Client Alerts & Publications Archive

The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations recently issued a Risk Alert announcing that they will be undertaking an examination initiative focused on the risk that registered advisers may be making conflicted recommendations to their clients.

The Securities and Exchange Commission recently proposed a new rule and rule amendments under the Investment Advisers Act of 1940 that would require SEC-registered investment advisers to adopt and implement written business continuity and transition plans.

Congress has approved the Puerto Rico Oversight, Management, and Economic Stability Act, and President Obama is expected to sign the measure into law by July 1, 2016. Puerto Rico owes its bondholders a $1.9 billion debt payment on July 1 that by all accounts it cannot make.

This article discussed leveraged lending guidelines, unitranche facilities and the risks associated with unitranche facilities, including with respect to “agreements among lenders” as illustrated by the recent case of In re Radio Shack Corporation.

On June 3, 2016, the United States Bankruptcy Court for the District of Delaware ruled that the intercreditor agreement between first lien noteholders and junior noteholders in In re Energy Future Holdings Corp. did not require the junior noteholders to bear the cost of a previously disallowed make-whole payment to the first lien noteholders. 

On May 27, 2016, New Jersey Gov. Chris Christie signed into law the Casino Tax Property Stabilization Act in an effort to help Atlantic City get back on the path to fiscal stability.

The U.S. Supreme Court placed the final nail in the coffin of the Puerto Rico Public Corporation Debt Enforcement and Recovery Act. The Court found that Puerto Rico was not entitled to create its own restructuring process because such a process is prohibited by the Bankruptcy Code.

UCITS are a type of collective investment vehicle and they may be difficult to fit into existing tax and regulatory schemes. Although UCITS were developed to facilitate cross-border investments, the model U.S. and OECD treaties are only recently beginning to effectively address collective investment vehicles.

The Financial Industry Regulatory Authority, Inc. recently filed changes to new FINRA Rule 2242 (Debt Research Analysts and Debt Research Reports) with the Securities and Exchange Commission. The rule is still new and FINRA has delayed implementation several times.

The Financial Industry Regulatory Authority, Inc. recently filed proposed changes to certain aspects of the FINRA rules governing member firms’ communications with the public. The proposed rule changes are substantially similar to those proposed by FINRA in May 2015. 

Over the past several years, a number of public-private partnership transactions have been financed in the domestic and cross-border U.S. private placement market. Given the need for new infrastructure both domestically and abroad, we anticipate that the number of P3 transactions entering the U.S. private placement market will continue to rise over the coming years.

New Jersey has taken steps to aid troubled Atlantic City in an apparent attempt to avoid a bankruptcy filing that may not only impact the distressed city but also other cities and towns in the State.    

It is a basic principle in bankruptcy that a secured lender is entitled to receive interest and other charges arising post-petition to the extent the lender is over-secured. A recent decision challenges this principle in cases where the value of a lender’s collateral diminishes during the course of the bankruptcy case.

In this edition:

• NACHA Operating Rules — New Unauthorized Entry Fee
• Customer Due Diligence — Beneficial Ownership Rule
• Limited English Language Proficiency Customers

A recent decision issued by a federal district court in North Carolina challenges the familiar principle that in a borrower’s bankruptcy, the lender, if it is oversecured as of the bankruptcy filing date, is entitled to receive post-petition interest, attorneys’ fees and other charges arising post-petition to the extent of the value of its collateral.

Atlantic City is in the midst of a financial crisis that has been in the making for years. Increased competition and a host of unfortunate spending and hiring decisions have led to a state of affairs that currently features the nation’s highest home foreclosure rate, junk bond credit status and an alarmingly large budget deficit. 

The Securities and Exchange Commission recently published a notice of its intention to adjust for inflation dollar amount thresholds for the “qualified client” definition under Investment Advisers Act of 1940 Rule 205-3. Under Rule 205-3, an investment adviser may charge performance-based fees to a “qualified client” meeting a minimum net worth or minimum assets.

Client Alert
The Financial Crimes Enforcement Network recently published its final rule under the Bank Secrecy Act of 1970, as amended on customer due diligence requirements for banks, broker-dealers, mutual funds and futures commission merchants and introducing brokers in commodities.

On April 4, the U.S. Treasury Secretary announced that the government would release regulations to curb inversions and reduce the ability of companies to avoid taxes through “earnings stripping;” those regulations were published in the Federal Register on April 8th. 

On May 18, 2016, the Department of Labor issued the final version of the its overtime rule, which officially raises the salary basis threshold for “white collar” overtime exemptions to $47,476 per year, or $913 per week, increasing the applicability of the Fair Labor Standards Act to an additional 4.2 million employees. 

In December 2015, Congress passed the Protecting Americans from Tax Hikes Act of 2015, which extended certain federal renewable energy tax credits for projects that began construction prior to the dates set forth in the Path Act. In response to that extension, the IRS has issued additional guidance with respect to a renewable energy facility’s eligibility to receive these tax credits.

On May 10, 2016 the U.S. Department of the Treasury published a white paper entitled “Opportunities and Challenges in Online Marketplace Lending.” The White Paper follows the “Request for Information” which the Department published in July 2015 to solicit public input on various topics concerning marketplace lending.

The Board of Governors of the Federal Reserve System issued a Notice of Proposed Rulemaking re-proposing a rule that would establish credit limits for single counterparties ofU.S. bank holding companies, foreign banking organizations, and U.S. intermediate holding companies of an FBO. 

