Category Archives: Legislative & Regulatory Developments

SEC Interpretation of “Whistleblower” Definition

Nicholas S. Goldin is a partner at Simpson Thacher & Bartlett LLP. This post is based on a Simpson Thacher publication by Mr. Goldin, Peter H. BresnanYafit Cohn, and Mark J. Stein.

On August 4, 2015, the Securities and Exchange Commission (“SEC”) issued an interpretive release to clarify its reading of the whistleblower rules it promulgated in 2011 under Section 21F of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The release expressed the SEC’s view that the employment retaliation protection accorded by the Dodd-Frank Act and codified in Section 21F is available to individuals who report the suspected securities law violation internally, rather than to the SEC. [1]


Asset Managers: AML ready?

Dan Ryan is Leader of the Financial Services Advisory Practice at PricewaterhouseCoopers LLP. This post is based on a PwC publication by Mr. Ryan, Jeff Lavine, Adam Gilbert, and Armen Meyer. The complete publication, including footnotes and appendix, is available here.

On August 25th, the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) proposed anti-money laundering requirements for US investment advisers. The proposal requires advisers that are registered with the Securities and Exchange Commission (SEC) to establish anti-money laundering (AML) programs, to report suspicious activities related to money laundering and terrorist financing, and to comply with other sections of the Bank Secrecy Act (BSA).

If finalized as proposed, the impact of these new requirements will vary. Advisers owned by bank holding companies (BHCs) are already subject to similar requirements that are applicable to their BHC parents and enforced by the Federal Reserve. These advisers will nevertheless likely experience an increase in regulatory oversight, as the proposal now allows the SEC to enforce AML requirements.


Announcement of New Rulemaking Database

Mary Jo White is Chair of the U.S. Securities and Exchange Commission. The following post is based on Chair White’s recent public statement, available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Strong regulations are central to the Commission’s mission. For more than 80 years, we have used rulemaking to establish a comprehensive framework for our securities markets that protects investors, enhances market integrity, and promotes capital formation. The rulemaking process is the means through which the Commission responds to the ever-changing securities markets, targets and attacks harmful practices in those markets, and meets the goals mandated by Congress. Our rules provide important standards against which we assess compliance in our examinations and hold wrongdoers accountable in our enforcement actions.


New Direction from Delaware on Merger Litigation Settlements

David A. Katz is a partner specializing in the areas of mergers and acquisitions and complex securities transactions at Wachtell, Lipton, Rosen & Katz; William Savitt is a partner in the Litigation Department of Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton memorandum, and is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

In a series of rulings culminating in a recent memorandum opinion, the Delaware Court of Chancery has reset the rules for settling merger-related litigation. In re Riverbed Tech. Inc. S’holders Litig., C.A. No. 10484-VCG (Del. Ch. Sept. 17, 2015).

Nearly every public company merger now draws class action litigation, and the great majority of these suits have long been resolved by “disclosure-only” settlements in which the target company makes supplemental disclosures related to the merger in exchange for a broad class-wide release of claims. The only money that changes hands is an award of fees for the plaintiff’s lawyers. In recent bench rulings, members of the Court of Chancery have noted that these settlements seem to provide very little benefit to stockholders and questioned whether plaintiffs and their counsel had investigated their claims sufficiently to justify what some judges call the customary “intergalactic” release of all potential claims relating to a challenged merger.


U.S. Enforcement Policy and Foreign Corporations

John F. Savarese is a partner in the Litigation Department of Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Mr. Savarese, David GruensteinRalph M. LeveneDavid B. Anders, and Lauren M. Kofke.

We recently reported on a new U.S. Department of Justice policy which expanded expectations for corporate cooperation in white collar investigations. While the initial wave of attention given to the DOJ pronouncement focused on U.S. companies, this new policy is also important for all companies with operations in the U.S. or whose activities otherwise bring them within the long arm of U.S. enforcement jurisdiction. Underscoring the relevance of these new policies to non-U.S. companies, Deputy Attorney General Yates noted in her remarks announcing the new policy that among “the challenges we face in pursuing financial fraud cases against individuals” is the fact that “since virtually all of these corporations operate worldwide, restrictive foreign data privacy laws and a limited ability to compel the testimony of witnesses abroad make it even more challenging to obtain the necessary evidence to bring individuals to justice.”


Open-End Fund Liquidity Risk Management and Swing Pricing

Mary Jo White is Chair of the U.S. Securities and Exchange Commission. The following post is based on Chair White’s remarks at a recent open meeting of the SEC, available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

The Commission will consider a recommendation of the staff to propose a new rule and amendments designed to strengthen the management of liquidity risks by registered open-end investment companies, including mutual funds and exchange-traded funds (or ETFs).

Regulation of the asset management industry is one of the Commission’s most important responsibilities in furthering our mission to protect investors, maintain orderly markets, and promote capital formation. The Commission oversees registered investment companies with combined assets of approximately $18.8 trillion and registered investment advisers with approximately $67 trillion in regulatory assets under their management. At the end of 2014, 53.2 million households, or 43.3 percent of all U.S. households, owned mutual funds. Fittingly, next Tuesday, we will reflect on our history of regulating funds and advisers at an event to celebrate the 75th anniversary of the Investment Company Act and the Investment Advisers Act.


