Global Financial Market Watch

The Committee of European Securities Regulators Provides Guidance to Investment Firms on Proper Practices for Inducements

K&L Gates — Thu, 29 Jul 2010 12:54:50 -0800

By Anna Paglia and Mark R. Greer

The Committee of European Securities Regulators (“CESR”) published on April 19 a report reviewing the good and poor practices on inducements (or compensation) exhibited by more than 150 regulated European investment firms (the “Report”). The Report provides firms with a benchmark against current industry practices to measure their effectiveness in complying with the rules on inducements as stated in Article 19(1) of the Markets in Financial Instruments Directive (“MiFID”), and in Article 26 of the MiFID implementing Directive 2006/73/EC (“Implementing Directive”).

To view the complete alert online, click here.

The New Hedge Fund Regulatory Era Begins

K&L Gates — Thu, 29 Jul 2010 11:00:00 -0800

K&L Gates Webinar Recording

By Michael S. Caccese, Nicholas S. Hodge, Rebecca O'Brien Radford, George Zornada .

Program Overview
On July 21, President Obama signed into law the "Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010." The new law will require all hedge fund managers (with certain exceptions for small and mid-sized managers) to register with the Securities and Exchange Commission and will subject them to regulatory oversight both under the Investment Advisers Act and under a new systemic risk regime administered by the SEC and a new Financial Stability Oversight Council. Under an amended version of the Volcker Rule, federally insured depository institutions and financial holding companies will face strict limitations on sponsoring and investing in hedge funds. In addition, the legislation has increased the enforcement powers and budget of the SEC, which is now focused as never before on hedge funds.

If you were unable to join us for the original presentation on July 27, 2010, you may access the webinar recording and presentation materials by clicking here.

Congressional Overhaul of the Derivatives Market in the United States

K&L Gates — Thu, 22 Jul 2010 07:00:27 -0800

By: Edward G. Eisert, Charles R. Mills, Anthony R.G. Nolan, Lawrence B. Patent, Gordon F. Peery

On July 15, 2010, the U.S. Senate passed by a 60-39 vote the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), following earlier passage of the legislation by a 237 to 192 vote in the U.S. House of Representatives on June 30, 2010. On July 21, 2010, President Obama signed Dodd-Frank into law.

To view the complete alert online, click here.

This client alert is part of a series of alerts focused on monitoring financial regulatory reform. Below is a list of other alerts in the series:

“Originate-to-Distribute” Lives on in Securitizations of Plain Vanilla Residential Mortgages: The Securitization Reform Provisions of the Dodd-Frank Act - July 21, 2010

Dodd-Frank Act Includes Immediate Change to “Accredited Investor”
Definition for Natural Persons - July 21, 2010

A New Era: Depository Institutions and Their Holding Companies Face a Deluge of Regulatory Changes - July 20, 2010

HVCC's Sunset and Other Appraisal Reforms on the Horizon - July 19, 2010

The Resolution of Systemically Important Nonbank Financial Companies… Will It Work? - July 16, 2010

Loan Servicing Déjà Vu - July 14, 2010

Financial Regulatory Reform Increases Federal Involvement in Insurance - July 13, 2010

Preemption for National Banks and Federal Thrifts After Dodd-Frank: Answers to the Ten Most Asked Questions - July 9, 2010

Increased Regulation of U.S. and Non-U.S. Private Fund Advisers Under the Dodd-Frank Act - July 9, 2010

Hope You Like Plain Vanilla! Mortgage Reform and Anti-Predatory Lending Act (Title XIV) - July 8, 2010

Consumer Financial Services Industry, Meet Your New Regulator - July 7, 2010

New Executive Compensation and Governance Requirements in Financial Reform Legislation - July 7, 2010

Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity - July 7, 2010

Investor Protection Provisions of Dodd-Frank - July 1, 2010

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010

"Originate-to-Distribute" Lives on in Securitizations of Plain Vanilla Residential Mortgages: The Securitization Reform Provisions of the Dodd-Frank Act

