On February 2, the Commodity Futures Trading Commission published in the Federal Register a notice of proposed rulemaking on agricultural swaps. According to the notice, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) "provides that swaps in an agricultural commodity (as defined by the Commission) are prohibited unless entered into pursuant to a rule, regulation or order of the Commission adopted pursuant to [the] Commodity Exchange Act . . . ." Dodd-Frank also includes options (other than an option on a futures contract) in its definition of swaps.
In general, the proposed rule "would implement regulations whereby swaps in agricultural commodities and all commodity options (including options on both agricultural and non-agricultural commodities), other than options on futures, may transact subject to the same rules as all other swaps. The proposed rules for swaps in an agricultural commodity would repeal and replace the Commission's regulations concerning the exemption of swap agreements. Because the Dodd-Frank Act defines commodity options (other than options on futures) as swaps, the proposed rules for options would substantially amend the Commission's regulations regarding commodity option transactions." The deadline for comments is April 4.
Thursday, February 17, 2011
Securities: SEC Issues Final Dodd-Frank Rules Relating to Asset-Backed Securities
On January 20, the Securities and Exchange Commission issued two sets of final rules to implement various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank). The first rule, which implements section 943 of Dodd-Frank, involves "new rules related to representations and warranties in asset-backed securities offerings. The final rules require securitizers of asset-backed securities to disclose fulfilled and unfulfilled repurchase requests. [The] rules also require nationally recognized statistical rating organizations to include information regarding the representations, warranties and enforcement mechanisms available to investors in an asset-backed securities offering in any report accompanying a credit rating issued in connection with such offering, including a preliminary credit."
The second rule, implementing Section 945 of Dodd-Frank, is a new rule under the Securities Act of 1933 requiring "any issuer registering the offer and sale of an asset-backed security ('ABS') to perform a review of the assets underlying the ABS." The rule also amends Item 1111 of Regulation AB "that would require an ABS issuer to disclose the nature of its review of the assets and the findings and conclusions of the issuer’s review of the assets." Both sets of rules take effect March 28.
The second rule, implementing Section 945 of Dodd-Frank, is a new rule under the Securities Act of 1933 requiring "any issuer registering the offer and sale of an asset-backed security ('ABS') to perform a review of the assets underlying the ABS." The rule also amends Item 1111 of Regulation AB "that would require an ABS issuer to disclose the nature of its review of the assets and the findings and conclusions of the issuer’s review of the assets." Both sets of rules take effect March 28.
Agriculture/Commodities: FT Report on Algorithmic Trading in Sugar Futures
On February 8, the Financial Times published an article on growing concerns among some in the commodities industry that so-called "algorithmic" trading -- futures trading with high-speed computers -- is causing price distortions. As the article put it, "Ten years ago it took the sugar market six months to move 2 cents. In the past three months, it has moved 2 cents in just one day on five occasions. Last Thursday, it moved this much in a single second."
The article also stated, however, that not everyone agrees that high-speed traders are to blame. Some traders reportedly said that "the increase in volatility simply reflects high prices for sugar."
The article also stated, however, that not everyone agrees that high-speed traders are to blame. Some traders reportedly said that "the increase in volatility simply reflects high prices for sugar."
Criminal Process: United Kingdom High Court Approves Extradition of Defendant in Foreign Corrupt Practices Case
On January 20, in Tesler v. Government of the United States of America, a panel of the High Court of Justice in London dismissed an appeal by Jeffrey Tesler, who had been indicted in the United States on charges of conspiring to violate, and aiding and abetting violations of, the Foreign Corrupt Practices Act (FCPA). Tesler, a dual United Kingdom and Israeli national residing in London, had been indicted in the Southern District of Texas in 2009 for his alleged participation in a scheme to bribe Nigerian Government officials to assist an international joint venture consortium.
