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The Principles for Responsible Investment (PRI), a UN-supported network of investors, has announced the publication of its 2023 Reporting Framework along with an update on accountability. This development, according to the PRI, represents a “key step forward in the development of the PRI’s Reporting and Assessment functionality as the industry-leading reporting framework globally.” Signatories now have until mid-May to prepare their responses before the reporting cycle opens.
In a response to a call for evidence on greenwashing by the European Securities and Markets Authority (ESMA), the Securities and Markets Stakeholder Group (SMSG) emphasized the importance for EU authorities to ensure that any new rules published on greenwashing also guard against “green-bleaching.” Green-bleaching is a term coined to describe financial market participants choosing not to claim ESG features of their products in order to avoid extra regulation and potential legal risks. The stakeholder group, which provides opinions on the technical aspects of regulation, suggests that adequate guidance on legally permissible representations may help in reducing this problem.
On January 24, the European Central Bank (ECB) announced the publication of “new experimental and analytical indicators” that are intended to help analyze climate-related risks in the finance sector and monitor green transition. This development follows the ECB’s detailed climate action plan announced in July 2021.
On January 17, the Sustainable Markets Initiative (SMI) announced that its Asset Manager and Asset Owner Task Force (AMAO Task Force) has released a Transition Categorization Framework.
With 18 new Attorneys General assuming their new roles this year − an unprecedented changing of the legal guardians − much of the old-school ways of collaboration may be in jeopardy. Gone are the days when Attorneys General were perceived as the only apolitical group of elected officials and an Attorney General may not even have known the political party of the Attorney General sitting next to him or her. As DAGA and RAGA continue to ascend in power, the collegiality of NAAG is waning. This tension may be seen by Attorneys General wading in on both sides of enforcement in the wake of major Supreme Court decisions around student loan, abortion, gun, and immigration issues. The one state Attorney General organization that has benefitted from maintaining an above-the-political-fray position seems to be the AGA (Attorney General Alliance), formerly known as CWAG.
On February 1, the European Commission (EC) launched its Green Deal Industrial Plan to “enhance the competitiveness of Europe’s net-zero industry and support the fast transition to climate neutrality.” According to the accompanying press release, the EC aims to provide a more supportive environment for scaling up the EU’s capacity to manufacture net-zero technologies and products. Additionally, the Plan is intended to build upon previous initiatives and complement ongoing strategies such as the Eu
The UK’s Competition Markets Authority (CMA) issued a press release on January 26, 2023 announcing a potentially wide ranging investigation into the “accuracy of ‘green’ claims made about household essentials – such as food, drink, and toiletries – to make sure shoppers are not being misled.”
Mark T. Uyeda, Commissioner at the U.S. Securities and Exchange Commission (SEC), spoke at the California ‘40 Acts Group on January 27 regarding various investment-related ESG issues.
On January 25, Representatives Sean Casten and Juan Vargas announced the launch of the Congressional Sustainable Investment Caucus (CSIC). According to the press releases, the “CSIC will bring together Members of Congress with experts to better understand sustainable investing and inform policy making that provides investor protections and transparency of information to market participants.” The caucus will be co-chaired by Representatives Casten and Vargas with the other founding members being Representatives Bill Foster, Seth Magaziner, Raúl Grijalva, Brad Sherman and Emanuel Cleaver.
On January 2, the New York City (NYC) Comptroller, Brad Lander, the NYC Employees’ Retirement System, the NYC Teachers’ Retirement System, and the NYC Board of Education Retirement System, announced that they had submitted shareholder proposals to three U.S. banks and one Canadian bank. The proposals, addressed to Bank of America, Goldman Sachs, JPMorgan Chase and Royal Bank of Canada, seek to require the banks to disclose their absolute greenhouse gas (GhG) emissions targets for 2030.
Twenty-five Republican state attorneys general, along with two energy companies, have commenced an action against the U.S. Department of Labor (DOL) seeking to “hold unlawful and set aside” rules governing how retirement plan mangers can consider climate change and other ESG factors.
Environmental advocacy group As You Sow has sent climate-focused shareholder resolutions to five major U.S. banks. The resolutions request that the banks disclose their climate transition plans for meeting financed emissions reduction targets, “including the specific measures and policies to be implemented, reductions to be achieved by such measures and policies, and timelines for implementation and associated emission reductions.”
In a recent speech to the Scottish Competition Forum, Sarah Cardell, newly installed Chief Executive of the UK’s Competition Markets Authority (CMA), laid out her vision for analyzing agreements among competitors that foster climate change goals. Simultaneously, the CMA issued Draft Guidance on Horizontal Agreements that more formally sets out the CMA’s policy in this area.
Can you play nice and share a piece of real estate? Sharing is hard enough, but imagine jointly owning an investment property with your brother when he decides that he would like to sell and then retire in Hawaii. While your brother would like to cash out his investment for the sun and sand, you live in the building, operate your business in the ground floor commercial space and never want to sell the building that you inherited from your parents. What if you cannot amicably resolve the dispute?
We previously we took an initial look at hedging in real estate financing transactions. In this article, we discuss the various hedging products that we commonly see in real estate financings.
On January 18, Azerbaijan’s Ministry of Foreign Affairs announced that it had commenced an action against Armenia under the Bern Convention on the Conservation of European Wildlife and Natural Habitats (Bern Convention). This development marks the first known interstate arbitration brought under the Bern Convention, which was signed on September 19, 1979.
Last week, agents from Brazil’s environmental protection agency, the Institute of Environment and Renewable Natural Resources (Ibama), carried out the first significant environmental enforcement activity under the new administration of President Luiz Inacio Lula da Silva (Lula), who assumed office on January 1, 2023. The anti-deforestation raids, which were accompanied by members of the press, took place in the rainforest state of Para within the protected Cachoeira Seca indigenous reserve with the goal of preventing loggers and ranchers from carrying out illegal deforestation and land clearance for agriculture. According to Ibama Environmental Enforcement Coordinator Tatiane Leite, additional raids were carried out in the Amazonian states of Roraima and Acre.
On January 10, 2023, Goldman Sachs Asset Management announced that it had closed over $1.6 billion in funding for Horizon Environment & Climate Solutions I (Horizon Climate), the first in an expected series of funds through which Goldman intends to target investments toward “key sustainability trends.”
The Securities and Exchange Commission (“SEC”) unanimously voted yesterday to re-propose a rule to prohibit conflicts of interest in certain securitization transactions. The SEC previously proposed, but never finalized, this rule in 2011. The rule is required by section 27B of the Securities Act of 1933 as added by section 621 of the Dodd-Frank Act. Comments on the proposal are due by March 27 (or possibly later if not published in the Federal Register by February 25 or if the comment period is extended).
This week, the Consumer Financial Protection Bureau issued a Consumer Financial Protection Circular reminding financial institutions that are covered persons that negative option marketing, when not done correctly, can be a violation of the Consumer Financial Protection Act, pursuant to the CFPB’s authority to address unfair, deceptive or abusive acts or practices.