K&L Gates — Wed, 21 Jul 2010 11:13:39 -0800

By: Steven M. Kaplan, Sean P. Mahoney, Anthony R.G. Nolan

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” or the “Act”) constitutes the most sweeping financial reform package since the 1930s. Title IX of the Dodd-Frank Act (“Title IX”), entitled the “Investor Protection and Securities Reform Act of 2010” enacts a grab bag of substantial changes to capital markets regulation and practices in the hope of putting back in their bottles the twin genies of moral hazard and lax regulation that are widely viewed as the tinder that sparked the great credit conflagration of 2008. Subtitle D of Title IX, entitled “Improvements to the Asset-Backed Securitization Process” (“Subtitle D”), has been of particular interest to capital markets participants both because practices in securitization markets are widely credited with contributing uniquely to the credit crisis and because of the sense of many that the resuscitation of robust securitization markets is one of the key predicates to an economic recovery.

To view the complete alert online, click here.

This client alert is part of a series of alerts focused on monitoring financial regulatory reform. Below is a list of other alerts in the series:

Dodd-Frank Act Includes Immediate Change to “Accredited Investor”
Definition for Natural Persons - July 21, 2010

A New Era: Depository Institutions and Their Holding Companies Face a Deluge of Regulatory Changes - July 20, 2010

HVCC's Sunset and Other Appraisal Reforms on the Horizon - July 19, 2010

The Resolution of Systemically Important Nonbank Financial Companies… Will It Work? - July 16, 2010

Loan Servicing Déjà Vu - July 14, 2010

Financial Regulatory Reform Increases Federal Involvement in Insurance - July 13, 2010

Hope You Like Plain Vanilla! Mortgage Reform and Anti-Predatory Lending Act (Title XIV) - July 8, 2010

Consumer Financial Services Industry, Meet Your New Regulator - July 7, 2010

New Executive Compensation and Governance Requirements in Financial Reform Legislation - July 7, 2010

Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity - July 7, 2010

Investor Protection Provisions of Dodd-Frank - July 1, 2010

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010

Dodd-Frank Act Includes Immediate Change to "Accredited Investor" Definition for Natural Persons

K&L Gates — Wed, 21 Jul 2010 11:05:32 -0800

By: Kristy T. Harlan, Vincent J. Pisano

On July 21, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Among the many provisions of the Dodd-Frank Act is a change to the definition of "accredited investor" under the Securities Act of 1933, which takes effect immediately and may impact issuers currently engaged in private offerings.

To view the complete alert online, click here.

This client alert is part of a series of alerts focused on monitoring financial regulatory reform. Below is a list of other alerts in the series:

A New Era: Depository Institutions and Their Holding Companies Face a Deluge of Regulatory Changes - July 20, 2010

HVCC's Sunset and Other Appraisal Reforms on the Horizon - July 19, 2010

The Resolution of Systemically Important Nonbank Financial Companies… Will It Work? - July 16, 2010

Loan Servicing Déjà Vu - July 14, 2010

Financial Regulatory Reform Increases Federal Involvement in Insurance - July 13, 2010

Hope You Like Plain Vanilla! Mortgage Reform and Anti-Predatory Lending Act (Title XIV) - July 8, 2010

Consumer Financial Services Industry, Meet Your New Regulator - July 7, 2010

New Executive Compensation and Governance Requirements in Financial Reform Legislation - July 7, 2010

Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity - July 7, 2010

Investor Protection Provisions of Dodd-Frank - July 1, 2010

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010

A New Era: Depository Institutions and Their Holding Companies Face a Deluge of Regulatory Changes

K&L Gates — Tue, 20 Jul 2010 10:02:18 -0800

By: Rebecca H. Laird, Sean P. Mahoney, Collins R. Clark

On June 30, 2010, the U.S. House of Representatives adopted the conference report on H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act" or "Act"), which restructures the regulatory framework for most banking organizations. The U.S. Senate followed suit on July 15, 2010. The Act is expected to be signed into law shortly. Although the full impact of the Dodd-Frank Act cannot be assessed until implementing regulations are released, depository institutions and their affiliates face new regulators, increased activities restrictions and capital requirements, and numerous other fundamental changes in how they are regulated.

To view the complete alert online, click here.

