LegalMinds® :: Thought Leadership for the Legal Community

Dodd-Frank’s “Living Will Rule” and the Impact on Financial Firms - Walter J. Mix III, Director, Berkeley Research Group

LegalMinds Editor — Tue, 18 Oct 2011 15:31:03 +0000

While the Dodd-Frank Act has had a broad impact on banking, one of the key aspects is the “Living Will Rule,” which seeks to limit the risks of “too big to fail” financial institutions in the United States.

In this exclusive LegalMinds/NASDAQ Securities & Capital Market Series interview, Walter Mix III, a former bank regulator and Director of Berkeley Research Group, discusses the rule and it’s impact on U.S. financial institutions, as well as foreign banks operating in the U.S .

“The largest banks have already started working on their living wills as of 2010,” says Mix. “The next tier down have recently begun planning their implementation of living wills. The timeline is for 2013 for every bank to be included.” According to Mix, the banks are “required to show every aspect at a very, very deep level of its banking operations and to create a strategic approach to unwind the institution in the event that it faces insolvency.”

In this video interview filmed at the NASDAQ MarketSite in Times Square, he outlines the key elements of the resolution plan and details what companies are covered, filing timelines and the strategic implications of the rule.

Also, discussed is the impact of the rule on the capital markets, which he believes will be similar to the way bank M&A will be affected. “You can expect to see a highlighting of the different risk areas of an institution and this information will be made available to investors so that they’ll be able to make more intelligent decisions about their investments and about acquisitions,” says Mix.

As far as what lies ahead, he adds that “at the end of the day what we’re hoping to see is enhanced risk management at the banks, and better corporate governance at the banks.”

Read Walter Mix III Bio (Click to Expand/Collapse)

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About Berkeley Research Group

Berkeley Research Group, LLC is a leading global expert services and consulting firm that provides independent expert testimony, litigation and regulatory support, authoritative studies, strategic advice, and document and data analytics to major law firms, Fortune 500 corporations, government agencies, and regulatory bodies around the world. BRG experts and consultants combine intellectual rigor with practical, real-world experience and an in-depth understanding of industries and markets. Their expertise spans economics and finance, data analytics and statistics, and public policy in many of the major sectors of our economy including health care, finance, banking, information technology, energy, construction, and real estate. BRG is headquartered in Emeryville, CA, with 19 offices in the United States and London, UK.

For additional information, visit: www.brg-expert.com

Contact Info:

Walter J. Mix III
Director
Berkeley Research Group, LLC
550 South Hope Street
Suite 2150
Los Angeles CA 90071
wmix@brg-expert.com
213-261-7712

Best Practices in Corporate Governance - Lucy Fato, VP, Deputy General Counsel and Corporate Secretary, Marsh & McLennan Companies Inc.

LegalMinds Editor — Thu, 15 Sep 2011 06:59:45 +0000

In this exclusive LegalMinds/NASDAQ Securities & Capital Market Series interview, Marsh & McLennan Companies’ (NYSE:MMC) Deputy General Counsel and Corporate Secretary Lucy Fato discusses “best practices” and key corporate governance issues, including the separation of the Chairman and CEO roles, board declassification, shareholder outreach and the challenges of board diversity and recruitment.

In addition to helping to oversee the firm’s global legal department and working on general legal matters, Ms. Fato also serves as Corporate Secretary to the Board of Directors, where she works closely with their independent Chairman on issues that impact the board.

Read Lucy Fato's Bio (Click to Expand/Collapse)

I'm the Deputy General Council, and the Corporate Secretary at Marsha McLean and Company. So I really have 2 distinct roles in the company. One is in the legal department helping to oversee our global department, and just working on general legal matters. And the other role is as Corporate Secretary to the Board of Directors.

And it really is a separate and distinct job. We have an independent chairman. So, I spend a lot of time working directly with him on board meetings and agendas and other issues that impact our board.

There are a number of key corporate governance issues that have really gotten a lot of attention over the last few years and some of them are high profile than others, some are really legal, technical points that some activists latch on to, and some on bigger issues uh, separating the The chairman position from the CEO has garnered a lot of attention in the last few years.

It's an issue that I think is near and dear at the hearts of CEOs so, therefore it takes up a lot of the time of the corporate secretary as well. But I think it's really evolved as a best practice, and I think a number of companies have moved towards that. At Marsha McLennan, we moved to having an independent chairman several years ago.

It's worked very well for us. I think it takes a certain type of CEO to be able to handle that kind of structure, and fortunately it's been a good experience for us. And I think it works well for the board, it gives the independent directors a sense that they have a voice that's separate and distinct from the CEO, and I think it's good to have that balance, and it's also been received very favorably by our shareholders.

At Marsha McLennan we haven't had a lot of challenges since the separation of the chairman and CEO, but again I think it really depends on the personality of your CEO. Our CEO is very confident, very successful person, very comfortable with the separation, and in fact, it takes a little bit of a burden off of him of not having to manage the board on a day to day basis as much - letting an independent director take that responsibility.

So in some ways I think it can work out well, if you have the right personality at the top of the company. As I said, I think for directors, it gives them great comfort knowing that they have someone at the helm who is the voice for the directors. They can speak privately with him. They can have separate meetings without the CEO present and really feel that they can have an open dialogue.

I think that really what the concept is getting at, to really have a balanced and open discussion, and that's what we've seen at Marsha McLennan. Another key issue that's garnered a lot of attention in the public is the declassification of boards. Historically a number of boards were structured so that only two or three directors would be nominated on an annual basis, so that if you had a shareholder activist, or someone else who was viewed as hostile to the company wanted to put up a slate, at the annual meeting they would only be able to put up two or three seats at a time and not take control of the company within one year.

And that was also an issue like the separation of the chairman and CEO that started to get a lot of attention in the last few years because it was viewed as an anti-takeover device and the number of larger institutional shareholders didn't think it was necessarily appropriate for the board to have that kind of power.

So, you've seen a lot of people move toward declassifying their boards. It's another thing we did at Marsha McLennan few years ago and I definitely think it's also evolved as a best practice, and most companies are now moving towards that model. Another very significant trend which our board has spent a lot of time on and I think just the director community at large is focused on, is the composition of boards and diversity in particular.

Much like our company at Marsha McLellan, we're very focused on diversity and inclusion, and our board feels the same way about its group.

So, we do spend a lot of time with the directors, talking about board composition, who our current directors are, what their background and experience is, what their profile is basically, and what kind of diversity they bring to the table, and we've had director searches ongoing for several years.

We've had a number of retirements over the last few years years and we know we will have directors retiring in the future. So, we are basically almost always searching for really good candidates. It's not easy to find good candidates. It takes time, even if someone is a great individual and a great director, you need to make sure the personality is right, that they will fit in with the rest of the personalities and that they really bring the right skill set.

So the criteria for the searches can change over time depending on what a company's needs are, what a board's needs are, the strategic direction the company might be going in, but there's a very very heavy focus, as well, on diversity, and making sure that we have women, minorities, people from outside the U.S. Diversity comes in very many forms and so we have a number of candidates that may not on their face look diverse, but when you actually look at the bios and backgrounds, and skill sets that they have.

They actually bring some very unique qualities to the board. Over the last few years, since Sarbains Oxley [sp?] back in 2002, the burdens on the board have gone up significantly, and the time commitment that's required particularly if you sit on an audit committee or a compensation committee, Dod Frank is going to continue to put additional pressure on directors as I think everyone is aware.

It's made it very hard. It's very challenging to find good candidates, especially sitting CEOs and CFOs who are so busy with their own companies, it's hard for them to make a commitment to join a board and be able to devote the amount of time that they need to, both to the board itself and to whatever committees they may be sitting on.

There are a number of other issues that corporate secretaries are dealing with right now and helping boards manage And they're not as high profile necessarily or as interesting to people as some of the ones that attract more attention, like separation of chairman and CEO and declassification of the board.

They're more technical points, for example, allowing shareholders to call a special meeting of shareholders, or allowing shareholders to act by written consent.

