For those of you following the Best Buy (NYSE:BBY) transaction, here is a link to our analysis of Minnesota laws which govern takeovers, including going private transactions. The outline addresses the business combination statute, the control share acquisition statute and fiduciary duties of directors of Minnesota corporations.
The Intercontinental Exchange (“ICE”), the world’s largest OTC energy marketplace for oil, natural gas and power, has announced that it plans to transition all cleared OTC products listed on its OTC energy market to economically equivalent futures contracts in 2013. The products will continue to be listed and traded on the ICE platform and cleared at ICE Clear Europe. ICE expects the transition to take place seamlessly over a weekend in January 2013 and stated that there will be no change to execution and clearing fees or margin requirements. All uncleared swaps will continue to be listed on the ICE OTC platform, which will register as a swap execution facility, and treated as swaps. The stated reason for the transition of cleared energy swaps to futures contracts is to avoid the increased compliance costs that will soon be imposed on swaps markets by the CFTC’s Dodd-Frank regulations. Futures contracts are explicitly excluded from the definition of “swap” by the Dodd-Frank Act, although many swaps are essentially futures look-alikes. Regulatory approvals of the transition from the CFTC and FSA (U.K.) will be required.
The JOBS Act increased the threshold of registration under Section 12(g) of the Exchange Act from 300 to 1,200 persons. The JOBS Act does not on its face provide relief from Exchange Act reporting requirements under Section 15(d), which applies if the issuer files or updates a registration statement in the current fiscal year.
However, the SEC issued the following FAQ in connection with the JOBS Act:
Question:
On or after April 5, 2012, how can a bank holding company suspend its reporting obligations under Section 15(d)?
Answer:
In general, the Section 15(d) reporting obligation is suspended if, and for so long as, the issuer has a class of security registered under Section 12. When an issuer terminates Section 12 registration, it must address any Section 15(d) obligation that would apply once the Section 15(d) suspension is lifted.
For the current fiscal year, a bank holding company can suspend its obligation to file reports under Section 15(d) with respect to a class of security that was sold pursuant to a Securities Act registration statement and that was held of record by less than 1,200 persons as of the first day of the current fiscal year. Such suspension would be deemed to have occurred as of the beginning of the fiscal year in accordance with Section 15(d) (as amended by the JOBS Act). If, during the current fiscal year, a bank holding company has a registration statement that becomes effective or is updated pursuant to Securities Act Section 10(a)(3), then it will have a Section 15(d) reporting obligation for the current fiscal year.
If a bank holding company with a class of security held of record by less than 1,200 persons as of the first day of the current fiscal year has a registration statement that is updated during the current fiscal year pursuant to Securities Act Section 10(a)(3), but under which no sales have been made during the current fiscal year, the bank holding company may be eligible to seek no-action relief to suspend its Section 15(d) reporting obligation. Such issuers should contact the Division’s Office of Chief Counsel for further information.
Bank holding companies have begun to ask the SEC staff for no-action relief under the foregoing FAQ, and the SEC staff have responded favorably. You can find examples here, here and here.
Check jobs-act-info.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.
The Commodity Futures Trading Commission has proposed new rules to require certain credit default swaps, or CDS, and interest rate swaps to be cleared by registered derivatives clearing organizations, or DCOs. The proposed rule is the first clearing determination by the CFTC under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the proposed rules, market participants would be required to submit a swap that is identified in the rule for clearing by a DCO as soon as technologically practicable and no later than the end of the day of execution.
The Dodd-Frank Act amends the Commodity Exchange Act, or CEA, to prevent market participants from engaging in a swap that is required to be cleared unless that person submits the swap for clearing to a DCO. The Dodd-Frank Act also requires the CFTC to determine whether a swap is required to be cleared by either a CFTC-initiated review or a submission from a DCO for the review of a swap, or group, category, type, or class of swap. The proposed rule does not apply to those who are eligible to elect an exception from clearing, such as non-financial entities hedging commercial risk.
The proposed rules codify statutory provisions that make clear that any swaps entered into prior to the enactment of the Dodd-Frank Act or prior to the application of the clearing requirement are not required to be cleared.
The CFTC is proceeding with a clearing requirement proposal based on submissions from DCOs. The CFTC received submissions from eight DCOs covering all the swaps that DCOs were offering for clearing as of February 1, 2012. The proposal addresses all CDS and interest rate swaps currently being cleared by DCOs. The Commission intends subsequently to consider other swaps submitted by DCOs, such as agricultural, energy, and equity indices. The decision to focus on CDS and interest rate swaps in the initial clearing requirement determination is a function of both the market importance of these swaps and the fact that a significant percentage of CDS and interest rate swaps already are being cleared.
