Client Alerts & Publications Archive

On May 20th, the IRS released draft updates to the U.S. Model Income Tax Convention.

On June 8, 2015, Long Beach Community College District in California paid the Internal Revenue Service $1,013,000 as a result of the private activity use of certain real property acquired by the District with proceeds of tax-exempt certificates of participation issued in 2001. 

A recent decision in the Southern District of New York interpreting the Trust Indenture Act will likely provide bondholders additional leverage in out-of-court restructurings.

In this edition:

• Servicemembers Update
• CFPB Consumer Complaint Narratives
• Private Student Loans and Cosigners

The U.S. Supreme Court’s 6-3 split decision in Baker Botts LLP v. Asarco LLC will have long standing implications for all bankruptcy professionals’ compensation, potentially making it much more costly for all professionals retained in chapter 11 cases.

On June 29, 2015, the Supreme Court issued a ruling declaring that the Environmental Protection Agency interpreted the Clean Air Act unreasonably in refusing to consider costs when deciding whether to regulate power plant emissions in relation to the EPA’s Mercury and Air Toxics Standards.

The Securities and Exchange Commission recently set the compliance date for the ban on certain payments to third-party solicitors under Rule 206(4)-5 of the Investment Advisers Act of 1940 as July 31, 2015.

The staff of the Securities and Exchange Commission’s Division of Investment Management recently published guidance on investment adviser Code of Ethics exceptions to personal securities transaction reporting for securities transactions occurring in certain types of trusts or investment management accounts where the beneficiary or account holder has limited or no discretionary investment authority. 

Private schools that are exempt from federal income taxation must file an annual information return with the IRS concerning their racial nondiscrimination policies. Schools that file the annual information return, Form 990, Return of Organization Exempt from Income Tax may satisfy this annual filing requirement on Schedule E.

Form 5578 is a half-page form simply certifying that a private school has complied with the racial nondiscrimination guidelines set forth by the Internal Revenue Service. The failure of a private school to annually file this form may jeopardize the school's tax-exempt status under Section 501(c)(3).

The purpose of this article is to provide a general overview of how royalty-backed securitizations work and to encourage further use of royalty-backed securities by leaders in the music, business, and financial industries.

On June 24, 2015, Prop. Treas. Reg. §1.148-1(f) addressing the definition of “Issue Price” was published in the Federal Register. The Internal Revenue Service is accepting comments on the Proposed Regulation through September 22, 2015.

On June 18, 2015, the Securities and Exchange Commission issued cease-and-desist orders to 36 underwriting firms in response to voluntary self-reporting of potential misrepresentations in municipal bond offering documents regarding compliance by issuers with prior disclosure obligations under the SEC’s Municipalities Continuing Disclosure Cooperation initiative. 

The Financial Industry Regulatory Authority is requesting comment on a revised proposal to adopt a new FINRA rule that would consolidate and clarify former National Association of Securities Dealers and New York Stock Exchange rules regarding discretionary accounts and transactions.

On June 18, 2015, the Securities and Exchange Commission issued cease-and-desist orders to 36 underwriting firms in response to voluntary self-reporting of misrepresentations in municipal bond offering documents regarding compliance with prior disclosure obligations under its Municipalities Continuing Disclosure Cooperation initiative.

In Delaware, arms-length negotiations may no longer be sufficient to protect an unwitting lender from a derivative claim brought by a borrower’s shareholder with respect to certain change of control defaults contained in credit agreements.

On June 12, 2015, the Securities and Exchange Commission issued a release seeking public comment to help inform its review of the listing and trading of new, novel, or complex exchange-traded products.

Under current law, affiliated creditors holding debt arising from the same loan transaction will not likely be lumped together when determining the number of creditors that have voted to approve or reject a plan, particularly where such affiliates held such debt prior to a bankruptcy filing and assert their claims through separate proofs of claim.

The Financial Industry Regulatory Authority recently issued a Regulatory Notice announcing that it had added additional guidance to the FINRA Rule 2210 questions and answers webpage to provide additional guidance on advertising and other communications with retail investors. 

The Securities Industry and Financial Markets Association recently proposed that the Financial Industry Regulatory Authority amend its rules to replace the current broker-dealer “suitability” standard with a new “best interests” standard along with enhanced customer disclosure about a broker-dealer’s services, conflicts of interest, fees, and compensation. 

To kick off the Memorial Day weekend, the Federal Reserve Board announced a proposal to include certain state and municipal general obligation bonds in the calculation of High Quality Liquid Assets, the numerator of the new Liquidity Coverage Ratio requirement to which large banks are subject. 

On December 8, 2014, the American Bankruptcy Institute Commission to Study the Reform of Chapter 11 released its Final Report and Recommendations for amendment to the current Bankruptcy Code. The proposals are significant, and on the whole, largely harmful to the rights of secured creditors.

The Financial Industry Regulatory Authority recently released a Regulatory Notice in which it proposed changes to certain aspects of the FINRA rules governing member firms’ communications with the public. This Client Alert is a summary of the proposed changes.