This client alert is part of a series of alerts focused on monitoring financial regulatory reform. Below is a list of other alerts in the series:

HVCC's Sunset and Other Appraisal Reforms on the Horizon - July 19, 2010

The Resolution of Systemically Important Nonbank Financial Companies… Will It Work? - July 16, 2010

Loan Servicing Déjà Vu - July 14, 2010

Financial Regulatory Reform Increases Federal Involvement in Insurance - July 13, 2010

Hope You Like Plain Vanilla! Mortgage Reform and Anti-Predatory Lending Act (Title XIV) - July 8, 2010

Consumer Financial Services Industry, Meet Your New Regulator - July 7, 2010

New Executive Compensation and Governance Requirements in Financial Reform Legislation - July 7, 2010

Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity - July 7, 2010

Investor Protection Provisions of Dodd-Frank - July 1, 2010

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010

HVCC's Sunset and Other Appraisal Reforms on the Horizon

K&L Gates — Mon, 19 Jul 2010 12:56:33 -0800

By: Nanci L. Weissgold, Kerri M. Smith

Congress is poised to eliminate the contentious Home Valuation Code of Conduct, (the “HVCC”), and with the HVCC set to sunset, more expansive (and expensive) appraisal reforms are on the horizon. Tucked within the massive Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) are provisions that will strengthen appraiser independence and enforcement, regulate the use of broker price opinions (“BPOs”), set standards for pricing of appraisals and appraiser valuation model products (“AVMs”), and subject appraisal management companies (“AMCs”) to potential federal and state oversight.

To view the complete alert online, click here.

This client alert is part of a series of alerts focused on monitoring financial regulatory reform. Below is a list of other alerts in the series:

The Resolution of Systemically Important Nonbank Financial Companies… Will It Work? - July 16, 2010

Loan Servicing Déjà Vu - July 14, 2010

Financial Regulatory Reform Increases Federal Involvement in Insurance - July 13, 2010

Hope You Like Plain Vanilla! Mortgage Reform and Anti-Predatory Lending Act (Title XIV) - July 8, 2010

Consumer Financial Services Industry, Meet Your New Regulator - July 7, 2010

New Executive Compensation and Governance Requirements in Financial Reform Legislation - July 7, 2010

Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity - July 7, 2010

Investor Protection Provisions of Dodd-Frank - July 1, 2010

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010

The Resolution of Systemically Important Nonbank Financial Companies... Will It Work?

K&L Gates — Fri, 16 Jul 2010 12:18:24 -0800

By: Stanley V. Ragalevsky, Sarah J. Ricardi

One of the glaring problems exposed by the recent financial crisis has been the absence of supervisory authority to deal effectively with the insolvency or collapse of significant, nonbank financial companies. While bank regulators have long been empowered to close and liquidate insolvent banks to protect the public, there was no comparable authority vested in any financial services regulator to close and liquidate insolvent bank holding companies or other kinds of financial companies. To make matters worse, when several systemically important financial companies were on the verge of collapse in September 2008, they were deemed “too big to fail” and given significant government assistance. Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” or the “Act”) addresses the absence of regulatory authority to liquidate systemically important, nonbank financial companies by creating an “orderly liquidation authority” (“OLA”) process to allow the Treasury Secretary to close and the Federal Deposit Insurance Corporation (“FDIC”) to wind up these companies.

To view the complete alert online, click here.

This client alert is part of a series of alerts focused on monitoring financial regulatory reform. Below is a list of other alerts in the series:

Loan Servicing Déjà Vu - July 14, 2010

Financial Regulatory Reform Increases Federal Involvement in Insurance - July 13, 2010

Hope You Like Plain Vanilla! Mortgage Reform and Anti-Predatory Lending Act (Title XIV) - July 8, 2010

Consumer Financial Services Industry, Meet Your New Regulator - July 7, 2010

New Executive Compensation and Governance Requirements in Financial Reform Legislation - July 7, 2010

Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity - July 7, 2010

Investor Protection Provisions of Dodd-Frank - July 1, 2010

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010

Loan Servicing Déjà Vu

K&L Gates — Wed, 14 Jul 2010 12:27:03 -0800

By: Jonathan D. Jaffe, Steven M. Kaplan, Kerri M. Smith

This alert addresses mortgage loan servicing requirements contained in the Mortgage Reform and Anti-Predatory Lending Act (Title XIV of the Dodd-Frank Wall Street Reform and Consumer Protection Act). The Act includes restrictions and requirements imposed on loan servicers regarding qualified written requests, escrow accounts, force placed insurance, periodic statements, crediting of payments, payoff statements, HAMP requirements, and tenant protections following foreclosure, but in many cases these changes piggyback the regulations issued by the Federal Reserve Board in 2008. Nevertheless, these changes could have a material impact on loan servicers and open them up to a federal cause of action with a private right of enforcement.