On January 23, the Chairman of the Commodity Futures Trading Commission (“CFTC”), Rostin Behnam, announced in his keynote speech at the Commodity Markets Council’s annual conference that the CFTC “can play a role in voluntary carbon markets.” This is not the first time that the CFTC has publicly stated that it is considering its role vis-a-vis regulation of voluntary carbon markets (“VCMs”) or compliance carbon markets (“CCMs”), but it is the first time that the CFTC Chair has articulated a clear action plan for regulation. According to Chairman Behnam, carbon markets "must have integrity and adhere to basic market regulatory requirements."
The transitional period for the implementation of new scope rules and amendments to regulatory technical standards for Packaged Retail and Insurance-based Investment Products (“PRIIPs“) came to an end on 31 December 2022, meaning that the new rules and guidance set out in Policy Statement PS22/2 by the Financial Conduct Authority (“FCA”) are now in force. PRIIPs rules, guidance and technical standards are aimed at protecting retail investors in these packaged products, largely through the prescription of the content and form of pre-investment disclosures, which has proved problematic for product providers and distributors.
The cryptocurrency industry may be breathing a sigh of relief following the release of recent IRS guidance on cryptocurrency tax reporting, which effectively postpones the January 1, 2023 effective date of the digital asset broker rules and reporting obligations enacted by the 2021 Infrastructure Investment and Jobs Act (the “Act”) under Sections 6045 and 6045A.
Some investors who experienced rapid declines in the value of their cryptocurrencies during 2022 may be attempting to claim 2022 tax losses. According to the IRS’s Office of Chief Counsel, some of these investors may be out of luck. On January 13, 2023, the IRS issued ILM 202302011 (the “Memo” reproduced here) stating that the substantial devaluation of cryptocurrency alone is not enough to claim a tax loss. In reaching this conclusion, the IRS addressed such threshold questions as (1) whether a cryptocurrency taxpayer can take a tax loss, (2) when a cryptocurrency taxpayer can take a tax loss, and (3) what the character of that tax loss is. While Chief Counsel Memoranda are not binding, not taxpayer specific, and subject to change without notice, they do at least provide insight on the IRS’s perspective on tax positions.
On January 17, 21 Republican attorneys general wrote to proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis over their recently released U.S. voting guidelines. As we reported last week, the updated guidelines include recommendations on a number of climate and social issues, including board oversight of and accountability for environmental and social issues, board diversity, racial equality audits, and disclosure of shareholder proposals.
On January 10, the Biden-Harris Administration released the U.S. National Blueprint for Transportation Decarbonization: A Joint Strategy to Transform Transportation, which is designed to cut all greenhouse emissions from the sector by 2050. The blueprint, developed by the Departments of Energy, Transportation, and Housing and Urban Development and the Environmental Protection Agency, provides a “framework of strategies and actions to remove all emissions from the transportation sector by 2050.”
On January 19, it was announced at the World Economic Forum Annual Meeting in Davos, Switzerland that the European Commission, EU member states and 26 partner countries would launch a “Coalition of Trade Ministers on Climate.”
Last week, the Federal Reserve Board (FRB) announced additional details on its pilot climate scenario analysis (CSA) involving six of the largest U.S. banks. The additional details include a Participant Instructions Document that calls for submissions by the participating banks by July 31, 2023. The FRB anticipates that it will publish insights and aggregate data from the exercise at the end of 2023. The FRB stated: “[t]his pilot CSA exercise will support the Board’s responsibilities to ensure that supervised institutions are appropriately managing all material risks, including financial risks related to climate change.”
Financial Restructuring attorneys Ingrid Bagby, Michele Maman, Anthony Greene, and Marc Veilleux contribute the second post in the Harvard Law School Bankruptcy Roundtable’s series of posts on bankruptcies of cryptocurrency companies and the emerging issues they pose.
Blackrock’s recently released 2023 Investment Stewardship Global Principles, identifies several key themes to guide stakeholders and promote sound corporate governance regarding sustainability-related issues.
Moody’s published its 2023 Outlook – Macroeconomic challenges to exacerbate ESG credit risks on January 9, 2023, laying out various macroeconomic challenges it expects as a result of climate-related and other issues.
In advance of the World Economic Forum’s (WEF) Annual Meeting now taking place in Davos, Switzerland, the WEF released its 2023 Global Risks Report to “highlight the multiple areas where the world is at a critical inflection point,” including the many climate-related risks facing the global economy. The 18th edition of the report drew from analysis of over 1,200 experts across academia, business, and government and found that over 50% of the top-10 risks to global stability come from environmental factors, including natural disasters, extreme weather conditions, natural resource crises, and the loss of biodiversity and ecosystems.
Proxy advisory firms Glass Lewis and Institutional Shareholder Services (ISS) have published their updated U.S. voting guidelines for 2023, with Glass Lewis additionally releasing its 2023 policy guidelines for ESG initiatives. These updates arrived just ahead of a letter from 21 Republican state attorneys general to Glass Lewis and ISS ac
Acting Comptroller of the Currency Michael Hsu delivered remarks, titled “Detecting, Preventing, and Addressing Too Big To Manage,” at the Brookings Institution yesterday in which he addressed and offered a possible solution to the too-big-to-manage (“TBTM”) problem.
U.S. regulators are signaling heightened expectations for anti-money laundering compliance within the crypto industry. Although FinCEN issued guidance in 2013 interpreting virtual currency “administrators” and “exchanges” as money services businesses (“MSBs”) subject to Bank Secrecy Act (“BSA”) requirements, both the crypto industry and U.S. regulators have evolved significantly in the past 10 years. While some crypto industry players have implemented bank-style anti-money laundering programs requiring customers to disclose their identity and source of wealth, other players have created projects specifically designed to bolster anonymity. In recent weeks, U.S. regulators and legislators have taken several actions to push the crypto industry toward a broader and more fulsome adoption of anti-money laundering controls.
The Consumer Financial Protection Bureau (“CFPB”) issued a proposed rule last week addressing the “Registry of Supervised Nonbanks that Use Form Contracts to Impose Terms and Conditions that Seek to Waive or Limit Consumer Legal Protections.” Comments on the proposed rule must be received by the CFPB by March 13, 2023 or thirty (30) days following publication of the proposed rule in the Federal Register, whichever date is later.
In CP16/22 (published on 30 November 2022), the UK’s Prudential Regulation Authority (“PRA”) sets out plans for implementing the Basel 3.1 standards for calculating risk-weighted assets (“RWA”). Concerned that downward movement in average risk weights (measured by the ratio of RWA to assets) over the last 10 years is due to fairly pervasive underestimation in internally-modelled risk, the PRA is proposing to align with international standards and implement the final Basel 3 package of significant changes to the way firms calculate RWA. The PRA’s aim is to mitigate the threats to confidence caused by degrees of variability in calculation of risk weights and resultant inconsistencies in capital ratios and difficulties in comparing like-for-like.
