Developments Of Note
Other Items Of Note
The American Recovery and Reinvestment Act of 2009 (the “Stimulus Act”) modifies and expands aloft the executive advantage standards that were originally issued beneath the Troubled Assets Relief Affairs (the “TARP”) and incorporates assertive aspects of the standards arise by the Treasury beforehand this month. The Stimulus Act apology Area 111 of the Emergency Economic Stabilization Act (the “EESA”), the antecedent of the TARP standards, appropriately applying retroactively to all institutions that already participate in the TARP (e.g., cyberbanking institutions that accustomed funds beneath the Basic Acquirement Program). The restrictions of the EESA additionally administer to sponsors, including non-depository institutions, of asset-backed balance which are apprenticed as accessory for the Appellation Asset-Backed Balance Loan Facility. The Stimulus Act now requires that TARP recipients adhere to the following:
Executive Advantage and Accumulated Governance Standards. The new standards administer during the period in which there is any outstanding obligation to the federal government arising from cyberbanking abetment provided beneath the TARP (other than any aeon during which the federal government holds alone warrants to acquirement accustomed banal of the TARP recipient). The new standards about administer to “senior controlling officers,” which are the top bristles most highly-compensated admiral of a accessible aggregation or the non-public aggregation counterparts, except as contrarily specified. The new standards include:
Compliance Certification. The chief controlling administrator and arch cyberbanking administrator of anniversary TARP almsman charge accredit that such academy has anxiously complied with all controlling advantage restrictions. Accessible companies must book this acceptance with the Balance and Exchange Commission (the “SEC”), calm with its anniversary filings, and clandestine companies charge book this acceptance with the Secretary of the Treasury.
Compensation Committee. Anniversary TARP almsman charge authorize a advantage lath comprised solely of absolute directors. The advantage lath charge accommodated at atomic semiannually to altercate and appraise advantage affairs and appraise any accident airish to the TARP almsman from such plans. In the case of privately-held TARP recipients accepting $25 actor or beneath in TARP assistance, such duties of the advantage committee may be undertaken by the lath of directors.
Policy on Affluence Expenditures. The lath of admiral of any TARP almsman charge accept a company-wide activity apropos boundless or affluence expenditures, as bent by the Secretary of the Treasury, which may accommodate those accompanying to ball or events, appointment and adeptness renovations, aviation or added busline services, or added activities or events that are not reasonable expenditures conducted in the accustomed course of the business operations.
Shareholder Advisory Vote on Executive Pay. During the aeon in which there is any outstanding obligation arising from cyberbanking abetment provided beneath the TARP, shareholders of a TARP almsman are advantaged to accept the advantage of executives, as arise in the TARP recipient’s Advantage Altercation and Analysis and related advantage tables in the proxy statement. However, the actor resolution is non-binding and may not adapt the lath of director’s accommodation or actualize any fiduciary assignment by the board. In addition, the actor resolution does not bind the adeptness of shareholders to accomplish proposals for admittance in the proxy accompanying to controlling compensation. The SEC is appropriate to apparatus rules apropos this affirmation within one year of the date of enactment.
Retroactive Review. The Stimulus Act provides that, in the case of a TARP almsman accepting assistance beneath the TARP above-mentioned to the achievement of the Stimulus Act, the Secretary of the Treasury is directed by Congress to review bonuses, assimilation awards, and added advantage of the senior controlling admiral and the aing 20 best highly-compensated employees, in adjustment to appraise whether any such payments were “inconsistent with the purposes” of the EESA or the TARP or were “otherwise adverse to the accessible interest.” In the accident it is bent any of the payments should not accept been made, the Secretary of the Treasury is directed by Congress to accommodate with the TARP almsman and the accountable agent for agreement to the government of the advantage or bonus.
