Corporate & Securities Law

Post-Roundtable Comments on PCAOB?s Proposed Standard on Auditor-Audit Committee Communications Caution Against Checklist Approach

Posted on November 02, 2010
The PCAOB?s reopened comment period on its proposed standard on auditor communications elicited concerns about a checklist approach to such communications. On March 29, 2010, the Board proposed a new standard to enhance the relevance and effectiveness of the communications between the auditor and the audit committee...

Geithner and Barnier Pledge Non-Protectionist Hedge Fund Legislation and Harmonized Derivatives Regulations

Posted on November 01, 2010
In a joint statement, Treasury Secretary Tim Geithner and EU Commissioner for the Internal Market reaffirmed their on-going commitment to the principle of non-discrimination in current hedge fund legislation and in the future implementation of rules for fund managers and funds, in recognition of the importance of maintaining a global level playing field...

EU Court of Justice Rules Internal Company Communications With in-House Lawyers Not Covered by Legal Professional Privilege

Posted on November 01, 2010
The European Union Court of Justice has ruled that the in-house corporate counsel are not entitled to the same legal professional privilege equal to outside counsel. Akzo Nobel Chemicals Ltd. v. EU, Case No. 550.07. In restricting the applicability of legal professional privilege to in-house counsel communications with clients, the Court indicated that inside counsel lack the independence from the company that would justify professional status in EU competition law matters...

Hedge Fund Industry Comments to SEC on Host of Commission Initiatives under Dodd-Frank

Posted on November 01, 2010
The hedge fund industry has commented to the SEC on a host of Commission initiatives under the Dodd-Frank Act involving both rulemaking and studies. Broadly, in its letter to the SEC, the Managed Funds Association asked the Commission to consider the appropriate regulatory framework for hedge fund and private investment fund advisers against the backdrop of a hedge fund industry that, while important to the capital markets, is relatively small in size and scope when considered in the context of the wider financial market landscape...

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SEC Issues Progress Report on IFRS Incorporation Work Plan for U.S. Issuers

Posted on November 01, 2010
The SEC Office of the Chief Accountant and the Division of Corporation Finance released a progress report on the SEC's work plan for considering whether to incorporate International Financial Accounting Standards (IFRS) in U.S. issuers' financial reports...

Presidential Assistant Warren Pledges Transparency and Tough Enforcement for new Bureau of Consumer Financial Protection

Posted on October 31, 2010
Assistant to the President Elizabeth Warren said that the new Bureau of Consumer Financial Protection created by the Dodd-Frank Act will operate with transparency and will strictly enforce its regulations. In remarks at the Mario Savio Memorial Lecture, the official committed to making public the advocates, lobbyists, and other stakeholders she meets with in creating the new Bureau...

Alaska Sets Schedule for IAs Filing Form ADV Part 2

Posted on October 29, 2010
State investment advisers applicants. Persons applying to register as investment advisers for the first time in any state may between October 12, 2010 and December 31, 2010 electronically file with the IARD an old Part II or new Part 2 of Form ADV. Beginning January 1, 2011 persons applying to register as investment advisers for the first time in any state or for initial registration in a new state must electronically file new Part 2 with the IARD...

Eighteen Senators Urge SEC to Adopt Strong Dodd-Frank Volcker Regulations

Posted on October 29, 2010
In a letter to the SEC and the broader Financial Stability Oversight Council, eighteen Senators provided detailed guidance to regulators to help them effectively implement and enforce the statutory language of the Volcker provisions of the Dodd-Frank Act...

EU Commissioner Barnier Sees No Point in Converged Capital Requirements If Accounting Standards Not Converged

Posted on October 29, 2010
It is essential for global financial reform that the SEC take the necessary steps to transpose IFRS in the United States since if accounting standards are different then capital requirements become different too, in the view of EU Internal Market Commissioner Michel Barnier, who asked what is the point of agreeing on capital requirements if their application leads to different results because of different accounting rules...

