On July 22, 2009, the Securities and Exchange Commission (the "SEC") unanimously voted at its open meeting to propose for public comment a rule and amendments to various existing rules under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), intended to curtail so-called "pay to play" practices involving investment advisers.
Client Alert | July 28, 2009
In a settled enforcement action instituted July 21, 2009, the SEC provided significant guidance on the filing obligations of institutional investors under Section 13(d) of the Securities Exchange Act of 1934. Specifically, the guidance addresses the meaning of the "ordinary course of business" prong of Rule 13d-1(b)(1)(i) and reflects an expansive interpretation of Section 13(d). The SEC's administrative order found that the respondent, a registered hedge fund adviser, Perry Corp., should have filed a Schedule 13D within 10 days of acquiring beneficial ownership of more than five percent of the shares of Mylan Inc.
Client Alert | July 27, 2009
In a case that raises important questions about the nature and scope of the remedy provided in Section 304 of Sarbanes-Oxley Act of 2002, the SEC on July 22, 2009, filed a civil suit seeking to "claw back" compensation from a former chief executive officer who has not been accused of any securities law violation. The case is SEC v. Jenkins, Case 2:09-cv-01510-JWS (D.
Client Alert | July 27, 2009
On 16 July 2009, Sir David Walker, Senior Adviser at Morgan Stanley International, who has been commissioned by the UK Secretary of State for Business, Enterprise and Regulatory Reform and HM Treasury to undertake an independent review of corporate governance of the UK banking industry, published his consultation document -- A Review of Corporate Governance in UK Banks and Other Financial Industries.
Client Alert | July 23, 2009
Yesterday, the Obama administration (the "Administration") delivered to Congress draft legislation, the Private Fund Investment Advisers Registration Act of 2009. Under the proposed legislation, managers of most hedge funds, private equity funds and venture capital funds in the U.S. would be required to register with the Securities and Exchange Commission (the "SEC") under the Investment Advisers Act of 1940 (the "Advisers Act"). The existing exemption for investment advisers with fewer than 15 clients would be eliminated, and specific information reporting would be required for advisers to any "private fund." A limited exemption will continue to apply to certain "foreign private adviser
Client Alert | July 16, 2009
On July 10, 2009, the Obama Administration delivered to Congress draft legislation to implement its regulatory reform agenda with respect to financial markets regulation. The draft "Investor Protection Act of 2009" largely tracks the Administration's June 17, 2009 framework for Financial Regulatory Reform.Although we are only now seeing the Administration's rough framework for regulatory reform, we can, and should, begin to anticipate the implications of the proposed changes to financial markets regulation with respect to compliance challenges, customer exposure, risk management, and operational burdens.In her article, Financial regulatory reform: anticipating the compliance challenges for broker-dealers, for Complinet (July 15, 2009), Susan Grafton of Gibson Dunn discusses
Client Alert | July 15, 2009
On 6 July 2009, the UK's financial services regulator, the Financial Services Authority (FSA), continued its "credible deterrence philosophy" by issuing a consultation paper (CP09/19) outlining proposals to change its current policy on determining the level of civil financial penalties imposed for regulatory breaches. These new proposals are consistent with the FSA's other recent indications that it can no longer be seen as a light-touch enforcer (see our previous client update: "The UK Financial Services Authority Demonstrates "Credible Deterrence Philosophy" with Prosecutions").What is somewhat startling about the FSA's proposals is quite how harsh they could potentially be in practice, for both corporations and individuals, but particularly for indivi
Client Alert | July 10, 2009
Without question, the first six months of 2009 have been a period of sharply increased enforcement activity at the Securities and Exchange Commission. The financial crisis, the new administration, new SEC leadership, increased funding and the focus of Congress and the media have all combined to encourage heightened government scrutiny. And even though it has only been a few months since a new Chairman took office, already there are tangible signs that the SEC has taken a more aggressive enforcement posture. In this alert, we review the changes the new SEC leadership has instituted and is considering, the observable impact of the new administration on enforcement activity and significant cases in key areas that reflect the agency's evolving enforcement program.I.
Client Alert | July 9, 2009
For the past several months, we have advised you of various plans announced by the Securities and Exchange Commission ("SEC") to revitalize its enforcement activities (see Gibson Dunn's May 11, 2009 Update on newly appointed Direct of Enforcement Robert Khuzami's plans). Demonstrating the adage that actions speak louder than words, the SEC on June 1, 2009 obtained a jury verdict against the former CEO of Kmart Corp for misleading investors about inventory levels and liquidity levels as the company was approaching a January 2002 bankruptcy filing. The SEC proceeded with the trial even though it dealt with conduct that took place over seven years ago, an arbitration panel had absolved the CEO of similar charges in 2005, and after the CFO had consented to
Client Alert | June 4, 2009
This week Pequot Capital Management announced that it will wind down in the wake of public disclosures that the government has reopened a previously closed investigation of potential insider trading. The announcement is a stark reminder of the high costs that can be imposed by a pending government investigation irrespective of the outcome and reinforces the need to (1) prevent investigations, and, if they cannot be avoided, (2) conclude them successfully and rapidly.