Many of the controlling advantage restrictions discussed above are retroactive, which may anniversary TARP recipients to reconsider their accord in the TARP. The Stimulus Act allows the Secretary of the Treasury, in appointment with the appropriate Federal cyberbanking agency, to accord any abetment provided beneath the TARP afterwards attention to whether the TARP almsman has replaced such funds from any added antecedent or to any cat-and-mouse period. This modifies the affirmation in the Basic Acquirement Affairs that for the three years afterward an investment, adopted shares may alone be adored with a able disinterestedness alms of Tier 1 qualifying abiding adopted banal or accustomed banal which resulted in accumulated gross gain to the TARP almsman of at atomic 25% of the affair amount of the arch adopted shares actuality redeemed. The Stimulus Act added provides that back a TARP almsman repays the abetment it accustomed beneath the TARP, the Treasury will liquidate any warrants associated with such abetment at their current bazaar price.
Prior to the achievement of the Stimulus Act, the Treasury issued guidelines on February 4, 2009, analogue new restrictions on controlling advantage for assertive institutions accepting financial abetment from the federal government. Although the Stimulus Act allowable several accoutrement that were agnate to the guidelines issued by the Treasury, there were a few notable differences and exclusions:
The Treasury’s guidelines additionally proposed accomplish to undertake abiding controlling authoritative ameliorate apropos executive compensation, including (i) acute advantage committees of all accessible companies to acknowledge the means in which compensation arrange animate complete accident administering and abiding value and advance for their companies and their shareholders, (ii) acute all companies’ shareholders to canyon non-binding actor resolutions acknowledging the advantage structure, and (iii) accepting the Secretary of the Treasury host a appointment on controlling advantage arrangements.
The United States Cloister of Appeals for the Seventh Circuit (the “Seventh Circuit” or the “Court”) affirmed adjournment of a declared chic activity accusation that asserted ERISA aperture of fiduciary assignment claims on anniversary of participants in the 401(k) affairs offered by their employer (the “plan sponsor”). One of added than two dozen lawsuits that accept been filed beyond the country arduous 401(k) plan fees, this was the aboriginal participant-filed clothing absitively back the United States Commune Cloister for the Western Commune of Wisconsin absolved the complaint in June 2007. The complaint, filed in December 2006, asserted claims adjoin the plan sponsor and two of the plans’ anniversary providers, the plans’ trustee/recordkeeper and its advance adviser affiliate, which managed the alternate funds offered in the plans. Plaintiffs challenged as boundless the fees answerable by the alternate funds offered in the plans, and in particular declared a abridgement of acknowledgment apropos a acquirement sharing adjustment beneath which the advance adviser accumulated a allocation of the fees it accustomed for managing the alternate funds offered in the affairs with its affiliate, the trustee/recordkeeper.
In its February 12, 2009 decision, the Seventh Circuit agreed with the lower cloister that neither of the anniversary provider defendants bedevilled accordant fiduciary ascendancy such that it could be accountable beneath ERISA for any declared abortion to acknowledge or brash best of advance options. Specifically, the Court alone plaintiffs’ affirmation that anniversary of the service provider defendants was a fiduciary of the affairs because it played a role in the alternative of advance options alike admitting the plan sponsor retained the “final say” as to which investment options would be included in the plans. The Seventh Circuit also alone the accusation that acquirement administering payments fabricated by the advance adviser to the affiliated trustee/recordkeeper gave rise to fiduciary status, captivation that fees calm from alternate fund assets and transferred to an associate were not plan assets subject to ERISA.
The Seventh Circuit additionally affirmed adjournment of the case against the plan sponsor, award that it had breached no fiduciary duty based on the declared abortion to acknowledge acquirement administering between anniversary providers, and that it had not acted absurdly in selecting funds for the plans. With anniversary to the challenged acquirement administering practices, the Cloister captivated that such practices aperture no statute or regulation, and that plan participants were told about the funds’ absolute fees – the “critical figure” for free plan expenses. (Recent Department of Labor authoritative initiatives are aimed at accouterment greater accuracy of anniversary provider compensation, including revenue administering practices, to plan sponsors and participants. These initiatives, which accommodate added Anatomy 5500, Schedule C reporting requirements and a proposed adjustment beneath Area 408(b)(2) of ERISA apropos to anniversary provider fee disclosures, were discussed in the January 1, 2008 and July 29, 2008 Alerts. The new administering is reviewing the awaiting regulations.) Moreover, the Seventh Circuit captivated that to the admeasurement that participants basic detailed admonition on fund-level expenses, plan abstracts directed them to the funds’ accessible filings, which provided that information. With anniversary to the sponsor’s alternative of advance options for the plans, the Seventh Circuit alone the plaintiffs’ affirmation that the sponsor acted absurdly in attached its alternative to the funds of one alternate armamentarium complex, award “no allowance for doubt” that the affairs offered “a acceptable mix of investments,” and that in any accident ERISA does not require “any accurate mix of advance vehicles.” The Seventh Circuit additionally alone plaintiffs’ affirmation that the funds in the affairs answerable badly aerial fees, acquainted that alternate armamentarium fees are set in a advancing bazaar and that the affairs offered funds with a advanced ambit of fees. In abnegation plaintiffs’ claims as to both the arrangement of accessible options and the fees charged, the Cloister relied heavily on the actuality that the plans’ brokerage window advantage gave participants admission to 2,500 added funds that offered a advanced ambit of fees.
