PwC discusses AML Global Alignment: Two Steps Forward, One Step Back

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

Latham & Watkins explains Top 10 Things to Know About the Easing of Sanctions Under the Iran Nuclear Agreement

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

Lael Brainard

Governor Lael Brainard on Dodd-Frank at Five: Assessing Progress on Too Big to Fail

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

John Coffee, Headshot

News From California: The 9th Circuit and the SEC Challenge New York

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[1]—that disagrees (at least marginally) with the Second Circuit’s important (but controversial) decision in United States v. Newman[2]; 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

Kathryn L. Dewenter and Leigh A. Riddick

What’s the Value of a TBTF Guaranty? Evidence from the G-SII Designation for Insurance Companies

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

Wulf Kaal

Stock Price Response to Non- and Deferred Prosecution Agreements

In response to perceived corporate governance shortcomings in major U.S. corporations, the U.S. Department of Justice, starting in 2002, substantially increased the execution of non- and deferred prosecution agreements (N/DPAs). High profile N/DPAs and plea agreements executed in 2012 and 2014 suggest that the DOJ – not judges or the legislature – through its targeting of certain industries, is effectuating large-scale corporate governance changes. The companies subject to NDPAs are among the largest domestically and worldwide, including Johnson & Johnson, KPMG, HSBC, JPMorgan Chase, Deutsche Bank, ABN Amro Bank, Barclays Bank, Credit Suisse, Fannie Mae, Freddie Mac, General Reinsurance, … Read more

black-decarvalho-khanna-kim-yurtoglu

Which Aspects of Corporate Governance Matter in Emerging Markets: Evidence from Brazil, India, Korea, and Turkey

Emerging markets are increasingly important destinations for international capital flows. Yet these markets pose important risks for investors, in addition to the business risks present in every market. For example, in some countries, many public firms are part of family business groups, raising the risk of self-dealing by the controllers. Thus, firm-level corporate governance can be an important factor in investors’ decisions on which countries and firms to invest in, and how much to pay for shares. Yet, despite the important role of corporate governance in affecting firm value, little is known about what aspects of governance are valued by … Read more

demirtas-celik-isaksson

Corporate Bonds, Bondholders and Corporate Governance

In recent years, corporate bond markets have become an increasingly important source of corporate finance, especially for non-financial companies. Given this worldwide trend, it is crucial for policy makers, regulators and market participants to have access to a comprehensive overview of corporate bond market developments and the structural issues accompanying these trends. In the recent OECD working paper entitled “Corporate Bonds, Bondholders and Corporate Governance”, we aim to serve this need by analysing more than 100,000 corporate bonds issued between 2000 and 2013 by companies from 108 different countries[1].

As depicted in Figure 1, the annual amount of … Read more

Gordon Ringe

Greece: What About the Banks?

A recent news story gives us a sobering anecdote about the Greek crisis: a merchant who must conduct all his business in cash because he can neither receive credit card payments nor pay vendors with electronic transfers. This means that the Greek banking system is failing to provide a payment system, a core function.   At first blush, this looks like another piece of the same crisis story we’ve heard for some time. But it is important to distinguish the banking system and its woes from the refusal of the “Troika” to extend a bailout program for the Greek government over … Read more

Latham & Watkins explains How Inversion Rules Maintain Tight Standard for Corporate Expatriations

On June 3, 2015, the US Department of the Treasury (Treasury) and the Internal Revenue Service (the IRS) issued final regulations (the 2015 Final Regulations) under Section 7874, 1 relating to corporate inversions or expatriations. The 2015 Final Regulations largely follow temporary regulations issued on June 12, 2012 (the 2012 Temporary Regulations), which introduced a rigorous, bright-line test (discussed below) that a foreign group must satisfy in order to be treated as having “substantial business activities” in a single foreign country and thereby avoid the US anti-inversion rules. The 2015 Final Regulations will continue to make it difficult for most … Read more

gounopoulos-kraft-skinner

The Effect of Regulatory Alteration on Management Earnings Forecast?

In 1999 Kotsovolos, the leading Electronics Supplier in Greece, reported in its initial public offering prospectus an earnings forecast that missed its actual earnings, as announced by its first annual report, by 234%. This inaccuracy is attributed to the mandatory disclosure requirement imposed by the Hellenic Capital Market Commission, which obligated every firm going through an IPO to predict its next year’s earnings regardless of its ability to do so. Ultimately, repeated failures to achieve accurate earnings forecasts led to a lifting of the obligation to forecast earnings. Our new paper, Voluntary vs Mandatory Management Earnings Forecasts in IPOs, … Read more

Hannah Buxbaum

Suing Transnational Enterprises in U.S. Courts

Over the past few years, the Supreme Court has made it harder for plaintiffs to sue foreign corporations in U.S. courts. A foreign company won’t be subject to general (“all-purpose”) jurisdiction unless it has so many contacts with the forum that it is “essentially at home” there[1]—and won’t be subject to jurisdiction in a lawsuit arising out of forum activities unless its business specifically targeted the particular state in question.[2] In addition, jurisdictional law takes an entity-based approach: jurisdiction over a specific company must be based on that company’s own contacts with the forum, no matter how … Read more

