Wednesday, December 11, 2013
Björn E. Strehl has posted Cross-Border Tender Offer, Exchange Offer and Business Combinations: A Comparison between U.S. Takeover Law, the New German Takeover Code and the 13th European Directive on SSRN with the following abstract:
This article deals with the latest developments in the regulation of cross-border tender offers in the U.S., in Germany, and in the European Union.
In the U.S. the SEC issued a new release concerning Cross-Border Tender and Exchange Offers, Business Combinations and Rights Offerings. The new release aims to solve the problem of exclusion of U.S. investors in foreign tender offers. The reason for the exclusion is the extraterritoriality of the U.S. securities regulation. The article will therefore discuss the problem of extraterritoriality in the U.S. and will show some alternative academic proposals for the application of the U.S. tender offer law.
In Germany the new Takeover Code will become effective at the beginning of the year 2002. It is the first binding regulation of Takeovers in Germany. It also deals with the applicability in the cross-border context. This article will therefore compare the different concepts of applicability in Germany and in the U.S. with a view to the conflict of laws rules.
In the EU the 13th Directive concerning Takeover Bids break down this summer. This article will discuss the reasons for the breakdown and the effects on the European tender offer market.
Furthermore the article will compare the new rules and concepts of the German Takeover Code with the tender offer regulation in the U.S. Especially the modified duty of neutrality in the new Code is of interest.
Nusret Cetin has posted Revisiting Turkish Market Abuse Regime on SSRN with following abstract:
The growth and development in the capital markets can be achieved when markets operate under a safe, sound and transparent environment. Prevention, detection and deterrence of market manipulation and insider dealing are preliminary conditions to attract more investors to, and increase the capacity of the markets. Turkish legislator has enacted a new Capital Market Act on the very last days of 2012, which replaces the Capital Market Act number 2499. This article analyses the new market abuse regime introduced by this Act, which regulates main framework of preventing and combating insider dealing and market manipulation. This article argues that the new Turkish market abuse regime recognizes developments in this field of securities law, and includes almost all necessary mechanisms and tools to deal with abusive practices in the capital markets. However, its impacts on the markets remain to be seen.
Adi Osovsky has posted The Curious Case of the Secondary Market with Respect to Investor Protection on SSRN with the following abstract:
The primary mission of the U.S. Securities and Exchange Commission is to protect investors. However, current securities regulation clearly separates between public markets and private markets with respect to investor protection. While the federal securities laws impose strict and costly disclosure and anti-fraud requirements on issuers that offer their securities to the public, they exempt private offerings from such rigid regime. The liberal approach toward private offerings is based on the assumption that investors in private markets are sophisticated and thus can "fend for themselves".
This Article explores the validity of such traditional dichotomy between the public market and the private market in a relatively new, organized secondary market for ownership interests in private companies with retail investor access (the "Secondary Market"). The Secondary Market provides investors and employees with an opportunity to sell their holdings even before the first exit event. It also allows greater flexibility in capital formation, which may enhance productivity and job growth. However, the Secondary Market raises serious problems with regard to investor protection.
As this Article shows, the rise of the Secondary Market has revealed conspicuous cracks in the wall traditionally separating the public and the private markets and the two markets’ participants – the sophisticated investors versus the unsophisticated investors. This separation was undermined by the penetration of unsophisticated investors to the private market sphere and by the erosion of the assumptions regarding the ability of Secondary Market’s participants to fend for themselves.
The Article suggests that the erosion of the sophistication presumption deems the classic dichotomy between the heavily regulated public market and the lightly regulated private market artificial. It calls for a reexamination of the current regulatory regime with respect to investor protection. Such reexamination is of particular importance in light of the new Jumpstart Our Business Startup (JOBS) Act that would enable private companies to stay private longer, and the Secondary Market to thrive.
On December 11, 2013, Paul Beswick, Chief Accountant of the SEC's Office of the Accountant, gave remarks at the AICPA 2013 Conference on Current SEC and PCAOB Developments in Washington, D.C. At the event, Beswick spoke about FASB outreach to investors, simplification of accounting standards, GASB standards and municipal issuers, valuation standards, audit committees and audit fees, auditor independence, and internal control over financial reporting.
Tuesday, December 10, 2013
On December 9, 2013, Commissioner Michael S. Piwowar spoke in London, England on The Benefit of Hindsight and the Promise of Foresight: A Proposal for A Comprehensive Review of Equity Market Structure. He summed up his remarks as follows:
[W]e should commence – in short order – a comprehensive, multi-year equity market structure review program, undertaken with the benefit of hindsight and the promise of foresight. In doing so, we can set our sights on ensuring that the U.S. securities markets remain a world leader in market quality, efficiency, and fairness, which in turn will fuel global capital formation and economic growth.
On December 6, 2013, Commissioner Daniel M. Gallagher offered remarks in New York at the 2nd Annual Institute for Corporate Counsel. Notably, Commissioner Gallagher stated:
Our disclosure regime, in all its aging and accreted complexity, is not perfect in view of its objectives. But in seeking to improve it, a fixation on the perfect will certainly put at risk achieving further good in the near term. So my plea today is this: let’s put ordinary individual investors, materiality, and practicality at the heart of a priority effort to improve public companies’ disclosure documents. It’s high time for the SEC — with your active assistance — to take the initiative on this crucially important issue.
