Client Alerts & Publications Archive

On June 27, 2024, the United States Supreme Court ruled in favor of the United States Trustee, who had objected to Purdue’s plan of reorganization that granted releases of third party claims to members of the Sackler family in exchange for their contribution of up to $6 billion to the Purdue bankruptcy estate. Justice Neil Gorsuch, writing for the majority, found that the type of relief being granted to the Sacklers (i.e., a blanket shield from all existing or potential liability relating to the opioid crisis) represented the kind of “discharge” only available to debtors who have “placed all their assets on the table.”

In a decision that should help restore investors’ faith in the protections afforded municipal bondholders under the United States Bankruptcy Code (the “Bankruptcy Code”), on June 12, 2024, the United States Court of Appeals for the First Circuit (the “First Circuit” or the “Court”) held that the bondholders (the “Bondholders”) of certain Puerto Rico Electric Power Authority (“PREPA”) electric revenue bonds (the “Bonds”) have a non-recourse claim against PREPA’s estate in PREPA’s reorganization proceedings under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act, 48 U.S.C. §§ 2161-78 (“PROMESA”), for the full principal amount of their outstanding Bonds, plus matured interest, of approximately $8.5 billion, and that the Bonds are secured by PREPA’s current and future Net Revenues.

Despite recent regulatory efforts from FINRA and the SEC, industry participants continue to have no clear understanding of what qualifies a product as either “complex” or “risky.”  In this article, Chapman attorneys provide insight and context for a path forward for definitive guidance regarding complex products, but also for a more rational regulatory scheme that considers a wide variety of factors. This article proposes an objective framework for broker-dealers and investment advisers to consider Defined Outcome ETFs, regardless of whether they are deemed complex under the current regulatory environment, by utilizing a well-established measure of risk to assess whether an investment in those vehicles is in a client’s best interest.

On June 7, Governor Pritzker signed into law House Bill 4582, Public Act 103-0591 (the “Act”). Among other items, the Act amends the School Code, the Local Government Debt Reform Act (Debt Reform Act), and the Property Tax Extension Limitation Law (PTELL).

On June 5, 2024, the United States Court of Appeals for the Fifth Circuit (the “Court”) determined to vacate rules recently adopted by the Securities and Exchange Commission (the “Commission”) regulating the conduct of investment advisers to private investment funds (the “Private Fund Advisers Rule”).

On May 16, 2024, the IRS released Notice 2024-41 (the “Notice”), which provides updated guidance on the domestic content bonus energy credit available for qualifying energy projects under the Inflation Reduction Act of 2022 (the "IRA"). The Notice modifies existing guidance on the domestic content bonus under Notice 2023-38 (“Notice 2023-38”) and establishes a new elective safe harbor (the “New Elective Safe Harbor”) that allows project owners to determine certain projects’ eligibility for the domestic content bonus using predetermined cost percentages provided by the IRS.  

On April 23, 2024, the Department of Labor (“DOL”) released its final investment advice fiduciary rule, titled the Retirement Security Rule (the “Final Rule”), which re-defines who is a fiduciary on account of providing investment advice to workplace retirement plans and individual retirement accounts (“IRAs”). In addition, the DOL released several amended DOL prohibited transaction exemptions that, together with the Final Rule, are “intended to protect the interests of retirement investors by requiring persons who are defined in the Final Rule as investment advice fiduciaries to adhere to stringent conduct standards and mitigate their conflicts of interest.” The Final Rule and the amended exemptions finalize the proposed investment advice fiduciary rule and proposed amendments to the prohibited transaction exemptions, which the DOL issued on October 31, 2023. The Final Rule narrows certain provisions in the proposed rule that some commentators and industry groups argued were overly broad. The Final Rule and the amended prohibited transaction exemptions will become effective on September 23, 2024, except that certain provisions in the amended exemptions will not be phased in until one year after such effective date.

Amidst an ever-changing US regulatory landscape, Israeli fintechs need to carefully consider their licensing obligations when offering their products to US consumers. Chapman partner Tobias Moon provides perspective on regulatory considerations associated with the credit products Israeli fintech companies are offering to US-based consumers in the US-Israel Legal Review, published by Israel Desks.

In February 2023, Perpetual US Services, LLC filed an application for exemptive relief with the Securities and Exchange Commission (SEC) that, if granted, would allow a mutual fund to create and operate an ETF share class alongside its mutual fund share classes. In the February 2024 issue of The Investment Lawyer, Chapman partners Rick Coyle, Barry Pershkow and Morrison Warren break down the history of the sought-after relief, the potential advantages to such a structure for mutual fund sponsors and shareholders, and share their insights into the SEC’s reluctance to grant such relief, while ultimately arguing that the approval of these applications is the proper step for the SEC to take.

