States valued at over US$100 million were … Read more

Georges Ugeux

Could Solvency II Threaten the Financial Stability of European Insurance?

The European insurance sector has approximately 6.8 trillion euros of assets under management. It is the largest European institutional investor, a fundamental element of financial stability and provides support for the global economy. Additionally, the European insurance sector is a significant source of jobs, providing employment for more than one million people. The chart below illustrates the share of GDP represented by insurance premiums, generally defined as penetration ratios.[1]

Solvency II, Figure 1
What is Solvency II?

The Solvency II Directive[2] is a set of regulatory requirements for the European insurance industry. Adopted in 2009, the Directive was slated to take effect … Read more

Cahill Gordon discusses Cybersecurity Developments and the Growing Role of Senior Executives and Directors

From the 2013 Target Corporation breach to this year’s attacks on Primera Blue Cross and American Airlines Group Inc., the issue of cybersecurity has emerged at the forefront of risks to be confronted by corporations across a spectrum of industries.1 Given the catastrophic risks and consequences that have emerged from recent cyberattacks and the litigation, regulatory, and enforcement trends that are driving the evolution of relevant legal standards, both senior executives and directors should be proactive in their oversight and monitoring of the implementation and continued refinement of their company’s cybersecurity controls and processes.

I. Government Enforcement and Regulatory Read more

Parveen Gupta and Tim Leech

Board Oversight of Risk Culture: Are U.S. Boards Willing and Able to Meet the Escalating Expectations?

Over the past 15 years expectations for board risk oversight have skyrocketed. In 2002 the Sarbanes-Oxley Act put the spotlight on board oversight of financial reporting. The 2008 global financial crisis focused regulatory attention on the need to improve board oversight of what is increasingly being referred to as management’s “risk appetite and tolerance.” In the wake of a number of high-profile personal data breaches, questions are being asked about board oversight of cyber-security, the newest risk threatening long term success of companies.[1] Most recently, boards, particularly boards in the financial services sector, are being called on to actively … Read more

Garrie and Reeves

An Unsatisfactory State of the Law: The Limited Options for a Corporation Dealing with Cyber Hostilities by State Actors

State-sponsored cyber hostilities on corporations are not a new occurrence. Recent examples include the August 2014 suspected Russian hack of JP Morgan Chase[1] and the continuous cyber activities against corporate targets conducted by Unit 61398 of the Chinese People’s Liberation Army.[2] However, North Korea’s actions against Sony are considered by many a “game changer” and a significant escalation of the cyber hostilities targeting corporations.[3] Rather than hacking Sony to steal corporate secrets or disrupt their business activity, the North Koreans attempted to devastate the company and chill its activities for a perceived nationalist slight.[4] This targeting … Read more

Daniel Kinderman

The Politics of Corporate Transparency and the Struggles over the Non-Financial Reporting Directive 2014/95/EU

Crises can generate pressure for change – and there are crises aplenty in contemporary governance and corporate accountability. After decades of neoliberal orthodoxy, the US sub-prime crisis, the European banking crises and corporate malfeasance[1] have shaken the ideologies of shareholder value and efficient self-regulating markets and increased support for the re-regulation of markets. Markets require information to discipline firms, and the lack of information on companies’ social and environmental impacts has prevented market mechanisms from pushing against the externalization of costs after impacts created by the externalization became a concern to society.[2]

In response, the EU has passed … Read more


Are Exchange Trading Rules Effective for Mitigating Insider Trading Activities?

Are securities law and their enforcement effective at mitigating market manipulation activities, especially insider trading activities? The study ‘Exchange Trading Rules, Surveillance and Suspected Insider Trading’, forthcoming in the Journal of Corporate Finance, tries to answer this question with unique international data and a natural experiment. For the first time, we examine the exchange trading rules that govern market conduct and relate these rules to insider trading. We use exchange trading rule changes in Europe as a natural experiment to ascertain the impact of trading rules on suspected insider trading. Further, we make use of unique surveillance data in … Read more