Friday, December 6, 2013
On December 5, 2013, Commissioner Daniel M. Gallagher offered Welcoming Remarks for Central and Eastern Europe Capital Market Summit. The remarks were taped for the event which was held in Warsaw, Poland.
On December 5, 2013 at the Proxy Advisory Firm Roundtable in Washington, D.C., Commissioner Luis A. Aguilar offered remarks on Looking at Proxy Advisory Firms from the Investor’s Perspective.
Wednesday, December 4, 2013
Commissioner Gallagher on The Realities of Stewardship for Institutional Owners, Activist Investors and Proxy Advisors
On December 3, at the Transatlantic Corporate Governance Dialogue Conference in Washington, D.C., Commissioner Daniel M. Gallagher offered remarks on The Realities of Stewardship for Institutional Owners, Activist Investors and Proxy Advisors. At the event, he stated, "Proxy advisory firms have gained an outsized role in corporate governance in the United States largely as a result of the unintended consequences of SEC action. . . . The SEC’s proxy advisory firm roundtable this Thursday should be the beginning of the Commission’s renewed and focused attention on proxy advisors . . . ."
Tuesday, December 3, 2013
Richard A. Booth has posted The Two Faces of Materiality on SSRN with the following abstract:
To make out a claim for securities fraud under federal law, a plaintiff must plead and prove the misrepresentation of a material fact. The Supreme Court has repeatedly defined a material fact as one that would be important to a reasonable investor in deciding how to act in that it would change the total mix of information — although it need not necessarily change the ultimate decision of the investor as to how to vote or whether to trade. The courts have also defined a material fact as one that would affect market price — which clearly implies that it must have changed the decisions of some investors. Although these two definitions of materiality appear to conflict, they can be reconciled as alternative expressions of the same standard, the former referring to individual investors and the latter referring to investors in the aggregate. Indeed, the Supreme Court has held a fact cannot be material if it cannot matter to the ultimate outcome, suggesting that a fact cannot be material if it does not affect the behavior of a number of investors sufficient to move the market. Arguably, it would be appropriate to consider price impact in connection with the decision to certify a securities fraud action as a class action under the fraud on the market (FOTM) theory since a class action involves the claims of investors in the aggregate and since price impact need not be dispositive as to the merits of the individual claim of the lead plaintiff who may be able to recover under the individual investor standard. The Supreme Court foreclosed that option in its Amgen decision, possibly for fear that failure to determine materiality in the context of a class action might lead to a multiplicity of lawsuits. Nevertheless, the Amgen Court stated that determination of the question may be appropriate on summary judgment even though earlier decisions have emphasized that materiality is a matter of fact that should not be decided by any bright line test. Moreover, in focusing on materiality as a matter of merit, Amgen says nothing about when a court should consider other grounds for rebutting the FOTM presumption of reliance based on the likelihood that the plaintiff class includes significant numbers of atypical investors who may have been indifferent to company-specific market prices and thus may not be adequately represented in a class action.
Merritt B. Fox has posted Due Diligence with Residential Mortgage Backed Securities on SSRN with the following abstract:
In seeking to explain how securitized funds became available for the large volume of mortgages that were inappropriately extended in the runup to the financial crisis, a number of commentators have argued that credit rating agencies and the market itself were unaware of the low quality of the assets backing many residential mortgage back securities (RMBS) offerings and that this lack of awareness was the result of inadequate due diligence. These concerns prompted a number of due diligence related provisions in the Dodd-Frank Act that are now the subject of SEC rule-making.
These developments raise two central questions: what is the socially appropriate level of due diligence that should be undertaken by persons preparing RMBS offering documents and credit ratings, and what is the proper role of regulation, if any, in assuring this level of due diligence. The paper reviews the general theory of asymmetric information in economics and applies this theory to the particular institutional features of securitized mortgage finance. The desirability of two possible policy options are discussed. One is direct regulation of the conduct of due diligence by certain securitization process participants. The other is imposition of liability on such participants for investor losses if these participants do not engage in due diligence that meets a governmentally determined standard.
The paper then engages in a review and assessment of the due-diligence-related provisions of Dodd-Frank and of the rules that have been adopted or are currently proposed by the SEC pursuant to these Dodd-Frank provisions or otherwise in reaction to the perceived role of RMBS offerings in the financial crisis. The paper concludes with a set of recommendations.
Monday, December 2, 2013
Friday, November 29, 2013
The objectives of the new portal are threefold. First, it seeks to provide a centralized point for monitoring global trends, risks and vulnerabilities; second, to provide a mechanism for comparison of how well markets are recovering in light of the crisis; and finally, to provide IOSCO members and the broader financial community with easy access to key statistics, charts and indicators on a number of securities markets, including:
• Corporate Debt - including global and regional issuances of investment grade and high yield debt
• Covered Bonds
• Securitized Products - including issuance since the crisis
• Islamic finance - sukuk bonds, with more products to be covered in the coming months
• Equity IPO volumes
• Equity market valuations - CAPE and Tobin's q measure
• Syndicated Loans - including average cost of deals
• Housing price indices - of selected countries
On December 5th, the SEC will convene a Roundable on Proxy Advisory Services at the SEC’s Washington, D.C. headquarters. The panelists for the event are available here. It looks like a wonderful event, although it would be nice if a few law professors had been included at the table.