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December 2012


From the editors of CCH Federal Securities Law Reporter, CCH Blue Sky Law Reporter and the securities publications of Aspen Publishers, this update describes important developments covered in these publications, as well as timely topics of interest generally to federal and state securities practitioners. This update includes a preview of IPO Vital Signs, an advanced IPO research analysis tool, for IPO professionals and pre-IPO companies and a preview of RBsource, a new all-in-one online securities law resource, powered by the Securities Redbook. Finally, please see the “Hot Topic of the Month,” for research tips and references to CCH and Aspen source material on point.

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Financial Reform Resources



CCH Federal Securities Law Reporter

New Investment Company Act Rule Establishes Standard of Credit-Worthiness for Business and Industrial Development Companies. The SEC adopted new Investment Company Act Rule 6a-5 that establishes a standard of credit-worthiness in place of a statutory reference to credit ratings removed by the Dodd-Frank Act. Rule 6a-5 also establishes the standard of credit quality that must be met by certain debt securities purchased by entities that rely on the Investment Company Act exemption for business and industrial development companies.

Dodd Frank Act Section 939(c) removed a reference to credit ratings from Investment Company Act Section 6(a)(5). Section 6(a)(5) exempts business and industrial development companies (BIDCO) from most provisions of the Investment Company Act subject to certain conditions; these companies invest in securities and frequently meet the Act's definition of "investment company." Before Dodd-Frank was enacted, Section 6(a)(5) limited BIDCOs to purchasing debt securities issued by investment companies and private funds rated as "investment grade." Section 939(c) removed this reference and replaced it with "such standards of credit-worthiness as the Commission shall adopt." The SEC subsequently proposed new Rule 6a-5 to establish a credit-worthiness standard to replace the removed reference.

Rule 6a-5 has been adopted as proposed and establishes "a standard of credit-worthiness designed to achieve the same degree of risk limitation as the credit rating it replaced." Under new Rule 6a-5, a BIDCO meets Section 6(a)(5)(A)(iv)(I)'s requirements for credit-worthiness if the board of directors or members of the company determine that the debt security, at the time of purchase,  is subject to no greater than moderate credit risk and is sufficiently liquid for the security to be sold at or near its carrying value within a reasonably short period of time. Rule 6a-5 additionally limits a BIDCO’s investments in registered open-end funds to funds investing at least 65 percent of their assets in debt securities that meet this standard.

There are no specific factors or tests for the board to apply in performing its credit analysis. The SEC believes that the new standards are clear enough for a BIDCO's board to understand the risks acceptable under the rule. The SEC also stated that in making the credit quality determinations, a BIDCO's board may consider credit quality reports prepared by outside sources that the board concludes are credible and reliable. Release No. IC-30268 will be published in a forthcoming Report.

SEC Again Extends NRSRO Temporary Conditional Exemption from Rule 17g-5(a)(3). The SEC has for the third time extended the temporary conditional exemption from Exchange Act Rule 17g-5(a)(3) for some NRSRO credit ratings. Under the latest extension, NRSROs are exempt from Rule 17g-5(a)(3) until December 2, 2013. The previous exemption was set to expire December 2, 2012.

Under the conditional exemption, an NRSRO is exempt from Rule 17g-5(a)(3) until December 2, 2013 for credit ratings where (1) the issuer of the security or money market instrument is not a U.S. person under Securities Act Rule 902(k) and (2) the NRSRO has a reasonable basis to conclude that the structured finance product will be offered and sold upon issuance, and that any arranger linked to the product will effect transactions in the product after issuance, only in transactions outside the U.S.

The extending release noted several reasons for extending the Rule 17g-5(a)(3) exemption. For one, the SEC’s serial extensions seek to avoid disruption of local securitization markets. The SEC also said it welcomes more time to gather additional input from interested parties. Public comments submitted in reply to prior extensions of the exemption urged Commission restraint in applying the rule extraterritorially. Release No. 34-68286 will be published in a forthcoming Report.