These are provisions that companies have in their bylaws and a number of shareholder activists have been submitting multiple shareholder proposals to many, many companies every year trying to get them to change their bylaws. These provisions are viewed as more shareholder friendly, because they're giving share holders the ability to call meetings outside of the annual meeting process, or outside of the board itself calling a special meeting or allowing shareholders to act by written consent where you don't have to call a meeting at all.

And with these provisions it's been a bit of a struggle because the devil is in the details and no one really knows exactly how to write them all the time to make sure that there aren't unattended consequences. I would say the right to call special meetings is definitely one that has gotten, gained a lot more traction over the last few years.

People have built in appropriate thresholds so that shareholders have to own a certain amount of stock before they can call a meeting, they have to have held it for a certain period of time.

So I think that corporate secretary community has gotten comfortable that with the right limitations, you can put provisions in that are shareholder friendly, but at the same time protect the company from a number of abuses where people may just submit multiple requests that can take a lot of management's time and a lot of expense.

And it's always a balance, because depending who the share holder is, they may have a different view on these provisions. The written consent provisions has has not gained as much traction. That one has been a little bit more difficult. A lot of share holders don't like the idea of a group being able to band together and take action without calling any kind of meeting, without giving notice to other shareholders.

So, that is viewed as a less shareholder provision by a lot of people. I think historically shareholder proposals were viewed as a nuisance. There were people on the corporate secretary staff whose job it was to try to get them. excluded from proxy statements, trying to get them voted down as much as possible.

And I think the climate has just changed such that boards understand that there needs to be more outreach, there needs to be more a balance and there needs to be more of a general understanding of what really is in the best interest of the company and its shareholders. It's not about a shareholder activist.

You have to take the emotion out of it I think. Take the personalities out of it and really focus on the issue and ultimately what you think is in the shareholders' best interest. Then again, not all shareholders are alike. So it's a little bit, it's a little tricky. It's not so easy all the time when people say something is shareholder friendly, you may talk to some large institutions that don't think it's shareholder friendly at all.

And it may just be that the smaller shareholders think that it's a friwndly provision.

Another practice that I think has developed over the last few years is and something that our directors encouraged me to do when I joined the company, is to engage in shareholder outreach on a sustained and regular basis.

So I do spend a lot of time through the year, particularly before proxy season starts, reaching out to shareholders, trying to understand what the issues are that they're focused on, what they think we could do better. If there are things that they like that we do, if there are things that we don't like, and really trying to get that data and information in so that I can really report back to the board on how we think we're doing in the area of corporate governance.

We are fortunate at Marsh ; McClennan because we have a number of businesses, Marsh in particular, our largest operating company, that focuses on the area of risk. We also have some businesses in Aller-Wyman who consult in specifically in the area of risk. We have a number of clients who hire all of our operating companies to just help with their most complex problems.

And so for our board, it's helpful to be able to have people like that. We often will bring people in to really educate our board, on an area of interest. A year of two ago there was a lot of focus and all the changes in healthcare and what risks did that raise for companies and their employees. And some people from Mercer were able to present on that and say this These are the kinds of products that we're creating.

These are the kinds of services we're providing.

Marsh is doing the same thing. They have conference calls with their clients all the time. Especially when markets are turbulent as they are right now, they will have calls with clients to talk about impact on the insurance industry, and how that might impact the client's ability to get insurance or how much it may cost to get insurance.

And so, we're really able to, you know, take advantage of a lot of these situations to demonstrate the value that we bring to our clients. And so it really does translate to the board, both in terms of helping to educate the board and then also helping the board think through how we manage our own business.

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About Marsh & McLennan Companies

Marsh & McLennan Companies is a global professional services firm providing advice and solutions in the areas of risk, strategy and human capital. It is the parent company of a number of the world’s leading risk experts and specialty consultants, including Marsh, the insurance broker and risk advisor; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of HR and related financial advice and services; and Oliver Wyman, the management consultancy. With 52,000 employees worldwide and annual revenue exceeding $10 billion, Marsh & McLennan Companies provides analysis, advice and transactional capabilities to clients in more than 100 countries. Its stock (ticker symbol: MMC) is listed on the New York, Chicago and London stock exchanges. Marsh & McLennan Companies’ website address is http://www.mmc.com.

Cautious Optimism in the Leveraged Finance Market - Joshua Thompson, Shearman & Sterling LLP

LegalMinds Editor — Tue, 13 Sep 2011 15:49:09 +0000

In this exclusive LegalMindsTV interview, Sherman & Sterling’s Joshua Thompson discusses the outlook for leveraged finance transactions.

“We’re seeing a number of interesting deals in the market,” says Thompson. “In addition to bank bond deals and complex refinancing, we’re also seeing private equity sponsors taking the initiative in what remains a relatively good market to do acquisitions and refinance their existing portfolio debt.”

In regard to international activity, he says their firm is continuing to see a vibrant market in Asia, as well as an active London and European market, which continues to remain open to new deals and refinancing.

CONTINUE READING SUMMARY (Click to Expand/Collapse)

We're seeing a number of interesting deals in the market, the complexity remains high in terms of the transactions. We're look looking at a number of bank bond deals, a number of complex refinancings, we continue to see private equity sponsors taking the initiative and using what remains a relatively good marketto do acquisitions and or refinancings of their existing portfolio debt.

We act for many of the significantly late arrangers in the market. Our flow of information suggests that there is somewhat a backlog of commitments but we would anticipate that backlog will clear, and that the market will open again actively after the summer. recent trends in deal terms suggest that the private equity sponsors still have somewhat of the upper hand in terms of negotiating.

But, that being said, the credit issues which lenders remain focused on are total leverage, the de-leveraging story, management of fixed charges and ensuring structural integrity with the credit, I think that reflects a fair balance between the interests of lenders and borrowers . We suspect that there will remain a relatively good deal of flexibility for top tier sponsors in the market, and at later ranges continue to compete very aggressively for their business.

We don't see any dramatic changes in market terms occurring, rather a gradual evolution. That's domestically. Internationally, we continued to see interesting and vibrant markets in Asia. Our colleagues in Asia did one of the few so-called dim sum bonds, which are RNBS denominated bonds out of Hong Kong.

Our colleagues in London and Europe remain very active, although they face similar economic conditions as we do. And the markets, you know, continue to remain open for new deals and continue to remain open for refinancings in Europe. And we continue to see a good deal flow in those jurisdictions.

The outlook for leverage finance in the United States remains relatively robust going into , going through the third quarter and into the fourth quarter of this year. We continue to see what we what we feel is a steady drumbeat of market activity. That being said the larger macroeconomic issues which we're seeing, such as potential sovereign defaults, would be a radical, potentially resulting a radical series of skating events in the leverage finance market which is difficult to predict at the moment but which we remain very focused on.

The outlook also will be contingent on general growth in the United States, and valuations for private equity firms. In particular of their assets. That's M and A teams, see a robust pipe line there and so we would suggest that leverage finance would correlate with what they're projecting as well.

Clients need to be actively engaged with preparing themselves for a number of different potential scenarios in the market. To some extent if you risk adverse, now is the time to start looking heard at your exposure in the debt markets if you believe that there are potentially adverse sovereign risk events that could materialize in the coming months.

That being said, constantly engaging with your potential providers of debt financing, understanding and working with your external advisor so whether that's your legal team, your accountants, your tax advisors, to optimize your debt structure is something that we would always encourage our clients to do.

We do that with our clients. We want to make sure that they're seeing the best opportunities in terms of leverage finance, whether we're acting for the borrower, or the private equity firm, or the late arranger.

We think there is a sense of optimism in the market, but it is cautious optimism, and assisting our clients to execute on great transactions and on financing which is highly tailored to their needs is something that we continue to see going forward

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ATTORNEY INFORMATION

Joshua W. Thompson
Partner, Shearman & Sterling LLP

Joshua W. Thompson is a partner in the Finance Group resident in the New York office. He focuses his practice on complex financings, including acquisition financings and other leveraged lending (including leveraged buyouts, tender offers and other going private transactions), structured financings, second-lien financings and mezzanine investments. In addition, he has extensive experience representing debtors, creditors, management and investors in complex restructurings, work-outs, bankruptcies and acquisitions of troubled companies. As counsel for lead arrangers and private equity sponsors, he is involved in all aspects of deal structuring, negotiation and documentation.Josh also is the former general counsel of Jefferies Finance.

