Insights

On December 31, 2024, the U.S. Court of Appeals for the Fifth Circuit ruled that mattress company Serta Simmons Bedding, LLC (“Serta”) violated the “sacred right” of its lenders to ratable repayment by placing more than $1 billion of new super-priority debt that would have priority over its existing loans and offering to “purchase” or “exchange” only a portion of its existing indebtedness for such new indebtedness, The Fifth Circuit held that such an exchange was not a permitted “open market purchase” under the terms of the existing indebtedness. While still significant, this ruling underscores the importance of the language in existing and future debt instruments which could either facilitate or inhibit similar transactions involving “liability management” or “lender-on-lender violence”.

As reported in our recent series of Client Alerts, on December 3, 2024, the U.S. District Court for the Eastern District of Texas (the “District Court”) issued a nationwide preliminary injunction that temporarily blocked enforcement of the Corporate Transparency Act (“CTA”) and the U.S. Department of the Treasury's Financial Crimes Enforcement Network’s (“FinCEN”) related beneficial ownership information (“BOI”) reporting rules. On December 23, 2024, the Fifth Circuit Court of Appeals (the “Court of Appeals”) granted the government’s motion to stay the District Court’s preliminary injunction pending its appeal of that injunction order. As a result of the Court of Appeal’s ruling, FinCEN extended the reporting deadline to January 13, 2025. 

A well-trodden path for banks to achieve regulatory capital reductions by mitigating credit risk is through a synthetic securitization, either by issuing credit-linked notes (CLNs) or engaging in bespoke bilateral credit derivative transactions. These transactions—while complex to execute—offer the significant advantage of transferring risk on a large, diversified portfolio of obligors, allowing investors to evaluate credit risk on a statistical basis. This lessens the need for investor diligence at the level of individual obligations, which facilitates risk transfer on obligors for whom information might be limited or costly to digest.

Chapman wrote the book on the marketplace lending regulatory landscape that the entire industry has come to rely upon. First published in 2013, the 2024 update covers a vast array of topics affecting the marketplace lending industry.

The Division of Examinations of the Securities and Exchange Commission published its examination priorities for fiscal year 2025. The 2025 Exam Priorities reflect practices, products, and services the Division believes present heightened risks to investors and the U.S. capital markets.

There have been several recent notable enforcement actions, including continued enforcement by the SEC and CFTC against off-channel communications, as well as an SEC fraud settlement with Macquarie Investment Management Business Trust.

Chapman's quarterly Regulatory Update contains an overview of the latest regulatory actions, market happenings, and litigation and enforcement activity in the investment management space.

On September 12, 2024, the Commodity Futures Trading Commission (CFTC) adopted amendments to CFTC Regulation 4.7 (Reg. 4.7), a rule that provides exemptions from the broader compliance requirements under Part 4 of the CFTC regulations (Part 4) for registered commodity pool operators (CPOs) with respect to pools (4.7 pools) offered solely to “Qualified Eligible Persons” (QEPs) and registered commodity trading advisors (CTAs) that advise or manage commodity trading accounts of QEPs. The amendments (i) increase the financial thresholds in the “Portfolio Requirement” of the QEP definition and (ii) permit CPOs of fund of fund pools offered solely to QEPs to provide monthly account statements within 45 days of the month-end, rather than providing quarterly account statements within 30 days of the quarter-end. The CFTC chose not to adopt, at this time, the proposed minimum QEP disclosures.

On August 22, 2024, a proposed rule (the “Proposed Joint Rule”) mandated by the Financial Data Transparency Act of 2022 (the “FDTA”) and adopted by nine federal financial regulators, including the U.S. Securities and Exchange Commission (the “SEC” and, together with the other eight regulators, the “Covered Agencies”), was published in the Federal Register. 

Chapman's white paper provides a summary of the interval fund and tender offer fund structures, including their basic legal framework, their investment restrictions, how they are distributed and how they facilitate redemptions. It also provides a comparison of interval funds and tender offer funds, both to each other and to other types of investment companies.