Morrison Foerster discusses Top Ten International Anti-Corruption Developments for May 2015

In order to provide an overview for busy in-house counsel and compliance professionals, we summarize below some of the most important international anti-corruption developments in the past month with links to primary resources. This month some major anti-corruption cases, both Foreign Corrupt Practices Act (FCPA) and nonFCPA related, have dominated the headlines and are reflected in our coverage. In addition, a number of government officials on both sides of the Atlantic have been on the speaking circuit, and we have captured some of the highlights from their speeches. Here is our May 2015 Top Ten list:

  1. FIFA Officials and Sports

Read more

Zonis Parsont

The U.S. Menu of Early-Stage Capital-Raising Options: Lessons for the European Commission

The European Commission, in its green paper dated February 18, 2015, announced the “need to build a true single market for capital – a Capital Markets Union for all 28 Member States.”[1] One of the goals of the Capital Markets Union is to unlock more investment for small and medium sized enterprises (“SMEs”). SMEs are Europe’s equivalent to startups and small businesses in the United States. At present, small businesses in Europe receive five times less funding from the capital markets than their American counterparts.[2] So, the European Commission is looking for feedback from those who work in … Read more

Roe Vatiero

Corporate Governance and its Political Economy

To fully understand the modern corporation’s ownership, shape, and distribution of authority, one must attend to politics. Because basic dimensions of corporate organization can affect the interests of voters, because powerful concentrated interest groups seek particular outcomes that deeply affect large corporations, because those deploying corporate and financial resources from within the corporation to buttress their own interests can affect policy outcomes, and because the structure of some democratic governments fits better with some corporate ownership structures than with others, politics can and does determine core structures of the large corporation. Interest groups often seek to obtain via politics both … Read more

Sarah Light

The New Insider Trading: Environmental Markets within the Firm

Global climate change is the most pressing environmental problem of our time. This fact has led legal scholars and policymakers to debate the relative environmental effectiveness, efficiency, and justice of different public policy instruments such as carbon taxes, cap-and-trade systems, and prescriptive regulation. Such scholarship tends to assume that the government is the key (or only) player setting and enforcing environmental standards against private firms, which are regulatory targets.

In a recent article, entitled, The New Insider Trading: Environmental Markets within the Firm,[1] (available here) I challenge these assumptions through a close examination of British Petroleum’s (BP’s) … Read more

WilmerHale discusses Central Register of Beneficial Ownership to be Introduced in the UK

On 26 March 2015, the United Kingdom Parliament passed into law the Small Business, Enterprise and Employment Act 2015 (the “Act”).

The Act will bring about a number of fundamental changes to UK company law including, amongst others, the abolition of bearer shares and corporations acting as directors and, perhaps most controversially, the establishment of a central public registry of those individuals who hold significant control of UK companies. The stated aims of the reforms are to “increase transparency around who ultimately owns and controls UK companies,” and should be framed in the wider context of … Read more

Andreou, Andrikopoulos and Christos

The Politics of Sovereign Debt in Greece: Crisis and Realism

The Greek crisis emerged as an offspring of the financial crisis of 2007, the institutional and fiscal problems of the Greek economy, the institutional structure of the Eurozone and, crucially, the failed political management in the last months that led to the European Financial Stability Facility (EFSF) and the bailout agreement in May 2010. Since then, the Greek governments, along with the creditors, designed and implemented a program of fiscal austerity and institutional reform which lead to some positive fiscal results but also to an unprecedented crisis of liquidity, orientation and cohesion in Greek economy and society.

The financial crisis … Read more

Shearman & Sterling discusses Capital Markets Unions: the EU’s Next Focus for Reforms

On 18 February 2015, the European Commission published a green paper on building a Capital Markets Union, alongside two complementary consultation papers on a revised EU framework for securitisation and a review of the Prospectus Directive. The proposals are part of an initiative to develop a more integrated single market for raising capital across the EU. The proposals in the green paper are in outline form because the ideas for creating the Capital Markets Union remain at an early stage of development. However, with an action plan due to be published later in 2015, they provide insight into the early … Read more

Sullivan & Cromwell discusses President Obama’s Executive Order Authorizing Sanctions for Malicious Cyber Activities

On April 1st, President Obama issued an Executive Order authorizing sanctions against persons found to have engaged in or supported significant malicious cyber activities. Under the order, the Secretary of the Treasury is authorized to designate and impose sanctions on individuals and entities that are responsible for or complicit in certain cyber-related activities that pose a significant threat to the national security, foreign policy, economic health, or financial stability of the United States. The Executive Order focuses in particular on cyber activities that harm or compromise critical infrastructure, disrupt computers or computer networks, or misappropriate funds, information, or trade secrets. … Read more