A recently published independent review of Australia’s carbon credit units (ACCU) scheme, commissioned by the Australian government, has found that the ACCU scheme is “essentially sound,” but provides 16 recommendations to avoid potential conflicts of interest and enhance transparency. The ACCU scheme, introduced 11 years ago, was developed by the Australian government to “remove greenhouse gases from the atmosphere, or to prevent their emission.” The scheme “supports carbon farming initiatives leading to the allocation of one ACCU for each ton of carbon abatement.” The review explains that the ACCU scheme “also allows some ACCUs to be purchased by the Australian Government, some by emitters to offset a proportion of their continuing emissions, or traded on the domestic market.”
Environmental nonprofit ClientEarth, with support from other activist groups, has commenced litigation in a Paris court against a global food-products company. The claimants contend that Danone has breached France’s Corporate Duty of Vigilance Law in that the company does not have an adequate plan to reduce its plastic footprint. Prior to filing the claim in Paris, ClientEarth served “legal warnings” on Danone and certain other French companies, including Auchan, Carrefour, Casino, Lactalis, McDonald’s France, Les Mousquetaires, Picard and Nestlé France.
Foreign energy companies are taking initial steps to develop a large number of offshore wind farms along the coasts of Brazil and Colombia. As governments seek to reduce their carbon emissions to meet climate goals and obligations, they are increasingly turning to new sources of energy.
On January 13, an independent report was published into the UK government’s approach to delivering on its net zero obligations. The review, commissioned by the Department for Business, Energy & Industrial Strategy (BEIS), was carried out over three months with the objective of looking into how the UK might meet its net zero obligations “in a more affordable and efficient manner, one which is pro- business, pro-enterprise and pro-growth.” The chair of the review, Member of Parliament Chris Skidmore, oversaw the consultation of a broad range of stakeholders including investors, industry participants and experts. This review follows the UK Government’s strategy
The Chair of the U.S. Federal Reserve Board (Fed), Jerome Powell, stated in a speech at the Swedish Central Bank’s symposium on January 10 that the Fed is not a “climate policymaker." He stated that it was critical for the U.S. central bank to “[s]tick to [its] knitting” by following its statutory goals and authorities and not expanding its remit to include “other important social issues.” Chair Powell went on to explain that “[t]he Fed does have narrow, but important, responsibilities regarding climate-related financial risks” and that “[t]hese responsibilities are tightly linked to our responsibilities for bank supervision.” He confirmed that the public expects supervisors to ensure that banks understand and manage risks, including those connected to climate change, but that without legislation from Con
On January 9, the UK’s Department of Business, Energy & Industry Strategy (BEIS) launched a consultation aimed at better aligning the UK’s electricity generation market with the UK government’s net zero targets, including a transition to a decarbonized electricity network by 2035, while also “[s]trengthening security” of the electricity supply.
In November 2022, the Global Reporting Initiative (GRI) launched a consultation on the latest draft of their biodiversity disclosure standard. The draft standard extensively updates the 2016 version (GRI 304) and is designed to assist companies report on their impact on nature. According to research published last year, less than half of the 5,800 largest global companies (made up of the largest 100 companies by revenue in 58 jurisdictions) report on biodiversity.
In its second report assessing how, and to what extent, S&P 100 companies have implemented climate-related policies into their own business initiatives, Ceres, through its Accelerator for Sustainable Capital Markets, found that the business community has largely “significantly improved . . . performance in establishing internal processes and systems for addressing climate change as a systemic risk.” There are also indications that companies are “increasingly prioritizing smart climate lobbying” to “advocate for the economy-wide policies necessary to address the climate crisis.”
A group of institutional investors led by the Australian Centre for Corporate Responsibility (ACCR) and the NGO ShareAction has filed a shareholder resolution seeking details of the “specific plan” for Glencore PLC, a multinational commodity trading and mining company, “to align thermal coal production with emissions reductions commitments.”
Luiz Inácio Lula da Silva assumed office on January 1 after being elected to a third term in a contentious and closely fought race. On his first day in office, Lula signed a package of executive orders, including seven that relate to environmental protection. Lula narrowly won the popular vote, receiving 50.90% over his rival, former president, Jair Bolsonaro. On January 8, large crowds of radicalized Bolsonaro supporters broke into the Brazilian Congress in Brasília and vandalized the legislative chambers, the Supreme Court and the Presidential Palace. The scenes were reminiscent of the January 6, 2021 riots at the U.S. Capitol Building in Washington D.C. These recent events in Brazil underscore some of the challenges Lula faces in implementing his ambitious climate agenda.
A global financial institution recently announced an updated energy policy, supplementing its previously issued 2030 targets.
The Australian Securities and Investments Commission (ASIC) appears to be making up for lost time as it imposed another greenwashing-related penalty, this time against Black Mountain Energy, an upstream oil and gas company, in the amount of AU$39,960.
On December 14, 2022, the Federal Trade Commission (FTC) announced that it is seeking public comment “on potential updates and changes to the Green Guides for the Use of Environmental Marketing Claims” (the Notice). The purpose of the FTC’s Green Guides, first published in 1992, is to assist marketers in avoiding making environmental marketing claims that are unfair or deceptive under Section 5 of the FTC Act.
Taiwan’s central bank announced it will begin incorporating climate change related risks into its forecasts and modelling for inflation and economic growth. The central bank will also amend its monetary policy to better promote sustainable development. The bank said it would “incorporate weather factors into forecast models and analyze their impact on forecasts such as prices and GDP growth” and “establish an overall model related to climate change at the industry level.” President of the central bank, Yang Chin-long, first announced the changes at a press conference on December 15: “If a company does not pay attention to ESG, for example, if it produces serious air pollution and does not meet the standards, then the (commercial) bank may not lend you money.”
In a recent valedictory press interview, the Secretary-General of the Financial Stability Board (FSB), Dietrich Domanski, posited that attempts to convince banks to combat climate change will be insufficient without financial incentives because “[i]n the end we are talking about profit-orientated institutions” and “[a]s long as you do not provide the necessary price signals, which then translate into profits or profit expectations, there is a limit to what one can expect.” Domanski offered his view that these “price signals” “ideally” would be in the form of a global carbon tax. Domanski also opined that regulators across the world are misguided in their increased use of “detailed and very expensive planning exercises” and stress testing to supervise climate risk. Instead, he suggested that a “mark
To ring in the new year, Kentucky’s Treasurer, Allison Ball, announced a list of eleven financial institutions that she claims are engaged in “energy company boycotts.” According to Ball, the list “was crafted after careful review of publicly available statements and commitments made by the companies.” The list includes Blackrock, BNP Paribas, Citigroup, HSBC and JPMorgan Chase, among others. Kentucky enacted a law in July 2022 requiring the treasurer to prepare and maintain such a list.
On the first business day of the year, January 3, 2023, the Board of Governors of the Federal Reserve System (“the Fed”), the Federal Deposit Insurance Corporation (“FDIC”) and the Office of the Comptroller of the Currency (“OCC”), the nation’s primary banking regulators, came together to issue a Joint Statement on Crypto-Asset Risks to Banking Organizations. Striking in its tone and issued “given the significant risks highlighted by the recent failures of several large crypto-asset companies,” the purpose of the statement is to ensure that banks do what they can to ensure “that risks to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking systems.”