Related Practices, Industries & Focus Areas:

Finance
Structured Finance

Bar Admissions/Qualifications:

New York
New South Wales, Australia

Education:

University of New South Wales, LL.B., summa cum laude
University of New South Wales, B.A.

Selected Business and Professional Activities:

Clerkship: High Court of Australia, Justice W.M.C. Gummow
Member, International Bar Association (Former Vice-Chair of Corporate Counsel Forum)

Contact:

599 Lexington Avenue
New York, NY 10022
(212) 848-8703

joshua.thompson@shearman.com

To see a full bio, visit: http://www.shearman.com/joshuathompson

FIRM INFORMATION

Shearman & Sterling has been advising many of the world’s leading corporations and financial institutions, governments and governmental organizations for more than 135 years. We are committed to providing legal advice that is insightful and valuable to our clients. This has resulted in groundbreaking transactions in all major regions of the world.

For additional information, visit: http://www.shearman.com

Other Shearman & Sterling Featured Video Interviews:

Structuring Public and Private Transactions
in the Current M&A Environment
Clare O’Brien, Partner, Mergers & Acquisitions Group
Shearman & Sterling LLP

Click image to view the video.

Emerging Growth in Latin America’s Capital Markets
Antonia Stolper, Partner and head of Latin America Practice
Shearman & Sterling LLP

Click image to view the video.

The Impact of Dodd-Frank on Private Placements - James Smith, Tarter Krinsky & Drogin LLP

LegalMinds Editor — Sat, 30 Jul 2011 14:50:57 +0000

With the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act last year, there were sweeping changes in the regulation of the financial markets. While much of the attention has been on publicly traded securities, recent changes in the legislation are also having an impact on private placements.

According to James Smith, a Partner at Tarter Krinsky and Drogin LLP who focuses on complex securities and corporate transactions, there are two significant changes to Dodd-Frank that will impact companies raising capital in offerings that are except from SEC registration – the modifications in the definition of “accredited investors” and the adoption of what are called “The Bad Boy Rules.”

In this LegalMinds interview, Smith discusses the changes to the exemptions in Rule 506 of Regulation D, the “most relied upon exemption from registration,” and how they will impact individual investors, as well as institutional investors such as bank, mutual funds, hedge funds and large corporations.

Companies may be faced with significant challenges under the changes to Dodd-Frank, says Smith. “For closely held companies, it may not be quite as difficult. But for publicly held companies or private companies with a significant stockholder base, it will be much more difficult to comply with some of these rules.” He adds that “ultimately, it’s going to come down to how the SEC shapes these definitions in its final rules.”

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ATTORNEY INFORMATION

James G. Smith
Partner, Tarter Krinsky & Drogin LLP

James G. Smith is a Partner at Tarter Krinsky & Drogin LLP. He focuses on complex securities and corporate transactions, investment management and corporate law.

Mr. Smith’s broad range of corporate and securities experience includes representing issuers, underwriters and investors in public and private offerings, PIPES, structured and asset-based financings, SEC reporting and compliance and corporate governance matters. His investment management experience includes formation and representation of hedge funds, private equity funds and venture capital funds. His corporate practice includes mergers and acquisitions and formation of partnerships and joint ventures.

Mr. Smith is a member of the Business Law Sections of the American and California State Bar Associations. He has been published in professional journals such as the Columbia Business Law Review, Warren Gorham & Lamont, and the Business Law Journal of the University of Miami.

Practices:

Banking and Finance
Corporate and Securities
International

Admissions:

New York
California

Education:

Golden Gate University School of Law, J.D. 1992
California State University at Hayward, B.S. 1988, M.B.A. 1991

Contact:

1350 Broadway
New York, NY 10018
(212) 216-8060

jsmith@tarterkrinsky.com

To see a full bio, visit: http://www.tarterkrinsky.com/pages/attorneys/smith_james.html

Recent Publications:

FIRM INFORMATION

Tarter Krinsky & Drogin LLP is a full-service law firm dedicated to smart counsel and strong client relationships. We offer the diverse practice areas of a large firm, coupled with superior service and personal attention. We are distinguished by the breadth and depth of our experience and by a level of sophistication unusual for a firm of our size.

For additional information, visit: http://www.tarterkrinsky.com

Emerging Growth in Latin America’s Capital Markets - Antonia Stolper, Shearman & Sterling LLP

LegalMinds Editor — Tue, 03 May 2011 12:36:57 +0000

While the U.S. and Europe have been facing significant economic challenges, growth in Latin American countries continues to exceed expectations. After emerging from an economic slump in 2008-2009, the region’s economies grew at a rate of 6% in 2010 and continue to rise — with the World Bank recently projecting 4-5% increases in 2011.

According to Antonia Stolper, a Partner in the New York office of Shearman & Sterling LLP and head of the firm’s Latin America practice, “The impact of the current expansionary economic times in Latin America is having a range of important effects on our business and on the business of our clients. As countries come out of the recession we are seeing the needs to borrow, to issue equity, to raise money from the private equity markets, eagerness to do M&A transactions, to expand globally, and eagerness to invest throughout the chain.”

CONTINUE READING SUMMARY (Click to Expand/Collapse)

What we're seeing is that these governments came out of the recession very strongly, having kind of gotten their fiscal houses in order when the commodity boom was at its height in 2005, 2006, 2007. As the United States is suffering from high oil prices, it's of course a boom time in those countries in Latin America that are exporting minerals and mining, all the basic commodities, food in particular, soy, corn, etc.

So, all these countries had coffers full at the point that the crash came. They also had strong banking systems. The banking regulators having watched many crises in the past were very focused on high liquidity and high capital requirements. And as a result, when the recession hit, which absolutely affected Latin America, and resulted in low or no growth in many countries.

Nevertheless, the governments were in a position to go out and spend money, and that's a first, an absolute first time a Latin American country has been able to do counter cyclical expansionary spending. So all the countries went into the capital markets and borrowed, and borrowed to spend money on social programs, to hire people to build roads, to hire people to build schools, to run feeding programs.

Whatever was needed, they were in a position to be out there, to do it. And as a result, instead of having, you know, desperately economic times, which is something we've seen inthe past from North American and European recessions, Latin America acme out strongly. As countries come out of the recession, we are seeing the needs to borrow, to issue equity, to raise money from the private equity markets, eagerness to do M&A transactions, to expand globally.

An eagerness to invest throughout the chain. Latin America has an infrastructure deficit. And that infrastructure deficit creates enormous opportunities for international lending institutions, for international lawyers and for domestic companies and governments in the region. Ports, roads, airports, power plants, water systems.

The range of basic infrastructure that was left quite untended over many decades in the region create enormous opportunities. That's just one example. Another example is the enormous investment going on right now in the commodities sectors in the commodity sectors go across the spectrum: oil and gas, minerals and mining, but also agricultural commodities.

Latin America, and the former Brazil and Argentina, have some of the largest amount of arable land in the world that still can be cultivated.

In a world where food security has become an enormous issue, that's a focus that we're seeing our clients concerned about, as well as domestic governments. Oil and gas, we've talked about how important Brazil is as a driver of economic growth in the region. It is, by far, the largest country. It is a country that we have a tremendous investment in having had an office in Sao Paolo since 2004.

Brazil's got the most ambitious oil and gas development program, maybe in the world. I'm not exactly sure, but it's very possible.

Patrick Bross just went out and did an 80 billion dollar equity raise, of which about 30 billion went into the international capital markets. That's the biggest equity raise any company has ever done, but what are they doing with it? They are exploring the pre-salt mines that are deep-water offshore Brazil.

The enormous amounts of capital that this project alone is going to require in terms of drilling rigs and ships and piping and expertise globally is something that is driving economic development. Infrastructure is something that demands enormous amounts of capital. Some of that's generated locally in these countries, some of that needs to be imported.

Capital is completely global, and capital moves across the borders with freedom. That's a plus and a minus for all the countries of for Latin America, that's been a tremendous plus. And where are we seeing the money coming from? It comes from, I would say, three big pockets. One is domestic savings in Latin America.

