August 21, 2010
Web Resources: PLI's Securities Law Practice Center
I'm not sure exactly how new this is, but I was just recently made aware of this site.
August 20, 2010
North Dakota Law Review Symposium Issue: Energy Derivatives and MoreThe North Dakota Law Review held an energy law symposium back in Apri, and a while back, I promised to follow-up on a discussion of energy derivatives. Well, at long last, the the symposium issue is out, and the issue includes the remarks of a friend and former colleague, Chris Schindler. His remarks, Energy Derivatives: The Likely Impact of Derivatives Regulations on North Dakota Utilities, are available here (pdf). The rest of the issue can be found here, and it includes a variety of pieces that look at energy and the business of energy development. For reference, here's the table of contents:
North Dakota’s Energy Landscape - Owen Anderson
North Dakota Century Code 17-04-06: The First Step Toward a Level Playing Field for Wind Projects and Rural Landowners - Colleen Rice
Minimizing the Environmental Impact of Oil and Gas Development by Maximizing Production Conservation - David E. Pierce
Harmonious Federalism in Support of National Energy Goals — Increased Wind Renewable Energy - Ronald H. Rosenberg
If Cap-and-Trade is the Answer, Somebody is Asking the Wrong Question: An Evaluation of Cap-and-Trade in the North Dakota Context - Tony Clark
A Market Based Approach: The Best Way to Transition to a New Energy Economy While Meeting the Responsibility to Address Global Climate Change — A North Dakota Perspective - Jason Schaefer
The Geothermal Bonus: Sustainable Energy as a By-Product of Drilling for Oil - Joshua P. Fershee
Energy Derivatives: The Likely Impact of Derivatives Regulations on North Dakota Utilities - Christopher A. Schindler
Oil and Gas Law — Rent or Royalties: North Dakota Joins the Majority of States in Adopting the “At the Well” Rule for Calculating Royalties in Oil and Gas Leases Bice v. Petro-Hunt, L.L.C., 2009 ND 124, 768 N.W.2d 496 - Lindsey Scheel
August 19, 2010
Earlier this week, my co-blogger J. Scott Colesanti asked whether there was a "New Scrutiny of Settlements" coming from the bench. This made me think of an earlier post by J. Robert Brown Jr. over at the Race to the Bottom, wherein he noted there was some irony in a Delaware judge criticizing less-than-stellar board oversight when that is precisely what one should expect in light of Delaware's deferential approach to directorial oversight. Similarly, one might argue that there is some irony in judges criticizing the decision by government agencies to settle cases on less than onerous terms when that is precisely what one should expect when the judiciary repeatedly bends over backwards to protect business from "frivolous" litigation when cases go to trial. (I set out the various ways this is done in the securities law area here.) Obviously, the devil is in the details. But if this trend of criticizing settlements continues, it would be interesting to compare the judicial criticisms to the results of similar cases that are actually litigated.
The Increasing Role of State Securities Regulators
The Wall Street Journal has an article today about the increased role of state securities regulators in the oversight of hedge funds. The article notes a difference of opinion as to whether the state regulators are up to the task.
Speaking of state securities regulators, my co-blogger Eric Chafee and I will be part of a panel on peer-to-peer lending at the 2010 Ohio Securities Law Conference on October 22. Our fellow panelists will be Geoffrey Rapp of the University of Toledo, and Mark Heuerman of the Ohio Division of Securities. Commissioner Andrea Seidt will be moderating the panel.
August 18, 2010
GM Warns of Anti-Takeover Provisions, But Are They a Risk?
General Motors today filed its SEC Form S-1 for its Initial Public Offering (IPO) (here). The Wall Street Journal has already noted a couple "surprising" risk factors listed in the filing (article here).
I was hardly surprised by the listing of company anti-takeover provisions as one of the "Risks Relating to this Offering and Ownership of Our Common Stock," although there are times when I have to wonder how real a risk this is.