SEC Issues Additional Hurricane Sandy Relief. The SEC issued an order providing relief from securities regulations in the aftermath of Hurricane Sandy. The order noted the wide-spread damage that occurred in the New York and New Jersey region, including power outages and broken lines of communication. The relief applies to Exchange Act filings, proxies, investment companies, transfer agents, and auditors. The Commission, in a related press release, directed SEC staff to take specified positions on a variety of matters, including Forms S-3 and S-8, for those eligible for relief under the SEC’s order.

The SEC’s order provides for relief from Exchange Act filing requirements. Registrants, as defined in Exchange Act Rule 12b-2, are exempt from filing or furnishing materials under Exchange Act Sections 13(a), 13(d), 13(f), 13(g), 14(a), 14(c), 15(d) and 16(a), Regulations 13A, 13D, 13G, 14A, 14C and 15D, and Rules 13f-1 and 16a-3 for the period October 29, 2012 to November 20, 2012. A registrant must be unable to meet applicable deadlines due to Hurricane Sandy, must file required materials with the SEC by November 21, 2012, and must disclose in their filings that they relied on the SEC’s order and state good faith reasons for the untimely filing.

The SEC’s order provides relief for proxy and information statements. A registrant or other person is exempt from requirements to furnish proxy statements, annual reports, soliciting materials, and information statements under Exchange Act Rules 14a-3, 14a-12, 14c-2, and 14c-3. Among other conditions, the registrant’s security holder must have a mail address in a zip code where U.S. Postal Service mail service was suspended due to Hurricane Sandy and the registrant making the solicitation otherwise followed normal procedures. Similar relief applies to registered investment companies regarding the transmittal of annual and semi-annual reports to investors under Investment Company Act Section 30(e) and Rule 30e-1.

The SEC also recognized a need to provide relief to registered transfer agents who may be unable to process or otherwise maintain records of record ownership under Exchange Act Sections 17A and 17(f). As a result, a registered transfer agent that is unable to comply with these provisions due to Hurricane Sandy is temporarily exempt from them for the period October 29, 2012 to December 1, 2012. A registered transfer agent, however, must notify the SEC in writing by November 19, 2012 that it is relying on the order, state good faith reasons for delayed compliance, and state its knowledge or belief that books and records, securities, or funds it is required to maintain were lost or destroyed. The statement also must explain what steps the registered transfer agent has taken to reduce any losses or to maintain the safekeeping of securityholder or issuer funds and securities.

Additionally, the SEC granted limited relief to auditors from the auditor independence requirements that bar auditors from providing bookkeeping services to audit clients under Exchange Act Section 10A(g)(1) and Regulation S-X Rule 2-01(c)(4)(i). Here, the order noted that audit clients whose records were damaged or lost because of Hurricane Sandy may seek help from their auditors to reconstruct those records. The relief is available only for reconstruction services for audit clients’ preexisting accounting records lost or destroyed in Hurricane Sandy. An auditor must stop providing these services for an audit client once the client’s records have been restored and the client can obtain help from other service providers. Audit services provided under the SEC’s order must be pre-approved by the audit client’s audit committee under Regulation S-X Rule 2-01(c)(7).

2nd Circuit: No Bad-Faith Exception to SRO Absolute Immunity. In a ruling by summary order, a 2nd Circuit panel concluded that a former FINRA members’ lawsuit against FINRA was properly dismissed because of FINRA’s absolute immunity as a self-regulatory organization. A former member firm and associated representatives sued FINRA for damages and reinstatement of their membership, alleging breach of a stipulation of settlement, malicious prosecution, and wrongful cover-up. The District Court for the Southern District of New York dismissed the complaint. On de novo review, the appellate court affirmed.