Tesler appealed from a ruling by a District Judge in the United Kingdom that the requirement for his extradition to the United States pursuant to the United Kingdom Extradition Act 2003 had been satisfied. The High Court (Lord Justice Pill) held that "[t]he appellant's acts in furtherance of the aims of the Joint Venture were performed outside the United States but that did not defeat the United States connection," and that "[t]he effects of his actions were to be felt in the United States and were intended to be felt there," even if "the eventual 'harm' may be in Nigeria."
Tesler appealed from a ruling by a District Judge in the United Kingdom that the requirement for his extradition to the United States pursuant to the United Kingdom Extradition Act 2003 had been satisfied. The High Court (Lord Justice Pill) held that "[t]he appellant's acts in furtherance of the aims of the Joint Venture were performed outside the United States but that did not defeat the United States connection," and that "[t]he effects of his actions were to be felt in the United States and were intended to be felt there," even if "the eventual 'harm' may be in Nigeria."
Tuesday, January 18, 2011
Legislative Process: ABA Task Force Issues Report on Federal Lobbying Laws
On January 11, the ABA announced that the Task Force on Federal Lobbying Laws, organized by the ABA Administrative Law and Regulatory Practice Section, had issued a report that recommends changes in various provisions of federal lobbying laws. In brief, the report, according to the ABA press release, recommends (1) greater transparency with respect to outside firms that lobbyists retain to do additional work and with respect to lobbyists' identification of specific legislative or executive offices that they plan to contact; (2) a two-year prohibition on lobbyists who advocate a position before a Member of Congress fundraising for that Member, and on fundraisers for a Member lobbying that Member; (3) restrictions on lobbyists who seek earmarks or other narrow financial benefits from Congress, including a ban on contingent fees; and (4) assignment of lobbying enforcement to a regulatory body such as the Civil Division of the Department of Justice, and assignment of appropriate administrative powers to that body.
On January 18, C-SPAN broadcast a discussion of the report by the Task Force's Co-Chair, Trevor Potter. The Harvard Law School News also issued a press release about the report that featured another Task Force Co-Chair, Professor Charles Fried.
On January 18, C-SPAN broadcast a discussion of the report by the Task Force's Co-Chair, Trevor Potter. The Harvard Law School News also issued a press release about the report that featured another Task Force Co-Chair, Professor Charles Fried.
Regulatory Policy: President Issues Executive Order on Regulatory Review
On January 18, President Obama issued a new Executive Order on "Improving Regulation and Regulatory Review." The Executive Order supplements and reaffirms the principles, structures, and definitions governing contemporary regulatory review that were established in Executive Order 12866, and mostly sets forth broad principles applicable to regulation and regulatory review.
Subsection 1(a) of the Executive Order states generically that
"[o]ur regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation"; "be based on the best available science"; "allow for public participation and an open exchange of ideas'; "promote predictability and reduce uncertainty"; "identify and use the best, most innovative, and least burdensome tools for achieving regulatory ends"; "take into account benefits and costs, both quantitative and qualitative"; "ensure that regulations are accessible, consistent, written in plain language, and easy to understand"; and "measure, and seek to improve, the actual results of regulatory requirements."
Subsection 1(b) states that "each agency must, among other things: (1) propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing that some benefits and costs are difficult to quantify); (2) tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations; (3) select, in choosing among alternative regulatory approaches, those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity); (4) to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public."
Section 2 directs that "[r]egulations shall be adopted through a process that involves public participation"; that each agency "shall endeavor to provide the public with an opportunity to participate in the regulatory process'; and that "[b]efore issuing a notice of proposed rulemaking, each agency, where feasible and appropriate, shall seek the views of those who are likely to be affected, including those who are likely to benefit from and those who are potentially subject to such rulemaking."
Section 3 states that "[i]n developing regulatory actions and identifying appropriate approaches, each agency shall attempt to promote" interagency coordination as well as simplification and harmonization of rules; and "shall also seek to identify, as appropriate, means to achieve regulatory goals that are designed to promote innovation." Section 4 states that "[w]here relevant, feasible, and consistent with regulatory objectives, and to the extent permitted by law, each agency shall identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public." Section 5 states that "each agency shall ensure the objectivity of any scientific and technological information and processes used to support the agency's regulatory actions."