To view the complete alert online, click here.

This client alert is part of a series of alerts focused on monitoring financial regulatory reform. Below is a list of other alerts in the series:

Financial Regulatory Reform Increases Federal Involvement in Insurance - July 13, 2010

Hope You Like Plain Vanilla! Mortgage Reform and Anti-Predatory Lending Act (Title XIV) - July 8, 2010

Consumer Financial Services Industry, Meet Your New Regulator - July 7, 2010

New Executive Compensation and Governance Requirements in Financial Reform Legislation - July 7, 2010

Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity - July 7, 2010

Investor Protection Provisions of Dodd-Frank - July 1, 2010

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010

Financial Regulatory Reform Increases Federal Involvement in Insurance

K&L Gates — Tue, 13 Jul 2010 12:13:15 -0800

By: Diane E. Ambler, András P. Teleki, Collins R. Clark

Two provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173) specifically target the insurance industry and are intended to promote a higher level of uniformity in the U.S. insurance industry regulatory landscape. First, the Federal Insurance Office Act of 2010 (“FIO Act”) creates a new Federal Insurance Office (“FIO”) within the Department of the Treasury and signals the beginning of a new era of federal involvement, at least at the macro level, in the U.S. insurance industry. Significantly, the FIO Act does not include a federal insurance charter provision, long sought by many in the insurance industry, and the states will remain the primary insurance regulatory authority. Second, the Nonadmitted and Reinsurance Reform Act of 2010 (“NRRA”) changes how authority over some forms of insurance is allocated among the states.

To view the complete alert online, click here.

This client alert is part of a series of alerts focused on monitoring financial regulatory reform. Below is a list of other alerts in the series:

Hope You Like Plain Vanilla! Mortgage Reform and Anti-Predatory Lending Act (Title XIV) - July 8, 2010

Consumer Financial Services Industry, Meet Your New Regulator - July 7, 2010

New Executive Compensation and Governance Requirements in Financial Reform Legislation - July 7, 2010

Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity - July 7, 2010

Investor Protection Provisions of Dodd-Frank - July 1, 2010

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010

Preemption for National Banks and Federal Thrifts After Dodd-Frank: Answers to the Ten Most Asked Questions

K&L Gates — Fri, 09 Jul 2010 12:50:50 -0800

By: David L. Beam

The last ten years have been a period of consistent expansion of federal preemption for national banks and federal thrifts. That period of expansion will come to a grinding halt if the Senate passes and President Obama signs the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” or the “Act”), which most observers expect to happen shortly after the Senators return from recess on July 12.

To view the complete alert online, click here.

This client alert is part of a series of alerts focused on monitoring financial regulatory reform that are being prepared by K&L Gates. Below is a list of other alerts in the series that have already been published:

Increased Regulation of U.S. and Non-U.S. Private Fund Advisers Under the Dodd-Frank Act - July 9, 2010

Hope You Like Plain Vanilla! Mortgage Reform and Anti-Predatory Lending Act (Title XIV) - July 8, 2010

Consumer Financial Services Industry, Meet Your New Regulator - July 7, 2010

New Executive Compensation and Governance Requirements in Financial Reform Legislation - July 7, 2010

Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity - July 7, 2010

Investor Protection Provisions of Dodd-Frank - July 1, 2010

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010

Increased Regulation of U.S. and Non-U.S. Private Fund Advisers Under the Dodd-Frank Act

K&L Gates — Fri, 09 Jul 2010 12:42:50 -0800

By: Edward G. Eisert, Rebecca H. Laird, Cary J. Meer, Mark D. Perlow

The authors acknowledge the assistance of associates Megan Munafo and Jarrod Melson in the preparation of this Alert.

The long-awaited financial reform bill, now entitled The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Bill”), appears to be moving toward passage by the Senate and enactment into law later this month. This Alert provides an overview of those provisions of the Dodd-Frank Bill that are likely to most directly affect investment advisers to hedge, private equity and venture capital funds, wherever such advisers and funds are domiciled.

