Davis Polk discusses U.S. Basel III Final Rule

The U.S. Basel III final rule is the most complete overhaul of U.S. bank capital standards since the U.S. adoption of Basel I in 1989 – nearly a quarter of a century ago.  The final rule comprehensively revises the regulatory capital framework for the entire U.S. banking sector by implementing many aspects of Basel III as well as key provisions of the Dodd-Frank Act, including the Collins Amendment capital floor in Section 171 and the ban on references to credit ratings in Section 939A.  The U.S. Basel III final rule also makes significant changes to the 2012 U.S. Basel III … Read more

E.U. Managers of Non-E.U. Funds

The Alternative Investment Fund Managers Directive (Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers) (the “Directive”) entered into force on July 21, 2011 with E.U. Member States having until July 22, 2013 to implement it. The Directive broadly aims to create a single harmonized pan-European regulatory framework for E.U.-established managers (“Managers”) of alternative investment funds (“AIFs”). It also sets out a regime for the marketing in the E.U. of both E.U. and non-E.U. AIFs by non-E.U. Managers. Our memorandum focuses on the specific provisions of the Directive and the … Read more

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Editor's Tweet: Davis Polk's Richard Small discusses E.U. Managers of Non-E.U. Funds

Reed Smith on Next Steps in French Crowdfunding

Crowdfunding basically consists in the funding of a project by raising many small amounts of money from a large number of people, typically via the Internet. Primarily used in specific artistic sectors, such as the music or movie business, crowdfunding is booming as it may be considered as an interesting alternative to finance projects other than by bank loans and venture capital, in particular for small- to medium-sized companies.

Under French law, public offers, banking and financing activities are strictly regulated. Because of regulation of banking monopoly, only credit institutions may carry out banking and financing activities which are subject … Read more

Should Lex Americana be universal? FATCA turns foreign banks into tax informants

Over the last decades, a number of initiatives taken by various US administrations on both sides of the aisle have raised concerns about the actual legality of the extraterritoriality attached to laws imposed by the United States of America on other jurisdictions around the world, often using “persuasion” rather than legal due process.

In my first course on International Private Law at the Catholic University of Louvain, we were taught that tax laws could not extend beyond the borders of the taxation authorities. The territoriality of tax laws is confirmed by the literature.   The double taxation treaties confirm this principle … Read more

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Editor's Tweet: George Ugeux discuss whether the Lex Americana should be universal? How FATCA turns foreign banks into tax informants

Disclosure and Ratings Requirements in European Structured Finance

The newly amended credit rating agencies regulation coming into force on 20 June will expand the scope and application of disclosure requirements and other ratings related regulation for structured finance instruments – a concept wide enough to include many transactions not traditionally thought of as securitisations. It imposes potentially extensive disclosure requirements and rules requiring at least two ratings. It also promotes the use of smaller credit rating agencies. Previously it had been possible for parties to ignore most disclosure requirements provided that the transaction in question was not offered to the public or listed on a regulated market. Read

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Editor's Tweet: Clifford Chance discusses Disclosure and Ratings Requirements in European Structured Finance http://wp.me/p2Xx5U-151

We are the (National) Champions: Understanding the Mechanisms of State Capitalism in China

China now has the second-largest number of Fortune Global 500 companies in the world. Most of the Chinese companies on the list are state-owned enterprises (sometimes called “SOEs”) organized into massive corporate groups with a central government agency as their ultimate controlling shareholder. Despite these groups’ importance to China’s domestic economy and foreign investment strategy, many features of the SOE sector—particularly the organizational structure and governance characteristics of the SOE groups—remain a black box.

Unpacking the black box requires moving away from the standard focus on agency costs in listed firms that predominates in the corporate governance literature. Instead, in … Read more

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Editor's Tweet: Professors Curtis Milhaupt and Li-Wen Lin of Columbia discuss the mechanisms of state capitalism in China

In Strange Company: The Puzzle of Private Investment in State-Controlled Firms

The following post comes to us from Professor Mariana Pargendler of the Fundação Getulio Vargas School of Law at São Paulo, Brazil.  

