In November of 2010, the SEC approved a new suitability rule developed by FINRA as part of the ongoing comprehensive reform of the financial regulatory system. FINRA, the New York based self-regulatory organization (“SRO”), issued guidance on the new rule in May 2012, and the rule went into effect on July 9, 2012. In general, the rule requires brokers to perform reasonable diligence on products, understand those investments and have a reasonable basis to believe that a security or investment strategy is suitable for the customer based on the customer’s profile. In addition, the rule adds age, investment experience, time…
Author: Veronica Dunlap
Enacted in 1977, the Foreign Corrupt Practices Act (“FCPA”) prohibits the bribing of foreign officials for the purposes of obtaining or retaining business. The FCPA has an extremely broad reach, allowing the Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) to bring claims against any publicly-traded companies and their officers, directors, employees, stockholders, and agents for committing prohibited conduct anywhere in the world. The term “agents” further expands the reach of the FCPA, including within its purview, third-party agents, consultants, distributors, joint-venture partners, and others. The number of new FCPA cases initiated by the DOJ and the…
Several months ago, we covered a U.S bankruptcy court’s denial of comity to Vitro S.A.B. de C.V. (“Vitro”)’s Mexican reorganization plan. The Fifth Circuit recently affirmed the decision. While press interest has been moderate, professionals have recognized that the case has important ramifications for Chapter 15 beyond the argued facts. What follows is a brief review of the background facts and essential holding of the bankruptcy court’s decision and then our analysis of the Fifth Circuit’s decision. For a more thorough analysis of the bankruptcy court’s decision please see our prior article. Facts Vitro, incorporated in Mexico, is among the…
William Ackman is so sure that Herbalife is a fraudulent company that he is literally willing to bet a billion dollars on it, and in December 2012, that is just what he did. Herbalife, a 30 year old food retailer of weight management shakes and supplements, is estimated to be worth billions and is openly traded on the NYSE. Fans of soccer may recognize the brand as the sponsor of both LA Galaxy and FC Barcelona, as well as the Brand’s spokesman Lionel Messi. The company uses a multilevel management business structure. They sign people up as sellers for a…
“In Citizens United v. Federal Election Commission, Justice John Paul Stevens, joined by Justices Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor, concurred in part and dissented in part, writing that Congress’s “‘careful legislative adjustment of the federal election laws … warrants considerable deference'” and that “we should instead start by acknowledging that ‘Congress surely has both wisdom and experience in these matters that is far superior to ours.'” However, “[t]his is not to say that deference would be appropriate if there was a solid basis for believing that a legislative action was motivated by the desire to protect incumbents or…
In 1933, Senator Carter Glass and Representative Henry B. Steagall, sponsored the Banking Act of 1933, which has been subsequently known as the Glass-Steagall Act. Its passage was prompted by the Great Depression, which was partially caused by commercial banks’ overexposure to risk. Part of this law forced commercial banks to cease brokerage and investment operations, in exchange for insurance under the FDIC. Part of the logic behind this division was that if commercial banks were going to have their deposits insured by the federal government, through the FDIC, then they would not have a right to profit from that…
Looking around the world, it is very clear that the internet, and social media specifically, have touched all aspects of life. Whether it is the new reality of shopping, and the impact e-commerce has had on the global economy or the Arab Spring Revolutions, which successfully leveraged social media, no part of the human experience remains untouched. The SEC, however, is attempting to cram the genie back inside the bottle and deny social media’s impacts on the securities markets. On October 23, 2000, the SEC passed Regulation FD, or Regulation Fair Disclosure. As the name implies, the purpose of the…
Marathon Asset Management recently requested the appointment of an examiner in the American Airlines bankruptcy case. Ostensibly, the hedge fund creditor was requesting an investigation of $2.26 billion in debt that AMR Corp., the parent corporation of American Airlines, assumed from its regional airline subsidiary American Eagle prior to the bankruptcy filings. Nonetheless, there was agreement from academia and bankruptcy professionals alike that Marathon’s request was merely a ploy to delay and frustrate the bankruptcy and the debtors, who have generally excluded Marathon from settlement discussions. And indeed, Marathon dropped its request when the debtors agreed to preserve their claims.…
On November 7th, California passed Proposition 39, a controversial change to California’s corporate tax code. Since 2009, corporations have been offered a choice between two formulas. Formula A based corporate tax on a corporation’s sales, in-state property, and employees, while formula B was based solely upon in-state corporate sales. Initially, the choice-of-formula system benefitted the numerous and growing technology companies headquartered in California (electing to use Formula A, tech companies without numerous properties or large workforces decreased their liabilities). However, others suggested that the true beneficiaries of the 2009 change were out-of-state companies, who were electing to be assessed under…
On July 21, 2010 President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank” or the “Act”) into law. Dodd-Frank is seen as the greatest transformation in the regulation of the financial services industry since the Glass-Steagall Act of 1933, enacted in response to the Great Depression. Spanning almost 9,000 pages of rules and regulations, Dodd-Frank is an enormous, complex piece of legislation. Among its many objectives, Dodd-Frank aims to: (1) increase consumer financial protection; (2) reduce the systemic risk created by large financial institutions; (3) ensure orderly liquidation and resolution planning; (4) place strict requirements on…