Earlier this month, the United States Securities and Exchange Commission (“SEC”) finalized a long-awaited rule that mandates climate-related disclosures by public companies and in public offerings. See here. The rule does not apply to public asset-backed securities (“ABS”) issuers and the SEC has stated that it will continue to review climate disclosures related to these issuers.

Earlier this month, the United States Securities and Exchange Commission (“SEC”) finalized a long-awaited rule that mandates climate-related disclosures by public companies and in public offerings. See here. The SEC’s rule is already facing legal challenges, including a recent ruling that temporarily blocks the rule from taking effect.

In its 2024 Supervisory Priorities, the NCUA set out examination priorities based on activities that pose the highest risk to federally insured credit union members (referred to as “credit unions”) and that are responsive to the continuous stream of challenges facing credit unions in this current market. It should come as no surprise to anyone that liquidity risk is once again an examination priority for 2024, as the economic environment continues to be uncertain. This all follows on the heels of the Addendum to the Interagency Policy Statement on Funding and Liquidity Risk Management: Importance of Contingency Funding Plans issued in July 2023 (the “Addendum”), highlighting the importance of contingency funding plans as a crucial component of managing funding and liquidity risk. 

On November 27, 2023, the US Securities Exchange Commission (“SEC”) adopted final Securities Act Rule 192 (“Final Rule 192”) prohibiting certain conflicts of interest in securitization transactions. In general, Final Rule 192 prohibits a “securitization participant” with respect to an “asset-backed security” (“ABS”) from directly or indirectly engaging in any “conflicted transaction” during the applicable prohibition period.

The Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) recently issued a decision in In re Envision Healthcare holding that a debtor did not forfeit its rights (including voting and managerial rights) in a Delaware limited liability company (an “LLC”) by filing for bankruptcy, notwithstanding the fact that Delaware state law terminates a person’s membership interest in an LLC upon the member’s bankruptcy.

The Corporate Transparency Act (CTA) went into effect January 1, 2024. Under the CTA, all newly created entities are now required to file a report with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) within 90 days of formation, unless an entity qualifies under one of 23 exemptions. That means, unless an exemption applies, any newly formed LLC, limited partnership, corporation, statutory trust, or other organization that is created by filing with a secretary of state has an additional federal filing requirement. All existing entities formed prior to January 1, 2024, that do not qualify for an exemption have until the end of 2024 to file a Report.

On December 22, 2023, the Internal Revenue Service unveiled its online pre-registration portal for elective pay (or “direct pay”) and transferability of tax credits under the Inflation Reduction Act (the “IRA”). Separately, on December 28, 2023, the IRS released Notice 2024-9, which provides relief for taxpayers facing a phaseout of elective pay tax credits related to a failure to meet certain domestic content requirements.

Our December 6, 2023 Client Alert described very generally important aspects of the “Basel III Endgame” NPR (NPR) that proposed replacing two “subparts” of the existing US Basel III rule. In that Alert, we indicated we would issue a separate Client Alert describing in more detail how the Standardized Approach “risk weights” in Section 32 and “credit conversion factors” (CCFs) in Section 33 of the US Basel III rule differ from the risk weights and CCFs proposed in the NPR (which would be contained in proposed Sections 111 and 112 of the US Basel III rule).

On July 27, 2023, the three federal banking agencies jointly issued a “notice of proposed rulemaking” captioned “Regulatory Capital Rule: Large Banking Organizations and Banking Organizations With Significant Trading Activity” (NPR) that is more commonly described as “the Basel III endgame.”

On November 17, 2023, the IRS released proposed regulations (the “Proposed Regulations”) that provide guidance relating to the investment tax credit (the “ITC”) under Section 48, which provides a tax credit for investment in certain types of green energy technology.

Chapman's quarterly Regulatory Update contains an overview of the latest regulatory actions, market happenings, and litigation and enforcement activity in the investment management space.

The Second Circuit Court of Appeals recently issued an eagerly awaited decision in Kirschner v. JP Morgan Chase Bank, N.A., which reconfirmed the widely accepted view that loans are not securities under federal or state securities laws.

On August 23, 2023, the Securities and Exchange Commission (the “Commission”) voted 3 to 2 to adopt new and amended rules under the Investment Advisers Act of 1940 (the “Advisers Act”) requiring advisers to private funds to provide additional disclosures to investors in such funds, restrict certain types of preferential treatment to investors, and impose new requirements related to fund audits, books and records, and adviser-led secondary transactions.