As an SRO, FINRA is entitled to absolute immunity from private damages suits relating to its regulatory responsibilities. The plaintiffs did not deny that their claims fell within FINRA’s regulatory responsibilities, but rather asked the court to recognize a bad-faith exception to absolute immunity. The court declined, citing an earlier Second Circuit decision holding that while bad faith may be relevant to a qualified immunity analysis, it cannot, under ordinary circumstances, overcome absolute immunity. Otherwise, the precedential case noted, the SRO’s "exercise of its quasi-governmental functions would be unduly hampered by disruptive and recriminatory lawsuits." Accordingly, the court affirmed the district court’s dismissal of the plaintiffs’ claims. The claims for non-monetary relief were precluded by adverse decisions already rendered by the SEC, which plaintiffs failed to appeal. Xu v. Financial Industry Regulatory Authority Incorporated (2ndCir) is reported at ¶97,087.

2nd Circuit Panel Declines to Hear Former CEO's Forfeited Arguments. In a summary order without precedential effect, the U.S. Court of Appeals for the 2nd Circuit affirmed a district court's disgorgement and prejudgment interest awards. The appellant had been convicted in a criminal action for operating a massive Ponzi scheme in his capacity as President and CEO of Credit Bancorp, Ltd. that resulted in losses of over $188 million to Credit Bancorp’s investors. The district court ordered the CEO to disgorge approximately $11 million in ill-gotten gains and to pay approximately $10 million in prejudgment interest.

The CEO argued that the district court had miscalculated the amount of the disgorgement award and that prejudgment interest should not be imposed on the entire disgorgement amount. The CEO, however, did not raise these arguments in the district court, despite the fact that they were available to him. The court accordingly concluded that the arguments were forfeited.

The court stated further that it saw no "manifest injustice" in declining to consider the forfeited arguments on appeal. Forfeiture rules apply to pro se litigants like the CEO, and, moreover, the CEO was a sophisticated former officer of a financial services company who had the means to hire counsel, and, in fact had counsel in both earlier proceedings and on this appeal. The court also remarked that the size of the disgorgement award did not merit intervention to avoid injustice, since the size of the award arose from "the massive nature of [the CEO's] fraud" and was thus not a factor supporting "the grant of special solicitude to raise forfeited arguments on appeal." SEC v. Blech (2ndCir) is reported at ¶97,078.

Jury Properly Found Accountant Liable in Backdating Scheme.
In an unpublished opinion, the Ninth U.S. Circuit Court of Appeals affirmed the jury verdict against CPA Michael Pattison for violations of the internal controls and recordkeeping requirements of Exchange Act Section 13(b)(5) and Rule 13b2-1. The court found that substantial evidence supported the jury’s findings that Pattison cherry-picked low share prices as the grant date for employee stock options and submitted documents to auditors that failed to reflect the backdating, and also wrote memos indicating that stock options were not issued below fair market value. Auditors testified that Pattison misled them by indicating that no compensation expense needed to recognized, even though accounting principles required recognizing such an expense.

The trial court did not abuse its discretion by allowing the SEC’s professional witnesses to provide opinion testimony, nor did it commit reversible error when it admitted a redacted version of a restated Form 10-K as a business record, or when it imposed a tier-two civil penalty. Disgorgement, ordered for the amount that Pattison earned from backdating stock options without reporting the transactions to auditors, was also within the court’s discretion. SEC v. Sabhlok (9thCir) is reported at ¶97,072.


CCH Blue Sky Law Reporter  

California Proposes New IA custody Rule. A new custody rule for investment advisers that incorporates the SEC’s custody rule adopted under the Investment Adviser Act of 1940, as well as NASAA’s model custody rule, was proposed by the California Department of Corporations. Interested persons may submit comments about the rule electronically (, by fax (916-322-5875) or by regular mail to the Department of Corporations, Attn. Karen Fong, Office of Legislation and Policy, 1515 K Street, Suite 200, Sacramento, California 95814. Comments must be received by 5:00 p.m. on December 31, 2012. ¶12,217.

