Financial Regulatory Forum

Private placements and conflicts of interest: do consenting adults need more protection? – COLUMN

By Helen Parry, Thomson Reuters Accelus regulatory intelligence expert. The views expressed are her own.

LONDON, May 16 (Thomson Reuters Accelus) -

“The first private placement memorandum disclosed the possibility that new investors may help pay distributions to old investors but this was not a risk; it was a certainty.” (US Securities and Exchange Commission v Bravata 2011 WL 339458.)

“This disclosure indicates that GSI may invest in securities that are ‘adverse to’ the Hudson investments … Goldman had already determined to keep 100 per cent of the short side of the Hudson CDO.” U.S.  Senate Investigations Subcommittee Levin-Coburn Report on the Financial Crisis.

The fact that investors in the Billionaire Boys Club property investment Ponzi scheme, the subject of the Bravata case quoted above, blithely handed over their hard-earned cash, despite the fact that the private placement memorandum disclosed that it may be just that, is a striking example of the dangers that may befall unwary investors who fail to check the small print.

Nevertheless, although disclosing the fact that one might be operating a Ponzi scheme or a conflicted interest may not suffice to protect one from potential liability for misrepresentation or fraud if one has already determined to engage in such a course of action, disclosing such matters when one is yet to make such a determination and the statement is, therefore, true, may do the trick, at least in the case of the collateralized debt obligation (CDO). (more…)

COLUMN: British bankers give up payment-protection appeal – the implications

By Adam Samuel, Thomson Reuters Accelus contributor. The opinions expressed are his own.

LONDON, May 13 (Thomson Reuters Accelus) – The British Bankers’ Association left it until the day before the last available one to appeal against its defeat in the Administrative Court, to throw in the towel in its payment protection insurance judicial review application.

Having lost on every point in front of Mr Justice Ouseley, the BBA’s undignified judicial review challenge to both the Financial Services Authority and the Financial Ombudsman Service’s material on PPI complaint handling is over.

Is the Financial Stability Board the regulator to rule them all?

By Susannah Hammond, Thomson Reuters’  regulatory intelligence team. The views expressed are her own

LONDON, May 9 (Thomson Reuters Accelus) – The Financial Stability Board, regulatory policy maker of choice for the G20, has started to show its teeth. From its roots as the supranational setter of standards, guidance, policies and principles in the wake of the financial crisis, the FSB has started to clarify how it will monitor compliance with its requirements as well as deal forcefully with breaches.

A progress report on one of its strands of work regarding promoting global adherence to regulatory and supervisory standards on international cooperation and information exchange highlights how the FSB uses the International Monetary Fund as its objective reviewer of compliance with international standards. Critically, it shows how the FSB has taken the first steps in setting out the implications for what are called non-cooperative jurisdictions.

U.S. insider cases reshape policy for U.S. companies, enforcers

David Sokol, Chairman, MidAmerican Energy Holdings, and Chairman, President, and CEO of NetJets, listens to a question during the Fortune Brainstorm Green conference in Dana Point, California in this April 13, 2010 file photograph. Former Berkshire Hathaway executive David Sokol has said he did nothing wrong in buying stock in a company that he then suggested Berkshire acquire.By Erik Krusch

NEW YORK  (Business Law Currents) Inside information seems to be making its way out of the office and boardroom and onto the Street where it is parlayed into lucrative stock trades. From former hedge fund mogul Raj Rajaratnam to erstwhile Berkshire Hathaway executive and reputed Warren Buffett successor David Sokol, individuals alleged to have traded on inside information are sweating in the proverbial hot seat.

Rajaratnam’s alleged violation of insider trading laws and Sokol’s alleged violation of Berkshire policy, and possibly state and federal law, are helping to shape current market norms and the future behavior of investors in U.S. capital markets. These corporate dramas are unfolding before our very eyes and today’s events offer a possible window into what post-Sokol and Rajaratnam corporate policy and insider trading enforcement may look like.