Section 6 is the section that creates the most specific new obligation for federal agencies. Subsection 6(a) states that "[t]o facilitate the periodic review of existing significant regulations, agencies shall consider how best to promote retrospective analysis of rules that may be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned." It also specifies that such retrospective analyses, "including supporting data, should be released online whenever possible." Subsection 6(b) provides that within 120 days of January 18, 2011, "each agency shall develop and submit to the Office of Information and Regulatory Affairs a preliminary plan, consistent with law and its resources and regulatory priorities, under which the agency will periodically review its existing significant regulations to determine whether any such regulations should be modified, streamlined, expanded, or repealed so as to make the agency's regulatory program more effective or less burdensome in achieving the regulatory objectives."
In a January 18 op-ed piece in the Wall Street Journal, the President explains that this regulatory review "will help bring order to regulations that have become a patchwork of overlapping rules, the result of tinkering by administrations and legislators of both parties and the influence of special interests in Washington over decades." He concludes with the observation that "[t]his is the lesson of our history: Our economy is not a zero-sum game. Regulations do have costs; often, as a country, we have to make tough decisions about whether those costs are necessary. But what is clear is that we can strike the right balance. We can make our economy stronger and more competitive, while meeting our fundamental responsibilities to one another."
Subsection 1(a) of the Executive Order states generically that
"[o]ur regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation"; "be based on the best available science"; "allow for public participation and an open exchange of ideas'; "promote predictability and reduce uncertainty"; "identify and use the best, most innovative, and least burdensome tools for achieving regulatory ends"; "take into account benefits and costs, both quantitative and qualitative"; "ensure that regulations are accessible, consistent, written in plain language, and easy to understand"; and "measure, and seek to improve, the actual results of regulatory requirements."
Subsection 1(b) states that "each agency must, among other things: (1) propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing that some benefits and costs are difficult to quantify); (2) tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations; (3) select, in choosing among alternative regulatory approaches, those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity); (4) to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public."
Section 2 directs that "[r]egulations shall be adopted through a process that involves public participation"; that each agency "shall endeavor to provide the public with an opportunity to participate in the regulatory process'; and that "[b]efore issuing a notice of proposed rulemaking, each agency, where feasible and appropriate, shall seek the views of those who are likely to be affected, including those who are likely to benefit from and those who are potentially subject to such rulemaking."
Section 3 states that "[i]n developing regulatory actions and identifying appropriate approaches, each agency shall attempt to promote" interagency coordination as well as simplification and harmonization of rules; and "shall also seek to identify, as appropriate, means to achieve regulatory goals that are designed to promote innovation." Section 4 states that "[w]here relevant, feasible, and consistent with regulatory objectives, and to the extent permitted by law, each agency shall identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public." Section 5 states that "each agency shall ensure the objectivity of any scientific and technological information and processes used to support the agency's regulatory actions."
Section 6 is the section that creates the most specific new obligation for federal agencies. Subsection 6(a) states that "[t]o facilitate the periodic review of existing significant regulations, agencies shall consider how best to promote retrospective analysis of rules that may be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned." It also specifies that such retrospective analyses, "including supporting data, should be released online whenever possible." Subsection 6(b) provides that within 120 days of January 18, 2011, "each agency shall develop and submit to the Office of Information and Regulatory Affairs a preliminary plan, consistent with law and its resources and regulatory priorities, under which the agency will periodically review its existing significant regulations to determine whether any such regulations should be modified, streamlined, expanded, or repealed so as to make the agency's regulatory program more effective or less burdensome in achieving the regulatory objectives."