Georgia Proposes Definition of “Individual” for Invest Exemption and Fee Schedule for Routine Exam of Mid-Size Advisers. The definition of an individual representing an issuer for the Invest Georgia Exemption was proposed by the Georgia Secretary of State’s Office, along with a fee schedule for routine examinations of mid-size advisers having switched from SEC to state registration. Interested persons may submit comments about the rule proposals to the Commissioner of Securities, Securities Division, 2 Martin Luther King Jr. Drive, S.E., 802 West Tower, Atlanta, Georgia 30334. Comments may, instead, be faxed to (770) 359-4921 or submitted electronically to NOTE: All comments must reference “SEC-2012-12” and be submitted by 5:00 p.m. on December 3, 2012. ¶18,420 and ¶18,447.

SLUSA Precluded Class Action by Investors in Madoff Feeder Funds. In Lakeview Investment, LP v. Schulman, a federal district court (SD.NY.) held that the Securities Litigation Uniform Standards Act (SLUSA) precluded a state court class action alleging that the defendants had violated the California securities laws by making untrue statements in connection with the sale of interests in two private investment funds. After it was revealed that the funds had invested, either directly or indirectly, in the massive Ponzi scheme operated by Bernard Madoff, the lead plaintiff sued the funds’ adviser and certain of its senior executives, seeking rescission or damages under California law based on alleged misstatements concerning the funds’ investment strategies. The court dismissed the action, however, concluding that the complaint was precluded by SLUSA.

The court noted that in order to successfully remove a state law action pursuant to SLUSA, a defendant must establish that the state court action: (1) is a covered class action; (2) based on state statutory or common law; that (3) alleges that the defendants made a misrepresentation or omission of a material fact; (4) in connection with the purchase or sale of a covered security. Although the plaintiff contended that neither of the two funds advised by the defendants had themselves traded in covered securities, the court reasoned that trading in covered securities was central to the plaintiff’s claims because the complaint repeatedly accused the defendants of misrepresentations concerning the extent to which Madoff’s investment strategy, which purported to invest in covered securities, would be used. As the "in connection with" requirement was thus satisfied, and all of the other elements of SLUSA preclusion were met, the action was dismissed. Lakeview Investment, LP v. Schulman is reported at ¶75,001.


Aspen Federal Securities Publications  

Corporate Finance and the Securities Laws, Fourth Edition, by Charles J. Johnson, Jr. and Joseph McLaughlin. The most recent supplement is now available online. Written in plain English by two top experts in the field, this “go to” resource explains the mechanics of corporate finance together with the statutes that govern each type of deal. The latest supplement includes White House and Congressional pressure on SEC rulemaking process; SEC removal of ratings as conditions to availability of short-form registration; new FINRA rules on IPO pricing, lockups, penalty bids, returned shares and first-day market orders; JOBS Act of 2012 and the “IPO On-Ramp;”; manipulation involving security-based swaps; standing issues in litigation under Section 11 of the 1933 Act; recent expanded allegations in Section 11 litigation of omissions of facts “required” to be stated; § 5.01[A][4]); Section 11 litigation and distinguishing between statements of fact and statements of opinion; due diligence relating to developing disclosure issues; JOBS Act of 2012 and mandated elimination in Rule 506 offerings of prohibition against general solicitation and general advertising; “crowdfunding” and “crowdsourcing;” “bad actors” disqualification under Rule 506; due diligence in private placements; recent rescission offers for failure to observe three-year “shelf life” of registration statement; Second Circuit decision regarding bankruptcy consequences of Enron’s repurchase of its commercial paper; developments in auction rate securities litigation; House Financial Services Committee approval of bill to establish a U.S. covered bond product; and recent developments in asset-backed securities regulation.