On July 27, 2023, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued a joint Notice of Proposed Rulemaking (the “NPR”) proposing significant changes to the US bank capital regulations. The NPR proposes several changes to the regulations for determining required capital for bank securitization exposures and additional changes that will impact securitization exposure capital charges. While the proposed changes impact banks originating both traditional and synthetic securitization of their own assets, and securitization exposures in the form of derivatives, and provide a new method for determining the risk weights of exposures to Non-performing Loan (“NPL”) securitizations, this Client Alert focuses on the impact of the proposed rules on banks investing in securitization transactions (other than NPL securitizations), both by buying asset-backed securities with the intent to hold such securities and by providing financing of securitizations by making loans or entering into asset purchase facilities, either directly or through credit and liquidity facilities provided to asset-backed commercial paper (“ABCP”) conduits.

Law firms can enhance their commitment to pro bono work by finding small ways to increase participation throughout their workforce.

Chapman's quarterly Regulatory Update contains an overview of the latest regulatory actions, market happenings, and litigation and enforcement activity in the investment management space.

One of the most innovative features of the energy tax credit provisions of the Inflation Reduction Act (the “IRA”), which became law on August 16, 2022, is a pair of provisions that allow taxpayers to sell energy tax credits to a third party for cash (Section 6418) or to elect to receive a cash payment of the tax credit directly from the federal government (Section 6417).¹ Since the IRA was enacted, taxpayers, tax-exempt organizations, governmental entities, and their advisors have been counting the days for the IRS to provide guidance on how to apply these monetization provisions, which are expected to be a game-changer in the U.S. market for investment into green energy technologies. 

The IRS released a major package of temporary and proposed regulations on these provisions on June 14, 2023.

Chapman partners Michael Friedman and Eric Silvestri, and associate Helena Honig discuss a recent decision of the US Bankruptcy Court for the Southern District of New York in an article published in the June 2023 issue of Israel Desks Magazine.

On June 5, 2023, the Governor of Colorado signed into law House Bill 23-1229 which contains a purported “opt out” of federal preemption made available to state chartered, FDIC insured institutions.  It appears aimed at least in part to online lenders making loans to Colorado residents. Whether this action will trigger additional states to attempt a similar move or whether this legislation is even valid will likely end up in litigation, teeing up another potential battle on federal preemption vs. states rights and likely leaving Colorado borrowers in limbo for some time to come. Of note, this law does not become effective until July 1, 2024.

The International Comparative Legal Guide - Securitisation 2023, now in its sixteenth edition, is a leading legal text spanning the global securitization market, providing insights into the US and EU CLO market, cross-border trade receivables, taxation, and other topical issues and jurisdictions. Chapman partners David Nirenberg and Steven Kopp, recognized authorities on the tax treatment of US securitization transactions, co-authored the chapter entitled, "U.S. Withholding on Asset-Backed and Structured Securities."

This Alert discusses the recent Delaware cases related to the duty of oversight and the recent decision of the Delaware Chancery court in a shareholders derivative lawsuit brought by the shareholders of McDonalds.

The Puerto Rico Electric Power Authority (“PREPA”) has been in debt adjustment proceedings since 2017 under the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”), which was signed into law in 2016.

Distressed US assets present unique investment opportunities for those willing to accept certain levels of risk and create value. Michael Friedman, Chapman's Israel practice head and practice leader for the firm's Special Situations and Restructuring Group, and associate Helena Honig, provide perspective on distressed investing in the United States in the US-Israel Legal Review, published by Israel Desks.

On March 15, 2023, the U.S. Securities and Exchange Commission (“SEC”) issued a series of proposals designed to improve firms’ preparedness and responses to cyber incidents. The proposals, which would impact many of the financial services industry participants regulated by the SEC, generally require that firms establish policies and procedures to better prevent and detect cyber incidents and disclose certain cyber incidents to clients and the SEC within specified time periods.

On January 25, 2023, the U.S. Securities and Exchange Commission (“SEC”) issued a proposed rule to prevent and avoid material conflicts of interest in certain securitization transactions. The rule would prohibit securitization participants from engaging in certain transactions that could incentivize structuring an asset-backed securities (“ABS”) transaction in a way that would put the securitization participant’s interests ahead of the interests of the ABS investors.

On March 14, 2023, an announcement from the CEO of the newly-created, full-service FDIC-operated Bridge Bank was posted on the Silicon Valley Bank website indicating that the Bridge Bank has “fully stepped into the shoes of the former Silicon Valley Bank.”

On Monday, March 13, 2023, the Federal Deposit Insurance Corporation transferred all deposits—both insured and uninsured—and substantially all assets of the former Silicon Valley Bank to Silicon Valley Bank, N.A, a newly created, full-service FDIC-operated ‘bridge bank’. The FDIC has not stated whether the bridge bank has assumed funding obligations under the former Silicon Valley Bank’s unfunded loan commitments.