Despite prior waves of privatization, state-owned enterprises (SOEs) remain a fixture of the variety of capitalism embraced by Brazil, Russia, India, and China as well as other emerging and developed economies. The state, however, is too often not alone in the companies it controls. Minority shareholdings in government-controlled firms are pervasive around the globe, and have been on the rise in a number of jurisdictions. As of 2010, publicly traded SOEs accounted for a startling one-fifth of the … Read more

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Editor's Tweet: Professor Mariana Pargendler discusses her new article on private investment in state-controlled firms

The Present and Future of Corporate Governance: Re-Examining the Role of the Board of Directors and Investor Relations in Listed Companies

In our new paper, The Present and Future of Corporate Governance: Re-Examining the Role of the Board of Directors and Investor Relations in Listed Companies, forthcoming in the European Company and Financial Law Review, we contribute a new perspective on corporate governance by examining the ‘ignored’ third dimension of the corporate governance debate: the prospect of business growth and value creation. A three-dimensional approach provides a better understanding of the dynamics of the corporate governance practices that we currently observe in listed corporations. Our analysis is supported by empirical evidence, derived from two hand-collected data sets, that consist … Read more

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Editor's Tweet: Joseph McCahery and others discuss the Role of the Board of Directors and Investor Relations in Listed Companies

Alston & Bird Discusses How Hedge Funds and Private Equity Firms Can Manage FCPA Risks

In recent years, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have aggressively investigated and enforced both the anti-bribery and accounting provisions of the Foreign Corrupt Practices Act (FCPA). Many of these matters have been the result of “industry sweeps,” which have included the oil and gas, pharmaceutical and medical device, and telecommunication industries.

DOJ and the SEC have also made clear that the banking and finance industry is a high priority for FCPA enforcement. In January 2011, the SEC initiated investigations into bank and private equity firm transactions involving sovereign wealth funds, national pension funds, … Read more

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Editor's Tweet: Alston & Bird Discusses How Hedge Funds and Private Equity Firms Can Manage FCPA Risks

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

Wachtell Lipton Discusses the SEC and “Exceptional” Cooperation

Earlier this week, the SEC announced that it had entered into a non-prosecution agreement (NPA) with Ralph Lauren Corporation to resolve an investigation under the Foreign Corrupt Practices Act (FCPA).  While the Department of Justice also announced that it had entered into an NPA with Ralph Lauren, it is the SEC agreement that is most notable.  This agreement, only the fourth publicly reported NPA that the SEC has entered since it announced that it would begin using such agreements – and the first such agreement in an FCPA case – illustrates the potential benefits of cooperation.

The SEC’s press release … Read more

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Editor's Tweet: Wachtell Lipton Discusses the SEC and “Exceptional” Cooperation

Applying Morrison v. National Australia Bank, the Supreme Court Rejects Extraterritorial Application of the Alien Tort Statute

Editors Note:  The author, a partner at Wachtell, Lipton, Rosen & Katz argued the Morrison case for the defendants in the Supreme Court.

Just as it extinguished class-action litigation tourism under the Securities Exchange Act three years ago in Morrison v. National Australia Bank, the U.S. Supreme Court, invoking Morrison, today abruptly ended the burgeoning use of the Alien Tort Statute to litigate extraterritorial torts.  Kiobel v. Royal Dutch Petroleum Co., No. 10-1491 (U.S. Apr. 17, 2013).

Enacted in 1789, the ATS provides that federal district courts have “jurisdiction of any civil action by an alien for … Read more

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Editor's Tweet: Wachtell's Conway discusses SUpreme Court's recent application of Morrison v. NAB to the Alien Tort Statute

An International Outlook for the SEC

Commissioner Walter delivered the below remarks on March 24, 2013 to the Australian Securities and Investments Commission Forum (via videoconference)

Good morning. Thank you, Greg [ASIC Chairman Greg Medcraft] for that kind introduction.

It is a real pleasure to be able to join you today — although I very much regret that I am not with you in person. I appreciate Greg’s graciousness in allowing me to present my remarks by video. The Australian Securities and Investments Commission and Greg himself have been wonderful partners in our many global ventures and that deepens my regret at not being in Australia … Read more

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Editor's Tweet: SEC Commissioner Elisse Walter describes an International Outlook for the SEC

Is Europe finally converging with the US on sanctions for insider trading and other market abuses?

Traditionally, the view of the US, whether in business or academia, has been that it was a place for weak private enforcement and stronger public enforcement. However, when compared with the level of public enforcement in the European Member States, even in the UK and in France, the US Securities and Exchange Commission has a stronger track record.

This picture is going to change dramatically, thanks to the proposed revisions in October 2011 of the European Union’s  2003 Market Abuse Directive (MAD), which deals with insider trading, market manipulation, and ad hoc disclosure.

