United States: Corporate And Financial Weekly Digest - March 21, 2014

Last Updated: March 26 2014

Edited by Robert Weiss and Gregory Xethalis

SEC/CORPORATE

Delaware Supreme Court Upholds Chancery Court Ruling that Applied Business Judgment Rule to Going Private Transaction with Controlling Stockholder

In Kahn v. M&F Worldwide Corp., the Delaware Supreme Court unanimously upheld the Chancery Court's decision in In re MFW Shareholders Litigation. In that decision, the Chancery Court had granted summary judgment in favor of the board of directors of M&F Worldwide Corp. (M&F) in a suit brought by former stockholders of M&F challenging the going private acquisition of M&F by MacAndrews & Forbes Holdings Inc., the owner of 43.4 percent of M&F's common stock. The Chancery Court held that a going private acquisition by a controlling stockholder that is conditioned, from the outset, on approval by both a properly empowered, independent committee, and an informed, uncoerced majority-of-the-minority vote would be reviewed under the business judgment standard of review, rather than the entire fairness standard of review. A summary of the Chancery Court's decision in In re MFW Shareholders Litigation is included in the June 7, 2013 issue of Corporate & Financial Weekly Digest.

In upholding the Chancery Court's decision, the Delaware Supreme Court held that the business judgment standard of review would apply to a going private acquisition by a controlling stockholder if, but only if, the following facts were established: (1) the controlling stockholder conditioned the transaction on the approval of both a special committee, and a majority-of-the-minority stockholders; (2) the special committee was independent; (3) the special committee was empowered to freely select its own advisors and to say no definitively; (4) the special committee acted with care; (5) the minority vote was informed; and (6) there was no coercion of the minority.

Notably, the Delaware Supreme Court left open the possibility for plaintiffs to question a special committee's independence and its process for selling a target company. The Delaware Supreme Court indicated that if, following discovery, triable issues of fact remain about whether either of the procedural protections were established or were effective, the case would survive a motion for summary judgment and would be subject to entire fairness review at trial. In upholding the Chancery Court's decision, the Delaware Supreme Court confirmed the Chancery Court's findings that the plaintiffs had failed to raise any genuine issues of material fact as to whether the procedural protections had been established or were effective. Accordingly, the Chancery Court's application of the business judgment standard of review at the summary judgment stage was found to be appropriate.

Click here to read the opinion.

BROKER DEALER

Amendments to Uniform Branch Office Registration Form

Broker-dealers are required to use the Branch Office Registration Form (Form BR) to register their branch offices with the Financial Industry Regulatory Authority, the New York Stock Exchange and participating states via the Central Registration Depository system. Form BR enables a firm to: (1) register its branch office(s), either by notice filing or approval, as required by the relevant jurisdiction or self-regulatory organization (SRO), (2) amend a registration; (3) close or terminate a registration; or (4) withdraw a filing in the appropriate participating jurisdiction and SRO.

The Securities and Exchange Commission approved amendments to Form BR to: (1) eliminate Section 6 of the existing Form BR, which was required only for firms seeking to register branch offices with the NYSE; (2) add questions relating to space sharing arrangements and the location of books and records that are currently only in Section 6 and make them applicable to all firms; (3) modify existing questions and instructions to provide more detailed selections for describing the types of activities conducted at the branch office; (4) add an optional question to identify a branch office as an "Office of Municipal Supervisory Jurisdiction," as defined under the rules of the Municipal Securities Rulemaking Board; and (5) make other technical changes to adopt uniform terminology and clarify questions and instructions.

The implementation date for the revised Form BR is April 7, 2014. Firms registering or notice filing new branch offices will be required to use the revised Form BR on or after the implementation date. Firms with existing registered branch offices will not be required to file the revised Form BR for such existing offices immediately upon the implementation date. Instead, firms will be required to provide the new information elicited on the revised Form BR for each existing registered branch office whenever an amendment is otherwise required, in the ordinary course, to update existing information items that have become inaccurate or incomplete.

Click here to read FINRA Regulatory Notice 14-11.

SEC Approves New FINRA Supervision Rules

The current rulebook of the Financial Industry Regulatory Authority consists of FINRA rules, legacy National Association of Securities Dealers (NASD) rules (that apply to all FINRA member firms) and rules incorporated from the New York Stock Exchange (that apply only to those member firms of FINRA that are also members of the NYSE). The Securities and Exchange Commission has approved new FINRA rules to replace existing NASD rules and corresponding provisions of the NYSE rules. The new rules become effective on December 1, 2014.

The new FINRA rules governing supervision are with respect to, and replace existing NASD rules and corresponding provisions of the NYSE rules regarding, supervisory systems, written procedures regarding supervision, inspection requirements, transaction review and reporting, branch office and office of supervisory jurisdiction designations, content requirements, obligations relating to holding of customer mail, and requirements relating to the tape recording of registered persons by certain firms. Specifically, new FINRA Rules 3110 (Supervision) and 3120 (Supervisory Control System) replace NASD Rules 3010 (Supervision), 3012 (Supervisory Control System) and corresponding provisions of the NYSE Rules and Interpretations. In addition, new FINRA Rules 3150 (Holding of Customer Mail) and 3170 (Tape Recording of Registered Persons by Certain Firms) replace NASD Rules 3110(i) and 3010(b)(2), respectively.