In a January 18 op-ed piece in the Wall Street Journal, the President explains that this regulatory review "will help bring order to regulations that have become a patchwork of overlapping rules, the result of tinkering by administrations and legislators of both parties and the influence of special interests in Washington over decades." He concludes with the observation that "[t]his is the lesson of our history: Our economy is not a zero-sum game. Regulations do have costs; often, as a country, we have to make tough decisions about whether those costs are necessary. But what is clear is that we can strike the right balance. We can make our economy stronger and more competitive, while meeting our fundamental responsibilities to one another."
Wednesday, January 12, 2011
Adjudication/Judicial Review/Tax: Supreme Court January 11 Decision in Mayo Foundation v. United States
On January 11, the United States Supreme Court handed down its decision in Mayo Foundation v. United States. Mayo involved a challenge to a Treasury Department regulation providing that the services of full-time employees, which include employees normally scheduled to work 40 hours or more a week, are required to pay taxes under the Federal Income Contributions Act (FICA). The Mayo Foundation and other plaintiffs, which provided doctors in their residency programs with annual "stipends" of more than $40,000 as well as health insurance, malpractice insurance, and paid vacation time, challenged this regulation on the ground that its residents were exempt from taxation under section 3121 of the FICA and that the Treasury regulation was invalid.
Chief Justice Roberts, writing for the Court, held that the Treasury regulation was a permissible construction of section 3121. The Court began by applying the first step of the two-part framework in Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-43 (1984). It determined that Congress, in the FICA, had not "directly addressed the precise question at issue," as the FICA did not define the term student and did not otherwise address whether medical residents are subject to FICA. (Slip op. at 6.) Although neither the plain text of the statute nor the District Court's interpretation of the exemption spoke with sufficient precision to the issue, the Court determined that the appropriate standard, under the second step in Chevron, was whether the agency's answer is based on a permissible construction of the statute.
In so doing, the Court rejected the multi-factor analysis set forth in National Muffler Dealers Assn., Inc. v. United States, 440 U.S. 472 (1979) for evaluating an ambiguous provision of the Internal Revenue Code. Recognizing "the importance of maintaining a uniform approach to judicial review of admistrative action," Dickinson v. Zurko, 527 U.S. 150, 154 (1999), the Court saw "no reason why our review of tax regulations should not be guided by agency expertise pursuant to Chevron to the same extent as our review of other regulations." (Slip op. at 10.)
The Court concluded that Chevron and United States v. Mead Corp., 533 U.S. 218 (2001), rather than National Muffler and Rowan Cos. v. United States, 452 U.S. 247 (1981), "provide the appropriate framework for evaluating the full-time employee rule." (Slip op. at 11.) Applying that framework, it found that the rule "easily satisfies the second step of Chevron
Chief Justice Roberts, writing for the Court, held that the Treasury regulation was a permissible construction of section 3121. The Court began by applying the first step of the two-part framework in Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-43 (1984). It determined that Congress, in the FICA, had not "directly addressed the precise question at issue," as the FICA did not define the term student and did not otherwise address whether medical residents are subject to FICA. (Slip op. at 6.) Although neither the plain text of the statute nor the District Court's interpretation of the exemption spoke with sufficient precision to the issue, the Court determined that the appropriate standard, under the second step in Chevron, was whether the agency's answer is based on a permissible construction of the statute.
In so doing, the Court rejected the multi-factor analysis set forth in National Muffler Dealers Assn., Inc. v. United States, 440 U.S. 472 (1979) for evaluating an ambiguous provision of the Internal Revenue Code. Recognizing "the importance of maintaining a uniform approach to judicial review of admistrative action," Dickinson v. Zurko, 527 U.S. 150, 154 (1999), the Court saw "no reason why our review of tax regulations should not be guided by agency expertise pursuant to Chevron to the same extent as our review of other regulations." (Slip op. at 10.)
The Court concluded that Chevron and United States v. Mead Corp., 533 U.S. 218 (2001), rather than National Muffler and Rowan Cos. v. United States, 452 U.S. 247 (1981), "provide the appropriate framework for evaluating the full-time employee rule." (Slip op. at 11.) Applying that framework, it found that the rule "easily satisfies the second step of Chevron
Subscribe to:
Posts (Atom)