The two proposals introduced were the Market … Read more

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Editor's Tweet: Professor Pierre-Henri Conac of the University of Luxembourg discusses the EU and US convergence on insider trading and market abuse

Ring-Fencing: Functions and Conceptual Foundations

“Ring-fencing” is often touted as a potential regulatory solution to problems in banking, finance, public utilities, and insurance. However, both the precise meaning of ring-fencing, as well as the nature of the problems that ring-fencing regulation purports to solve, are ill defined.  My new article, recently posted here on SSRN, examines the functions and conceptual foundations of ring-fencing.

The recent report by the U.K. Independent Commission on Banking (known as the “Vickers Report”) proposes ring-fencing banks by legally separating certain of their risky assets from their retail banking operations.[1]  Federal regulators in the United States are considering requiring the … Read more

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Editor's Tweet: Professor Steven L. Schwarcz of Duke Law discusses ring-fencing.

Cyprus: what happened to the sanctity of insured deposits?

In the turmoil created by the decision of the Cyprus Government to impose a 6.75% levy on deposits up to 100,000 euros and 9% above, it might be useful to look at the legal aspects of this decision. The issue of a guarantee scheme for deposits is not new, and even Cyprus established such a scheme in 2000. This posts walks through the relevant European and Cypriot regulation.  I argue that there is no precedent for Cyprus’ levy and that it creates a serious risk of contagion.

European regulation

On July 12, 2010, the European Commission adopted a legislative proposal … Read more

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Editor's Tweet: Georges Ugeux, Chairman and CEO, Galileo Global Advisors, discusses Cyprus: what happened to the sanctity of insured deposits.

A Primer on the Uncorporation

More and more companies appear with strange abbreviations behind their business name. Consider Chrysler Group LLC (instead of Inc.) or LVMH Montres & Joaillerie France SAS. Some even speak about the “endangered corporate form” and point to the rise of the uncorporation. In the paper, “A Primer on the Uncorporation, ” Erik Vermeulen, Priyanka Priydershini and I examine how the uncorporation has evolved in the United States and, more recently, in other economies around the world. The growth in non-listed business forms in Europe, Latin America and Asia has been shaped by a mixture of learning and professional advice arising … Read more

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Editor's Tweet: Joe McCahery of Tilberg University School of Law discusses his recent work on Uncorporations

Regulatory Competition and Anticorruption Law

My paper, Regulatory Competition and Anticorruption Law, which was recently published in the Virginia Journal of International Law, responds to arguments that the recent increase in European enforcement of anti-bribery laws has created a risk of overenforcement. Critics of the current international regime, including the U.S. Chamber of Commerce and several academics, have argued that cracking down on bribery of government officials by rich-world firms will leave the field open to multinationals whose home countries do not care about corruption (China and India typically are mentioned). These critics would have the United States relax its international bribery rules by … Read more

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Editor's Tweet: Professor Paul Stephan of UVA law discusses international bribery rules and the dynamics of regulatory competition.

The ICE Acquisition of NYSE Is a Failure for Europe

In 2011, the Deutsche Boerse Group launched an offer on the New York Stock Exchange. Everybody expected that the U.S. authorities would object to this foreign acquisition of the most iconic Stock Exchange in the United States, and arguably in the world. Not only did it not happen, but very quickly the U.S. Department of Justice, quite naturally, concluded that there was no antitrust issue. Incidentally, NASDAQ made a desperate attempt to purchase the NYSE for $11.8 billion and the merger of the two largest cash equity exchanges of the United States was stiffly rejected by the U.S. authorities. Even … Read more

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Editor's Tweet: Georges Ugeux, CEO of Galileo Global Advisors, opines on the ICE acquisition of NYSE

Why Did Australia Fare So Well in the Global Financial Crisis?

Not all jurisdictions around the world suffered the effects of the so-called “global” financial crisis equally. Even among common law countries, which are routinely bundled together in much academic literature, the impact of the crisis varied significantly from jurisdiction to jurisdiction.

The crisis proved dire for some common law countries, such as the United States and the United Kingdom. Others, however, including Australia and Canada, were considerably more fortunate. Although there were over fifty government-sponsored bank bailouts around the globe during the crisis, including in the United States and the United Kingdom, there were no such bailouts in either Australia … Read more

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Editor's Tweet: Professor Jennifer G. Hill of the University of Sydney discusses why Australia fared so well in the recent financial crisis.