In its last regulatory action for 2022, on December 23, the U.S. Commodity Futures Trading Commission (“CFTC”) published its staff no-action letter No. 22-21 (“NAL”) allowing commodity brokers – Futures Commission Merchants (“FCMs”) – to invest their customer funds in investment instruments that contain an adjustable rate of interest that is benchmarked to Secured Overnight Financial Rate (“SOFR”) instead of London Interbank Offered Rate (“LIBOR”). This NAL expanded CFTC’s previous similar relief to also apply to Derivatives Clearing Organizations (“DCOs”) investing customer funds.
The UK’s Financial Conduct Authority (“FCA”) and Prudential Regulation Authority (“PRA”) have together fined a leading bank a total of £48,650,000 for IT failures that left customers unable to access their accounts. The fine would have been £69,500,000 were it not for a 30% discount for early settlement.
On 21 December 2022, ESMA published a final report in relation to draft technical standards for cross-border fund management activities and the cross-border marketing of investment funds within the EEA under the UCITS and AIFM directives. This follows a consultation paper ESMA had published on 17 May 2022. The EU Commission is now expected to adopt the draft technical standards within three months from the publication date.
On December 22, just before many of us may have started turning to our holiday breaks, the Federal Reserve Board (“FRB”), Federal Deposit Insurance Corporation (“FDIC”) and Office of the Comptroller of the Currency (“OCC”) issued an extension of the no-action relief they had previously given. The interagency statement reiterates what the agencies have said for the past few years that they “will continue to exercise discretion to not take enforcement action against either an asset manager that is a principal shareholder of a bank, or a bank for which an asset manager is a principal shareholder, with respect to extensions of credit by the bank to the related interests of such asset manager that otherwise would violate Regulation O.”
Real Estate Finance head Bonnie Neuman reflects on some key 2022 market trends in the commercial real estate industry and looks ahead to 2023.
The United Nations Biodiversity Conference (COP15) ended in Montreal, Canada, on December 19, 2022 with a landmark agreement to protect at least 30% the planet’s lands, inland waters, coastal areas and oceans by 2030 (known as the “30x30” target). The Kunming-Montreal Global Biodiversity Framework (GBF) was adopted by almost 200 countries after intense final negotiations. European Commission president, Ursula von der Leyen, said the agreement was a “Road map to protect and restore nature” that complemented the climate change mitigation-focused Paris Agreement.
Environmental regulators and ministers from across the EU member states provisionally approved the introduction of the world’s first major carbon border tax, the Carbon Border Adjustment Mechanism (CBAM), which will require foreign exporters to the EU to pay for the cost of their carbon emissions. Imports into the EU of iron, steel, cement, aluminum, fertilizer, electricity generation, hydrogen and certain iron and steel products will be subject to the tax.
On December 16, the Amsterdam headquartered bank ABN AMRO announced the publication of a climate strategy and its decision to join the Net Zero Banking Alliance (NZBA). ABN AMRO stated that it is “committed to making a difference” and that “sustainability has been core to our strategy since 2018.”
The Swiss Federal Council has published a position paper on the “prevention of greenwashing in the financial sector.” The Federal Council is composed of seven members—each a head of a government department—who, collectively, serve as the executive body of the Swiss government.
Dorothy Auth, Howard Wizenfeld and A.J. Harris analyze the likely outcomes of the US Supreme Court’s review of several intellectual property cases in 2023—in creative works, extraterritorial trademark infringement, and patent genus claims.
The Australian Treasury announced a consultation into proposed rules on climate-related financial disclosure, which will align with the International Sustainability Standards Board (“ISSB”) recommendations. The consultation, which “seeks initial views on key considerations for the design and implementation of standardised, internationally‑aligned requirements for disclosure of climate‑related financial risks and opportunities in Australia,” will be open for responses until February 17, 2023. The consultation also seeks views on relevant related matters, such as any required changes that need to be made to ensure financial reporting bodies “can keep pace with the expansion of international standard-setting priorities o
The UK-based responsible investing non-profit ShareAction announced the publication of a report into the biodiversity and climate strategies of the 25 largest European banks, measured by total assets. The report concludes that even though the surveyed banks are taking steps to expand their green finance offerings, they are “resisting implementing ambitious climate policies” and are generally unprepared for the risks posed by biodiversity loss. The report ranked each bank’s performance on metrics measuring the bank’s approach to climate and biodiversity governance, strategy, and engagement and collaboration.
Earlier this month, the European Commission announced a provisional agreement between the European Parliament and the Council of the European Union on regulation pertaining to deforestation-free supply chains.
Republican members on the House Committee on the Judiciary have written a letter to the steering committee members of Climate Action 100+, Ceres and CalPERS, requesting documents and seeking information regarding antitrust compliance. The letter claims that Climate Action 100+, the investor-led initiative created to “ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change,” “seems to work like a cartel.” The press release accompanying the letter states that the House Republicans have “launched an investigation ... probing whether major
Tough Negotiations: As the end of COP15 approaches, negotiations to reach agreement on a post-2020 global biodiversity framework continue but progress remains slow. As we previously discussed, the framework provides 2030 and 2050 milestones, including for 2030, conservation of at least 30% globally of land and sea areas (known as 30 by 30), restoration of at least 20% of degraded water systems and reduction of invasive species by at least 50%.
This week, the UK’s Financial Conduct Authority (FCA) announced the establishment of an ESG Advisory Committee to assist the FCA Board with executing its ESG-related responsibilities. The Advisory Committee is tasked with supporting the FCA Board in “executing oversight of ESG-related issues relevant to the FCA as a corporate entity and as a regulator.” Furthermore, the Advisory Committee will advise the FCA Board on relevant ESG topics and offer views on how the FCA should “develop its ESG strategy in keeping with the organization’s statutory objectives and regulatory principles.”
On December 13, the European Banking Authority (EBA) announced the publication of its roadmap on sustainable finance, which outlines the “objectives and timeline for delivering mandates and tasks in the area of sustainable finance and environmental, social and governance (ESG) risks.” The roadmap sets out the EBA’s plan for the next three years to “integrate ESG risks considerations” into the banking framework and to “support the EU’s efforts to achieve the transition to a more sustainable economy.” This roadmap follows various legislative acts and initiatives that have allocated to the EBA “new mandates and tasks in the area of sustainable finance and ESG risks.”
The Australian Securities & Investments Commission (ASIC) issued three infringement notices to the Australian unit of a large U.S.-headquartered asset manager for greenwashing infringements. The breach involved three funds that were set up to exclude certain tobacco investments but excluded only manufacturers of cigarettes and related products, not companies involved in the sale of such products. The ASIC was concerned that the disclosure statements for these funds “may have been liable to mislead the public by overstating an exclusion, otherwise known as an investment screen.” The asset manager
On December 13, the U.S. Attorney’s Office for the Southern District of New York (the “U.S. Attorney’s Office”), the U.S. Securities and Exchange Commission (the “SEC”), and the U.S. Commodity Futures Trading Commission (the “CFTC”) announced parallel criminal and civil actions (here, here and here) against FTX co-founder and former CEO Sam Bankman-Fried. The charges were made public the morning after the U.S. Attorney tweeted that Bankman-Fried had been arrested by Bahamian authorities at the request of the U.S. government.