To view the complete alert online, click here.

Hope You Like Plain Vanilla! Mortgage Reform and Anti-Predatory Lending Act (Title XIV) - July 8, 2010

Consumer Financial Services Industry, Meet Your New Regulator - July 7, 2010

New Executive Compensation and Governance Requirements in Financial Reform Legislation - July 7, 2010

Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity - July 7, 2010

Investor Protection Provisions of Dodd-Frank - July 1, 2010

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010

Hope You Like Plain Vanilla! Mortgage Reform and Anti-Predatory Lending Act (Title XIV)

K&L Gates — Thu, 08 Jul 2010 05:18:32 -0800

By: Kristie D. Kully, Laurence E. Platt

The Mortgage Reform Act and Anti-Predatory Lending Act, part of the comprehensive Dodd-Frank Wall Street Reform package under final Hill consideration, will likely melt any hopes for other than plain vanilla residential mortgage loans. Makers of "strawberry" or "rocky road" loans will likely face enhanced scrutiny, and may face increased damages, extended exposure to borrower claims, and risk retention requirements. In this client alert, we summarize the hefty provisions in the Mortgage Reform Act that would require creditors to consider a borrower’s ability to repay; the safe harbor for plain vanilla loans; the restructuring of mortgage originator compensation; and other amendments to TILA, HOEPA, FCRA, HMDA, and the S.A.F.E. Act. In the end, as consumers, the industry, and the federal regulatory agencies work to implement these changes, Supreme Court Justice Breyer may be the final authority on plain vanilla mortgages and the Mortgage Reform Act’s other ambiguous provisions.

To view the complete alert online, click here.

This client alert is part of a series of alerts focused on monitoring financial regulatory reform. Below is a list of other alerts in the series:

Consumer Financial Services Industry, Meet Your New Regulator - July 7, 2010

New Executive Compensation and Governance Requirements in Financial Reform Legislation - July 7, 2010

Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity - July 7, 2010

Investor Protection Provisions of Dodd-Frank - July 1, 2010

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010

Consumer Financial Services Industry, Meet Your New Regulator

K&L Gates — Wed, 07 Jul 2010 06:50:59 -0800

By: Melanie H. Brody, Stephanie C. Robinson

The centerpiece of the Dodd-Frank Act from a consumer protection standpoint is Title X, the Consumer Financial Protection Act of 2010. The Act will create a powerful consumer financial protection watchdog, the Bureau of Consumer Financial Protection. The majority of existing federal consumer financial protection laws will come under the Bureau's purview, and the Bureau will have broad authority to enforce those laws and to issue its own rules under the Act. This alert describes the Bureau, including its structure, objectives, functions, jurisdiction, rulemaking authority and enforcement powers.

To view the complete alert online, click here.

This client alert is part of a series of alerts focused on monitoring financial regulatory reform. Below is a list of other alerts in the series:

New Executive Compensation and Governance Requirements in Financial Reform Legislation - July 7, 2010

Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity - July 7, 2010

Investor Protection Provisions of Dodd-Frank - July 1, 2010

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010

New Executive Compensation and Governance Requirements in Financial Reform Legislation

K&L Gates — Wed, 07 Jul 2010 06:28:22 -0800

By: James E. Earle

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), while delayed as the Senate leadership searches for votes, is almost certain nevertheless to be enacted in mid-July 2010. While the Act’s primary purpose is to broadly reform the regulation of the financial services industry, within the massive text of the Act lurk new requirements that may impact executive compensation and corporate governance practices at most public companies, not just banks. This alert highlights these key executive compensation and governance changes.

To view the complete alert online, click here.

This client alert is part of a series of alerts focused on monitoring financial regulatory reform. Below is a list of other alerts in the series:

Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity - July 7, 2010

Investor Protection Provisions of Dodd-Frank - July 1, 2010

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010

Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity

K&L Gates — Wed, 07 Jul 2010 06:20:08 -0800

By: Daniel F. C. Crowley, Bruce J. Heiman, Karishma Shah Page, Collins R. Clark, Margo A. Dey, Akilah Green, Justin D. Holman

On June 30, 2010, the House adopted the conference report on H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Bill” or “Bill”). The Senate is expected to follow suit when it returns from recess later in July. This alert provides a high-level summary and analysis of the significant aspects of the Bill. In the days ahead, K&L Gates will be issuing alerts addressing in detail the various provisions of the Bill.