Pratt's Privacy & Cybersecurity Law Report republished a special edition of Chapman's To the Point! newsletter. 

On April 26, 2016, the Federal Deposit Insurance Corporation issued a proposed rule to implement the Net Stable Funding Ratio requirement. The Board of Governors of the Federal Reserve Board will consider the proposed NSFR rule at its meeting on May 3, 2016 and the Office of the Comptroller is also expected to to consider the proposed rule in the near future.

The Financial Industry Regulatory Authority, Inc. delayed the implementation of FINRA Rule 2242 until July 16, 2016. FINRA Rule 2242 addresses conflicts of interest relating to the publication and distribution of debt research reports.

On March 4, 2016 the Board of Governors of the Federal Reserve System issued a Notice of Proposed Rulemaking re-proposing a rule that would establish credit limits for single counterparties ofU.S. bank holding companies, foreign banking organizations, and U.S. intermediate holding companies of an FBO, with $50 billion or more of consolidated assets. 

In this edition:

• Recent Action by the OCC of Special Concern for Directors, Senior Managers, and Compliance Officers
• FDIC Provides Additional Guidance on Corporate Governance

Pratt's Journal of Bankruptcy Law republished a Chapman Client Alert.

The Municipal Securities Rulemaking Board prohibits a broker, dealer or municipal securities dealer from effecting a customer transaction in municipal securities in an amount lower than the minimum denomination. The MSRB recently proposed adding two additional exceptions that would allow dealers to sell below stated minimums. 

This alert addresses several frequently asked questions related to sales of unit investment trusts registered under the Investment Company Act of 1940 by those persons deemed fiduciaries under the U.S. Department of Labor's recently released fiduciary rule.

Today the U.S. Department of Labor released its highly anticipated final rule to define the term “fiduciary” and address conflicts of interest in providing investment advice to retirement accounts.

Today, the Basel Committee on Banking Supervision published a consultative document proposing revisions to its Basel III leverage ratio framework. Among other things, the Proposed Revisions provide that for purposes of calculating the denominator of the leverage ratio, off-balance sheet exposures of banks to securitization transactions are to be treated the same as such exposures are treated under the Basel Committee revisions to its securitization framework for risk-based capital.

The Internal Revenue Service recently released proposed regulations concerning the definition of a “political subdivision” for purposes of tax-exempt financing.

Law360 republished a Chapman Corporate Governance Quarterly Update.

In a widely expected ruling, the Illinois Supreme Court has upheld a Cook County state court ruling holding that a state law, Public Act 98-641, reducing annuity benefits for employees and retirees of the City of Chicago, in exchange for increased contributions to certain pension funds, was unconstitutional.

Retail bondholders recently filed two class action suits in the United States District Court for the Southern District of New York challenging exchange offers under the Trust Indenture Act.

On Oct. 27, 2015, the United States Treasury Department and the Internal Revenue Service published long-awaited final regulations that provide welcome guidance to 501(c)(3) health care organizations that are borrowers of qualified 501(c)(3) bonds.

In this edition:

• Use of Property Evaluations
• A Bank Customer’s Guide to Cybersecurity
• Certain Prepaid Cardholders Treated as Customers for CIP Requirements 

In a move that has been anticipated for months, on March 15, 2016, the Department of Labor took one of the final steps toward making its new overtime rules a reality. 

On March 9, 2016, the U.S. Securities and Exchange Commission issued a cease and desist order against Westlands Water District, a public agency of the State of California, the District General Manager and General Counsel, and the former District Assistant General Manager.

On Friday, March 18, 2016, the United States Supreme Court issued a call for the views of the Solicitor General of the United States before it decides whether to hear an appeal from a Second Circuit Court of Appeals decision rendered last May in the case of Madden v. Midland Funding, LLC.

Oversight of a company’s enterprise risks has recently evolved into one of the board’s most critical fiduciary duties and responsibilities. Since enterprise risks do not remain static and are often interrelated and complex, it is imperative that boards maintain continuous risk oversight.

The staff of the Securities and Exchange Commission’s Division of Investment Management recently released guidance regarding registered investment company risk disclosure.

On March 7, the CFPB announced that it is accepting consumer complaints about online marketplace lenders, giving consumers “a greater voice in these markets and a place to turn to when they encounter problems.” The CFPB also issued a bulletin to provide consumers with information on marketplace lending.

On February 16, 2016, the District Court for the District of Delaware affirmed the decision of the Delaware bankruptcy court in In re Energy Future Holdings Corp., that noteholders’ claims for make-whole premiums may be blocked by the automatic stay of the U.S. Bankruptcy Code. 

The Municipal Securities Rulemaking Board is seeking comment on proposed guidance on establishing the “prevailing market price” and calculating mark-ups and mark-downs for principal transactions in municipal securities.  

In this article, we provide a brief overview of the key reforms under Regulation AB II, followed by a more focused review of the next compliance hurdle that ABS issuers will face — annual compliance checks to determine continued shelf eligibility.

In this edition:

• Standards for Safeguarding Customer Financial Information
• HIPAA Data Breach Notification Deadline — February 29, 2016
• CFPB Issues Additional Guidance on Furnisher Obligations under Regulation V
• Court Denies Motion to Dismiss Complaint Against Compliance Officer for Bank Secrecy Act Violations