Wednesday, October 17, 2018
1:00 p.m. – 2:00 p.m. EDT

During this session, Partners Michael L. Hermsen and Anna T. Pinedo will review the accommodations available to foreign private issuers, or non-U.S. domiciled companies, that choose to access the U.S. capital markets. We will discuss assessing a company’s status as a foreign private issuer, the initial registration and ongoing disclosure requirements for foreign private issuers, liability considerations, and related topics. The speakers also will address recent developments significant to foreign private issuers, including:

  • Staff guidance regarding the foreign private issuer definition;
  • Areas of focus for SEC comments in anticipation of upcoming 20-Fs and 40-Fs, including cyber security matters;
  • Disclosure simplification;
  • Exhibits, HTML and XBRL for foreign private issuers and IFRS filers; and
  • Areas of likely SEC focus in the coming months.

Wolters Kluwer will provide CLE credit. For more information, or to register for this session, please visit the event website.

Structuring a transaction that addresses an issuer’s capital structure, including its debt obligations, financial and other covenant limitations, and debt maturity profile, involves compromise in some cases. An appropriate liability management transaction that considers the issuer’s objectives and also provides sufficient incentives for existing security holders can be a delicate balancing exercise.

The topic is timely as in the years following the financial crisis, low interest rates lead issuers to take on cheap debt, with some later refinancing through liability management transactions. Debt management exercises are expected to increase in the years to come.

In the International Financial Law Review‘s publication, Structuring Liability Management Transactions, Mayer Brown lawyers provide a summary of the US legal framework, including guidance provided in numerous no-action letters issued over many years, applicable to debt repurchases, tender offers and exchange offers. They also present some of the main regulatory and tax considerations that should be taken into account when determining the best approach.

To download a copy of the publication, please click here If you or your colleagues would like hard copies of the publication, please click here

Tuesday, October 16, 2018

The Fairmont Royal York
100 Front Street West
Toronto, ON M5J 1E3
Canada

Please join Mayer Brown Partners Thomas A. Humphreys,  Anna T. Pinedo, Jerome J. Roche, and Donald S. Waack for one (or both) of the following presentations.

During the first session, we will provide an overview of the most significant regulatory changes and proposed amendments affecting financial institutions, with a focus on non-US-domiciled banks doing business in the United States. As year-end approaches, we’ll also share our views on what to expect in the months to come as mid-term elections approach. During our session, we will review the changes that have come as a result of actions taken by the banking agencies, including proposed amendments to the Volcker Rule and the proposed stress capital buffer. We will also address the changes contained in the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act. We will also provide some perspective on the additional changes that should be expected in the near term.

During the second session, our discussion will focus principally on the below aspects of the US Tax Cuts and Jobs Act of 2017.

Session 1: Financial Services Regulatory Reform
10:30 a.m. – 12:00 p.m.

  • The Economic Growth, Regulatory Relief, and Consumer Protection Act and the tailoring of regulatory requirements;
  • The likely approach for foreign banking organizations;
  • Amendments proposed by the agencies to the Volcker Rule;
  • Single-counterparty credit exposures; and
  • Other proposed and anticipated changes.

Session 2: US Tax Reform and Cross-Border Impacts
12:30 p.m. – 2:00 p.m.

  • Base Erosion Anti-Abuse Tax;
  • New US limits on business interest expense deductions; and
  • New US treatment of US investments in non-US countries, including Canada
    –Participation exemption
    –GILTI

To register, please visit our event website.

Thursday, October 10, 2018
1:00 p.m. – 2:00 p.m. EDT

This webinar provides all the basics a lawyer needs to be conversant in and familiar with the Commodity Exchange Act and the regulatory framework for futures, commodity options, swaps, and retail foreign exchange. Partner Anna T. Pinedo and Partner Curtis A. Doty will discuss topics including:

  • The jurisdiction of the Commodity Futures Trading Commission (CFTC);
  • Who are the registrants and what authority does the CFTC have over them? What role do the Securities and Exchange Commission and other regulators have?;
  • The regulation of swaps post Dodd-Frank;
  • Commodity pool definition and status as a commodity pool operator; and
  • An overview of recent changes to swaps regulation.

PLI will provide CLE credit.

For more information, or to register, please visit the event website.

On August 17, 2018, the SEC amended certain disclosure requirements that it considered to have become redundant, duplicative, overlapping, outdated or superseded, in light of other SEC disclosure requirements or changes in the information environment. The SEC has now published the final rules in the Federal Register. The amendments will go into effect on November 5, 2018.

The SEC final rules can be found here.

In a recent speech, SEC Commissioner Kara Stein commented on the importance of cybersecurity.  The Commissioner noted that encouraging adoption of written policies and procedures, voluntary frameworks and non-binding guidance was not sufficient.  She noted that boards of directors have a fiduciary duty to shareholders to monitor and oversee risk, including cybersecurity oversight.  She seems to suggest that just as Commission rules require disclosure regarding financial experts, it would be reasonable for there to be some disclosure as to whether boards have an independent director with expert knowledge of technology and cybersecurity.  Otherwise, boards should retain experts to provide advice.  The Commissioner suggests independent directors meet with the company’s chief information security officer at least twice a year in executive session.  She notes that boards should assess company disclosures regarding cyber risks.  Finally, she suggests that the board ought to consider how well prepared the company is to respond to a breach, the resiliency of its infrastructure, and the procedures that will be implemented to recover and resume operations.

In a recent paper titled “Unicorn Stock Options – Golden Goose or Trojan Horse?” Anat Alon-Beck analyzes the issues arising in connection with stock-based compensation awarded to employees of unicorns given the trend toward remaining privately held longer and the deferral of IPOs, which traditionally served as the principal liquidity opportunities for employees.