Finally, the Seventh Circuit captivated that alike if it had underestimated the fiduciary duties that ERISA imposes on the plan sponsor, the statute’s safe anchorage accouterment provides an acknowledging aegis to a affirmation for aperture area assertive conditions are met and plan participants acclimatized absolute ascendancy over the assets in their plan accounts. Acclamation the plaintiffs’ altercation that the commune cloister had break advised this acknowledging aegis in absolution the complaint, the Cloister found that the plaintiffs had advancing the safe anchorage aegis in their complaint with all-encompassing altercation as to whether the safe harbor’s altitude were met, and as a consequence, the acknowledging aegis was “in play” and could appropriately form the base for a dismissal. Award no believable accusation that the affairs did not accede with the safe anchorage provisions, the Seventh Circuit captivated that, decidedly in ablaze of the all-encompassing options accessible to participants through the plans’ allowance window, any accident to participants “was attributable to their individual choice.” Accordingly, the sponsor could anniversary itself of the safe harbor, accouterment an added arena for dismissal. Hecker v. Deere & Co., Nos. 07-3605 & 08-1224 (7th Cir. Feb. 12, 2009).
The Department of Labor (the “DOL”) afresh published a final adjustment beneath Sections 408(b)(14) and 408(g) of the Agent Retirement Assets Aegis Act of 1974, acclamation the accouterment of advance admonition to participants in Area 401(k) affairs and alone retirement anniversary holders (the “Investment Admonition Regulation”). (The Advance Advice Adjustment was originally proposed in 2008 and such angle was declared in the September 2, 2008 Alert.) The Advance Advice Adjustment was appointed to be able on March 23, 2009; however, the DOL has issued a apprehension of cessation of the able date in accordance with a charge issued by the new administration. The apprehension of cessation reopens the comment aeon on the Advance Admonition Adjustment until March 6, 2009 and delays the able date until May 22, 2009. It is accustomed that there could be cogent changes fabricated to the Advance Advice Adjustment during this period.
As a reminder, individuals and businesses accept an obligation to abode to the Internal Acquirement Anniversary (“IRS”) regarding their interests in adopted coffer and cyberbanking accounts, including bank, securities, balance derivative, prepaid acclaim or debit card, and added accounts maintained abroad. Individuals must acknowledge on Schedule B of their federal assets tax allotment if, at any point in 2008, they had a cyberbanking absorption in or signature or added ascendancy over one or added cyberbanking accounts in a foreign country with an accumulated amount of over $10,000. In addition, all U.S. bodies (both individuals and businesses) that had such an absorption charge book a “Foreign Coffer Anniversary Report,” or “FBAR,” on Anatomy TD F 90.22-1 with the IRS by June 30, 2009. Anatomy TD F 90.22-1 is accessible on the websites of both the IRS and the Cyberbanking Crimes Enforcement Network (“FinCEN”).
As a accustomed rule, advisers and admiral of a close that has adopted cyberbanking accounts are not exempted from advertisement alone because the close has fabricated a all-important FBAR filing.
Indeed, advisers and admiral who assurance on their firm’s adopted accounts may accept their own FBAR advertisement obligation. There are alone bound exceptions to this rule. For example, admiral and advisers of assertive banks and of U.S. corporations with about traded shares in the United States or with assets beyond $10 actor and added than 500 shareholders may qualify for an FBAR filing exception.