On December 31, 2024, the U.S. Court of Appeals for the Fifth Circuit ruled that mattress company Serta Simmons Bedding, LLC (“Serta”) violated the “sacred right” of its lenders to ratable repayment by placing more than $1 billion of new super-priority debt that would have priority over its existing loans and offering to “purchase” or “exchange” only a portion of its existing indebtedness for such new indebtedness, The Fifth Circuit held that such an exchange was not a permitted “open market purchase” under the terms of the existing indebtedness. While still significant, this ruling underscores the importance of the language in existing and future debt instruments which could either facilitate or inhibit similar transactions involving “liability management” or “lender-on-lender violence”.

For the fifteenth consecutive year, Chapman received a 100% score on the annual Corporate Equality Index and was named among the Best Places to Work for LGBTQ+ Equality by the Human Rights Campaign Foundation.

As reported in our recent series of Client Alerts, on December 3, 2024, the U.S. District Court for the Eastern District of Texas (the “District Court”) issued a nationwide preliminary injunction that temporarily blocked enforcement of the Corporate Transparency Act (“CTA”) and the U.S. Department of the Treasury's Financial Crimes Enforcement Network’s (“FinCEN”) related beneficial ownership information (“BOI”) reporting rules. On December 23, 2024, the Fifth Circuit Court of Appeals (the “Court of Appeals”) granted the government’s motion to stay the District Court’s preliminary injunction pending its appeal of that injunction order. As a result of the Court of Appeal’s ruling, FinCEN extended the reporting deadline to January 13, 2025. 

A well-trodden path for banks to achieve regulatory capital reductions by mitigating credit risk is through a synthetic securitization, either by issuing credit-linked notes (CLNs) or engaging in bespoke bilateral credit derivative transactions. These transactions—while complex to execute—offer the significant advantage of transferring risk on a large, diversified portfolio of obligors, allowing investors to evaluate credit risk on a statistical basis. This lessens the need for investor diligence at the level of individual obligations, which facilitates risk transfer on obligors for whom information might be limited or costly to digest.

Chapman wrote the book on the marketplace lending regulatory landscape that the entire industry has come to rely upon. First published in 2013, the 2024 update covers a vast array of topics affecting the marketplace lending industry.

The Division of Examinations of the Securities and Exchange Commission published its examination priorities for fiscal year 2025. The 2025 Exam Priorities reflect practices, products, and services the Division believes present heightened risks to investors and the U.S. capital markets.

There have been several recent notable enforcement actions, including continued enforcement by the SEC and CFTC against off-channel communications, as well as an SEC fraud settlement with Macquarie Investment Management Business Trust.

Chapman's quarterly Regulatory Update contains an overview of the latest regulatory actions, market happenings, and litigation and enforcement activity in the investment management space.

On September 12, 2024, the Commodity Futures Trading Commission (CFTC) adopted amendments to CFTC Regulation 4.7 (Reg. 4.7), a rule that provides exemptions from the broader compliance requirements under Part 4 of the CFTC regulations (Part 4) for registered commodity pool operators (CPOs) with respect to pools (4.7 pools) offered solely to “Qualified Eligible Persons” (QEPs) and registered commodity trading advisors (CTAs) that advise or manage commodity trading accounts of QEPs. The amendments (i) increase the financial thresholds in the “Portfolio Requirement” of the QEP definition and (ii) permit CPOs of fund of fund pools offered solely to QEPs to provide monthly account statements within 45 days of the month-end, rather than providing quarterly account statements within 30 days of the quarter-end. The CFTC chose not to adopt, at this time, the proposed minimum QEP disclosures.

A recognized securities and commodities regulatory authority, Peter’s practice focuses on the registration and regulation of investment advisers, broker-dealers, commodity trading advisors, commodity pool operators, and introducing brokers, as well as the formation and ongoing compliance obligations of registered and private investment companies.

Chapman's 2024 Social Impact and Sustainability report showcases our commitment to the United Nations Global Compact (UNGC).