To view the complete alert online, click here.

This client alert is part of a series of alerts focused on monitoring financial regulatory reform. Below is a list of other alerts in the series:

Investor Protection Provisions of Dodd-Frank - July 1, 2010

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010

Investor Protection Provisions of Dodd-Frank

K&L Gates — Fri, 02 Jul 2010 05:55:07 -0800

By Stephen J. Crimmins, Kay A. Gordon and Matt T. Morley

The investor protection provisions of Title IX of the Dodd-Frank Wall Street Reform and Consumer Protection Act promise to make major changes in the world of securities enforcement and regulation. Thanks to Dodd-Frank, we will shortly see whistleblowers enticed by potentially lucrative bounties for reporting violations to a much larger and more powerful SEC. In addition to seeing its budget likely double over the next five years, the SEC will benefit from relaxed proof standards in pursuing secondary actors, expanded jurisdiction over foreign cases, the ability to obtain penalty awards in SEC administrative cases, industry-wide bars for securities professionals, and the ability to subpoena trial witnesses nationally. The SEC will also have the power to impose fiduciary standards on brokers, regulate short selling, restrict customer arbitration agreements, and engage in other extensive rulemaking.

To view the complete alert online, click here.

This client alert is part of a series of alerts focused on monitoring financial regulatory reform. Below is a list of other alerts in the series:

Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 9, 2010

Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 2010

New UK Government Announces Bank Levy and Likely New Measures on Bank Remuneration Policies

K&L Gates — Fri, 25 Jun 2010 07:25:25 -0800

By: Philip J. Morgan and Neil Nick Robson

On 22 June 2010, the UK's new Chancellor of the Exchequer, George Osborne, delivered the new Government's “emergency” budget. Amongst a package of other measures, he announced a bank levy from 1 January 2011, and plans to carry out further work to tackle unacceptable bank bonuses, including a consideration of the costs and benefits of a “Financial Activities Tax” on bank profits and remuneration.

BANK LEVY

The UK Government announced that it will introduce a bank levy based on banks’ balance sheets from 1 January 2011. The levy is intended to encourage banks to move to less risky funding profiles. The Government believes that banks should make a fair contribution in respect of the potential risks they pose to the UK financial system and wider economy. HM Treasury has stated that “systemic risks must always be assessed in light of the circumstances at the time. The regulatory reforms underway are aimed at ensuring that no firm is too big to fail and that all firms are resolvable. The levy is a contribution reflective of economic risk; it is not an insurance against failure or a fund for future resolution.”

To whom will it apply?

The levy will apply to:

the consolidated balance sheet of UK banking groups and building societies;
the aggregated subsidiary and branch balance sheets of foreign banks and banking groups operating in the UK; and
the balance sheets of UK banks in non-banking groups.

These institutions and groups will only be liable for the levy where their relevant aggregate liabilities, as set out below, amount to £20 billion or more. In calculating branch liabilities and Tier 1 capital (i.e. the most permanent form of capital), the Government proposes to use the principles applied to the capital attribution methodology used for UK Corporation Tax purposes.

What will the levy be calculated on?

The levy will be based on total liabilities (i.e. both short- and long-term liabilities) excluding:

Tier 1 capital;
insured retail deposits;
repos secured on sovereign debt; and
policyholder liabilities of retail insurance businesses within banking groups.

The Government proposes that only net derivative liabilities will be taken into account, but will consider the technical details of this and other aspects of the levy design in consultation with industry over this Summer.

How will the levy be calculated?

It is proposed that the levy, which will be administered by HM Revenue & Customs, will be set at 0.07%. It is expected to raise over £2 billion annually. However, the Government has proposed a lower rate of 0.04% for 2011. There will also be a reduced rate for longer-maturity wholesale funding (i.e. greater than one year remaining to maturity) to be set at 0.02% rising to 0.035%, half the main rate.

The levy will not be deductible for Corporation Tax.

Timing

The Government will consult over the Summer. Final details of the levy will be published later this year, following this consultation.