This Client Alert summarizes the Securities and Exchange Commission proposed changes to certain aspects of the reporting, disclosure, and recordkeeping obligations of registered investment advisers. 

This Client Alert summarizes the Securities and Exchange Commission proposed changes to certain aspects of the disclosure and reporting obligations of registered investment companies. 

The Financial Industry Regulatory Authority recently issued an interpretive letter that allows distributors of mutual funds to include related performance information in communications with institutional investors, including registered broker-dealers and investment advisers.

On May 20, 2015, the Securities and Exchange Commission proposed changes to certain aspects of reporting and disclosure obligations of registered investment advisers and investment companies. 

On May 18, 2015, the Board of Governors of the Federal Reserve System issued guidance indicating when a banking organization that determines its risk-based capital using the advanced approaches may apply the simplified supervisory approach rather than the supervisory formula approach when determining the risk weight of a securitization exposure for risk-based capital purposes.

The United States District Court for the Southern District of New York recently affirmed the Bankruptcy Court’s decision in In MPM Silicones, LLC, establishing Judge Drain’s “prime plus” formula as the appropriate interest rate required in connection with new notes issued to secured creditors under a cramdown plan of reorganization in the Southern District of New York.

This is the fifth installment of Chapman and Cutler LLP’s discussion of the proposals contained in the Final Report and Recommendations of the American Bankruptcy Institute’s Commission to Study the Reform of Chapter 11.

In this edition:

• U.S. Supreme Court Will Not Hear CashCall Case – Uncertainty for Marketplace Lenders?
• FinCEN Current Priorities
• Guidance on Youth Savings Programs
• Overdraft Update – CFPB Enforcement Action

In order to avoid future intercreditor disputes, investors can learn from past mistakes and draft or revise their intercreditor agreements accordingly. In this Client Alert, we attempt to highlight a number of specific considerations that may improve intercreditor agreements, to better achieve their intended purpose of delineating the respective priorities and rights of senior and junior secured creditors while avoiding intercreditor conflict.

On May 4, 2015, the U.S. Commodity Futures Trading Commission published a letter providing clarification of an issue that has been of acute interest to the auto and equipment securitization industry. Section 2(h)(7)(A) of the Commodity Exchange Act permits certain qualifying entities to elect not to clear a swap that is otherwise subject to a Clearing Determination.

The staff of the Securities and Exchange Commission’s Division of Investment Management recently published guidance for registered investment advisers and registered investment companies related to cybersecurity preparedness in their business practices. 

The Securities and Exchange Commission staff recently announced an initiative to conduct examinations of registered investment company complexes that have not previously been examined. 

On March 31, 2015, the U.S. Commodity Futures Trading Commission issued no-action relief stating that, with respect to certain legacy special purpose vehicle swaps, swap dealers would be exempt from complying with certain CFTC regulations. These Specified Regulations relate to external business conduct standards and swap trading documentation that swap dealers would otherwise be required to adhere to.

In this issue: 

• CFPB Arbitration Study: First Step to Restricting their Use?
• 7th Circuit Requires Servicers to Credit Payments on the Day Authorized
• Target Data Breach Settlement

On March 16, 2015, the United States Environmental Protection Agency announced its new voluntary “Safer Choice” labels, which are intended to inform consumers about chemicals present in household and industrial products.

This Chapman and Cutler white paper provides a summary of, and practical guide to, the principal requirements of federal securities laws relating to municipal bonds. Much of the information discussed in this white paper applies to both higher education bonds and other municipal securities, while certain sections focus on securities laws as applied to the high education sector, in particular.

Out-of-court debt restructurings may face greater hurdles to success in light of two recent federal court decisions out of New York broadly expanding dissenting bondholders’ rights under the Trust Indenture Act.

The Corporate Board published an article written by Chapman attorneys.

Insights: The Corporate & Securities Law Advisor published an article based off a Chapman Insights article.

As indicated in our January 20, 2015 Client Alert, the Obama Administration previously announced in general terms its Fiscal Year 2016 budget plans with respect to the maintenance and improvement of US public infrastructure.

The staff of the Securities and Exchange Commission recently issued guidance to remind affiliates of registered investment companies that the receipt of gifts or entertainment may violate Section 17(e)(1) of the Investment Company Act of 1940.

The Harvard Law School Forum on Corporate Governance and Financial Regulation posted an article based on a recent Chapman Insights. 

In order to maintain the global private placement market as an attractive market for both issuers and investors, the American College of Investment Counsel undertook to update its Model Form Note Purchase Agreement last year and released its Transaction Process Management Committee Updated Model X Form No. 2, draft dated April 15, 2014.

Pratt's Journal of Bankruptcy Law recently published an article based on a recent Chapman Client Alert.

On February 18, 2015, the European Commission issued two publications which begin a three-month consultation with member states, capital market participants, and other stakeholders towards the development of an action plan for a fully functioning European Capital Markets Union by 2019. 

The Banking Law Journal published an article based on a recent Chapman Client Alert.