Zurich-based investment bank, Credit Suisse, recently reported a second-quarter loss of 700 million Swiss francs (779 million dollars)—the bank’s largest lost since the financial crisis in 2008. The loss stands in contrast to the bank’s net profit of 1.05 billion francs in the previous year. The loss is the aftershock of a settlement Credit Suisse reached with the United States in May by pleading guilty to one count of conspiring to aid tax evasion. The bank was helping Americans hide their money in Swiss accounts in order to avoid paying U.S. taxes. As a result, Credit Suisse agreed to pay $2.6 billion in penalties. In regards to the bank’s recent legal issues, Brady Dougan, the bank’s Chief Executive Officer in the U.S., said that “there is no issue that has taken more of [the bank’s] time over the past five to six years.”
July marks the four year anniversary of the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The law, which was passed by the Obama administration with the intent to prevent the recurrence of events that caused the 2008 financial crises, has been a divisive issue in Washington and Wall Street since its initiation.
On July 16, the U.S. government further expanded the sanctions imposed in response to Russian President Vladimir Putin’s decision to reclaim the Crimean Peninsula as a part of the Russian Federation. These expanded sanctions include the introduction of the Sectoral Sanctions Identifications List (SSI List), which restricts financial transactions with certain entities that operate in the financial and energy sectors of the Russian economy, as identified by the U.S. Treasury Secretary pursuant to Executive Order 13662.1 The new sanctions represent a significant escalation in the tensions between Russia and the United States and target large banks, energy, and defense firms.
On July 15, 2014, the United States Court of Appeals for the District of Columbia remanded Ralls Corporation’s (Ralls) precedent-setting case against the Committee on Foreign Investment in the United States (CFIUS or the committee) and President Obama to district court for the enforcement of Ralls’s right to due process.1 Ralls had argued,inter alia, that CFIUS and the president had unconstitutionally deprived it of its right to property by forcing it to divest that property for national security reasons. The court found that the president had not provided process sufficient to satisfy the Fifth Amendment, and that Ralls was entitled to (a) notice of the official action, (b) review of the unclassified portions of the evidence relied upon by the president in his decision and (c) the right to respond to that evidence. Separately, the court found that the district court also had incorrectly dismissed a number of Ralls’ other claims against CFIUS as moot, and remanded those additional claims for a hearing on the merits. The court’s decision may add a new layer of uncertainty to CFIUS processes, impact both applicants’ rights and committee procedures, and increase the number of tactical decisions involved in preparing for a CFIUS review.
In a recent announcement, the Department of Justice, along with the FBI have begun investing the alleged rigging and manipulation of the foreign exchange (“FX”) market. The FBI is already “looking into alleged rigging of interest rates associated with the London interbank offered rate, or Libor.”
SEC Staff Provides Guidance on Custody Rule Compliance When Private Funds Use SPVs and Escrow Accounts
The staff of the SEC’s Division of Investment Management issued IM Guidance Update No. 2014-7 (the “Guidance Update”) to provide guidance on how Rule 206(4)-2 under the Investment Advisers Act of 1940 (the “Custody Rule”) applies when private pooled investment vehicles (“private funds”) use special purpose vehicles (“SPVs”) to own one or more assets or use escrow accounts in connection with the sale of a portfolio company.
Two months ago, we reported on the Comcast and Time Warner Cable merger. At the time, Comcast had expressed confidence in the approval of the merger. However, recent events have commentators speculating whether approval will be as easy as Comcast believed. The infamous Comcast customer service call that has been making the rounds online has come at a very inconvenient time for Comcast, who is in the middle of the merger approval process.
Not-for-profit health care providers that have borrowed on a tax-exempt basis within the last five years should be aware of the Securities and Exchange Commission’s (SEC) Municipalities Continuing Disclosure Cooperation (“MCDC”) Initiative. The MCDC Initiative applies to municipal issuers and obligated persons, such as tax-exempt hospital borrowers, that provided materially misleading disclosure in Official Statements issued within the past five years regarding compliance with their continuing disclosure obligations under SEC Rule 15c2-12. The SEC is offering to enter into settlements pursuant to which such borrowers neither admit nor deny wrongdoing, but agree to a cease and desist order against future misleading disclosure and agree to certain undertakings, such as remedying all past disclosure failures, cooperating with subsequent SEC investigations, disclosing the settlement terms for five years in Official Statements, and establishing training programs regarding continuing disclosure obligations. However, the MCDC Initiative expires on September 10, 2014. After that date, the SEC has indicated that penalties for such misleading disclosure are likely to be more severe and may include fines.
Last week, the financial world goggled in astonishment at the meteoric rise in the CYNK Technology Corp stock. Cynk, a supposed social-networking company, is a business which appears to have one employee, large losses, no turnover, and no assets. However, what Cynk does have is a $4.5 billion stock market valuation: numbers that clearly don’t add up to the baffled financial world.
Dubai Holding, a global investment company, has unveiled plans to construct the world’s first temperature controlled mini-city, called Mall of the World. The project will “develop the world’s largest mall, largest indoor park, cultural theatres and wellness resorts with a capacity to host over 180 million visitors annually.”