The proposed determination would require that swaps in four interest rate swap classes and two CDS classes be required to be cleared under section 2(h) of the CEA. By using basic specifications to identify the swaps subject to the clearing requirement, counterparties contemplating entering into a swap would be able to determine quickly whether or not the particular swap may be subject to a clearing requirement. If the swap has the basic specifications of a class of swaps determined to be subject to a clearing requirement, the parties would know that they need to verify whether a DCO will clear that particular swap.
Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.
The Commodity Futures Trading Commission has approved final regulations that establish a schedule to phase in compliance with new clearing requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The final rule will phase in the clearing requirement based on the type of market participant entering into swaps subject to the clearing requirement. Moreover, the compliance schedule will be used at the CFTC’s discretion when it believes that phasing is appropriate and needed by market participants.
The triggering event for the compliance schedule will be the CFTC’s issuance of a final clearing requirement determination. The Commission has issued the first proposed clearing determination for credit default swaps and interest rate swaps, and is indicating that the compliance schedule will be employed for implementation of that requirement.
Specifically, the compliance schedule applies to three categories of market participants:
Phase 1/Category 1 Entities
Phase 2/Category 2 Entities
Phase 3/Category 3 Entities
Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.
The U.S. Department of the Treasury’s Office of Financial Research, or OFR, has released its inaugural Annual Report to Congress. Under the Dodd-Frank Act, the OFR must report annually to Congress on threats to the financial stability of the United States; the status of efforts to meet its mission; and key findings from its research and analysis of the financial system.
The report identifies what OFR believes are some of the most significant gaps in the understanding of the financial system and in metrics to quantify financial activity. The report says these gaps continue to threaten financial stability and describes how the OFR—working with the Financial Stability Oversight Council—is taking the critical first steps to fill them.
Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.
The Commodity Futures Trading Commission, or CFTC, has issued an order designating DTCC-SWIFT as the provider of the legal entity identifiers, or LEI, which will be used by registered entities and swap counterparties in complying with the CFTC’s swap data reporting regulations. LEIs, to be known as CFTC Interim Compliant Identifiers or CICIs until establishment of a global LEI system, are, according to the CFTC, essential tools for aggregation of derivatives data. The CFTC believes they will be crucial to the ability of CFTC and other financial regulators to use swap data to fulfill the systemic risk monitoring and mitigation, market transparency, and market abuse prevention purposes of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The CFTC is also participating in an international process, coordinated by the Financial Stability Board, or FSB, to establish governance principles and reference data requirements and implement a global LEI system. Once the global LEI system is implemented and operational, the CFTC anticipates that the interim identifier will transition into the global LEI.
Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.
Section 106(b) of the JOBS Act requires that the SEC conduct a study examining the transition to trading and quoting securities in one penny increments, also known as decimalization. Among other things the study is to examine the impact that decimalization has had on the number of initial public offerings since its implementation relative to the period before its implementation.
The JOBS Act also provides that if the SEC determines that the securities of emerging growth companies should be quoted and traded using a minimum increment of greater than $0.01, the Commission may, by rule not later than 180 days after the date of enactment of the JOBS Act, designate a minimum increment for the securities of emerging growth companies that is greater than $0.01 but less than $0.10 for use in all quoting and trading of securities in any exchange or other execution venue.
The SEC staff recently completed the decimalization study. In it the staff recommends that the SEC should not proceed with the specific rulemaking to increase tick sizes, as provided for in Section 106(b) of the JOBS Act, but should consider additional steps that may be needed to determine whether rulemaking should be undertaken in the future.
Check jobs-act-info.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.
The Municipal Securities Rulemaking Board, or MSRB, has published implementation guidance to assist underwriters in meeting their newly expanded legal obligations to state and local governments. According to the MSRB, the Dodd-Frank Act expressly directs the MSRB to protect municipal entities.
Effective August 2, 2012, underwriters of municipal securities are required to disclose to their state and local government clients information about their role in a municipal bond transaction, risks about complex financial transactions, potential conflicts of interest and compensation received from third-party providers of derivatives and other investments, among other new requirements. According to the MSRB, these expanded obligations are intended to ensure state and local governments have the necessary information to make decisions when undertaking financial The transactions, and are outlined in an interpretive notice to MSRB Rule G-17 on fair dealing, which was approved by the Securities and Exchange Commission on May 4, 2012. The interpretive notice also describes fair dealing responsibilities of underwriters in connection with their representations to issuers and with certain financial aspects of an underwriting.
Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.
The Financial Stability Oversight Council, or FSOC, has issued its annual report. Part of the report focuses on Potential emerging threats to U.S. financial stability. According to the report:
Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.