Corporate Criminal Defense: Compliance Investigation, and Trial Strategies by Eric W. Sitarchuk, Mark A. Srere, and Kelly Moore. The 2013 Supplement is now available online. This publication is your complete resource to identifying the specific areas that leave your corporation open to legal actions and designing programs to avoid points of risk. Prevention is key, but this resource also provides guidance on how to handle a governmental investigation as well as formulate an effective defense if an action does occur. It provides expert guidance—practice tips and warnings, checklists, strategic commentary, and primary law interpretation—plus sample forms, letters, motions, and agreements—on elements, policies, training, auditing, and structure of a compliance program; voluntary disclosure to authorities; dealing competently with the DOJ and SEC; legal representation of employees, officers, and directors; and trial issues unique to corporate criminal defense. The 2013 Supplement contains the latest developments in this increasingly scrutinized area, including: an updated chapter including analysis of the 2012 landmark decision, United States v. Jones, in which the Supreme Court held that the government’s attachment of a GPS device in a target’s car and the subsequent recording of positioning data constituted a search under the Fourth Amendment (see Chapter 7); a revised chapter concerning cyber-evidence, incorporating case developments since the original edition (see Chapter 10); and an updated chapter on criminal discovery, including expanded coverage of appellate review (see Chapter 16).

A Practical Guide to SEC Proxy and Compensation Rules, Fifth Edition, edited by Amy L. Goodman, John F. Olson, and Lisa A. Fontenot. The 2013 Supplement is now available online. This analytical treatise includes comprehensive analysis of the SEC’s revised executive compensation disclosure rules and discusses the increase of shareholder activism. The Fifth Edition continues to be written by a team of experts with a wealth of practical experience in counseling clients on these issues. Part I focuses on the current state of executive compensation matters, reflecting the latest SEC and Internal Revenue Service regulations, interpretations, and disclosure practices. Part II deals with the proxy rules and board of directors and governance proxy disclosures. The 2013 Supplement updates to the Fifth Edition’s comprehensive analysis of the SEC’s revised executive compensation disclosure rules and discusses other recent legislative and regulatory developments. In addition to miscellaneous updates throughout the guide, the 2013 Supplement includes an updated discussion of executive compensation disclosure and CD&A practices, including updated SEC comments regarding CD&A disclosures, and the impact of the Dodd-Frank Act including discussion of “say on pay,” independence of compensation committees and their advisors, as well as impending rule proposals regarding clawbacks, hedging policies, internal pay ratio, and pay for performance; an updated Chapter 4 on the “say-on-pay” vote required, discussing the experience in the first two years this advisory vote has been generally required of companies, with discussion of the new ISS methodology for evaluating pay and performance and practical guidance for a successful outcome, and discussion of “say-on-frequency” and “say-on-golden parachutes;” an updated and expanded overview of the proxy solicitation rules; an updated discussion of the shareholder communications rules, recent experience regarding dissident Board slates, and legislative developments and advance notice model bylaw provisions; a revised chapter regarding shareholder proposals including a discussion of 2012 shareholder proposal developments and experiences; an updated chapter including discussion of the recently proposed Nasdaq and NYSE requirements for independence of compensation committees’ members; revised appendices, including revised Rules 10A-3 and 10C-1 regarding requirements of audit and compensation committees and “say on pay” requirements, the proxy rules in light of “say-on-pay” and proxy access developments, and 2012 amendments to the NASDAQ corporate governance rules and related interpretative materials; and a new appendix entitled “Compensation and Proxy Disclosure Requirements for Emerging Growth Companies—Excerpts from the Jumpstart Our Business Startups Act.”