Client Alert | May 28, 2009
On May 7, 2009, the Securities and Exchange Commission settled charges against INTECH Investment Management, LLC, a registered investment adviser with over $55 billion in assets under management, and David E.
Client Alert | May 21, 2009
On May 14, 2009, the U.S. Securities and Exchange Commission held an open meeting to consider proposed amendments to rule 206(4)-2 under the Investment Advisers Act of 1940. According to Andrew J.
Client Alert | May 15, 2009
The Securities and Exchange Commission's newly-appointed Director of the Division of Enforcement, Robert Khuzami, outlined a plan of aggressive enforcement of securities laws during his testimony to the U.S.
Client Alert | May 11, 2009
The Financial Services Authority (FSA), the UK's financial services regulator, has in the past month given three signals it is no light-touch enforcer.
Client Alert | April 9, 2009
Today, the Securities and Exchange Commission unanimously approved publication of a release proposing multiple price tests and circuit breakers to limit short selling.
Client Alert | April 8, 2009
The Financial Accounting Standards Board ("FASB") voted on April 1 to issue and on April 2 voted to prepare final drafts of additional staff guidance that will modify a number of financial accounting standards relating to:1.
Client Alert | April 3, 2009
New York partner Mark K. Schonfeld is the author of "Law Enforcement Response to the Financial Crisis" [PDF] published in the April 1, 2009 issue of Law Journal Newsletter: Business Crimes Bulletin.Reprinted with Permissions from the April 2009 edition of Law Journal Newsletters 2009, an incisivemedia publication.
Client Alert | April 1, 2009
Washington, D.C. partner Barry R. Goldsmith, associates Daniel H. Ahn and Brian D. Boone are authors of "Hedge Funds in the Crosshairs: The Year in Review" [PDF] published in the March 11, 2009 issue of BNA's Securities Law and Regulation.
Article | March 11, 2009
Significant proposed amendments to the Delaware General Corporation Law dealing with proxies and stockholder meetings, among other items, have been submitted to the Delaware State Bar Association for approval.
Client Alert | March 5, 2009
In recent years, Securities and Exchange Commission ("SEC") enforcement investigations have become extended and enforcement actions have often been commenced five years or more after the events that form the basis for the claim. As a result, lawyers for persons who are involved in SEC investigations are frequently asked to sign agreements tolling the running of the statute of limitations. On February 26, 2009, the United States Court of Appeals for the Seventh Circuit issued a significant decision in Securities and Exchange Commission v. Koenig (Docket No.
Client Alert | March 5, 2009
New York partner Mark K. Schonfeld is the author of "Back to the Future: Chairman Schapiro Ends Pilot Program for Corporate Penalties, Eliminates Commission Pre-authorization, Allows Staff to Negotiate" [PDF] published in the February 23, 2009 issue of BNA Inc.'s Securities Regulation and Law.
Client Alert | February 23, 2009
First Steps in "Empowering" the Enforcement StaffIn her first speech as Chairman of the Securities and Exchange Commission, Mary Schapiro announced today two changes to the enforcement process at the SEC intended to "empower" the staff of the Enforcement Division. First, Chairman Schapiro announced an end to a two-year "pilot" program which had required the Enforcement staff to obtain a special set of approvals from the Commission in cases involving civil monetary penalties against public companies as a sanction for securities fraud. Second, Chairman Schapiro announced a plan to provide more rapid approval of formal orders of investigation authorizing the staff to issue subpoenas. Although these changes affect only the internal procedures of
Client Alert | February 6, 2009
Yesterday, Senators Charles Grassley (R-IA) and Carl Levin (D-MI) introduced the Hedge Fund Transparency Act ("HFTA"), which would require hedge funds, private equity and other private funds with $50 million or more in assets, or assets under management, to register with the Securities and Exchange Commission ("SEC"), notwithstanding the availability of exemptions from registration for privately offered funds under Sections 3(c)(1) and 3(c)(7) of the Investment Company Act of 1940 ("1940 Act"), as renumbered.
Client Alert | January 30, 2009
Responding to market conditions in September 2008, the U.S. Securities and Exchange Commission (the "SEC" or "Commission") and other regulatory and governmental authorities around the globe took dramatic steps to address the market turmoil resulting from potentially manipulative short selling. The measures released in September 2008 have been updated, particularly in the U.K.
Client Alert | January 19, 2009
I. Hedge Fund Enforcement Update A. Introduction 1. 2008--A Watershed Year in Hedge Fund Enforcement By virtually any measure, 2008 was a watershed year on the hedge fund enforcement front. Driven by the turmoil that has reshaped our capital and credit markets, enforcement efforts soared to new heights.
