Financial Regulatory Forum

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.

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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…)

Corporate Governance: Staggered U.S. boards are endangered species

By Erik Krusch

NEW YORK, March 23 (Westlaw Business) – Classified boards may be moving towards the endangered species list, as investors and even management are hunting them down.

Valero and Biogen Idec’s management teams, for example, are recommending that shareholders approve amendments declassifying their respective boards. Other corporations, such as Alcoa and McDonald’s Corp, however, are fighting their shareholders’ attempts to level their staggered boards. It remains to be seen how many staggered boards emerge from this proxy season unscathed. (more…)

COLUMN – U.S. Libya sanctions: vendors beware — and beware of your vendors

By Richard J Cellini, Esq, CEO Briefcast analytics. The views expressed are his own.

NEW YORK, March 18 (Complinet) - New Libya sanction rules will have the biggest impact on suppliers and distributors of large U.S. companies. It’s official: the U.S. government has adopted unprecedented emergency regulations blocking property and prohibiting certain transactions connected with Libya and high-ranking Libyan officials. The new rules took effect on February 25, 2011.

These sanctions impose serious and far-reaching legal, financial and operational constraints on a broad range of US-based companies, business executives, investors and private individuals. And that’s the easy part. (more…)

UK financial regulatory changes sharpen accountability of senior managers

By Susannah Hammond

LONDON, March 18 (Complinet) The new UK financial regulatory architecture is taking shape. The new bodies, their responsibilities and reporting lines are currently being consulted on and seem likely to be fairly close to the structures which will be in place by the end of 2012.

The regulatory philosophy which will underpin the new architecture has already been trailed as being more of the same intrusive and intensive approach to supervision. But it is also clear that senior managers of regulated firms will faced increased scrutiny as the regulators focus on individual accountability.

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