In the wake of mounting crypto bankruptcies and federal investigations into the alleged misappropriation of crypto assets, among other possible wrongdoing by market participants, the U.S. Securities and Exchange Commission’s Division of Corporation Finance announced new guidance on December 8 for public company disclosures about the impact of these and other developments.
As we are coming to a close on 2022, we’re taking a look back at some of the important developments of 2022 and what lies ahead for 2023.
On December 14, Senators Elizabeth Warren (D-Mass.) and Roger Marshall (R-Kan.) introduced in the U.S. Senate a new bipartisan bill, titled "Digital Asset Anti-Money Laundering Act of 2022" (the “Bill”), intended to curb the use of digital assets for money laundering and to counter the financing of terrorism. This is a very narrow bill and is not intended to supplant previously proposed legislation on digital assets by Senators Stabenow/Boozman or Lummis/Gillibrand, and does not address the Commodity Futures Trading Commission (“CFTC”)/Securities and Exchange Commission (“SEC”) jurisdictional reach over digital assets.
On the 9th of December, the UK’s Chancellor, Jeremy Hunt, set out a “collection of announcements” aimed at reforming the UK’s financial services ecosystem to maximise its position outside the EU while aligning still with those European regulatory requirements and processes that make sense given the UK’s status as a third country that needs to do business in the EU.
As we make the transition from 2022 to 2023, this is a good time to look ahead to developments in the UK and the EU that will likely impact the financial services industry. Here are some observations.
On 12 December 2022, the three European Supervisory Authorities (“EBA,” “EIOPA” and “ESMA”) published a joint advice on the review of the securitisation prudential framework.
As part of the Edinburgh Reforms announced by the UK Government (link back to “UK FS Reforms”), the UK Government has also confirmed that the “Investment Transactions List” (“ITL”) would be expanded to include cryptoassets. This follows the UK Government’s consultation on this issue, which was held earlier this year and which we previously covered in BrassTax here.
Reportedly, there are over a million creditors in the bankruptcy of the cryptocurrency exchange FTX and its affiliated entities. A substantial number of these FTX creditors may include U.S. retail customers who held and traded digital assets (such as Bitcoin, Ether, and FTT (the native token of FTX)) through a bankrupt FTX entity.
Last week, in a December 7 statement published on its website, one of the world’s largest asset managers announced its withdrawal from membership of the Net Zero Asset Managers initiative (NZAM).
According to the results of a climate vulnerability assessment (CVA) conducted by the Australian Prudential Regulation Authority (APRA), Australia’s largest banks have outlined how they would amend both their risk appetites and lending practices in response to increasing climate-related losses. Proposed responses include reducing high loan-to-value mortgage lending and minimizing exposure to sectors such as mining, manufacturing and transport. The APRA carried out its CVA with the country’s five largest banks, which prepared estimates and carried out modeling to assess the potential financial impact of climate change on their business. The banks were further required to provide potential responses to both physical and transition-related climate risk.
Earlier this month, the Federal Reserve Board of Governors, announced a public consultation on a proposed “framework for the safe and sound management of exposure to climate-related financial risks for large banking organizations.”
Securities and Exchange Commissioner Hester Peirce, in a speech delivered before a panel at the American Enterprise Institute, expressed her concern about the SEC’s proposed climate-related disclosure rule. Peirce, one of two Republican commissioners on the five-member commission voted against the March release of the proposal. The SEC, which has recently re-opened the consultation period, has now received over 11,400 comment letters.
The United Nations’ Environment Programme’s Biodiversity Conference, COP15, kicked off this week in Montreal after a two-year delay. The overarching aim is for governments to agree on a new set of goals for nature over the next decade through the UN Convention on Biological Diversity post-2020 framework process. The first draft of the framework was released in July 2021.
Banks continue to navigate rough waters in dealing with certain state finance officials over positions on climate. As we have reported, in August approximately nine financial institutions were included on a list, mandated under state law to be complied with by the Texas comptroller, of “Financial Companies that boycott energy companies.”
In February 2022, the European Commission adopted a proposal for a Corporate Sustainability Due Diligence Directive to “foster sustainable and responsible corporate behavior throughout global value chains.” On December 1, the European Council adopted a General Approach regarding the Directive that modified the prior draft in certain respects. In their current form, the rules would require in “scope” companies to undertake due diligence across aspects of their “chain of activities” in order to identify adverse climate and social impacts and implement mitigation efforts. The EC chose “chain of activities” over the original “value chain” language in order to “reflect divergent views of Member States on the issue of whether to cover the whole ‘value chain’ or limit the
The Singapore exchange, SGX Group, announced the launch of the SGX Sustainable Fixed Income initiative, which “allows investors to more easily identify investments that meet certain criteria at issuance” for fixed income securities. These criteria are: (1) alignment with recognized green, social and sustainability standards; (2) confirmation from a “reputable external reviewer” that the securities align with these recognized standards; and (3) regular public reports setting out the securities’ alignment with these recognized standards and any material developments that may affect alignment with these standards. Issuers can use the SGX Sustainable Fixed
The Financial Conduct Authority (“FCA”) has banned and fined three bond traders for placing large-sized orders for future contracts in relation to Italian government bonds that they did not intend to execute, while concurrently placing smaller orders on the opposite end of the order book over the period from June 1 to July 29, 2016. At the time the facts occurred, the three individuals were part of the Fixed Income Government Bond Trading desk at a global financial institution where they held the position of Managing Director, Director and Associate, respectively.
On December 1, Federal Reserve Board (“FRB”) Vice Chair of Supervision Michael Barr gave a speech at the American Enterprise Institute on Bank Capital. Vice Chair Barr noted that the FRB’s holistic review of capital standards continues and that they “hope to have more to say about that review early in the new year.”
On November 22, the United States Department of Labor (“DOL”) released its final rule (the “Final Rule”) adopting certain revisions to its investment duties regulation under ERISA at 29 CFR Section 2550.404a-1 (the “Section 404a-1 Regulation”). The revisions in the Final Rule are intended to clarify the application to ERISA plan fiduciaries of the ERISA duties of loyalty and prudence in respect of investments and the use of written proxy voting guidelines and policies. The Final Rule clarifies that ERISA plan fiduciaries may consider climate change and environmental, social and corporate governance (“ESG”) factors when making investment decisions and exercising shareholder rights for plans.
Last week, the Federal Reserve Board (“FRB”) proposed principles for climate-related financial risk management for large financial institutions. The proposed guidance is open for comment until 60 days after publication in the Federal Register.
The Consumer Financial Protection Bureau (“CFPB”) announced a proposed consent order on December 1 intended to address a scam engaged in by a company called Loan Doctor, as well as by the company’s founder, Edgar Radjabli.