For the first time in decades, we see high levels of savings in the home market. What does that mean? That means that there are pension fund savings going on in the home market. There are mandatory savings schemes in most of the countries in Latin America, and we're seeing that money deployed. And, curiously, that money is both being deployed to invest in the home market, but also, because these markets are relatively small, there's some interest in moving that money across border.

Then, we're seeing the international capital markets. And where is that money coming from? I would say everywhere. Huge chunks of it are in the United States in institutional investors, some retail. Huge chunks of that are in institutional investors in Europe and some retail. And huge chunks of that are in China, fundamentally.

Where the Chinese government has made a decision that lending to Chinese exporters, lending to Chinese entities, who are becoming construction contractors, and otherwise getting involved in Latin America is something that there's now a national interest in doing. We're also seeing the Koreans involved.

The Japanese have been involved in London to Latin America over many many decades. Their big particular power companies have been investing in building power plants and using Japanese source capital investment for many, many years. So, and now we're starting to see the Middle East, which is for us in Latin America a brand new player!

We're seeing the equity markets. Brazil had an amazing equity boom for three years. We were absolutely part of that equity boom. Through our process in San Paulo, it sort of stopped because the Petro Brastile, which we were also pleased to be involved in, kind of ate up the Brazil market for most of the year because it was so enormous. Everybody was waiting for that to happen. The rest of Latin America has historically been a debt market and not a equity market.

We're seeing that there 's been some interest and I'm starting to see the pipeline fill of, other countries getting back into the equity markets. Some of that's money being raised in the United States and in Europe and being brought to Latin America. We've seen several major funds raised over the last year.

But some of it is also internally generated. We're seeing Peruvians raise funds. We're seeing Mexicans raise funds. We're seeing Brazilians raise funds and they're attracting in those funds international money, they are attracting local pension fund money and we're seeing them attract cross border money.

The Chileans are going into Columbia to raise private equity funds. The Columbian's looking elsewhere. And, so we're seeing a dramatic integration of the capital flows within the region as well. MNA is another important element to the story in Latin America right now. There's a tremendous amount of what I would call "inbound MNA," where countries, companies in the United States and in Europe and in Asia are buying assets and buying companies in Latin America.

We're seeing lots of that, a lot of movement in the commodity space, a lot of investment in the oil and gas industry, minerals and mining, and in commodities -- soy, wheat, et cetera -- but also a lot of investment in infrastructure. Again, bringing the expertise, and some of that -- I would say, most of that -- on the infrastructure side is through public/private partnerships, through concessions, through partnerships with local companies, et cetera.

Infrastructure is one of those things that having a local angle is very, very important because your relationship with the government in any kind of infrastructure project is very important.

So that's one source of tremendous amount of basic MNA joint venture, pure investment activity. Another place where we're seeing just tremendous activity is what we'll call the outbound, which is Latin American companies, who are looking for acquisition opportunities outside their own countries.

That's generated by two things. One is highly concentrated local markets, so its very hard to grow locally because you already have a rather large chunk of the market. So, antitrust considerations in these countries, which have active antitrust regulators, make the consolidation in your home market problematic.

You're looking for opportunities elsewhere. We've been very pleased to be part of JBS' expansion, the largest beef producer in the world, who's been catively acquiring in the United States, for example. We've also been involved with Ecopetrol, which is the state-owned oil company of Colombia who's making acquisitions within Colombia from other operators.

Where they've been able to involve us is international council. So we're seeing that kind of cross-border activity, where companies looking for high-growth opportunities, looking for places to invest, and looking for places to enhance shareholder value are trading among themselves and moving out of their home countries.

Each of these countries is unique. That goes without saying, but Brazil's got 200 million people. Mexico's got 100 million people. Those are very big countries. The rest of the countries are really pretty small. They have small economies. There's a lot of other challenges, infrastructure, development, poverty, educational needs, such that you can't have a Latin America strategy, whether you're an investment bank, whether you're a law firm, whether you're a manufacturer, without thinking about the country that you want to invest in.

One of the key challenges as lawyers is that we're engaging with the law. That's what we do, so our clients may be running economic models about growth, et cetera, but we're thinking about how it is that we can get this project done in this country. So, one of the key focuses always is how to engage the regulatory environment such that you can do the project.

And that ranges from tax issues, which are these are highly complex tax systems and have also been subject to a lot of change. I'm a capital markets lawyer, personally. The securities regulatory system of many of these countries remain quite undeveloped. Brazil's gotten quite advanced, Argentina's quite advanced, Mexico's quite advanced, Chile's quite advanced.

New countries that are newer on the scene of the international capital market are less advanced. What does that mean? How do you get a deal done if the stock exchange doesn't know how to trade the security that you're trying to put forward? As a capital markets lawyer, where we're looking to import capital into the country, you're very concerned about ways in which you get repaid.

What are the exchange control rules? What are the capital control rules? Do you have to remain and invest it for a certain period of time. What kinds of dividends repatriation rules are there, what the tax regimes are going to be? All of those things are key to determining any project, whether it's a fund-raising project, whether it's a building project, whether it's a joint venture, and what the rights of the joint venture party are going to be.

All of those things are immediate challenges for lawyers, but they're also what make what we do really interesting. Where's Latin America going and where do we go with it. One of the great advantages of now being a magnet of investment, is that most of this investment is for the long term. And I'm not just talking about inbound.

Private inbound investment, but I'm talking about companies on the ground raising money to invest. And because the horizon is now relatively good, then people are making investment decisions for the long term.

The great thing about infrastructure is that its fallout is, has so many positive impact. So what's very exciting about the current investment boom is that it is focused on basic economic generating assets that both require a commitment to an investment horizon that's many many years long. As well as having economic benefits to the home country that's many many years long.

That's a positive spiral.

You can scroll through the transcript and click on any text in the CaptionBox above to go directly to that part of the video. [To start, click on Expand Transcript.] Or click on the links below to view by topic.

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ATTORNEY INFORMATION

Antonia E. Stolper
Partner, Shearman & Sterling LLP

Antonia Stolper is a partner in Shearman & Sterling’s New York office and head of the Firm’s Latin America practice group. Ms. Stolper’s practice focuses primarily on corporate finance transactions in emerging markets. She has extensive registered public offering experience for foreign private issuers.

Recently her practice has focused on debt and equity securities offerings for Latin American corporate and sovereign issuers, representing both underwriters and issuers, and on restructuring transactions, primarily in Latin America, representing issuers, dealer managers and creditors. In addition, she advises a number of foreign and domestic issuers on their ongoing SEC reporting requirements, Sarbanes-Oxley compliance and corporate governance matters.

Related Practices, Industries & Focus Areas:

Capital Markets
Latin America & Caribbean
Corporate Governance
Pro Bono
State Controlled Companies/Sovereign Wealth Funds
Oil & Gas

Admissions:

New York

Education:

New York University School of Law, J.D., 1988
Yale University, B.A., 1979

Contact:

599 Lexington Avenue
New York, NY 10022
(212) 848-5009

astolper@shearman.com

To see a full bio, visit: http://www.shearman.com/astolper

Recent Publications:

Using a Credit Rating in a Public Offering – What to Expect Now That the Dodd-Frank Wall Street Reform and Consumer Protection Act is the Law (22 July 2010)

U.S. Supreme Court Rules Against Extraterritorial Application of Antifraud Provisions in “Foreign Cubed” Case (8 July 2010)

SEC Proposes Rule Change to Allow Underwriters to Offer Securities of WKSIs Before a Registration Statement is on File With the SEC (6 January 2010)

The Cuban Missive Crisis – Texas District Court Dismisses Mark Cuban Insider Trading Case (28 July 2009)

SEC Proposed Amendments – Proxy Disclosure, Solicitation Enhancements and NYSE Rule 452 (9 July 2009)

ADR Programs: Impact of Unsponsored Programs on Non-US Issuers (3 March 2009)

SEC Final Rule — Modernization of Oil and Gas Reporting (16 January 2009)

FIRM INFORMATION

For additional information, visit: http://www.shearman.com

Other Shearman & Sterling Featured Video Interviews:

Structuring Public and Private Transactions
in the Current M&A Environment
Clare O’Brien, Partner, Mergers & Acquisitions Group
Shearman & Sterling LLP

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Structuring Public and Private Transactions in the Current M&A Environment - Clare O'Brien, Shearman & Sterling LLP

LegalMinds Editor — Thu, 14 Apr 2011 17:17:11 +0000

As many companies and private equity firms have been accumulating large amounts of cash over the last three years, they’re coming under increased pressure to deploy that cash productively. According to Clare O’Brien, a partner in the Mergers & Acquisitions Group at Shearman & Sterling LLP, this has led to an increase in M&A activity — both public and private transactions.