First, this is more and more a risk of investing in any public company. Publicly traded companies commonly have anti-takeover provisions, and they are often strong takeover provisions. (See, e.g.,Lucian Arye Bebchuk, WHY FIRMS ADOPT ANTITAKEOVER ARRANGEMENTS, here) Second, it's not clear that such provisions are a problem. There is at least some evidence that such provisions support long-term value creation and do not facilitate major managerial entrenchment in the way that might be expected. (See, e.g., here.)
Ultimately, I suppose it's best to list them as possible risk factors, but I have to wonder if anyone will really consider such provisions when determining whether to participate in the IPO. In case you are curious, here are the provisions:
Anti-takeover provisions contained in our organizational documents and Delaware law could delay or prevent a takeover attempt or change in control of our company, which could adversely affect the price of our common stock.
Our amended and restated certificate of incorporation, as amended (Certificate of Incorporation), our amended and restated bylaws, as amended (Bylaws), and Delaware law contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our Board of Directors. Our organizational documents include provisions:
--Authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock;
--Limiting the liability of, and providing indemnification to, our directors and officers;
--Limiting the ability of our stockholders to call and bring business before special meetings;
--Prohibiting our stockholders, after the completion of this offering, from taking action by written consent in lieu of a meeting except where such consent is signed by the holders of all shares of stock of the Company then outstanding and entitled to vote; 26 Table of Contents
--Requiring, after the completion of this offering, advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nomination of candidates for election to our Board of Directors; and
--Limiting, after the completion of this offering, the determination of the number of directors on our Board of Directors and the filling of vacancies or newly created seats on the board to our Board of Directors then in office.
These provisions, alone or together, could delay hostile takeovers and changes in control of the Company or changes in management.
The New Scrutiny of Settlements?
This week - and for at least the third time this year - a federal judge has refused to rubber stamp a monetary settlement between a bank and a U.S. regulator. Specifically, a Washington court will later today scrutinize a proposed $298 million deal between authorities and Barclays bank concerning alleged violations between 1995 and 2006 of U.S. sanctions prohibiting trade with certain nations.
The higher bar for settlements appears to have been set by Judge Rakoff of the SDNY, who, earlier this year rejected a settlement between the SEC and Bank of America on a host of grounds. Commentators note that judges appear to be disgruntled with what appears to be the acceptance of a check for very serious misconduct; in the BOA case, Rakoff ultimately and "reluctantly" accepted a deal with a higher monetary penalty, the establishment of a FAIR fund for investors, and attendant policy changes at the bank.
For details on the Barclays case, see "Barclays Follows Citigroup With Court Rejection of U.S. Accord" at Bloomberg.com.
August 16, 2010
Dodd-Frank and Bounty Hunters...
...or "Dodd-Frank and Whistleblowers," depending on your point of view.
As previously noted here and elsewhere, the mammoth financial reform legislation touches, in part, upon the bounties paid by the SEC to individuals providing information leading to charges of fraud.
For a thorough (and timely) breakdown of how the new law may affect enforcement of the Foreign Corrupt Practices Act, see Professor Koehler's thoughtful post at http://fcpaprofessor.blogspot.com/2010/07/financial-reform-bills-whistleblower.html .
Peak Oil, Peak Stocks
The Wall Street Journal reports that the correlation between stock prices and oil prices is near 70%, which more than doubles the rate in 2008 (article here). There are a variety of theories posed as to why this might be the case: psychological links, algorithmic trading, risk trading, etc.
I think all these things have a role, but I am also inclined to think that the strength of the correlation is likely to come and go over time. Right now, the expectations for oil consumption are tied largely to an economic recovery. The stock market is often used as a proxy for such a recovery. Thus, if the stock market goes up, people expect oil consumption to go up, and oil prices rise, too (and vice versa). If there were some major change in oil supply, regardless of the market, oil prices would go up, even if stock prices plummeted.
I’d be curious to see the data over a longer period of time. I suspect that the correlation is higher today that in years past because it is my sense that there are more people with money in both markets that in prior generations. However, I also suspect that there are periods where the correlation would increase and decrease in the same way it has over the past few years.