International consensus

The UK, French and German governments have confirmed in a joint statement their commitment to introducing bank levies based on banks’ balance sheets ahead of the current Toronto G20 summit (which started on 24 June 2010). The joint press release states that in light of agreement in the G20 that the financial sector should make a fair and substantial contribution towards paying for any burdens associated with government interventions to repair the banking system or fund resolution in a financial crisis, and the valuable work undertaken by the International Monetary Fund (“IMF”) in response to this (and the conclusions of the European Council on 17th June), the governments of France, the United Kingdom and Germany propose to introduce bank levies based on banks’ balance sheets.

BANK REMUNERATION

The Government states in the main budget paper that underpinning its approach is a commitment to fairness. It goes on to state that it “will ensure that every part of society makes a contribution to deficit reduction while supporting the most vulnerable, including children and pensioners. The Government will also seek to build over the long term a fair tax and benefit system that rewards work and promotes economic competitiveness [and] the Budget sets out a vision for a refocusing of the tax and benefit framework. It announces measures to encourage people to take personal responsibility for their actions by rewarding those who work hard and save responsibly for the future.” One element of fairness that the Government proposes to deal with is what it perceives as “unacceptable bank bonuses” with measures including:

commissioning an Independent Commission on Banking to look at structural and non-structural measures to reform the banking system and promote competition.
working with international partners to explore the costs and benefits of a financial activities tax (FAT) on profits and remuneration. The IMF is expected to deliver its final report on a FAT at the current G20 Toronto summit.
consulting on a remuneration disclosure scheme.
requesting that the FSA, as part of its anticipated review of its Remuneration Code, should:

● consider whether to impose more stringent requirements on the deferral and award of variable pay;
● examine mechanisms for strengthening the link between performance and remuneration to ensure that incentives are aligned with the long-term performance of the firm; and
● consider how to vary capital requirements to offset risk in remuneration practices.

Financial Services Authority to be scrapped in major overhaul of UK financial regulation

K&L Gates — Thu, 17 Jun 2010 08:24:48 -0800

By: Philip J. Morgan and Nicholas Brown

UK Chancellor of the Exchequer George Osborne yesterday announced the scrapping of the Financial Services Authority as part of a major shake-up of the regulation of financial services in the UK.

The FSA will be replaced by three new entities:

a prudential regulator, which will be a subsidiary of the Bank of England, and will be responsible for oversight of UK-based retail lenders, investment banks, building societies and insurers, and regulation of capital requirements of financial institutions;

a Consumer Protection and Markets Authority, responsible for the protection of consumers and day-to-day policing of financial firms; and
a financial crime agency, incorporating the current financial crime powers of the FSA, the Serious Fraud Office and the Office of Fair Trading.

The FSA will be wound down over the next two years, with its full abolition set for some time in 2012.

The new prudential regulator will be focused on setting institution-specific capital requirements and will report to a new Financial Policy Committee of the Bank of England. This Committee will be chaired by Mervyn King, the Governor of the Bank of England, and together with the existing Monetary Policy Committee will provide a "big picture" assessment of the activities of the City. It will be given unspecified tools to stop the dangerous build-up of credit or asset bubbles. Mr King said its role would be to "turn down the music when the dancing gets a little too wild". The aim of putting the regulatory functions of the FSA under the control of the Bank of England, which is also in control of monetary policy, is to provide a unified approach to regulation of the financial sector.

The prudential regulator will be run on a day-to-day basis by the current FSA Chief Executive Hector Sants, who will continue to run the FSA until it is wound down, and will also sit on the Financial Policy Committee. It had been anticipated that Mr. Sants would stand down in July.

It is unclear at this stage what effect any of this will have on the regulations that are currently applied to banks and other financial services firms in the UK.

Mr Osborne also used his Mansion House speech to confirm that a bank levy will be introduced in the emergency budget on 22 June, and that an independent commission will be launched to review the future of banking with a view to reducing systemic risk. The Commission will consider measures to promote a more stable financial system, including the possible separation of retail and investment banking. It will be chaired by Sir John Vickers, former head of the Office of Fair Trading, and will consist of former gas regulator Claire Spottiswoode, former JP Morgan boss Bill Winters, ex-Barclays boss Martin Taylor and Martin Wolf, the chief economics writer at the Financial Times. The review is expected to take up to a year to complete.