Individual Accountability for Corporate Wrongdoing

Daniel P. Chung is of counsel in the Washington, D.C. office of Gibson, Dunn & Crutcher LLP. This post is based on a Gibson Dunn publication authored by Mr. Chung, F. Joseph Warin, Charles J. Stevens, and Debra Wong Yang.

On September 9, 2015, the Department of Justice (“DOJ”) issued a new policy memorandum, signed by Deputy Attorney General Sally Yates, regarding the prosecution of individuals in corporate fraud cases—”Individual Accountability for Corporate Wrongdoing” (“the Yates Memorandum”).

The Yates Memorandum has been heralded as a sign of a new resolve at DOJ, and follows a series of public statements made by DOJ officials indicating that they intend to adopt a more severe posture towards “flesh-and-blood” corporate criminals, not just corporate entities. Furthermore, the Yates Memorandum formalizes six guidelines that are intended “to strengthen [DOJ’s] pursuit of corporate wrongdoing.”

Though much of the Yates Memorandum is not entirely novel, corporations and their executives should take close note of DOJ’s increasing and public focus on individual prosecutions. Additionally, both corporations and DOJ should take note of how the Yates Memorandum may carry a number of consequences—intended and unintended—with respect to cooperation with DOJ investigations.


Title VII and Security-Based Swaps

Robert W. Reeder III and Dennis C. Sullivan are partners at Sullivan & Cromwell LLP. This post is based on a Sullivan and Cromwell publication. The complete publication is available for download here.

In the first half of 2015, the Securities and Exchange Commission (the “SEC”) finalized or proposed a number of rules relating to security-based swaps (“SBSs”). These include final and proposed rules on the reporting and public dissemination of security-based swaps, proposed rules on security-based swap transactions arranged, negotiated or executed by U.S.-based personnel of a non-U.S. person and final rules on the registration of security-based swap data repositories (“SDRs”). This post provides an overview of these regulatory developments.


Remuneration in the Financial Services Industry 2015

Will Pearce is partner and Michael Sholem is European Counsel at Davis Polk LLP. This post is based on a Davis Polk client memorandum by Mr. Pearce, Mr. Sholem, Simon Witty, and Anne Cathrine Ingerslev. The complete publication, including footnotes, is available here. Related research from the Program on Corporate Governance includes Regulating Bankers’ Pay by Lucian Bebchuk and Holger Spamann (discussed on the Forum here), The Wages of Failure: Executive Compensation at Bear Stearns and Lehman 2000-2008 by Lucian Bebchuk, Alma Cohen, and Holger Spamann, and How to Fix Bankers’ Pay by Lucian Bebchuk.

The past year has seen the issue of financial sector pay continue to generate headlines. With the EU having put in place a complex web of overlapping law, regulation and guidance during 2013 and 2014, national regulators are faced with the task of interpreting these requirements and imposing them on a sometimes skeptical (if not openly hostile) financial services industry. This post aims to assist in navigating the European labyrinth by providing a snapshot of the four main European Directives that regulate remuneration:

  • Capital Requirements Directive IV (CRD IV);
  • Alternative Investment Fund Managers Directive (AIFMD);
  • Fifth instalment of the Undertakings for Collective Investment in Transferable Securities Directive (UCITS V); and
  • Markets in Financial Instruments Directive (MiFID).


Treasury Seeks to Curb “Cash-Rich” and
REIT Spin-Offs

Jodi J. Schwartz and Joshua M. Holmes are partners at Wachtell Lipton Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Ms. Schwartz, Mr. Holmes, and David B. Sturgeon.

The Treasury Department and the Internal Revenue Service have announced (in Notice 2015-59) that they are studying issues related to the qualification of certain corporate distributions as tax-free under Section 355 of the Internal Revenue Code in situations involving substantial investment assets, reliance on relatively small active businesses, and REIT conversions. The IRS concurrently issued related guidance (Rev. Proc. 2015-43), adding such transactions to its ever-expanding list of areas on which it will not issue private letter rulings. While this expansion of the IRS’s “no-rule” areas is not a statement of substantive law, these announcements may have a chilling effect on certain pending and proposed transactions.


  • Subscribe

  • Cosponsored By:

  • Supported By:

  • Programs Faculty & Senior Fellows

    Lucian Bebchuk
    Alon Brav
    Robert Charles Clark
    John Coates
    Alma Cohen
    Stephen M. Davis
    Allen Ferrell
    Jesse Fried
    Oliver Hart
    Ben W. Heineman, Jr.
    Scott Hirst
    Howell Jackson
    Robert J. Jackson, Jr.
    Wei Jiang
    Reinier Kraakman
    Robert Pozen
    Mark Ramseyer
    Mark Roe
    Robert Sitkoff
    Holger Spamann
    Guhan Subramanian

  • Program on Corporate Governance Advisory Board

    William Ackman
    Peter Atkins
    Joseph Bachelder
    John Bader
    Allison Bennington
    Daniel Burch
    Richard Climan
    Jesse Cohn
    Isaac Corré
    Scott Davis
    John Finley
    David Fox
    Stephen Fraidin
    Byron Georgiou
    Larry Hamdan
    Carl Icahn
    Jack B. Jacobs
    Paula Loop
    David Millstone
    Theodore Mirvis
    James Morphy
    Toby Myerson
    Morton Pierce
    Barry Rosenstein
    Paul Rowe
    Rodman Ward