In this exclusive LegalMinds interview, Ms. O’Brien discusses these trends and explores some of the key issues in structuring both public and private M&A transactions — from basic considerations such as whether the transaction should be a merger or tender offer to the impact of decisions such as which assets should be sold, what kinds of liabilities should be accepted, retaining employees and sharing any intellectual property.

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ATTORNEY INFORMATION

Clare O’Brien
Partner, Shearman & Sterling LLP

Clare O’Brien has been a partner since January 1995. She joined the firm in 1988 and in 1989 moved to the Mergers & Acquisitions Group, where she has worked on a large variety of public and private transactions, including public company restructurings, joint ventures and large public transactions. She also advises clients regularly on mergers and acquisitions and other corporate law questions.

Prior to joining the firm, Ms. O’Brien worked with the law firm of Brady & Tarpey, P.C., where her practice included cross-border corporate transactions, litigation and domestic relations. Ms. O’Brien began her legal career at the Irish law firm of Eugene F. Collins & Son, and was admitted to the Irish Roll of Solicitors in 1985.

Practices:

Mergers & Acquisitions
State Controlled Companies/Sovereign Wealth Funds

Admissions:

New York
Ireland

Education:

Incorporated Law Society of Ireland
Trinity College, Dublin, B.A. Legal Science

Contact:

599 Lexington Avenue
New York, NY 10022
(212) 848-8966

cobrien@shearman.com

To see a full bio, visit: http://www.shearman.com/cobrien/

Recent Publications:

SEC Proposed Amendments – Proxy Disclosure, Solicitation Enhancements and NYSE Rule 452
Guidelines for Directors in Change-of-Control Transactions

FIRM INFORMATION

For additional information, visit: http://www.shearman.com

Other Shearman & Sterling Featured Video Interviews:

Emerging Growth in Latin America’s Capital Markets
Antonia Stolper, Partner and head of Latin America Practice
Shearman & Sterling LLP

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The Legal Challenges of Privacy, Computer Fraud and Data Security - Nick Akerman, Dorsey & Whitney LLP

LegalMinds Editor — Thu, 31 Mar 2011 20:52:30 +0000

The development of new technology platforms and explosive growth of social media presents companies with complex legal challenges — from securing trade secrets to safeguarding customer privacy, not to mention protecting your company from potential litigation or direct economic loss.

While an old adage has been that companies’ greatest assets walk out the door at the end of each day, now in the Digital Age they can easily take other vital and proprietary assets in their pocket with them. As Dorsey & Whitney LLP partner Nick Akerman points out, ” what previously could be put into a dozen file cabinets can essentially be downloaded into a small USB disk drive that somebody can just put in their pocket and walk out the door with undetected. Or they can take the same information and simply send it with a couple mouse clicks halfway around the world without even stepping foot out of their office.” And in many cases, outsourcing data operations or working with third-party processors can dramatically increase your exposure and potential liability.

CONTINUE READING SUMMARY (Click to Expand/Collapse)

I think one of the biggest challenges right now is the fact that, in the old days, when you had to be concerned about your proprietary information and your trade secrets, everything was kept in documents, in hard copy, so that if somebody were to steal your trade secret information or your documents, they've had to walk out with boxes and boxes of material.

Today, what could be put into to a dozen file cabinets can essentially be downloaded into a small USB disk drive that somebody could just put in their pocket, walk out the door, or they can take the same information and simply send it with a couple mouse clicks halfway around the world. The other big challenge in this area is that most companies really don't realize that this is more than a data security issue.

It relates to HR the human resource department and how you deal with your employees, the agreements that you have with your employees. They're the ones, that if someone's going to take data, that's probably the biggest risk that's involved, is an insider theft. Also, getting involved with the legal staff and knowing what sorts of rules should be in place and what kinds of issues should be looked at when people leave, when they're hired, and all sorts of compliance issues.

There are certainly some very proactive steps that companies can take in going after people who steal their data, whether it's somebody who hacks into the system from the outside or whether it's an inside threat. In fact, I would say one of the biggest problems here really comes from company insiders, people who wind up leaving the company and going to a competitor and taking data with them in order to enhance their position in their new company or to start a competing business themselves.

I think what a lot of companies don't realize is that there are tools out there, legal tools, that companies can use to go after individuals who steal data.

Probably the most under-used statute is the Federal Computer Fraud and Abuse Act, which is a federal computer crimes statute. It was originally enacted back in 1984 as a part of the federal criminal code, and in 1992 was amended by Congress to include civil remedies, so that anybody who been injured as a result of any criminal activity that would be covered by this statute, has the right to bring a federal civil suit.

This suit would involve not only damages, but more importantly an injunction. An injunction is simply a court order that directs somebody to do something. In this case with respect to computer data where I use it most with my clients, is getting an injunction that directs somebody to return the data and to refrain from using it anywhere, at any time, which can be a pretty powerful weapon in terms of insuring that your data does not get out into the market place and is not used against you competitively.

The other legal remedy that has evolved over the years has been the simple state law of conversion, which up until a few years ago didn't apply to computer data. In fact, the old rule was that conversion only applied to tangible property.

And just a few years ago, the New York Court of Appeals held that computer data is encompassed within conversion: basically, looking at how our common laws developed in this area of theft, going all the way back in 1066 with William the Conqueror, and looking at how societal values have changed over the years, and as societal values have changed, so hasn't the common law.

And in this particular case, the New York Court of Appeals decided that because computer data is so important to our commercial life, so important to what we do every day and is so ubiquitous, that there is no good reason why it should not be included as part of the property that's encompassed within conversion.

There are way companies can actually protect their data. A lot of it deals with technology and having the proper technology in place. Encryption is a big issue. Part of the problem here though is that technology moves so fast, the criminal element keeps up with that technology just as well as everybody else does.

And so that what you're dealing with is a moving target that you constantly have to be on top of, and constantly have to be looking at to make sure that your systems are secure. Now keep in mind, no system is totally secure. When you're dealing with data, there's no such thing as a Fort Knox. The best you can do is try and minimize the potential for theft, and put yourself in a position such That if there is a theft of either your proprietary information or personal data that might relate to people's Social Security Numbers that you're in a position to go after them.

And so part of security is not just securing your system, but also having in place, technology, that allows one to determine who actually committed the crime. One of the most frustrating things I find is getting into a situation where I'm called in by a client, and we look at the system, and we find that sure a person who we suspect went into the system the day before he left, was in there for three hours.

But yet there is nothing in the system that allows us to determine what the person looked at, whether the person downloaded anything, whether the person printed anything off the computers. So we're basically left in a position where we do not have admissible proof that permits us to go into court. So one of the lessons of that little story is that you really have to have your technology in place so that you have audit trails, so you have the ability to be able to prove what happened.

There is a major obligation on behalf of companies, if they find that there's been a breach of personal information. Over the last few years, forty-six different states across the country have enacted breach notification laws such that if a company has reason to believe that there has been a breach of personal information -- that includes Social Security numbers, bank card information, anything that can be used to perpetrate identity theft, the whole...

One of the most important things that a company can do to determine that is really have in place a protocol such that they can investigate and determine pretty quickly whether or not there really is a need to disclose. Now, the federal government has not yet enacted an encompassing law on this subject. There is in the TARP Bill, the stimulus bill that was Enacted at the beginning of 2010.

An amendment to the HIPAA, which is the health care act that actually does now put a federal law in place for breach notification. And I think what most companies have to realize is that probably is going to be the forerunner of what were going to see ultimately, in a federal law and what is significant about that new statue is, that isn't just having a reasonable belief that there was a breach but it's also a question of when you should have known there was a breach.

All of which is to say that companies are going to have to be more and more vigilant in this area.

There are certain clients, there are certain industries that have a higher bar than others and that's because of statutes that exist. There for example Gramm-Leach-Bliley applies to the financial industry, and that creates all kinds of requirements on banks and financial institutions. HIPAA, which is the health area; hospitals now have a heightened responsibility in the area of personal information and protecting that information.

But what has happened, and I think what the trend is, and what we're seeing is that this responsibility is really being spread across all industries. And the forerunner on this is the Massachusetts statute that just went into effect this last year which requires all companies, whether they're in Massachusetts or elsewhere that have personal information related to Massachusetts residents to have in place a full blown compliance program relating to the protection of data and are required to encrypt the data in certain ways.

That is a trend that is not just in Massachusetts, but is also something which has come up in a number of other states. Even though there are 46 state laws, with respect to this data and notification, consumer notification, there are some general principles that you can take out of all of these laws and pretty much comply with them.

But they all are basically, kind of, have the same parameters to them, that if you have a reasonable basis to believe that there's been breach, you have to notify. Some states say it's a reasonable amount of time, other states actually set the time limit as 45 days. If you notify law enforcement and law enforcement asks you not to notify because they want to conduct an investigation, that gives you some breathing room in terms of having to notify consumers.

Some states, like Connecticut, require an investigation.

Cloud computing has actually just complicated this issue of security a little bit more, in the sense that companies that use cloud computing are basically outsourcing the data to another party, and so what that means is that you gotta be even more vigilant, because the data is no longer on your premises.

You have to ask yourself, do you know who the company is? Do you know what kinds of protection they're providing for the data? And if they're there is a breach, what kind of control are you going to have over that data? Are you going to be able to conduct the investigation, as opposed to having the third party conducting an investigation?

Are you going to have access, if you need to get that data, in order to comply with just your document retention program? Are you going to have access to that data to be able to comply with e-discovery obligations, which are becoming a big issue for every company? If you look at the 46 state laws that require notification to consumers if there's reason to believe there's a breach, all of those laws require a third parties that are holding the data to immediately notify the other company or the owner of the data that there has been such a breach.

But that really is only the start of it, it just kind of begs the issue about who then conducts the investigation. This past year there have been two major privacy decisions that have come out. One from the Supreme Court, the Quon case, which is a case out of northern California. The city of Ontario had a policy that basically is the same policy that most employers have, that you can only use the computers for personal, for non-personal use, or you can only use the computers for business purposes, and that in this particular situation, this related to text messages.

And the police officer basically was paying for the use of the text messaging, but, they were told that the policy was that the police department could look at anything. Well, it turns out that this particular police officer had some sexually explicit text messages. Which were found at some point by one of the officers reviewing this.

And the District Court and the Ninth Circuit Court of Appeals basically said that even though there were these policies that allowed the employer to look at whatever the employee was doing in the text messaging and had the right to monitor, in practice it didn't work that way. And so therefore, this employee did not have, had an expectation of privacy that his text messages would not be looked at.

The Supreme Court reviewed it and reversed it and basically said under these circumstances that what the city did, did not violate the the 4th Amendment to the Constitution. The other case of interest in this area relating to the attorney-client privilege was from the Supreme Court of New Jersey, where a woman at work had written to her before she left, thinking about suing her company for discrimination, and used the company computers to do that, but used a web-based e-mail.

And of course, after she left, the company looked at her and found the temporary file in which this email was sent to her attorney. So the question was, even though the policies were in place that said that the computers belonged to the company, and that all of the information on there belonged to the company, and that she could only use it for business purposes, the Supreme Court of New Jersey said that, no, that the privilege applied here, regardless.

I mean very, very blanket prohibition here which, I am not sure would be followed in any other state. But I think one of the big lessons to learn from this particular situation was again an inconsistency in policies. Even though the policy stated that employees were only to use the computers for business and not personal use, there was also one provision that said that you could use it for personal use.

And there's a little bit of confusion that the court detected. All of which is to say that companies that write computer policies have to be very careful to write them in a way that is very straightforward and not contradictory. And very explicitly sets out what an employee's expectation of privacy is when they use the company computer.

There are basically seven areas of importance that a company has to look at in terms of mitigating its risk, in terms of protecting its data. First and foremost is the hiring process. This is the area, where new people, new employees come into the company. It's an opportunity to explain to people what the rules are, concerning data.

It's the place where you can be certain that people who are coming into your company are not bringing data from their former employer, which can create risks in terms of being sued by your former employer, as well as criminal risks of being prosecuted by the Federal Government for the Economic Espionage Act or the Computer Fraud and Abuse Act.

Secondly, you want to be looking at the agreements that you have in place. Not only with your employees, but also with third parties as they relate to data. What responsibilities do employees have in terms of returning data to the company when they leave? What are the responsibilities that the employees have, in terms to their access to the company computers?

The third area that is important to look at in terms of mitigating risk here are the rules. Now some of those rules that I talked about can be incorporated in agreements, but you also want to have a code of conduct that basically describes what people can do and can't do with the data. And what they can do, for example, in terms of taking laptops home, working at home, what other responsibilities in terms of what you can do with that data and where it can go.

Fourth, you want to look at your technology. What kind of technology do you have in place that will protect the data. Fifth, you want to have a good termination process in place, because a termination process is sort of the bridge where the employee leaves the workplace and if they're going to steal data and go to a competitor or use it for their own purposes, this is the place where you want to make sure that you have returned everything.

Sixth, you want to have protocols for response. These are pretty fast-moving issues. When you find out that your data has been stolen, you don't want to be waiting around. And Seventh, the other big area that companies really ought to be looking at is their compliance function, because ultimately I think this whole issue is going to boil down to compliance.

As the Massachusetts statute is pretty much requiring now all companies with Massachusetts data to have a compliance program in place, I think that's going to spread to other states and I think that's the trend of the future.

But, what I advise my clients to do is if you're going to be protecting the personal data, there is no reason not to be also protecting your competitively sensitive data since the margin of cost is pretty slight and the danger is just as great to the company.

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ATTORNEY INFORMATION

Nick Ackerman
Partner, Dorsey & Whitney LLP

A partner in Dorsey’s New York Office, Nick Akerman is a trial lawyer specializing in both complex civil and criminal cases. He is a nationally recognized expert on computer crime and the protection of competitively sensitive information and computer data. Nick has obtained over 15 injunctions under the federal Computer Fraud and Abuse Act in various federal courts around the country requiring computer thieves to return stolen computer data and prohibiting the dissemination of the data to competitors. He also consults with clients in developing systems, policies and protocols to protect computer data.

Nick speaks and writes regularly on protecting computer data, including in his regular computer data column for the National Law Journal. He has been a featured quoted expert on computer fraud and computer security issues in the New York Times, USA Today, the San Jose Mercury, the Boston Globe, the St. Louis Dispatch, the Sacramento Bee, Forbes, ComputerWorld, CFO Magazine, CNET, CNET Japan, ZDNet, MSN, Internet Week and the Weekly Homeland Security Newsletter..

Prior to private practice Nick served as a federal prosecutor. He was an Assistant United States Attorney in the Southern District of New York, where he prosecuted a wide array of white collar criminal matters, including bank frauds, bankruptcy frauds, stock frauds, complex financial frauds, environmental and tax crimes. Nick was also an Assistant Special Watergate Prosecutor with the Watergate Special Prosecution Force under Archibald Cox and Leon Jaworski..

You can find his Computer Fraud and Data Protection Blog at http://computerfraud.us .

Practices:

Computer Fraud and Abuse

Admissions:

New York
Massachusetts

Education:

Harvard Law School, J.D., 1972, cum laude
University of Massachusetts, B.A., 1969, magna cum laude, Phi Beta Kappa

Contact:

250 Park Avenue
New York, NY 10177
(212) 415-9217

akerman.nick@dorsey.com

To see a full bio, visit: http://www.dorsey.com/akerman_nick/

Recent Publications:

For recent articles, visit http://computerfraud.us/category/articles

FIRM INFORMATION

Clients have relied on Dorsey since 1912 as a valued business partner. With more than 650 lawyers in 19 locations in the United States, Canada, Europe and Asia-Pacific region, Dorsey provides an integrated, proactive approach to its clients’ legal and business needs. Dorsey represents a number of the world’s most successful Fortune 500 companies from a variety of disciplines, including leaders in the financial services, investment banking, life sciences, securities, technology and energy sectors, as well as nonprofit and government entities.

For additional information, visit: http://www.dorsey.com

CMO Corner: The Value of Social Media in Law Firm Marketing - Adrian Dayton, Author of "Social Media for Lawyers"

LegalMinds Editor — Wed, 09 Mar 2011 12:38:14 +0000

We recently sat down with Adrian Dayton to discuss the value of social media and its impact on law firm marketing. Adrian shared his thoughts on some of the key issues involved in implementing a social media program – from both a strategic and tactical perspective.

Adrian describes himself as “an attorney with a passion for growing law practices through the power of social media.” As an expert in the field, he has been quoted by the Wall Street Journal, Entreprenuer.com, Fast Company Magazine, Mashable, the ABA Journal, Above the Law and The Buffalo News. His articles on the topic have been published for Above the Law, Lawyerist, The Texas Bar Journal and The Buffalo Law Journal.

He is a weekly columnist for the National Law Journal and author of the blog Marketing and the Law: Social Media Edition. Adrian is also author of the recently released “Social Media for Lawyers: Twitter Edition.”

You can follow Adrian on Twitter at @AdrianDayton or find him on Facebook at http://www.facebook.com/adriandayton.

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Learn how LegalMinds® Thought Leadership programs can help increase your firm’s visibility and influence clients and prospects. Visit www.legalminds.tv/thoughtleadership

Share Repurchase Considerations - David M. Lynn and David H. Kaufman, Morrison & Foerster LLP

LegalMinds Editor — Wed, 19 Jan 2011 13:39:21 +0000

With an improving economy and an increase in cash assets, many companies are expanding their stock buyback activity. While few expect an increase to the levels seen five years ago, which capped a meteoric 25 year rise from $5 billion to almost $350 billion, there has been a steady growth in share repurchase in the past year — with 128% growth in Q3 2010 among S&P companies.

In this exclusive LegalMinds/NASDAQ Securities & Capital Market Series interview, David Lynn and David Kaufman, Partners at Morrison & Foerster LLP, discuss some of the considerations involved in a stock repurchase program — ranging from regulatory issues to the impact on shareholder value.

According to Lynn, Co-chair of the firm’s Public Companies and Securities Practice and former Chief Counsel of the Securities and Exchange Commission, “I think one of the first considerations is if I have a lot of cash on my balance sheet, my shareholders are often going to be pretty impatient about whether I can pull that cash into investments or acquisitions or other uses that are going to benefit the shareholders in the long run.” If the company believes the stock is undervalued, then a repurchase program can help support a more “correct” valuation. Additionally, it can also help reduce dilutive effects of the exercise of stock options or offset securities coming out because the company is making acquisitions.

CONTINUE READING SUMMARY (Click to Expand/Collapse)

Though Lynn adds that there are also several downsides to share repurchase programs, including a potential downgrade if the company needs to go out and borrow the cash. He says it should also be considered whether it is the best “alternative for the use of it’s cash,” which in addition to acquisitions or investments, could include offering dividends to investors.

Once deciding on a repurchase program, there are significant steps to assure it’s successful execution. “I think sometimes there’s a misconception that you can just go out and start a stock repurchase program overnight,” says Lynn. But it does require some advance planning and due diligence on the part of the company, as well as board authorization. “It’s very important that the board determine that the share repurchase program is in the best interest of the company and the shareholders.” Going forward, other issues to address include existing provisions in the charter and bylaws, arrangements with market participants, price limitations and meeting disclosure requirements.

Two very important considerations in a share repurchase program are the SEC’s anti-manipulation provisions and anti-fraud or insider trading regulations, which are discussed by Kaufman, who is ranked as one of America’s leading capital markets–derivatives and structured products attorneys by Chambers USA and Chambers Global.

“The SEC has a number of restrictions under the 33 Act and the 34 Act that would apply to stock repurchase program,” says Kaufman. “First and foremost are the rules regarding anti-manipulation and that a company can’t be seen as manipulating its own stock through executing a repurchase program. Second, companies need to be very careful that they comply with the antifraud rules under the Federal Securities laws.”

In addition to current disclosure requirements, Kaufman also discusses the SECs proposal to modify what’s known as Rule 10b-18, which is the rule that provides a safe harbor under which companies can execute stock repurchase programs. According to Kaufman, the SEC was trying to create a little more flexibility for issuers – adding a concept known as 10b-18 VWAP (Value Weighted Average Price) to the rule – in terms of how issuers execute their buyback, including timing issues.

Kaufman also advises clients to “step back and have a very fruitful and a constructive conversation” with their advisors – their broker-dealer, investment banking advisor, whomever – regarding just what type of share buyback, if any, they want to execute because there are quite a variety of characteristics and potential effects. “For example,” Kaufman adds, “ASRs (Accelerated Stock Repurchase programs) have different accounting effects, as I said, but possibly different economic performance attributes. And all of these may have different aftermarket impacts in terms of how the stock performs once the program is up and running or completed.”

View and download a PDF transcript of the full interview — coming soon.

VIDEO SECTIONS (Click link to advance video to specific topic.)

ATTORNEY INFORMATION

David M. Lynn
Partner, Morrison & Foerster LLP

David Lynn is a co-chair of the firm’s Public Companies and Securities Practice. Mr. Lynn’s practice is focused on advising a wide range of clients on SEC matters, securities transactions and corporate governance. Mr. Lynn is well known in the area of executive compensation disclosure, having co-authored, “The Executive Compensation Disclosure Treatise and Reporting Guide.” While serving as Chief Counsel of the Securities and Exchange Commission’s Division of Corporation Finance, Mr. Lynn led the rulemaking team that drafted sweeping revisions to the SEC’s executive compensation and related party disclosure rules.

Mr. Lynn re-joined the SEC as Chief Counsel shortly after adoption of the Sarbanes-Oxley Act of 2002, and served in that position until 2007. As a result, he was intimately involved in implementing and interpreting the record amount of SEC rulemaking that occurred in the wake of SOX. Mr. Lynn initially served on the SEC staff from 1995-2000 as an Attorney-Advisor and subsequently a Special Counsel in the Division of Corporation Finance. While in private practice from 2000-2003, he advised clients on SEC investigations, securities transactions, mergers and acquisitions and corporate governance.

Contact:

2000 Pennsylvania Avenue, NW
Washington, DC 20006-1888
(202) 887-1563
dlynn@mofo.com

To see a full bio, visit: http://www.mofo.com/david-lynn/

Related Interviews:

Say-on-Pay and Other Issues for the Upcoming Proxy Season
Click image to view the video.

David Kaufman
Partner, Morrison & Foerster LLP

David Kaufman concentrates on derivatives and commodities transactions, mergers and acquisitions and private equity financings. He also has extensive experience with reorganization and insolvency matters. Mr. Kaufman works closely with the firm’s financial institution clients in the equity and credit derivative markets, where his activities are concentrated on assisting the firm’s clients in designing and structuring new products and evaluating the securities and commodities law issues implicated by the hedging and monetization techniques associated with these products. His work in this area often involves counseling financial institution clients regarding the particular regulatory, tax, accounting or economic objectives of a new product.

Mr. Kaufman has represented numerous funds and individuals in negotiating and documenting equity derivative transactions designed to hedge and/or monetize large or illiquid share positions. He also works closely with the many large commodities trading firms, focusing in particular on transactions involving energy, precious and base metals, currencies and agricultural products. His work in these areas has involved structuring and documenting trading, hedging and financing transactions, together with associated margin and other collateral arrangements.

A significant aspect of Mr. Kaufman’s work in the derivatives and commodities field involves assisting clients in assessing and mitigating the credit and various trading risks that are integral to derivatives and commodities transactions. In addressing risk management issues, Mr. Kaufman has acquired extensive experience in structuring complex collateral arrangements and liquidation and setoff provisions, and in analyzing such arrangement and provisions under the UCC, other applicable lien laws, the federal bankruptcy code and other insolvency regimes.In his mergers and acquisitions work, Mr. Kaufman represents both strategic and financial market participants, as well as mezzanine lenders, private equity funding sources and key management personnel. Mr. Kaufman’s work in the private equity field also includes representing emerging (primarily technology) companies and venture capital investors in such companies. Mr. Kaufman frequently counsels holders of restricted or otherwise illiquid capital stock regarding securities law issues relating to the ownership and transfer of such stock.

Practice Areas:

Capital Markets
Financial Institutions + Financial Services
Corporate

Admissions:

New York

Education:

University of Rochester (B.A., 1980)
Harvard Law School (J.D., 1983)

Contact:

1290 Avenue of the Americas
Washington, DC 10104-0050
(212) 468-8237
dkaufman@mofo.com

To see a full bio, visit: http://www.mofo.com/david-kaufman

Publications:

“Credit Derivatives: Recent Regulatory Developments in the United States,” Derivatives Law Report, Vol. 29 Issue 6, June 2009

“Securities Markets: Short Selling Under Fire,” INSIGHTS, Vol. 11 Issue 11, November 2008

“Is Cash Still King in Acquisitions?,” Financier Worldwide, January 2007

FIRM INFORMATION

We are Morrison & Foerster—a global firm of exceptional credentials. Our clients include some of the largest financial institutions, investment banks, Fortune 100, technology and life science companies. We’ve been included on The American Lawyer’s A-List for seven straight years, and Fortune named us one of the “100 Best Companies to Work For.” Our lawyers are committed to achieving innovative and business-minded results for our clients, while preserving the differences that make us stronger.

For additional information, visit: http://www.mofo.com

Other Morrison & Foerster LLP Featured Video Interviews:

Share Repurchase Considerations
David M. Lynn and David H. Kaufman, Partners, Morrison & Foerster LLP

Click image to view the video.

Hybrid Financing: Certain Ideas for Uncertain Times
James Tanenbaum, Chair of Morrison & Foerster’s Global Capital Markets practice

Click image to view the video.

Preparing to Raise Capital in Volatile Markets Using a Shelf Registration
Anna T. Pinedo, Partner, Morrison & Foerster LLP

Click image to view the video.

“Say on Pay” and Other Issues for the Upcoming Proxy Season
David M. Lynn, Partner and Chair of Public Companies and Securities Practice, Morrison & Foerster LLP

Click image to view the video.

Hybrid Financing: Certain Ideas for Uncertain Times - James R. Tanenbaum, Morrison & Foerster LLP

LegalMinds Editor — Mon, 03 Jan 2011 13:00:30 +0000

In response to the continued volatility and uncertainty in the public markets, there has been an increase in popularity of hybrid financing vehicles such as PIPEs and Registered Direct offerings for public companies seeking to raise capital.

According to James Tanenbaum, chair of Morrison & Foerster’s Global Capital Markets practice, these transactions formats, which have attributes of both private placements and public offerings, offer several unique advantages under these market conditions.

“In the case of PIPEs,” say’s Tanenbaum, “these advantages include “speed, costs and certainty of execution.” He explains that “one of the greatest things about a PIPE is that an issuer will be able to see whether there is a transaction available, who the investors are, and what price they’re prepared to pay before there’s any public knowledge that the company is contemplating a transaction — and also before they have undertaken the cost associated with getting the transaction completed.”

CONTINUE READING SUMMARY (Click to Expand/Collapse)

View and download a PDF transcript of the full interview here. (Coming soon.)

VIDEO SECTIONS (Click link to advance video to specific topic.)

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ATTORNEY INFORMATION

James R. Tanenbaum
Partner, Morrison & Foerster LLP

James Tanenbaum serves as chair of the firm’s Global Capital Markets practice. Mr. Tanenbaum has concentrated his practice on corporate finance and the structuring of complex domestic and international capital markets transactions. He represents issuers, including some of the nation’s largest financial institutions, underwriters, agents, and other financial intermediaries, in public and private offerings of securities as well as issuers, investment banks, and purchasers in hybrid, mortgage-related, and derivative securities transactions. He has developed some of the most widely used hybrid techniques for the placement and distribution of securities.

Mr. Tanenbaum works closely with leading investment banks to formulate new methodologies for securities offerings and to structure innovative financial products. He has also represented many technology-based companies, including biotech and medical device companies.

Mr. Tanenbaum is a frequent lecturer on capital markets topics, and has lectured at the Securities and Exchange Commission, SIFMA and at a variety of securities industry groups. He lectures at law schools in the United States and abroad. He is the co-author of Covered Bonds Handbook, published by Practising Law Institute (2010), co-author of the treatise Exempt and Hybrid Securities Offerings, published by Practising Law Institute (2009) and also co-author of BNA Tax and Accounting Portfolio, SEC Reporting Issues for Foreign Private Issuers (BNA Accounting Policy and Practice Series, 2009). Additionally, Mr. Tanenbaum co-authored “Regulation of Financial Institutions, Financial Crises and Rescue Packages in Europe: the Iceland Case,” a chapter in Global Financial Crisis (Globe Law and Business, 2009) and “The Law: Legal and Regulatory Framework,” a chapter in PIPEs: A Guide to Private Investments in Public Equity (Bloomberg, 2006).

Mr. Tanenbaum has been cited as a recommended lawyer for capital markets in the IFLR1000 Guide to Leading Lawyers, as one of America’s leading lawyers for capital markets–debt and equity by Chambers USA and Chambers Global, as a recommended lawyer for capital markets–debt and equity transactions by The Legal 500 US, and as a recommended lawyer for capital markets–equity by PLC Which lawyer?.

Mr. Tanenbaum served as an Editor of the University of Pennsylvania Law Review during his time in law school. He served as Chairman of the Board of Trustees of Lehigh University and as National Chair of the Benjamin Franklin Society of the University of Pennsylvania.

Practices:

Capital Markets
Financial Institutions + Financial Services
Banking + Finance Services
Admissions:

New York

Education:

Lehigh University (B.A., 1971)
The Fletcher School of Law and Diplomacy (M.A., 1972)
University of Pennsylvania Law School (J.D., 1975)Contact:

1290 Avenue of the Americas
New York, NY 10104
(212) 468-8163

jtanenbaum@mofo.com

To see a full bio, visit: http://www.mofo.com/james-tanenbaum/

Recent Publications:

“A Requiem for Hybrids?,” Euromoney International Debt Capital Markets Handbook 2011, August 2010 – by Anna T. Pinedo and James R. Tanenbaum

Exempt and Hybrid Securities Offerings, Practicising Law Institute (PLI), 2009 – authored by Anna T. Pinedo and James R. Tanenbaum

“International Briefings: ATMs: The Other Cash Machine,” International Financial Law Review, July/August 2009 – by Anna T. Pinedo and James R. Tanenbaum

“Over the Wall and Through the Woods: A Look at Wall-Crossed Deals,” GT News, June 30, 2009 – by Anna T. Pinedo and James R. Tanenbaum

“The Capital Markets Two Step,” Financier Worldwide, January 2009 – by Anna T. Pinedo and James R. Tanenbaum

“Over the Worst of It,” International Financial Law Review, June 2008 – by Anna T. Pinedo and James R. Tanenbaum

“The Offering of Choice in 2008” International Financial Law Review, March 2008 – by Anna T. Pinedo and James R. Tanenbaum

FIRM INFORMATION

For additional information, visit: http://www.mofo.com

Other Morrison & Foerster LLP Featured Video Interviews:

Share Repurchase Considerations
David M. Lynn and David H. Kaufman, Partners, Morrison & Foerster LLP

Click image to view the video.

Hybrid Financing: Certain Ideas for Uncertain Times
James Tanenbaum, Chair of Morrison & Foerster’s Global Capital Markets practice

Click image to view the video.

Preparing to Raise Capital in Volatile Markets Using a Shelf Registration
Anna T. Pinedo, Partner, Morrison & Foerster LLP

Click image to view the video.

“Say on Pay” and Other Issues for the Upcoming Proxy Season
David M. Lynn, Partner and Chair of Public Companies and Securities Practice, Morrison & Foerster LLP

Click image to view the video.