The paper notes that for many Unicorn employees, choosing between exercising their options or forfeiting them is difficult.  Valuations for unicorns may be high, so paying the cash exercise price and meeting the tax obligations may be difficult for an employee.  Even if the employee were to exercise, the underlying stock would still be illiquid.  Moreover, for many employees that choose to leave their companies, the standard option terms provide for a limited period of 90 days or so during which departing employees must make a decision whether to exercise.  Given information asymmetries, employees may not have a well-formed view regarding the value of the stock.  Many of these factors appear, according to the author, to be contributing to the high turnover among unicorns.

The author notes that stock-based compensation models were premised on the fact that most entrepreneurial companies had a lifetime of four years or so to IPO.  With an extended timeline to IPO, the author suggests that it may be necessary to formulate a new approach to compensation.  Possible alternatives may include: longer vesting periods, longer periods in which to exercise when an employee departs, back-end loaded options and greater reliance on RSUs.  However, each such alternative has its limitations.  As a result, the author contends that regulatory reform is needed.  First, the author calls for changes to the Exchange Act Section 12(g) threshold to include employees in the holder count and more rigorous information requirements for companies under Rule 701.  Given that the SEC’s Concept Release relating to Rule 701 and Form S-8 generally reflects a predisposition for less disclosure and greater flexibility, the article provides an interesting counterpoint.  As the author notes, current regulations did not contemplate the growth of unicorns and, while increased flexibility for stock-based compensation grants may be useful, it does not address the information disparities or the lack of liquidity for employees and other optionholders.

On September 6, 2018, House Committee on Financial Services Chairman Jeb Hensarling and Representative John Delaney released a discussion draft of the Bipartisan Housing Finance Reform Act (the “Act”).  The Act would require eligible private credit enhancers (as approved by the Federal Housing Finance Agency, “PCEs”) to engage in approved credit risk transfer transactions.  PCEs would be new entities in the secondary mortgage market that would be required to provide eligible private insurance for conventional mortgage loans financed through Ginnie Mae.  In order to encourage investment in the credit risk transfer securities issued by the PCEs, the Act would expand the current Section 3(c)(5)(C) exemption to include all risk-sharing transactions and the investment in any other products created pursuant to the Act with an aim of diversifying risk away from the current government housing finance system.

The current Section 3(c)(5)(C) exemption generally excludes from the definition of “investment company” any entity primarily engaged in, among other things, purchasing or otherwise acquiring mortgages and other interests in real estate.  In order to qualify for this exemption, a mortgage REIT must comply with strict asset tests, including having at least 55 percent of its assets consist of mortgages and other liens on, or interests in, real estate that are the functional equivalent of mortgage loans, referred to as “qualifying assets,” and at least 80 percent of its assets consist of qualifying assets and real estate-related assets.  The Act would expand the exemption’s qualifying asset definition to expressly include any financial instrument that transfers credit risk on mortgage loans.

Neither Chairman Hensarling nor Representative Delaney is planning to run for re-election to Congress in 2018.  We will continue to track the progress of the draft Act as it is considered by the House Committee on Financial Services.

A summary of the draft Act is available here.

 

On August 17, 2018, the US Securities and Exchange Commission (SEC) adopted disclosure update and simplification amendments to certain of its disclosure requirements. These amendments become effective 30 days after publication in the Federal Register. (As of today, the amendments have not been published.)

One of the amendments requires the presentation of changes in shareholders’ equity in the interim financial statements (either in a separate statement or footnote) in quarterly reports on Form 10-Q. Recognizing that the anticipated effective date of the amendment may be close to filing dates for most filers’ quarterly reports, the staff of the SEC’s Division of Corporation Finance (Staff) issued compliance and disclosure interpretation 105.09 on September 25, 2018. While reiterating that the amendments apply to all filings made after the effective date, the Staff said that it “would not object if the filer’s first presentation of the changes in shareholders’ equity is included in its Form 10-Q for the quarter that begins after the effective date of the amendments.” (Emphasis added.) As an example, the Staff indicated that if the effective date of the amendments were October 25, a calendar-year filer could omit the changes in shareholders’ equity disclosure from its September 30, 2018 Form 10-Q. The Staff also stated that a June 30 fiscal year-end filer could omit this disclosure from its September 30, 2018 and December 31, 2018 Forms 10-Q but not from its March 31, 2019 Form 10-Q.

Additional interpretations of the amendments could be coming. Interested persons should continue to look for such developments as they revise their disclosures and procedures to comply with the revised requirements.

For further information on the disclosure simplification amendments, see our Legal Update, “Capital Markets Implications of Amendments to Simplify and Update SEC Disclosure Rules,” dated August 29, 2018.

Thursday, October 4, 2018
1:00 p.m. – 2:00 p.m. EDT

Interest in the formation of business development companies, especially private BDCs, remains high. BDCs have also recently been in the spotlight as a result of significant changes to the regulatory framework affecting them. During the session, Partner Anna T. Pinedo and Counsel Brian D. Hirshberg will provide a brief overview of the legal and regulatory requirements applicable to BDCs generally, and focus on recent developments.

Topics will include:

  • The 40 Act requirements applicable to BDCs;
  • The tax treatment and diversification requirements;
  • The registration process;
  • Using a BDC to address Volcker Rule constraints;
  • Statutory changes affecting leverage and related rating agency actions; and
  • Different approaches to structuring private BDCs.

West LegalEdcenter will provide CLE credit.

For more information, or to register, please visit the event website.