The Governor of New York, Kathy Hochul, has signed a bill establishing a two-year moratorium on new or renewal permits necessary to modify certain fossil fuel plants for cryptocurrency mining operations using proof-of-work (POW) authentication methods.
As we discussed last week, a number of European asset managers, including Amundi, AXA, and BNP Paribas, have announced their plans to reclassify the sustainability profile of investment funds from Article 9 to the less onerous Article 8 under the EU’s Sustainable Finance Disclosure Regulation (SFDR).
In its 2022 Global Asset Manager Survey focused on emerging and frontier markets, consulting firm Mercer polled over 400 asset managers across the globe, representing over $51 trillion of assets under management. The survey found that only 27% of respondents have established climate transition targets such as net-zero in their portfolios, with only 16% having set science-based net-zero targets. On the other hand, 58% of managers track portfolio company emissions, 64% have established climate transition targets, 39% track forward-looking transition metrics such as target setting, and 59% have policies regarding how climate change is incorporated into their portfolios. In addition, 89% of respondents identified ESG-related transparency and disclosure as a barrier to in
On November 18, 2022, Attorneys General from 16 states and the District of Columbia, led by D.C.’s Karl Racine, wrote to the chairs and ranking members of the Senate Banking, Housing, and Urban Affairs Committee and the House Financial Services Committee regarding “efforts to interfere with financial institutions’ ability to make sound investment decisions on behalf of hardworking Americans.”
On November 16, the European Financial Reporting Advisory Group (EFRAG) approved revised versions of the European Sustainability Reporting Standards (ESRS). EFRAG is a private association established in 2001 to, among other things, provide technical advice to the European Commission (EC) on sustainability reporting. The ESRS provides guidance regarding corporate disclosure on climate and other ESG issues as part of the Corporate Sustainable Reporting Directive (CSRD), which received final European Council approval on November 28. The CSRD, in turn, requires companies within its scope to report—using a double materiality standard—in
Activists from Peru, Senegal, Uganda, Mexico, and the U.S. met with Members of the European Parliament last month seeking support for legislation to introduce the ‘one for one’ rule. This follows a similar request in an open letter to the Bank of England sent by academics, economists, and climate campaigners in October.
A recent study conducted annually of the world’s 50 largest asset managers examines how these institutions are factoring sustainability considerations into their investment process.
The newly adopted “Ordinance on Climate Disclosures,” effective on January 1, 2024, will require large Swiss public companies, banks, and insurance companies to report climate risks using a similar approach to the EU regulatory framework. This announcement follows a consultation that ran from March to July 2022 and is in line with the recommendations published by the Task Force on Climate-Related Financial Disclosures (TCFD). In its press release announcing the adoption of the rules, the Swiss Federal Council stated that “large companies’ transparency on the climate impact of their activities is a key aspect for the markets to function well and for climate sustainability in the financial sector. To date, Switzerland has lacked clear and comparable climate-related disclosures. The Federal Council intends to make that possible with the new ordinance.”<
Last week, the Federal Reserve Board (“FRB”) and the Federal Deposit Insurance Corporation (“FDIC”) released their feedback to the eight global systemically important banking institutions (“G-SIBs”) headquartered in the United States on their resolution plans, more commonly called living wills. The eight U.S. G-SIBs are Bank of America Corporation (“BofA”), Bank of New York Mellon Corporation (“BNYMellon”), Citigroup Inc. (“Citi”), The Goldman Sachs Group (“GS”), JPMorgan Chase & Co. (“JPMC”), Morgan Stanley (“MS”), State Street Corporation (“State Street”), and Wells Fargo & Company (“Wells Fargo”).
On November 29, U.S. Senator Ron Wyden (D-OR), Chairman of the Senate Finance Committee, sent requests for information to the CEOs of six of the largest crypto exchanges. The requests seek information about the safeguards each exchange has put in place to protect customers’ assets in the event they file for bankruptcy or otherwise experience financial distress.
On November 23, the UK’s Financial Conduct Authority (“FCA”) released its further consultation to require the administrator of LIBOR to publish a synthetic version of 1-, 3-, and 6-month U.S. dollar LIBOR settings for a temporary period until end-September 2024. Overnight and 12-month USD LIBOR settings will cease permanently at end-June 2023.
On 18 November, the European Securities and Markets Authority (“ESMA“) published a consultation paper containing draft guidelines on funds’ names using ESG or sustainability-related terms. The deadline for comments on the consultation paper is 20 February 2023. This consultation follows the consultation issued on 15 November by the joint European supervisory authorities (including ESMA) in relation to greenwashing (see our news item in the 23 November issue of Cabinet News and Views), and is seen as part of this initiative.
Since at least 2016 the IRS has been ferreting out taxpayers who failed to report their taxable gains from cryptocurrency transactions by issuing John Doe summonses to crypto exchanges and dealers.
On 10 October 2022, the Organisation for Economic Co-operation and Development (“OECD”) published the final guidance on the Crypto-Asset Reporting Framework (“CARF”) and a set of amendments to the Common Reporting Standard (“CRS”). Taken together, the final CARF guidance and the amendments to the CRS set out a global tax transparency compliance framework with model rules for the automatic reporting and exchange of taxpayer information between countries relating to financial accounts and crypto-assets.
On November 22, the UK’s Financial Conduct Authority (FCA) announced the creation of a group to develop a voluntary Code of Conduct covering ESG data and ratings providers with the aim of bringing about greater market transparency.
A number of large asset managers have announced their intention to downgrade ESG funds totaling tens of billions of dollars from Article 9–the highest sustainability classification under the Sustainable Finance Disclosure Regulation (SFDR)—to the broader, and less restrictive, Article 8. The asset managers include Amundi, BlackRock, DWS, HSBC AM, Axa, Invesco, NN Investment Partners, Pimco, Neuberger Berman, Robeco and Deka.
On Tuesday, November 22, the U.S. Department of Labor (DOL) announced a final rule overturning previous restrictions on the ability of retirement plan fiduciaries to consider ESG-related factors in their investment decisions. The final rule, Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, builds on Executive Order 14030 signed by President Biden on May 20, 2021. The Rule clarifies that, consistent with the fiduciary duties of prudence and loyalty under the Employee Retirement Income Security Act (ERISA), retirement plan fiduciaries may consider ESG factors when selecting investment and exercisin
In a recent interview, and accompanying social media post, the Chief Investigator of the UK’s Serious Fraud Office (SFO), Michael Gallagher, stated that the agency is focused on tackling ‘green fraud’. He cited examples of recent SFO investigations that resulted in prison sentences for individuals seeking to exploit the current consumer appetite for green investments. Gallagher explained his view that fraud “moves with the times” and that the SFO has seen “climate fraud cases grow exponentially” to involve millions of pounds and span multiple jurisdictions across the world. The SFO expects to see individuals and organizations attempting to take advantage of the growth in the sustainable-investment market by “manipulati
On November 14, the White House announced that President Biden is nominating Martin Gruenberg for a five-year term as Chair, and six-year term on the Board, of the Federal Deposit Insurance Corporation (“FDIC”). Mr. Gruenberg is currently the Acting Chair of the FDIC, and remains a member of the FDIC Board on an expired term. The nomination will allow Mr. Gruenberg to remain as the FDIC Chair if confirmed by the Senate.