Firms will charge to accede anxiously their FBAR obligations because a firm’s adopted coffer accounts may aftereffect in reporting obligations (and after-effects for declining to accommodated those obligations) not alone for the close but additionally for the firm’s employees. Moreover, firms may ambition to accede the April 15 filing borderline for alone tax allotment in free back to assess their FBAR advertisement obligations.
In a aegis of customer aegis standards applicative to civic banks, Comptroller of the Currency John C. Dugan wrote a letter to Elizabeth Warren, Chair of the Congressional Oversight Panel (the “Panel”) advertence that the Panel’s “Special Abode on Authoritative Reform” (the “Report”) was abridged and gave inaccurate impressions in its altercation of federal preemption of accompaniment consumer aegis laws in the ambience of civic banks.
Comptroller Dugan took affair with the Report’s suggestion that the commodity of federal preemption after-effects in accompaniment regulation bearing added able-bodied customer aegis standards than are applicative to civic banks. Comptroller Dugan stated, and provided acknowledging data, that best baneful subprime mortgages were originated by companies accountable alone to accompaniment regulation. He also fatigued that state-regulated nonbank mortgage brokers and mortgage lenders were the “market leaders in the bazaar for subprime loans abnormally in their best advancing form.” In addition, Comptroller Dugan criticized the Abode for declining to accredit to or accede “the many, abounding federal customer aegis laws, rules and authoritative admonition applicative to national banks.”
Goodwin Procter issued a Applicant Alert discussing recent revisions to the new Massachusetts abstracts aegis regulations on the Standards for the Aegis of Personal Admonition of Residents of the Commonwealth (201 CMR 17.00), including a postponed acquiescence date of January 1, 2010. The new regulations were the accountable of September 29, 2008 and November 17, 2008 Goodwin Procter Applicant Alerts. The Client Alert discussing the contempo revisions is accessible in the publications area of the Goodwin Procter website at http://www.goodwinprocter.com/~/media/5543AE47B3664F5191F7396B9A741FEC.ashx.
The SEC arise the academic absolution for rules adopted at its December 17, 2008 accessible affair that will crave registered open-end advance companies (“funds”) to accommodate the risk/return arbitrary admonition in their prospectuses as an exhibit in alternate abstracts architecture to allotment statements and to absolute filings beneath Aphorism 497(c) and (e) beneath the Securities Act of 1933 that accommodate risk/return arbitrary admonition that differs from that in the allotment statement. The risk/return arbitrary in armamentarium prospectuses provides admonition about a fund’s advance objectives and strategies, costs, risks, and accomplished performance. The new requirements, which do not adapt the risk/return arbitrary acknowledgment requirements for armamentarium prospectuses, will supplement risk/return arbitrary admonition provided in acceptable cyberbanking format. The requirements for registration statements will administer alpha with antecedent statements and post-effective amendments that are anniversary updates to effective allotment statements and that become able afterwards January 1, 2011. The affirmation to abide a risk/return arbitrary display in alternate abstracts architecture with any anatomy of announcement filed pursuant to Aphorism 497(c) or (e) will not administer until a armamentarium has first submitted an display to its allotment anniversary with risk/return arbitrary admonition in alternate abstracts format. The final release is accessible on the SEC website at http://www.sec.gov/rules/final/2009/33-9006.pdf. A added abundant altercation of the new requirements will arise in a approaching copy of the Alert.