Corporate Secretary’s Answer Book, Fifth Edition, by Cynthia Krus. The 2013 Supplement is now available online. Corporate Secretary’s Answer Book addresses issues vital to corporate secretaries and shares a wealth of practical experience, providing tips, strategies, and forms to assist in the day-to-day planning and implementation of the corporate secretarial function. This publication gives any corporate secretary, from the newly appointed to the more experienced, the answers he or she needs. The 2013 Supplement contains a new chapter on the JOBS Act (see Chapter 29). Beyond textual discussion, the Answer Book is replete with forms, memorandums, checklists, and real-life examples to assist the corporate secretary in his or her daily tasks. The 2013 Supplement also includes discussion and analysis of the following new questions: Can a certificate of incorporation limit the voting rights of its shareholders? If so, how? (see Chapter 1); What has been the reaction to multi-tier share structures? (see Chapter 1); What other actions have shareholders taken to fight against advance notice provisions? (see Chapter 2); How common are disruptive shareholders at annual meetings? (see Chapter 3); What other notable data was gathered from 2012 annual meetings? (see Chapter 3); What have been the NYSE Proxy Advisory Fee Advisory Committee’s recent recommendations with regard to proxy distribution services? (see Chapter 4); What has been the criticism by the Securities Transfer Association of the NYSE Proxy Advisory Fee Advisory Committee’s recent recommendations with regard to proxy distribution services? (see Chapter 4); What information is included in companies’ supplemental filings on “say on pay”? (see Chapter 4); What has been the impact on companies that have made supplemental filings on “say on pay”? (see Chapter 4); How has the NYSE recently narrowed the scope of discretionary broker votes under Rule 452? (see Chapter 5); Have there recently been any protests at annual shareholder meetings? (see Chapter 6); What is the background surrounding the Conflict Minerals disclosure requirements? (see Chapter 6A); Who do the Resource Extraction Rules apply to and what is required? (see Chapter 6A); What is Mine Safety Disclosure, who does it apply to, and what is required? (see Chapter 6A); What should companies do to assist boards in adjusting to using digital board books? (see Chapter 9); What are the disclosures required about diversity? (see Chapter 10); How do companies assess a director’s qualifications? (see Chapter 10);  Does the prohibition on interlocking apply to parent, subsidiaries, or affiliates? (see Chapter 10); Are there any recent cases regarding director compensation? (see Chapter 10); How may an audit committee utilize PCAOB inspections when evaluating the company’s independent auditors? (see Chapter 14); How should audit committees handle IFRS? (see Chapter 14); How does the JOBS Act affect accounting and audit requirements of public companies? (see Chapter 14); How has Delaware interpreted mandatory and permissive indemnification claims? (see Chapter 15); How are confidential registration statements submitted by Emerging Growth Companies pursuant to the JOBS Act processed? (see Chapter 16); What are “blocker provisions” and how do they work? (see Chapter 17); Are there any hidden risks in disclosing tax considerations in the CD&A? (see Chapter 23); Should the company disclose privileged materials to the government agency when self-reporting? (see Chapter 26); Do the protections for SEC whistleblower have extraterritorial effect? (see Chapter 27); How does the JOBS Act impact initial public offerings? (see Chapter 29); When is the SEC expected to finalize the amendments to Rule 506 or Rule 144A to permit general solicitation and general advertising in connection with such offerings? (see Chapter 29).

Securities Regulation in Cyberspace, by Howard M. Friedman. The 2013 Supplement will soon be available online. This treatise analyzes the interweaving of technology and the securities laws, providing in-depth review of the tremendous impact technological advancements such as the Internet have had, and will continue to have, on securities regulation. The 2013 Supplement contains several rewritten and revised chapters including: Chapter 1, The Online Revolution: The Basics of Cyberspace For Securities Regulation, Corporate Finance, and Shareholder Relations; Chapter 2, Electronically Posting and Delivering SEC Documents; Chapter 3, Electronic Offer, Sale, and Distribution of Securities: A Guide For Issuers, Underwriters, and Dealers; Chapter 4, Blue Sky Law Considerations in Cyberspace; Chapter 5, Finding Capital Through the Internet: E-Underwriters and Direct Issuer Offerings; Chapter 6, Issuer and Third-Party Bulletin Boards: Failed Experiments in Seeking Liquidity Online; Chapter 7, Employee Stock Plans, Dividend Reinvestment Plans, and Direct Stock Purchase Plans; Chapter 8, International Offerings in an Electronic Age; Chapter 9, Electronic Marketing of Mutual Fund Shares; Chapter 10, Investor Relations on the World Wide Web; and Chapter 11, Corporate Governance in Cyberspace: Proxy Statements, Annual Reports, and the Virtual Shareholders’ Meeting. Other chapters contain updates of recent developments, including: The NYSE’s implementation of the Dodd-Frank mandate requiring all exchanges to adopt rules barring discretionary broker voting in election of directors, approval of executive compensation, and in any other significant matter specified by SEC rule; securities fraud, especially offerings through social media; the informal disclosure of financial information by municipal issuers on their own Web sites; the JOBS Act’s provision permitting emerging growth companies to file a draft IPO registration statement with the SEC for confidential nonpublic review and ongoing changes to EDGAR filings; FINRA’s guidance on the application of its rules to broker-dealer communications through blogs and social networking Web sites, building on the rules previously promulgated to regulate other types of online communications; electronic communications by investment advisers that are subject to recordkeeping requirements as well as their use of social media; the SEC’s one-year pilot program, based on a broader proposal by the stock exchanges and FINRA, that creates a market-wide limit-up/limit-down mechanism; and an updated online resources for securities lawyers.