CFTC Staff Issues Advisory on Trading of Foreign Security Futures, but Availability Remains Limited

K&L Gates — Thu, 17 Jun 2010 08:19:25 -0800

By: Lawrence B. Patent

On June 8, 2010, the Commodity Futures Trading Commission’s (“CFTC”) Division of Clearing and Intermediary Oversight (“DCIO”) issued an Advisory regarding the extent to which certain sophisticated customers located in the United States may transact in foreign security futures products (“FSFP”). The Securities and Exchange Commission (“SEC”) issued an Order on this subject about a year ago, on June 30, 2009, as described in a previous K&L Gates Alert.

The SEC’s Order permits only qualified institutional buyers (“QIBs”) and non-U.S. persons to trade FSFPs through registered securities brokers or dealers or banks. (A QIB is defined in Rule 144A under the Securities Act of 1933, 17 C.F.R. §230.144A, and generally requires that the en-tity, acting for its own account or the accounts of other QIBs, in the aggregate owns and invests on a discretionary basis at least $100 million in securities of issuers that are not affiliated with the entity.) The registered securities brokers or dealers covered by the SEC Order include “No-tice Broker-Dealers,” which are futures commission merchants (“FCMs”) or introducing brokers that register with the SEC as a broker or dealer pursuant to Section 15(b)(11) of the Securities Exchange Act of 1934 (“Exchange Act”), and whose only securities-related activity involves se-curity futures. In addition, a foreign broker or dealer could effect transactions pursuant to the SEC Order if it is exempt from U.S. broker-dealer registration by Rule 15a-6 under the Exchange Act or alternative exemptions from the registration requirements under Exchange Act Section 15(a)(1) that the SEC also issued on June 30, 2009.

The limited relief provided by the SEC Order leaves numerous persons that qualify as “eligible contract participants” (“ECP”) under the Commodity Exchange Act (“CEA”), but do not satisfy the $100 million QIB investment threshold, unable to lawfully trade FSFPs. These persons may have real needs for risk management based upon exposures in foreign financial markets or to the economic conditions in other countries, or may want to gain some exposure to those markets as part of the asset allocation in their investment portfolio.

The new DCIO Advisory does not expand the availability of trading in FSFPs for U.S. investors. The DCIO Advisory notes that, although the CEA permits ECPs to trade FSFPs to the same ex-tent that they may trade foreign securities, there is no parallel provision in the Exchange Act. The Exchange Act also requires, in Section 6(h)(1), that security futures products be listed for trading on national securities exchanges or national securities associations. When Congress lifted the ban on trading security futures products in the United States as part of the Commodity Futures Modernization Act of 2000 (“CFMA”), joint jurisdiction over such products was given to the CFTC and SEC. Generally, Congress adopted parallel amendments to the CEA and the Exchange Act regarding security futures products, but it failed to do so with respect to FSFPs, creating considerable confusion. Thus, until further action by Congress or the SEC, the avail-ability of trading in FSFPs by U.S. investors will remain quite limited.

The previous K&L Gates Alert on this topic suggested that a possible workaround for an ECP that was not also a QIB would be to find another ECP willing to enter into an off-exchange de-rivative transaction that would mirror the return of FSFPs. As also noted in that Alert, such a strategy would need to be reconsidered if statutory and regulatory changes affecting derivatives were adopted. Although the final details of these changes are not yet known, it is clear that ma-jor changes are coming to the derivatives area that could result in restrictions on the ability to enter into, and the availability of dealers willing to offer, off-exchange transactions that would mirror the return of FSFPs.

The impending financial regulatory reform legislation, as well as the Joint Report of the SEC and the CFTC on Harmonization of Regulation issued last October, calls for greater coordination by the two agencies across a wide range of subjects. Implementation of the new regulatory authori-ties will require a huge commitment of resources and expertise. Hopefully, the DCIO Advisory is not the final word on the ability of U.S. investors to trade FSFPs, and both the CFTC and the SEC will keep the issue of access to FSFPs on their crowded agendas, so that ECPs will be able to realize the access to FSFPs permitted under the CEA when the CFMA was passed almost ten years ago.