The credit crisis currently impacting the global economy has caused signifi cant regulatory and compliance concerns to surface in the financial services industry.
Whenever significant losses are suff ered by funds or accounts managed on behalf of ERISA plans, whether as a result of events adversely aff ecting specific securities or assets, or as a result of a general market decline, there often is a rise in ERISA fiduciary litigation against investment service providers to ERISA plans.
In response to investigations into alleged corrupt practices involving the use of placement agents with respect to public pension funds, retirement systems and other government fund entities, both the Illinois legislature and the New York State Comptroller took action in April of this year to restrict the use of placement agents.1 Over the last several months, state and local pension funds, retirement systems and other government fund entities (referred to herein as government funds) have followed suit by adopting various policies regulating the use of placement agents.
On September 22, 2009, the Office of Chief Counsel of the Internal Revenue Service (the “Service”) issued a memorandum to the Director of Field Operations for Financial Services in Manhattan (the “Memorandum”) setting forth its position and legal analysis with respect to certain lending activities undertaken by foreign corporations. The Memorandum concludes that a foreign corporation has income that is effectively connected with a banking, financing, or similar business activity within the United States (and thus is subject to net basis US federal income tax) when origination activities are performed in the United States by an agent of the foreign corporation.
In an effort to provide increased transparency to the financial markets and protect investors from fraud and abuse, Congress and the Obama administration have proposed several bills (the “Legislation”) that would require certain advisers to private investment funds to register with the US Securities and Exchange Commission (the “SEC”) under the Investment
Advisers Act of 1940, as amended (the “Advisers Act”).
By a vote of 4-1 (with OTS Acting Director John Bowman dissenting), the board of the Federal Deposit Insurance Corporation (FDIC) adopted a final policy statement establishing guidelines for private equity investors in failed banks or thrifts. The “Final Statement of Policy on Qualifications for Failed Bank Acquisitions” (Policy Statement) (available at http://www.fdic.gov/news/board/Aug26no2.pdf) reflects a few important modifications to the FDIC’s controversial July 2, 2009, proposal (Proposal) (see our Client Alert, “FDIC Proposes a Hard Line on Private Equity Investments in Failed Banks”), but retains many of the elements of the original proposal.
he German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, “BaFin”) submitted a report on the “Grey Capital Market” to the German parliament’s finance committee on June 10, 2009. The BaFin-report makes several proposals aimed at improving investor protection in the Grey Capital Market.
The Federal Deposit Insurance Corporation (FDIC) issued today for public comment its anticipated guidance for private equity investors in failed banks or thrifts. The proposed policy statement, which will be open for public comment for 30 days following publication in the Federal Register, would impose significant and, in many cases, ambiguous restrictions on (i) private equity investors in a company (other than certain existing bank or thrift holding companies) seeking to acquire from the FDIC deposits (or deposits and assets) of failed institutions, and (ii) applicants for de novo bank or thrift charters in connection with the resolution of failed institutions.
A United States person1 with a financial interest in, or signature authority over, “foreign financial accounts,” may be required to file a “Report of Foreign Bank and Financial Accounts” (Form TD F 90-22.1, or “FBAR”). As we discussed in our previous Client Alert on this topic (available here), the US Internal Revenue Service has apparently interpreted this term broadly, as including all vehicles for which investments are made on a pooled basis (e.g., to include mutual funds and hedge funds).
Several US Internal Revenue Service (IRS) officials have recently indicated that TD F 90-22.1 (Report of Foreign Bank and Financial Accounts) (FBAR) should be filed by United States persons that own interests in certain non-US investment vehicles, such as hedge funds.
The FBAR is an informational filing that is made to the US Treasury Department.
On May 20, 2009, the US Securities and Exchange Commission (SEC) issued proposed amendments to Rule 206(4)-2 (Custody Rule) under the Investment Advisers Act of 1940 (Advisers Act) aimed at providing additional safeguards for client assets held by registered investment advisers (Proposed Amendments). According to the SEC, the Proposed Amendments are intended to address the findings of several recent high-profile enforcement actions involving certain advisers’ custody arrangements, particularly self-custody or custody of client assets with an affiliate, in which client assets were misappropriated or otherwise fraudulently handled.
The Obama Administration has released a detailed proposal to change the financial services regulatory regime in the United States. The “white paper,” entitled “Financial Regulatory Reform: A New Foundation,” calls for the most significant overhaul of the American financial regulatory landscape since the Great Depression and is intended to mitigate or forestall future financial crises.
12 June 2009 - Mayer Brown LLP, a leading global law firm, announced today that 124 of its attorneys are ranked in the 2009 edition of Chambers USA: America’s Leading Lawyers for Business, including 32 who achieved top-band ranking or higher in 26 national and/or state categories.
The financial services industry is constantly debating the roles and responsibilities of fiduciaries and how they contrast with those of service providers who are sometimes erroneously construed as fiduciaries. In Eurycleia Partners, LP et al. v. Seward & Kissel, LLP, No.88, 2009 WL 1543689, 2009 N.Y. Slip Op. 04299 (June 4, 2009), New York’s highest court shed light on the type of relationship that can give rise to breach of fiduciary duty claims and clarified the pleading standard applicable to fraud and aiding and abetting claims.
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