The Federal Trade Commission (“FTC”) announced last week that it is delaying the date by which certain financial institutions must comply with certain provisions of its updated Safeguards Rule by six months, with the compliance date now being June 9, 2023. Applicable to non-banking institutions such as mortgage brokers, motor vehicle dealers, and licensed lenders, the FTC’s iteration of the Safeguards Rule (16 C.F.R. 34) — which implements data security requirements from the Gramm-Leach-Bliley Act (“GLBA”) — was updated in December 2021.
On November 14, the Consumer Financial Protection Bureau (“CFPB”) filed a Petition for a Writ of Certiorari with the Supreme Court for Community Financial Protection Bureau et al. v. Community Financial Services Association of America, Ltd. et al. The Petition asks the Supreme Court to promptly hear the CFPB’s appeal of the Fifth Circuit Court of Appeals’ decision in Community Financial Services Association of America, Ltd. v. CFPB (“CFSAA”) that the CFPB’s funding structure violates the Constitution’s Appropriations Clause and, as a result, that the CFPB’s “Payday Lending Rule” is invalid. Citing the case’s “enormous legal and practical consequences,” the Petition requests a hearing during the Court’s April 2023 sitting.
The International Organization of Securities Commissions ("IOSCO"), an international policy forum for securities regulators, has announced the publication of a consultation report and discussion paper.
On November 15, three European supervisory authorities ("ESA"s) — the European Banking Authority ("EBA"), the European Insurance and Occupational Pensions Authority ("EIOPA") and the European Securities and Markets Authority ("ESMA") — announced a Call for Evidence on greenwashing. The ESAs are seeking feedback on “potential greenwashing practices in the whole EU financial sector, including banking, insurance and financial markets, and which may be relevant to various segments of the sustainable investment value chain and of the financial product lifecycle.” The Call for Evidence defines greenwashing “broadly” to include “sustainability-related claims relating to all aspects of the ESG spectrum.”
COP27 drew to a close in Sharm El Sheikh, Egypt with the almost 200 countries in attendance reaching an agreement to establish a dedicated fund to assist developing countries respond to loss and damage caused by climate change. “Loss and damage” refers to the concept that wealthier nations, which have been the largest emitters of greenhouse gas emissions, should compensate developing nations for harm caused by climate change.
With Republicans assuming control of the House of Representatives in January, the fate of the House Select Committee on the Climate Crisis appears uncertain at best. Garret Graves (R-LA), the Ranking Member on the panel, recently stated that “The climate crisis committee will not exist” with a spokesperson for Graves stating that “We don’t see a scenario where the ‘Climate Crisis Committee,’ a creature of Pelosi, will continue to exist” and that “Garret is committed to delivering on the energy components of the Commitment to America and will be intimately involved in making sure that happens.”
On Wednesday, Brazilian President-elect Lula addressed attendees at COP27 re-affirming his pledge to tackle the climate crisis and “fight hard against illegal deforestation.” He has previously made ambitious statements about his intention to reduce and ultimately stop Amazonian deforestation together with increasing the representation of indigenous people living in the region. In his speech, he confirmed that “I’m here today to say that Brazil is ready to come back.” He told attendees that he intends to apply for Brazil to host COP30 in 2025 in the Amazon rather than in the more populated coastal regions of the country.
On November 15, three European supervisory authorities (ESAs), the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA), announced a Call for Evidence on greenwashing. The ESAs are seeking feedback on “potential greenwashing practices in the whole EU financial sector, including banking, insurance and financial markets, and which may be relevant to various segments of the sustainable investment value chain and of the financial product lifecycle.” The Call for Evidence defines greenwashing “broadly” to include “sustainability-related claims relating to all aspects of the ESG spectrum.”
In addition to COP27, a G20 summit also took place this week in Bali, Indonesia, where ten nations and the EU jointly announced a “just energy transition partnership” (JETP) for Indonesia. The JETP for Indonesia also has support from the EU, individual EU governments and member banks of the Glasgow Financial Alliance for Net Zero. Initially, $20 billion has been pledged to assist Indonesia phase out coal, which currently supplies 60% of the country’s electricity production.
On November 4, the Taskforce on Nature-Related Financial Disclosures (TNFD) published the third iteration of its beta framework for nature-related risk management and disclosures. The draft framework, which is an update to the second draft released in June, is designed to help companies report on their nature-related risks and impacts. It also includes disclosure requirements and guidance on how to establish science-based targets. According to the framework’s executive summary, TNFD is now half-way through its planned two-year “design and development phase” in building the framework.
The International Organization of Securities Commissions (IOSCO), an international policy forum for securities regulators, has announced the publication of a consultation report and discussion paper.
The United Nations’ High-Level Expert Group on the Net Zero Emissions Commitments of Non-State Entities has published a report titled, Integrity Matters: Net Zero Commitments by Businesses, Financial Institutions, Cities and Regions. The report establishes five principles to guide setting and achieving net-zero targets, together with ten recommendations for what non-state actors should consider at each stage of the process to becoming net-zero aligned.
Global Litigation Group co-chair Jason Halper and partner Adam Magid explore the implications of recent, diverging decisions from the Seventh and Ninth Circuits on the enforceability of forum-selection clauses contained in company bylaws.
Global Litigation Group co-chair Jason Halper and special counsel Sara Bussiere discuss proposed amendments to SEC Regulations, and the options afforded by them to activist shareholders with a green agenda.
With the war in Ukraine showing no sign of abating and the after-effects of the pandemic only slowly subsiding, global markets are in turmoil. The markets in the UK are not immune from this upheaval and indeed have their very own localised issues to contend with.
The spotlight has shone brightly on carbon credits during the first week of COP27 in Sharm El-Sheikh, Egypt. On November 9, John Kerry, the U.S. Special Presidential Envoy for Climate, announced the “Energy Transition Accelerator” (ETA), a billion-dollar carbon credit program designed to help private companies in wealthier countries support developing countries to reduce their reliance on fossil fuels.
