Securities
Flash Trading
High-frequency trading that enables a specific subset of buyer and
sellers a preview of what other buyers and sellers are willing to pay
or accept for a stock before those orders are routed to the market for
execution.
Continue reading "Flash Trading"
Like Butter: Understanding Churning And Other Aspects Of The Broker-Dealer/Customer Relationship
Toolbox is part of the generation of investors whose primary experience with
broker-dealers is the "trade confirmed" message that comes from
whatever online service you use. Because of this, Toolbox has never
much worried about concepts that are hallmarks of the traditional
broker-dealer/customer relationship—things like trade suitability,
unauthorized trading and churning. When Toolbox trades go awry, Toolbox
can only curse itself; and legal action for breach of fiduciary duty to
self seems entirely out of the question. Nonetheless, the concepts are
important, if only because most people (whether as individuals or as
part of institutional investment pools) still hire someone else to do
their investing for them—which means if you think churning has
something to do with making butter, you can't help them.
Regulators May Be Set To Trim The Hedges: The Future Of Hedge Fund Regulation
The topic of hedge fund regulation comes up frequently. This and PLI's
other eNewsletters have chronicled SEC and legislative efforts at
trimming the sails of unregistered investment vehicles. Up to now, no
changes substantial enough to impact how hedge funds do business have
stuck. But as funds came under increasing and withering criticism for
the (perceived) role they played in the financial meltdown of 2008, new
calls are again being made for re-regulation of hedge funds.
Continue reading "Regulators May Be Set To Trim The Hedges: The Future Of Hedge Fund Regulation "
At-The-Market (ATM) Offering
Securities offered pursuant to SEC Rule 415(a)(1)(x) "on a continuous
or delayed basis in the future" at a price that is not fixed at the
time of registration.
Continue reading "At-The-Market (ATM) Offering "
Catherine T. Dixon: The more MD&A stays the same, the more it changes
PLI: What's new in MD&A for 2009?
CATHERINE T. DIXON: Although the Securities and Exchange Commission
("SEC") has issued no new rulemaking on the MD&A section of
periodic reports since publication of its December 2003 interpretive
release (the "2003 MD&A Interpretive Release"),1
this guidance remains the agency's "gold standard" for determining what
constitutes full and fair disclosure of a public company's financial
position and results of operation.
Continue reading "Catherine T. Dixon: The more MD&A stays the same, the more it changes "
Paul F. Roye (Capital Research and Management Company) examines the state of the mutual fund industry in light of current economic conditions
PLI: How has the current economic downturn impacted the financial situation of mutual fund groups?
PAUL F. ROYE: The current market environment has caused fund groups to
focus on valuation issues. Additionally, as a result of the recent
market environment many mutual funds have experienced higher than
average redemptions and exchange activity. Consequently, many fund
groups have been closely monitoring their cash flows, closely
monitoring liquidity to meet redemptions and making contingency plans
in the event of high redemption levels.
Birthing A Junkyard Dog: Negotiating High-Yield Indentures
Apparently, this week has been designated "Let's feature articles that will confuse Toolbox" week. With a little sleight of hand and by use of some of the tools discussed in this week's first download, Toolbox has determined that an indenture is simply the formal agreement between bond issuer and bondholder. And high-yield is just lots of interest. Whew, Toolbox was worried it was going to find out something negative about Grandma Tool's fake teeth. Anyway, Gerald T. Nowak (Kirkland & Ellis LLP) knows from high-yield indentures, which he notes are an "integral part of the capital structure of many private equity sponsored portfolio companies." That's the opening line of this week's second download, The Gift That Keeps on Giving: Negotiating the High Yield Indenture (great title).
Continue reading "Birthing A Junkyard Dog: Negotiating High-Yield Indentures "
Laurie B. Smilan (Latham & Watkins LLP): Amended FRCP Rule 23 offers more certitude to securities class action certifications
PLI: How have securities class action certifications changed in light of amended FRCP 23?
LAURIE B. SMILAN: The fraud-on-the-market presumption of reliance recognized in Basic Incorporated v. Levinson makes securities class actions possible. 485 U.S. 224, 241-49 (1988).1 The presumption assumes that all investors purchase in reliance on the integrity of the market price, which, in turn, reflects all material information. Id. Without the presumption, "proof of individualized reliance from each member of the proposed plaintiff class" would be required and "individual issues . . . [would] overwhelm[] the common ones," thereby "prevent[ing plaintiffs] from proceeding with a class action." 485 U.S. at 242.2 See Federal Rule of Civil Procedure 23(b)(3) requiring that common class issues predominate over those of individual class members.
A Financial Instrument That Bails Itself Out: Covered Bonds
After spending most of last year and this trying to learn the ins and outs of a variety of securitization products, Toolbox is happy to be able to bail on the effort, since it figures those products, even if still theoretically on the market, won't be de rigueur for quite some time. And that's not even just because a lot of the institutions that dealt in them no longer exist. Toolbox senses a quiet yearning across the land (ok, it's a hammer over the head) for more simple financial instruments that you don’t need a M.B.A., Ph.D. and a slide rule to explain. How about a mortgage-backed debt security where the institution that issues the mortgage stands behind it, rather than runs away from it? Toolbox knows that sounds borderline crazy, but such an instrument exists, and has existed (in Europe especially) for quite some time. And that instrument is the covered bond, which may become to the next few years what the CDO was supposed to be to the last.
Continue reading "A Financial Instrument That Bails Itself Out: Covered Bonds "
Thomas A. Roberts (Barrasso Usdin Kupperman Freeman & Sarver, LLC) examines the dangers of financial fraud in the context of the aging baby boomer generation
PLI: Baby boomers are aging, and that reality could bring an exponential increase in securities arbitration filings. Can you put that in perspective as far as it relates to the possibility of investment fraud.
THOMAS A. ROBERTS: It is projected that by the year 2012 roughly 10,000 Americans will turn 65 each day. By 2030, the US Population aged 65 years and older is expected to double to over 71 million.1 At that time 20% of the population will be 65 years or older.2 As baby boomers approach the dawn of their retirement, they have more than $8.5 trillion in investable assets, and stand to inherit roughly $7 trillion from their parents.3 However, due to the decline in traditional corporate pension plans and the strain on social security, baby boomers have had to take more responsibility for planning for their financial futures. Accordingly, in increasing numbers, baby boomers and seniors are turning to investment professionals to establish secure, profitable plans for their golden years.
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