January 16, 2009

The Schapiro Confirmation Hearing

Yesterday, the US Senate held a 90-minute confirmation hearing for Mary Schapiro to determine if she will be the next SEC Chair. Here are articles from Washington Post, NY Times and WSJ (and here is the WSJ Blog's play-by-play of the hearing). Among other things, Mary said she may:

- Increase power of large shareholders to nominate directors and shape governance practices
- Pursue legislation to increase auditor oversight
- Consider changing IFRS transition timetable
- Act more aggresively against fraud
- Study short-selling impact
- Continue plan to register hedge funds
- Revamp how securitie are rated

Nasdaq Increases Compliance Period for "Market Capitalization Requirement"

On Wednesday, Nasdaq filed an immediately effective rule change with the SEC, which extends the compliance period which a listed company gets when it fails to comply with the market value of listed securities requirement - what they used to call the "market capitalization requirement" - from 30 to 90 days, making it consistent with the compliance period allowed for companies that fail the "market value of publicly-held shares" requirement. While this likely was done partially in response to market conditions, the old 30-day compliance period was too short in any market environment.

The Latest Cross-Border Deal Developments

With the dealmaking environment facing unforeseeable challenges - and the SEC making the biggest batch of changes to its cross-border in years, practitioners are grappling with how these deals will now change. Learn from these experts how cross-border deal practices are evolving and how they differ from the past in Thursday's DealLawyers.com webcast, "Implementing the New Cross-Border Rules":

- Christina Chalk, Senior Special Counsel, Division of Corporation Finance's Office of Mergers & Acquisitions
- Frank Aquila, Partner, Sullivan & Cromwell LLP
- Peter King, Partner, Weil, Gotshal & Manges LLP
- Alan Klein, Partner, Simpson Thacher & Bartlett LLP
- Greg Wolski, Partner, Ernst & Young LLP

Renew Now: As all memberships are on a calendar-year basis, you need to renew now to access this webcast. If you're not a member, try a no-risk trial for 2009.

GAO Report: Laying Down Ground Rules for Financial System Reform Debate

With Treasury’s financial system overhaul proposal already on the table (in addition to remarks by other government officials, e.g., Ben Bernanke), the GAO issued a report last week detailing a framework that can be used for evaluating these and future proposals to modernize the financial regulatory system.

In the report, the GAO reviews various market developments over the last century and how they have revealed gaps and limitations in the existing regulatory system, and then sets out nine characteristics (the framework) that should be reflected in any new regulatory system. The GAO hopes that by applying the framework to a proposed financial system reform, the benefits and trade-offs involved will become apparent.

According to the report, any regulatory system that Congress would implement should:

1. Have clearly defined and relevant regulatory goals.

2. Have comprehensive regulation of activities that pose risks to consumer protection and financial stability, while recognizing that not all activities will require the same level of regulation.

3. Have a mechanism for identifying, monitoring and managing risks to the financial system.

4. Be adaptable and forward-looking to respond to market innovations/changes and include a mechanism for evaluating potential new risks to the system.

5. Provide efficient oversight of financial services by eliminating overlapping federal regulatory missions while effectively achieving the goals of regulation.

6. Include consumer and investor protection as part of the regulatory mission.

7. Provide regulators with independence, prominence, authority and accountability.

8. Ensure that similar institutions, products, risks and services are subject to consistent regulation, oversight and transparency.

9. Have adequate safeguards that allow financial institution failures to occur while limiting taxpayers’ exposure to financial risk.

Next up is Treasury’s (EESA-required) recommendations on “the current state of the financial markets and the regulatory system,” due April 30, 2009. Keep up-to-date with these happening in our “Credit Crunch” Practice Area.

- Broc Romanek