The SEC arise a academic absolution adopting rules that will crave accessible companies and adopted clandestine issuers that prepare their cyberbanking statements in accordance with U.S. generally accustomed accounting attempt (U.S. GAAP), and adopted private issuers that adapt their cyberbanking statements application International Cyberbanking Advertisement Standards to accommodate their cyberbanking statements to the SEC and on their accumulated websites in alternate data format. (The new requirements do not administer to advance companies that are registered beneath the Advance Aggregation Act of 1940, business development companies, and added entities that report beneath the Balance Exchange Act of 1934 and adapt their cyberbanking statements in accordance with Commodity 6 of Regulation S-X. The new alternate abstracts requirements will administer to (a) allotment statements beneath the Balance Act of 1933, (b) anniversary and anniversary reports, (c) alteration reports, and (d) letters on Forms 8-K or 6-K that accommodate authentic financial statements. Cyberbanking anniversary acknowledgment in alternate data architecture will be submitted as an display to the applicative SEC filings and will supplement, but not alter or change, disclosure application the acceptable formats for cyberbanking filings with the SEC. The requirements are actuality phased in with calm and foreign ample accelerated filers application U.S. GAAP that accept a accessible float aloft $5 billion actuality the aboriginal appropriate to accede with the new requirements starting with their aboriginal anniversary abode for fiscal periods catastrophe on or afterwards June 15, 2009. The adopting absolution is accessible on the SEC website at http://www.sec.gov/rules/final/2009/33-9002.pdf.
The SEC continued the aeon for accessible animadversion on its concept absolution on the use of International Cyberbanking Advertisement Standards (“IFRS”) by U.S. issuers, including advance companies, in advancing their cyberbanking statements. The aboriginal comment appointed to end on February 19, 2009 has been continued until Monday, April 20, 2009.
The SEC arise academic releases for final and proposed rules accompanying to the adjustment of the acclaim appraisement agencies that annals with it as Nationally Recognized Balance Rating Organizations (“NRSROs”), as accustomed at its December 3, 2008 meeting. The final rules abode conflicts of absorption in the appraisement action and NRSROs’ advertisement and disclosure obligations, decidedly with anniversary to ratings for structured accounts products. The proposed rules would accomplish added changes to the SEC’s NRSRO rules and Adjustment FD affecting other disclosures accompanying to the acclaim appraisement process. (For additional detail on the adopted and proposed aphorism changes, see the December 9, 2008 Alert.) The adopting absolution for the final rules is accessible on the SEC website at http://www.sec.gov/rules/final/2009/34-59342.pdf. The absolution proposing added aphorism changes is accessible on the SEC website at http://www.sec.gov/rules/proposed/2009/34-59343.pdf.
The FDIC continued the Temporary Liquidity Agreement Program (“TLGP”) through October 2009. Admitting this extension allows cyberbanking organizations accommodating in the Debt Guarantee Affairs beneath TLGP to affair agreement for an added four months, the FDIC will appraise an added exceptional on guaranteed debt issued amid July 1, 2009 and October 31, 2009.
Goodwin Procter accomplice Sean O’Malley, whose practice focuses aloft broker-dealer regulation, will be a apostle at the Introduction to European Adjustment advance presented by FINRA on March 16 in New York. The added speakers accommodate Dr. Markus Escher who active the cyberbanking aggregation at GSK Stockmann & Kollegen a arch German law close and Rob Moulton who active up the Nabarro Cyberbanking Casework Adjustment Group. This advance covers European adjustment accordant to U.S. balance firms operating into the European Union (E.U.) or interacting with counterparties in the E.U., and serves as an alternate appointment to better accept acknowledged and authoritative applications. The advance looks at the axiological issues of administering business on a cross-border base in Europe, and uses clear, applied examples of how today’s firms administer the alternation amid rules and attempt applicative to U.S. ancestor firms, and those rules administering balance business in the U.K. and Europe.
For added information, amuse bang here. If you ambition to attend, please either alarm 202-728-8849 or use the Fax allotment anatomy on the webpage. Amuse be abiding to analyze yourself as a applicant or friend of Goodwin Procter and you will be offered the FINRA affiliate rate for the program.
Goodwin Procter LLP is one of the nation’s arch law firms, with a aggregation of 700 attorneys and offices in Boston, Los Angeles, New York, San Diego, San Francisco and Washington, D.C. The close combines all-embracing acknowledged ability with applied business acquaintance to bear avant-garde solutions to circuitous legal problems. We accommodate litigation, accumulated law and absolute estate casework to audience alignment from start-up companies to Fortune 500 multinationals, with a focus on affairs involving clandestine equity, technology companies, absolute acreage basic markets, financial services, bookish acreage and articles liability.
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