Click here to read FINRA Regulatory Notice 14-10.

CFTC

CFTC Requests Comment on Swap Data Reporting Rules

On March 19, the Commodity Futures Trading Commission approved for publication in the Federal Register a request for public comment on swap data reporting requirements under Part 45 of the CFTC's regulations. The request was developed by a CFTC interdivisional working group that was charged with reviewing the reporting rules and making recommendations for resolving reporting challenges. The request seeks comment on confirmation data reporting, continuation data reporting, reporting transactions and workflows not explicitly addressed in swap data reporting rules, monitoring the primary economic terms of a swap, reporting of cleared swaps, other swap data repository (SDR) and counterparty obligations, swap dealer and major swap participant oversight, risk monitoring and surveillance, and swap data ownership and transfer across SDRs. Although the CFTC did not specifically request comments regarding the requirements imposed by Part 43 of its regulations (real-time public reporting of swap transaction data) or Part 46 (recordkeeping and reporting for pre-enactment and transition swaps), it did invite comments on other "challenges" associated with the reporting of swap transaction data.

Comments are due 60 days after publication in the Federal Register.

The request for comment is available here.

LITIGATION

Fourth Circuit Holds Minority-Owned Corporation Can Bring Race Discrimination Suit

The United States Court of Appeals for the Fourth Circuit recently decided in a case of first impression, that a minority-owned corporation had standing to bring a Title VI race discrimination suit because it established an "imputed racial identity" for the purposes of prudential standing considerations under federal law.

The plaintiff, Carnell Construction Corporation (Carnell) won a bid to build low-income rental units in a public, federally funded housing project in Danville, Virginia. After extensive delays, the relationship between Carnell and the Danville Redevelopment and Housing Authority became strained. In May 2009, the Housing Authority informed Carnell that it would not extend its contract. Carnell sued claiming, among other things, race discrimination under Title VI.

On appeal, the Fourth Circuit addressed whether Carnell, as a corporate entity, met the statutory requirements of Title VI, which protects any "person" from discrimination based on a "race, color or national origin." Adopting the position of many other circuits, the court held that a properly certified minority-owned corporation could be the direct object of discrimination and meet the prudential standing requirements of showing that Carnell fell within the zone of interests protected by Title VI. Because Carnell publicly represented itself as a minority business enterprise, was owned by an African-American and was properly certified, the court held that it had standing to bring the claim.

Carnell Construction Corp. v. Danville Redevelopment & Hous. Auth., Nos. 13-1143, 13-1229, 13-1239 (4th Cir. Mar. 6, 2013).

Second Circuit Vacates Conviction After Counsel Misstated Deportation Consequences

The United States Court of Appeals for the Second Circuit recently vacated the 1999 conviction of an Australian national living in the United States for misprision of felony. The court granted a writ of error after Stephen Kovacs demonstrated that his guilty plea relied on ineffective assistance of counsel. Kovacs's attorney affirmatively misstated the immigration consequences of a misprision of felony conviction and based on that advice, Kovacs accepted a plea he would not otherwise have taken.

Kovacs was charged in October 1996 with the substantive offense and conspiracy to commit wire fraud after submitting an inflated insurance claim at the recommendation of his corrupt insurance adjuster in September 1991. Kovacs instructed his attorney to negotiate a plea with no immigration consequences. Kovacs's attorney advised a misprision of felony charge for failing to disclose the criminal conduct of the public adjuster, believing in error that it was not a deportable offense. The government agreed to the proposed plea, aware of Kovacs's immigration concerns, and Kovacs was sentenced to probation and restitution. Between 2006 and 2009, Kovacs travelled internationally until immigration officials questioned his eligibility to return to the United States, after which Kovacs remained in Australia, separated from his wife and children, who resided in the United States where they were citizens. In May 2012, Kovacs submitted a petition for coram nobis relief asking the court to overturn his conviction on the grounds of ineffective assistance of counsel. The District Court for the Eastern District of New York denied the petition and Kovacs appealed.

The Second Circuit reversed, finding that Kovacs reached the demanding standard for obtaining the extraordinary remedy of the writ. Counsel's affirmative misrepresentation regarding the deportation consequences of a guilty plea was outside the range of professional competence and therefore objectively unreasonable and deficient representation. Kovacs was prejudiced by his counsel's error because he was primarily interested in reaching a plea that did not have an adverse effect on his immigration status. He chose not to litigate a statute of limitations defense because he was satisfied that he would not be deported if he accepted the plea. The court found that Kovacs demonstrated a reasonable probability that he would have negotiated a more favorable plea but for his counsel's error.

Kovacs v. United States, No. 13-0209 (2d Cir. Mar. 3, 2014).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions