On January 9, 2014, the Municipal Securities Rulemaking Board (“MSRB”) published a request for comments on a proposed new conduct rule for non-solicitor municipal advisors and amendments to existing books and records rules to include municipal advisors in Regulatory Notice 2014-01 (the “Rule Notice”).
MSRB Proposes New Conduct Rule for Non-Solicitor Municipal Advisors and Amendments to Books and Records Rules for Municipal Advisors
Earlier this year, the DC Circuit in Verizon v. FCC struck down anti-discrimination and anti-blocking policies of the FCC and allowed internet service providers (ISP) to make some traffic run faster or block other services, so long as they disclose this information to all subscribers.
Federal Reserve Adopts Final Rule Implementing Enhanced Prudential Standards for Certain Domestic Bank Holding Companies and Foreign Banking Organizations
On February 18, 2014, the Board of Governors of the Federal Reserve System approved its final rule implementing enhanced prudential standards for certain domestic bank holding companies and foreign banking organizations (the Final Rule). While the Final Rule does not implement every provision of the December 2011 and December 2012 proposed rules, the Final Rule still requires enhanced standards of liquidity, risk management, and capital for covered institutions. Compliance with certain of the provisions of the Final Rule begins January 1, 2015.
This month, Moody’s downgraded Puerto Rico’s credit rating to junk status. The same week, Standard & Poors, another one of the three main credit rating agencies, dealt the same blow to Puerto Rico’s credit rating. The downgrade knocked the island’s credit rating down to two notches below investment grade status, following another downgrade that occurred last year.
Puerto Rico has been on shaky financial footing since the recession began in 2007. For months, the Puerto Rico has been on notice for a potential downgrade. According to Moody’s, February’s downgrade was the result of concern about Puerto Rico’s weak growth and ability to access capital markets.
Moody’s also noted that underfunded pension plans and an escalating deficit “have now put the commonwealth in a position where its debt load and fixed costs are high, its liquidity is narrow, and its market access has become constrained.”
Despite the downgrade, investors generally have not fled the Puerto Rico market. According to Dealbook, while prices of some of the island’s bonds dropped, there was no sign of a panicked mass sell-off of Puerto Rican investments. One large US mutual fund, OppenheimerFunds, said that the downgrade did not activate any selling rules. Oppenheimer’s stated that the rule to sell non-investment grade bonds applied only at the time it bought the bonds, but not if the bonds were downgraded later.
For one thing, investors have anticipated the downgrade for months. Moody’s advance notice has given investors the time to reduce their exposure in the Puerto Rican market. Conversely, other firms see an investing opportunity in the lower prices, though they have not yet dropped far enough to cause a buying spree.
Many large investors remain confident that the island’s finances will bounce back. Puerto Rican bonds have long been popular with American banks because they have consistently generated high returns. In addition, its legal status allows it to issue bonds that pay tax-exempt interest in the states.
The Puerto Rican government is also taking steps to instill confidence in the strength of its economy. The government is focused on cutting back on government pensions, reining in government spending, and promoting economic development. The hope is that these initiatives will decrease the island’s outstanding debt, which is currently estimated to be at around $70 billion. Puerto Rico’s municipal debt is on par with the debt of New York and California, while the island has a much smaller underlying economy than its US counterparts.
Last Tuesday, the Puerto Rican legislature proposed raising the legal debt limit. Senior officials say that the island still has the capacity to issue $3 billion in new debt, which they hope to do in March. The borrowing in March would consist of general obligation debt, used primarily to refinance existing debt.
Supreme Court Holds SOX Whistleblower Law Protects Employees of Private Contractors; Yet Full Scope Remains Unclear
On March 4, 2014, the United States Supreme Court held in Lawson v. FMR LLC, 571 U.S. __ , Case No. 12-3 (Mar. 4, 2014), that §806 of the Sarbanes-Oxley Act of 2002 (“SOX”) provides a cause of action for employees of private contractors and subcontractors that are retaliated against for whistleblowing activities.
On February 25, 2014, the Berkeley Center for Law, Business and the Economy (BCLBE) hosted a lunchtime talk on Systemic Risk and the Financial Crisis by Prof. Steven L. Schwarcz. Prof. Schwarcz is a Professor of Law & Business at Duke University and is well known for his research and scholarship in the area of financial regulation and systemic risk. In his lecture, Prof. Schwarcz focused on how regulations should address systemic risk – “the risk that the failure of financial markets or firms harms the real economy by increasing the cost of capital or decreasing its availability.”
On February 25, House Ways and Means Committee Chairman David Camp (R. Mich.) proposed a dramatic overhaul of the U.S. tax code (the Code). While the “Tax Reform Act of 2014,” (the Proposals) contains a number of previously released tax law changes, it also includes an unexpected and unwelcome strike on many public REITs.
On February 24, the Berkeley Center for Law, Business and the Economy (BCBLE) hosted a lunch presentation featuring Eugene Ludwig, founder and CEO of Promontory Financial Group. In his talk titled “Financial Regulation in the Post Reform Era: Putting Dodd-Frank in Context,” Ludwig shared his perspectives on the Dodd-Frank Act and other regulation efforts within the context of earlier cycles of crisis and reform. He discussed what the changes mean for the evolution of the American regulatory model and the transformative potential of the financial services industry.
Deadline for Nasdaq Certification Requirement for Compensation Committee Independence and Change to Nasdaq Independence Rules
Companies listed on the Nasdaq Stock Market must certify that they have complied with Nasdaq’s listing standards regarding compensation committees by the earlier of 30 days after their 2014 annual meeting (if that meeting is held after January 15) or October 31, 2014. This certification must be done through the Nasdaq OMX Listing Center. A preview of the certification form is available at the Nasdaq OMX Listing Center.
In this age of innovation, when a majority of prominent companies are moving towards a greener, cleaner world, Google seems to be at the forefront of the initiative. One of the world’s largest technology companies has invested over $1 billion on wind and solar projects. Google believes these innovative, large-scale energy projects can become major sources of power in the future.