Capital Markets Handbook, Edited by John C. Burch, Jr. and Bruce S. Foerster. The 2013 Supplement will soon be available online. This supplement includes coverage of the Jumpstart Our Business Startups (JOBS) Act of 2012 and the dramatic changes this legislation brings to capital raising for so-called “emerging growth companies”; updated descriptions of the duties and functions of the SEC’s divisions and offices; expanded treatment of due diligence; expanded “Overviews” section to the beginning of many of the chapters; updated underwriting and pricing statistics; inclusion of new Appendix L for pertinent Op-eds, articles, and open letters; and an amended and expanded Glossary.


IPO Vital Signs

IPO Vital Signs, an advanced IPO research analysis tool, assists IPO professionals and pre-IPO companies satisfy their most challenging research needs and answers hundreds of mission critical questions for all the players in the IPO process. IPO Vital Signs’ tabular data analyses focus on issues surrounding client advisement, deal negotiation, and prospectus disclosure.

IPO Week in Review, a weekly e-newsletter to keep professionals up to date with recent filing and going public activity, is an important element of the IPO Vital Signs system or is available by separate subscription. Coverage includes a monthly feature article on recent trends in going public in the U.S.

To see how an IPO Vital Sign works click on the Vital Sign title below:



#161 – IPO Lawyers
Who are the leading IPO lawyers??
Review IPO lawyer activity based on

  • Number of IPOs (combined)
  • Issuer's/Underwriters’ Representations
  • Aggregate IPO Offer Amount

Hint! 1) Click a blue number to see more details on the IPOs represented, and 2) click a column heading to re-sort the table to see leadership in different categories (click once to rank ascending, twice for descending). 


A new research tool powered by the Securities Redbook (Securities Act Handbook), RBsource offers you securities laws, rules, regulations and forms together with related SEC guidance and interpretations. With RBsource, you will have SEC guidance related to a specific law, regulation or rule at your fingertips without the need of further searching or browsing. RBsource uniquely associates related content, going beyond the limits of standard searching making research more streamlined and productive. This intuitive research tool will drastically reduce your research time and provide the unparalleled confidence expected from the trusted Securities Act Handbook.

SEC Rulemaking Activity

  • IC-30268—Purchase of Certain Debt Securities by Business and Industrial Development Companies Relying on an Investment Company Act Exemption (November 19, 2012).

The final release adds Investment Company Act Rule 6a-5 to establish credit worthiness standards for debt securities bought by entities that rely on the Investment Company Act exemption for business and industrial development companies.

  • 34-68286—Order Extending Temporary Conditional Exemption for Nationally Recognized Statistical Rating Organizations from Requirements Of Rule 17g-5 Under the Securities Exchange Act of 1934 and Request for Comment (November 26, 2012).

The SEC’s order further extends the temporary conditional exemption from Exchange Act Rule 17g-5(a)(3) for eligible NRSRO credit ratings.

The Road Ahead

Upcoming rulemaking activity will continue to reshape the securities regulation landscape. The items below are a selection of expected near-term regulatory actions. The SEC’s schedule is subject to change at any time. RBsource includes daily updates to securities regulations affected by final Commission action.