Corporate Counsel Say That Proposed Changes to FASB Standard on Loss Contingencies Could Harm Auditor Relationship

Posted on October 29, 2010
The tension over waivers of privilege or work product protection for accrual work papers arising from proposed changes to the FASB standard for disclosing loss contingencies would complicate the relationship between companies and their independent auditors...

EU Commissioner Barnier Links More Board Involvement to Sound Corporate Governance

Posted on October 28, 2010
Effective corporate governance requires that company directors limit the number of boards that they serve on so that they can dedicate more time to their governance duties, emphasized EU Commissioner for the Internal Market Michel Barnier at a Brussels seminar...

American Securitization Forum Urges SEC Not to Take Broad Reading of Material Conflict of Interest When Crafting Dodd-Frank Volcker Regulations

Posted on October 28, 2010
With regard to the conflict of interest provision in Dodd-Frank co-authored by Senators Carl Levin and Jeff Merkley, the American Securitization Forum urged the SEC to, consistent with legislative intent, adopt regulations specifically tailored to prohibit transactions that create a material incentive for firms to intentionally design asset-backed securities to fail or default...

SEC Seeks Comments in Aid of Dodd-Frank Mandated Study on Extraterritorial Reach of Federal Securities Laws

Posted on October 27, 2010
The SEC has requested, Release No. 34-63174, public comments to help it conduct a Dodd-Frank Act mandated study to determine the extent to which private rights of action under the antifraud provisions of the Securities Exchange Act should be extended to cover transnational securities fraud...

Connecticut Adopts New Form ADV Part 2 for IAs in 2011

Posted on October 27, 2010
Investment adviser applicants filing an initial Form ADV, Uniform Applicationfor Investment Adviser Registration, may between October 12, 2010 and January 1, 2011 submit electronically through the IARD or file in paper format directly with the Securities and Business Investments Division of the Connecticut Department of Banking either current Part II or new Part 2 of Form ADV...

UK Audit Overseer Says Market Forces Alone Will Not Move Auditor Choice Beyond the Big Four

Posted on October 27, 2010
The UK regulator of financial statement audit told a parliamentary committee that market forces alone will not expand global audit choice beyond the Big Four and that regulation will be needed on auditor concentration. In a prepared submission to the Economic Affairs Committee, the Financial Reporting Council expressed concern that the highly concentrated market for audit services in the Big Four and a litigious market, especially in the US, poses a risk that one of the Big Four could fail, resulting in severe disruption to global capital markets as investors lose confidence in the financial statements of the firm?s audit clients...

Hawaii Nonsubstantively Amends Dealer Waiver of Annual Report of Condition

Posted on October 26, 2010
The following interpretive order from 2003 was amended only nonsubstantively to replace the name of the ?NASD? organization with its current ?FINRA? name and to substitute the outdated section numbers with the new numbers for the Hawaii Uniform Securities Act of 2008...

EU Reaches Compromise on Legislation Regulating Hedge Funds, Final Vote in Parliament Set for Early November

Posted on October 26, 2010
EU authorities reached a final compromise on draft legislation regulating hedge funds and alternative investment funds. The European Parliament is expected to vote on the legislation in early November. Commissioner for the Internal Market Michel Barnier hailed the breakthrough agreement as a victory for transparency and risk management in the alternative investment fund area...

Maine Adopts New Form ADV Part 2 for IAs in 2011

Posted on October 26, 2010
Investment adviser applicants filing an initial Form ADV, Uniform Application for Investment Adviser Registration, and investment adviser licensees filing amendments to Form ADV Part II may, between October 12, 2010 and January 1, 2011, use either current Part II or new Part 2, although Maine's Office of Securities encourages using new Part 2 as soon as possible...

KPMG Survey Finds that New IRS Uncertain Tax Position Disclosure Regime Could Create Tension with Outside Auditor

Posted on October 25, 2010
Almost half of senior corporate executives surveyed by KPMG believe that the IRS?s new reporting regime for uncertain tax positions will create tensions among or between their outside audit firm, tax advisors and tax department. The survey also revealed that an enhanced policy of restraint in discovering tax accrual work papers used to prepare corporate financial statements, announced by the IRS concomitant with the new Schedule UTP, left corporate executives divided over their comfort level...