Included in this Frequently Asked Questions are some general observations on the Federal Deposit Insurance Corporation (“FDIC”) receivership process for Silicon Valley Bank (“SVB”). The specifics of the receivership process are uncertain at this early stage and, hopefully, more guidance with respect to the issues discussed below will be provided by the FDIC over the next few days.

On February 13, 2023, the IRS released Notices 2023-17 and 2023-18, which provide guidance on energy incentive tax credit provisions that were amended by the Inflation Reduction Act of 2022 (the "IRA"). Taxpayers and their advisors have been eagerly awaiting guidance on many aspects of the IRA's changes. The guidance in Notices 2023-17 and 2023-18, however, does not cover many of the most pressing issues regarding the new tax credit rules, such as the details of how to obtain a refund of tax credits under the new “direct pay” provision and how to comply with the prevailing wage and apprenticeship requirements. The IRS has stated that it will issue additional guidance on the IRA's changes to existing tax credit provisions in the future.

The U.S. Supreme Court recently took up In re Grand Jury, No. 21-1397, from the U.S. Court of Appeals for the Ninth Circuit to address a common, recurring, and sometimes vexing question as to attorney-client privilege: how to apply the privilege to communications with counsel that contain both legal and non-legal advice? This is a particularly important question for corporate in-house counsel who, as the courts often say, “wear two hats,” providing both legal and business or policy advice to their employers.

On February 22, 2023, the New York Stock Exchange (“NYSE”) proposed the adoption of new listing standards contained in the Corporate Governance section of the NYSE Listed Company Manual (the “Manual”). New Section 303A.14 would “require issuers to develop and implement a policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers.”

On February 15, 2023, the U.S. Securities and Exchange Commission (the “SEC”) adopted rule changes to Exchange Act Rule 15c6-1, shortening the standard settlement cycle for most broker-dealer transactions in securities from two business days after the trade date (T+2) to one day (T+1).

On February 15, 2023, by a vote of 4 to 1 with only Commissioner Peirce voting no, the U.S. Securities and Exchange Commission proposed to amend the content of Rule 206(4)-2 under the Investment Advisers Act of 1940 (the “Advisers Act”), known as the Custody Rule, and redesignate it as Rule 223-1 under the Advisers Act, now known as the Safeguarding Rule. If adopted, the proposal would, among other things, expand the coverage of the Advisers Act’s custody provisions beyond “client funds and securities” to include any client assets of which an adviser has custody, a change that would bring within the rule’s coverage all digital assets, including non-securities such as commodities. Such a change would impose a requirement on many investment advisers that hold client assets to place those assets with a “qualified custodian,” despite a current lack of widespread availability of such service providers for many digital assets.

The much anticipated updated regulations for disclosure requirements for commercial financing in New York have been adopted by the New York Department of Financial Services ("NYDFS"). 

This Chapman Insights article is part of our ongoing series on Real Estate Investment Trust (REIT) financings. 

Pratt's Journal of Bankruptcy Law republished a Chapman Client Alert.

At a time when the digital asset market is badly in need of good news, the International Swaps and Derivatives Association (ISDA) has delivered the long-awaited ISDA Digital Asset Derivatives Definitions (the “Definitions”).

This Chapman Insights article is the first in a series on Real Estate Investment Trust (REIT) financings and focuses on collateral structures. A REIT may incur indebtedness for a variety of purposes, including to smooth out cash flow, as a bridge to an additional capital raise, and/or to leverage its assets for the purpose of acquiring additional assets. While there are many different forms this indebtedness can take — from bank debt to bond issuances — this article highlights considerations when the debt incurred is from a bank or bank group.

The Inflation Reduction Act (the “IRA”), which became law in August 2022, provides one of the most significant packages of renewable energy incentives in recent history. Most of the renewable energy provisions take the form of extended and expanded tax credits, which apply to investments in solar, wind, geothermal and other nontraditional energy resources. One tax credit provision of the IRA that will be of interest to ordinary consumers are the changes to the tax credit for taxpayers who purchase an electric vehicle (the “EV tax credit”).

The Inflation Reduction Act (the "IRA") is being hailed as one of the most significant legislative actions in recent history intended to incentivize investment in renewable energy technologies. The IRA generally achieves this through the extension and broadening of existing tax credit provisions that apply to investments in clean energy technologies such as solar, wind and geothermal. Since the IRA became law in August 2022, taxpayers have been eagerly awaiting regulations and other guidance on how to apply the new provisions and how to claim the tax credits. On November 30, 2022, the IRS issued the first item of guidance on these provisions in the form of IRS Notice 2022-61 (the "Notice").