Client Alert | January 9, 2009
On December 30, 2008, the Securities and Exchange Commission delivered to Congress a report, mandated by the Emergency Economic Stabilization Act, on mark-to-market accounting standards and their application to financial institutions. The report concludes that fair value accounting standards should not be suspended, but makes eight recommendations to improve their application, including additional guidance for determining fair value in inactive markets. The report finds that investors generally believe fair value accounting increases transparency and facilitates investment decision-making. The report also observes that fair value accounting did not appear to play a meaningful role in the bank failures of 2008, but rather that those failures appeared to be the result of gr
Client Alert | January 9, 2009
In connection with regulatory reform legislation anticipated to be introduced in the 111th Congress, consideration will be given to enacting proposals to further legislate the swaps market and, in particular, credit default swaps ("CDS") and the over-the-counter ("OTC") derivatives market.
Client Alert | December 23, 2008
Position on Waiver of Attorney-Client Privilege Follows Trend of DOJ, SEC The Financial Industry Regulatory Authority ("FINRA") has recently provided guidance on the extent to which "extraordinary cooperation" by a firm or individual in an investigation can influence FINRA's enforcement decisions. In particular, with respect to waiver of the attorney-client privilege, the guidance states that waiver or non-waiver of the privilege will not be considered in whether to grant credit for cooperation, but rather it is the assistance in "uncovering the facts in an investigation" that will yield credit for cooperation. In this respect, FINRA follows the trend recently set by the Securities and Exchange Commission and the Department of Justice. Despit
Client Alert | December 5, 2008
Washington, D.C. of counsel Susan Grafton and associate S. Joy Dowdle are the authors of "Adapting to the Regulatory Clamp Down on Short Selling: The Investment Manager's Perspective" [PDF] published in the November 2008 issue of IAA"s Compliance Corner.
Client Alert | November 3, 2008
The SEC's Division of Enforcement issued its first-ever manual this week. Intended as a reference for Enforcement Division staff, the Manual provides important insight into SEC decision-making and processes on such key matters as evaluating possible investigations, opening and closing matters, issuing Wells letters, communicating with senior SEC officials, responding to document subpoenas, "witness assurance" letters, contacting current and former employees, and respecting the attorney-client privilege during an investigation. It will be an essential guide for anyone with a matter before the Division of Enforcement.
Client Alert | October 10, 2008
* Updated to reflect additional regulatory guidance and action. Responding to current market conditions, the U.S. Securities and Exchange Commission (the "SEC" or "Commission") and other regulatory and governmental authorities around the globe have taken dramatic steps to address the current market turmoil resulting from potentially manipulative short selling.
Client Alert | September 26, 2008
On Friday, September 19, 2008, the Securities and Exchange Commission announced a "sweeping expansion" of its ongoing investigation of possible manipulation of the price of equity securities of financial institutions, to determine whether certain market participants engaged in illegal activity to enhance the value of short positions. SEC Chairman Christopher Cox stated that the investigation will look into the activity of investors with significant short positions in equity markets and positions in credit default swaps. This expansion, according to Chairman Cox, supplements ongoing SEC investigations concerning the origination and securitization of sub prime mortgage loans, the involvement of credit rating agencies and insurers in the securitization proce
Client Alert | September 24, 2008
On June 18, 2008, the SEC obtained an order from the High Court of Justice in London freezing assets held by a UK citizen who is a principal of an SEC-registered hedge fund advisory firm.
Client Alert | June 25, 2008
On April 4, 2008, the United States Court of Appeals for the Ninth Circuit reversed the much-discussed Oregon federal court decision, United States v. Stringer, which had dismissed a criminal indictment due to the government's violation of the defendant's due process rights resulting from "egregious" behavior in conducting a parallel civil-criminal investigation.
Client Alert | April 14, 2008
Washington, D.C. partner John Sturc and associate John W.F. Chesley are the co-authors of "The FCPA and Analogous Foreign Anti-Bribery Laws--Overview, Recent Developments, and Acquisition Due Diligence" [link to PDF] published in the September 24, 2007 issue of Capital Markets Law Journal.
Client Alert | September 24, 2007
The Securities and Exchange Commission recently provided an important reminder of the need for effective information barriers and procedures to address potential conflicts of interest, including misuse of confidential information, that may exist given the multiple hats increasingly worn by broker-dealers, investment advisers, hedge funds, private equity funds, and other financial intermediaries.
Client Alert | June 11, 2007
Gibson Dunn partner Barry Goldsmith, the former Executive Vice President for Enforcement of NASD and Chief Litigation Counsel at the SEC, is interviewed in "Former Senior Enforcement Official Discusses SEC Expectations, Enron, SRO Consolidations and the Pros and Cons of Cooperating with Regulators," published in the June 2006 issue of Securities Litigation Report.
Client Alert | June 30, 2006