Comments on SEC Proxy Voting Concept Release Explore Regulation of Proxy Advisory Firms, New Dodd-Frank Mandates Heighten Concern

Posted on October 24, 2010
Comments received by the SEC on its proxy voting concept release, 34-62495, reveal a growing consensus in the corporate community that proxy advisory firms should be subject to federal regulation requiring greater transparency and accountability with respect to the formulation of voting recommendations and potential conflicts of interest...

Basel Committee Issues Corporate Governance Principles, Strong Role Seen for Internal and External Audit

Posted on October 22, 2010
The Basel Committee has issued corporate governance principles emphasizing transparency, aligning executive compensation with prudent risk taking, and making more and better use of internal and external auditors. A central principle envisions the board and senior management making very broad use of internal audit and effectively engaging the independent outside auditor...

Adoption of Poison Pill to Protect Net Operating Loss Carryforwards Protected by Business Judgment Rule

Posted on October 22, 2010
In a case involving a profitless company?s fight to preserve valuable net operating loss carryforwards, the board of director?s adoption of a poison pill to protect the NOLs bestowed on the company by the federal tax code was protected by the business judgment rule even under the heightened Unocal test...

IRS Expands Policy of Restraint in Discovering Tax Accrual Work Papers Used In Preparing Financial Statements

Posted on October 22, 2010
Concomitant with requiring companies to file an uncertain tax position statement on Schedule UTP, and addressing an issue that has roiled the federal courts, the IRS expanded its policy of restraint and will forgo seeking particular documents that relate to uncertain tax positions and the work papers that document the completion of Schedule UTP...

President?s Working Group Proposed Reform of Money Market Fund Regulation Would Require SEC Rulemaking and Legislation

Posted on October 22, 2010
A report by the President?s Working Group on Financial Markets detailing reforms for money market funds will be considered by the Financial Stability Oversight Council, with the assistance of the SEC. The Commission, which would lay an integral role in implementing the reforms, will soon solicit public comment on the proposed reforms...

Massachusetts Set Time-Table for Mandating New Part 2 of Form ADV

Posted on October 21, 2010
Massachusetts-registered investment advisers may continue to use old Part II of Form ADV to electronically file material amendments with the IARD until their next annual updating amendment is required, within 90 days of a registrant's fiscal year-end...

House Passes Investment Company Taxation Reform Legislation

Posted on October 21, 2010
The House has passed by voice vote bi-partisan legislation modifying and updating federal tax code provisions pertaining to investment companies in order to make them better conform to, and interact with, other aspects of the tax code and applicable securities laws...

Montana Mandates Investment Company Filings at the Class Level

Posted on October 20, 2010
Investment company and similar issuers must, starting January 1, 2011, register or notice file their securities in Montana at the class rather than at the previously-required portfolio level. Beginning January 1, 2011, new and renewing issuers must submit a new application for each class previously incorporated in a portfolio filing of multiple classes...

New Mexico Proposes Eliminating Form U-2 from Rule 506 Notice Filing Requirement

Posted on October 20, 2010
Form U-2, Uniform Consent to Service of Process, would be eliminated from the Rule 506 notice filing requirement, as proposed by the New Mexico Securities Division. With this requirement eliminated, issuers would file Form D and a $350 fee.Written comments...

Congress, Not IRS, Must Provide Tax Relief from Flash Crash

Posted on October 19, 2010
Absent the enactment of a relief provision by Congress, the IRS is not authorized to provide for the non-recognition of gain for stop-loss orders executed on the day of the flash crash in the markets, May 6, 2010. An SEC-CFTC report said that the flash crash was triggered by large trader automated sell algorithms triggered during a an unusually turbulent day for the markets...

Hong Kong Appeals Court Upholds Insider Dealing Convictions

Posted on October 19, 2010
In the first indictable prosecution since insider dealing was made a criminal offense under the Hong Kong Securities and Futures Ordinance, a court of appeals panel upheld the insider dealing convictions of tippees who traded on price sensitive inside information about a company?s going private received from an investment banker who was working on the privatization proposal...

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