(more…)

U.S. chases elusive currency-detection technology

By Brett Wolf

ST. LOUIS, May 4 (Thomson Reuters Accelus) – To combat money laundering and contain the drug war raging along the U.S.-Mexico border, U.S. authorities are seeking technology that can detect the hoards of cash that smugglers try to spirit abroad.

But as results come in on initial development efforts, it is uncertain whether the technology is within reach.

“Right now we don’t know if it’s even feasible to make it work,” said John Verrico, a spokesman for the U.S. Department of Homeland Security’s and Technology Directorate. “There is a whole lot that has to be considered before we can say we have viable technology.”

Dodd-Frank and SEC blaze new trail for credit ratings

NEW YORK, April 19 (Westlaw Business) – Dodd-Frank’s credit-rating provisions do more than just hamstring ratings agencies; they also open new frontiers of opportunity.

Already on the wane as a result of their collective role in the world financial crisis, the influence of the big ratings agencies will soon take another hit as the Dodd-Frank financial regulation overhaul formally strips these analysts of their aura of omniscience. Obscured in the conversation is what collateral effects may spring from this new regulation. (more…)

Taiwan takes tough stance on corporate governance

By Patricia Lee

(Complinet) Taiwan’s Financial Supervisory Commission has stepped up enforcement of its corporate governance regulations by making it mandatory for listed firms and financial institutions to appoint independent directors and set up a remuneration committee. The latest regulations will carry a penalty in the event of any breaches, an FSC official told Complinet, speaking on condition of anonymity.

According to the FSC official, although the requirement to appoint independent directors was not entirely new, the commission’s latest move built on its existing corporate governance regulations. It further expands their reach to cover the entire spectrum of the financial services sector.

Securities investment trust enterprises and integrated securities firms which are not subsidiaries of a financial holding company, exchange- or over-the-counter-listed futures commission merchants, as well as exchange- or OTC-listed non-financial institutions each with a paid-in capital of at least NT$10 billion ($344.7 million), but not exceeding NT$50 billion ($1.7 billion), are the four additional types of firms in the financial sector now covered under the corporate governance regulations.

Where to put the ring-fence: implications of the UK bank report

By Peter Elstob

LONDON, April 12 (Complinet) – The Independent Commission on Banking said on Monday that separating retail and wholesale banking in some way might have “a number of potential benefits”, and it invited views on the best design for a “retail ring-fence”.

In an annex to its interim report, the commission illustrated one way to devise such a ring-fence. This is to divide banking business into three broad categories: activities which must take place within the ring-fence; activities which may take place within it; and those which may not take place within it.

But the example leaves a lot of room for interpretation. (more…)

COLUMN – UK Bribery Act guidelines: has the lobbying worked?

By Helen Parry,   senior regulatory intelligence expert, Complinet. The views expressed are her own.

LONDON, April 5 (Complinet) - Seemingly unnerved at the anti- Bribery Act lobby’s dire predictions of British corporations losing out to competitors hailing from jurisdictions with a more relaxed approach to such matters, the Ministry of Justice appears to have taken heed. This is clearly demonstrated by the reassuring, empathetic and positively emollient tone employed in the revised version of the guidance for companies issued last week, particularly when sensitive issues such as facilitation payments and corporate hospitality are being addressed. This change of heart can be clearly discerned by comparing the original and revised versions of the case study on facilitation payments featured in the guidance documents.

THE ORIGINAL CASE STUDY

The original version posited a UK company engaging with a US counterpart in a consortium which was contracting in a third country jurisdiction “rife with corruption.” They were already in serious trouble, having made facilitation payments, struck a deal with union leaders, replaced the facilitation payments with IT services to educational centres connected to an opposition party and been accused of bribery by an overseas government.

Japan’s material adverse change: from financings to M&A

By John Mackie

TORONTO, March 23 (Westlaw Business) – Japan’s nuclear difficulties must be mourned, without qualification. At the same time, the business and legal communities cannot stand still, as they deal with several quite-unexpected ripple effects. Both M&A and capital markets transactions have suffered, and disclosure practices are now coming under review. Set against a backdrop of plummeting stock prices, companies in nuclear-related industries are caught in their own battle to sustain themselves. (more…)

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