SEC Chairman Mary L. Schapiro on November 26, 2012 announced that she will leave the Commission on December 14, 2012. President Barack Obama has stated his intention to designate current SEC Commissioner Elisse Walter as the SEC’s next chairman. According to Jim Hamilton, Securities Principal Analyst for Wolters Kluwer Law & Business, Walter has advocated money market fund reforms that build on the SEC’s 2010 reforms. Said Hamilton, “[Walter’s] appointment comes at a critical time when the Financial Stability Oversight Council has urged the SEC to act quickly on alternative reform options, including a floating NAV and a capital buffer.”

Earlier this year, out-going Chairman Schapiro published a statement noting the lack of support among SEC commissioners for the money fund proposal she had planned to put forward. Three other commissioners publicly replied by stating their own views. The question now is whether new personnel atop the SEC coupled with FSOC’s spotlight on the SEC’s key role in money fund reform might spur SEC action. Until a fifth commissioner is confirmed to fill the soon to be open seat, any SEC action would need to overcome a potential tie vote.


Hot Topic of the Month

This month’s hot topic is the forfeiture of bonuses and profits, or clawbacks. The Sarbanes-Oxley Act requires certain officers to forfeit profits realized on company stock sales, or bonuses received from the company, while management is misleading the public and regulators about the company's financial condition. Section 304 of the act provides that, in the case of accounting restatements that result from material non-compliance with SEC financial reporting requirements, the chief executive officer and chief financial officer must disgorge bonuses and other incentive-based compensation and profits on stock sales, if the non-compliance results from misconduct. The required disgorgement applies to amounts received for the 12 months after the first public issuance or filing of a financial document embodying such financial reporting requirement. The SEC may, however, exempt any person from this requirement as it deems necessary and appropriate.

Sarbanes Oxley Section 304 does not require personal misconduct. In SEC v. Baker (WD Tex 2012), the court concluded that the language of the statute and its legislative history unambiguously requires reimbursement by CEOs and CFOs of qualifying compensation received after a filing and subsequent restatement due to misconduct; there is no requirement of scienter or separate misconduct. The court held further that Section 304 is constitutional on its face because it has a rational basis in creating a personal incentive for CEOs and CFOs to take their reporting and certification duties seriously. Additionally, the statute is not void for vagueness and does not violate the Excessive Fines or Due Process clauses.

Courts that have addressed the issue have found that Section 304 does not create a private right of action for shareholders and is enforceable only by the SEC. For example in In re iBasis, Inc. Derivative Litigation (DC Mass 2007), the court found that shareholders who filed a derivative action failed to assert a viable federal claim. In determining that there was no private right of action under Section 304, the court found that "the statutory structure of [Sarbanes-Oxley], the nature of the penalty provision, and precedent from other courts" indicated that Congress did not intend to provide for private enforcement of the section.

We publish information in a wide range of resources (e.g., Federal Securities Law Reporter, SEC Today, Securities Regulation - Loss & Seligman, etc.), and document types (cases, laws, regulations, newsletter articles, treatise discussion). For example:

  • Federal Securities Law Reporter
  • Sarbanes-Oxley Act Section 304, at ¶62,849
  • SEC v. Baker (WD Tex 2012), at  ¶97,085
  • In re iBasis, Inc. Derivative Litigation (DC Mass 2007), at ¶94,536
  • CCH Explanations (e.g., ¶62,991.054)
  • Report Letters (e.g. "SEC May Seek Reimbursement of Bonuses from Officers Who Took No Part in Fraud" (11-29-12)
  • Insights – Amy L. Goodman (e.g., “How Effective Is Your Company's Clawback?" (March 1, 2010))
  • Securities Regulation – Loss & Seligman (e.g., Chapter 6.F.4)
  • Regulation of Securities: SEC Answer Book – Levy (e.g., Question 9:48)
  • U.S. Regulation of the International Securities and Derivatives Markets – Greene, Beller, Rosen, Silverman, Braverman & Sperber (e.g., Chapter 4.07[2][e])
  • Jim Hamilton’s World of Securities Regulation (Commentary and musings on the complex, fascinating and peculiar world that is securities regulation)