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Several times over the past six months, I have noted potential issues with New York’s new power of attorney law (egs. this blog – and this one). Cravath, Swaine & Moore recently informed me that it has been considering various issues raised by law and has concluded that, based on principles of statutory construction, this new statute is best understood as not applying beyond powers of attorney that convey to the agent power over the principal’s money and property. Understood in this light, the statute does not apply to powers of attorney that only authorize signatures required in SEC filings. These include powers of attorney used in registration statements and annual reports on Form 10-K, as well as Section 16 filings. Here are more thoughts from Cravath:

The Statute speaks of two types of power of attorney – the “statutory short form power of attorney” and a “non-statutory power of attorney” – and then directs that, among other requirements, these two types of power of attorney must contain the “exact wording of the ‘Caution to the Principal'” that is set forth in the Statute. The “Caution to the Principal” reads: “As the ‘principal,’ you give the person whom you choose (your ‘agent’) authority to spend your money and sell or dispose of your property during your lifetime without telling you.”

The Statute does not provide that these two types of power of attorney are the only types of power of attorney recognized in New York, nor does the Statute define “non-statutory power of attorney”. The obligation to include the “Caution to the Principal” legend with any power of attorney governed by the Statute reveals the necessarily limited scope of the term “non-statutory power of attorney” and thus the limited reach of the Statute.

Cravath’s analysis concludes that, in light of the legend, the Statute should be interpreted to regulate only powers of attorney that convey authority to the agent to spend the principal’s money and to sell or dispose of the principal’s property. Otherwise, one would have to accept:

(a) that the Statute requires the inclusion of a false legend, which would be an absurd result and a reading that is inconsistent with basic principles of statutory construction, or

(b) that the Statute requires that every power of attorney executed by an individual in New York must convey power over the principal’s money and property, which would be an absurd result in the absence of any evidence in the Statute or legislative history of the legislature’s intent to effect such a dramatic change in the law would be even more absurd given the clear intention of the legislature in enacting the Statute to protect individuals from the abuse of that power by their agents, or

(c) that notwithstanding the plain words of the Statute a valid “non-statutory power of attorney” does not require the “Caution to the Principal” legend unless it includes power over the principal’s money and property.

Rather than be forced to adopt any of these absurd interpretations or ignore the plain words of the Statute, our analysis suggests a more straight-forward result – the otherwise undefined term “non-statutory power of attorney” should be interpreted not to cover powers of attorney unless they convey authority to the agent to spend the principal’s money and to sell or dispose of the principal’s property.

Treasury Proposes “Volcker Rule” Legislative Text

On Wednesday, the Treasury Department proposed legislative text to implement the “Volcker Rule” announced by the Obama Administration back in January. This Davis Polk memo briefly summarizes the provisions of Treasury’s proposal, which takes the form of new Sections 13 and 13a of the Bank Holding Company Act of 1956.

SEC Adds Six New XBRL FAQs

Yesterday, the SEC posted six new items (Q. 36-41) to its XBRL Staff Interpretations and FAQs. Note that on March 23rd, the SEC is holding a free XBRL seminar.

– Broc Romanek