The UK’s Transition Plan Taskforce (TPT) has announced the publication of a “gold standard” Disclosure Framework and Implementation Guidance for how companies should develop, test and report on climate transition plans. The UK Chancellor announced the formation of the TPT in November 2021 at COP26 as part of the UK’s plans to become the world’s first net zero financial center and to address the fact that “early plans have va
On November 8, non-profit sustainability disclosure platform provider CDP and the International Sustainability Standards Board (ISSB) announced that CDP will integrate the ISSB’s climate-related disclosure standards into CDP’s disclosure platform. In 2022, 18,700 companies globally—worth almost $61 trillion and encompassing half of global market capitalization—have utilized CDP’s platform to disclose environmental information. The ISSB standard, when it is finalized, will be included into CDP’s questionnaires, which in turn are issued to companies annually. For further details on the standards, and their path to finalization, see our Timbre Shriver
Related Practice(s): Environmental, Social & Governance (ESG)
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The Review of Finance recently published a paper entitled Aggregate Confusion: The Divergence of ESG Ratings, which disclosed the findings of an investigation into the “divergence of sustainability ratings.” The authors investigated six ESG ratings providers: Kinder, Lydenberg, and Domini (KLD); Sustainalytics; Moody’s ESG (Vigeo-Eiris); S&P Global (RobecoSAM); Refinitiv (Asset4); and MSCI. The paper found not only that the ratings providers failed to reach the same conclusion on a company’s ESG rating, but also that “in most cases there was little agreement among them” and that “ESG rating divergence is not merely a matter of varying definitions but a fundamental disagreement about the underlying data.” The paper was supplemented by a subsequent Wall Street Journal Sara Bussiere
Related Practice(s): Environmental, Social & Governance (ESG)
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On November 9, the UN-convened Net-Zero Banking Alliance (NZBA) announced the publication of its first progress report. The NZBA reported that over half of its members have now set intermediate (i.e., 2030) decarbonization targets and that 90% of the 43 banks that were due to publish targets by the end of October have done so. The report “captures an aggregated view of the intermediate targets that have been reported by members.” Since its inception in April 2021, the NZBA has almost tripled in size from 43 founding members to 122 member banks hailing from 41 different countries and representing 40% of global banking assets.
In an unwelcome reminder of the events that unfolded in the wake of the May 2022 crypto market collapse, Bahamian-based crypto exchange FTX is reportedly on the brink of collapse following an unexpected surge in customer withdrawals and a failed deal with competitor Binance. In an effort to stave off the fate of former crypto giants Three Arrows Capital (3AC), Voyager Digital and Celsius Network, each of which entered bankruptcy protection earlier this year, FTX and Binance announced on Tuesday that they had entered into a “non-binding letter of intent” for Binance to purchase all of FTX’s non-U.S. exchange business. However, within 24 hours, Binance announced that it would not proceed with the deal, citing concerns about mishandling of customer funds and U.S. regulatory investigations.
Against a deteriorating global economic backdrop, company directors must navigate an increasingly intricate web of obligations, duties and regulations.
On Sunday, the UK passed the COP27 presidency to Egypt, which will host COP27, the 2022 United Nations Climate Change Conference, in Sharm El-Sheikh, with 50,000 attendees, including 110 heads of state, policy-makers and NGOs. The conference will continue until November 18. Discussions at COP27 are occurring against the backdrop of the global energy impact caused by the war in Ukraine, the latest World Meteorological Organization report showing that the global average temperature in 2022 was around 1.15°C higher than pre-industrial levels, and increasingly vigorous calls by developing nations for wealthier countries to fund future climate mitigation investments and to compensate for loss and damage.
Last week, U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) wrote follow-up letters to 12 ESG ratings firms requesting that recipients preserve material potentially responsive to requests made in an earlier September 20 letter. According to a press release from Senator Toomey, as of November 3, six companies had yet to respond at all or “provided incomplete responses.”
On November 1, the International Sustainability Standards Board (ISSB) confirmed companies will be required to utilize climate-related scenario analysis “to report on climate resilience and to identify climate-related risks and opportunities to support their disclosures.”
Several major asset managers last week announced plans to expand programs providing investors with greater say over how their shares are voted, some of which announced similar plans for some individual index fund shareholders. Vanguard’s pilot program will commence in early 2023, with Vanguard intending to offer “a number of proxy voting policy options for individual investors” in several of its equity funds. For BlackRock, this program will only be available, at least initially, to UK index fund investors. BlackRock’s CEO, Laurence Fink, Sara Bussiere
Related Practice(s): Environmental, Social & Governance (ESG)
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The U.S. Court of Appeals for the Ninth Circuit recently held, in Ad Hoc Comm. of Holders of Trade Claims vs. Pacific Gas and Elec. Co. (In re PG&E Corp.), that when a debtor is solvent, a creditor may be entitled to receive interest at the contract rate (subject to equitable considerations), rather than at the federal judgment rate.
On October 30, Luiz Inácio Lula da Silva (Lula) was elected President of Brazil for a third term, having previously governed Brazil for two consecutive terms between 2003 and 2010. Lula’s narrow victory follows a divisive election campaign against incumbent Jair Bolsonaro and Lula’s corruption convictions, which led to his imprisonment for 580 days. Lula was able to stand as a presidential candidate only after these convictions were quashed by the Brazilian Supreme Court for not having been heard in the appropriate court. He will assume office on January 1, 2023 and is expected to pursue progressive environmental policies.
On October 27, Institutional Shareholder Services (ISS) published a report intended to “provide an overview of the different changes taking place in the corporate governance landscape in light of increasing awareness of sustainability issues.”
Recent reports show that over 90% of companies that have articulated net-zero targets will not meet their goals based on their current climate change plans. On November 1, Accenture published a report stating that 34% of an Accenture-created list of 2,000 of the world’s largest public and private companies made public net-zero commitments, and that 93% of those that have made commitments will “miss their targets” unless they “accelerate progress” in reducing their emissions. The report also draws attention to the fact that over 90% of the global economy is now covered by national net-zero commitments.
On November 2, the European Central Bank (ECB) published the results of its thematic review into climate-related and environmental risks. As part of its review, the ECB looked at 186 banks with total combined assets of €25 trillion (approximately $25 trillion).
On November 1, in Abu Dhabi, the United States and the United Arab Emirates agreed to a clean energy framework called the Partnership for Accelerating Clean Energy (PACE). According to a U.S. Department of State press release, this partnership will lead to “$100 billion in financing, investment, and other support, allowing us to accelerate toward a goal of deploying 100 gigawatts of clean energy by 2035.”
On October 27, the Australian Securities and Investments Commission (ASIC) announced it had fined Tlou Energy Limited (Tlou) AUD 53,280 (approximately $34,000) “over concerns about alleged false or misleading sustainability-related statements made to the Australian Securities Exchange.”
The Glasgow Financial Alliance for Net Zero (GFANZ) has amended its membership rules by dropping its connection to the UN-supported Race to Zero campaign. As mentioned in our article last week, certain major U.S. banks were considering withdrawing from GFANZ over litigation and enforcement concerns. GFANZ’s progress report does not mention compliance with Race to Zero guidelines as a condition of membership. Instead it states that the alliances would “take note of the advice and guidance” of Race to Zero. GFANZ has over 450 members worldwide and represents over $130 trillion in assets. Prior to this change, one of the key requirements for institutions signing up to one of the GFANZ alliances, was the commitment to adhere
A group of over 300 companies, in advance of the December COP15 in Montreal, have signed a statement asking governments to mandate that “large and transnational businesses and financial institutions assess and disclose their impacts and dependencies on biodiversity, by 2030.” The group includes many large institutions, including Axa Group, Aviva Investors, BNP Paribas, UBS, Roche, Unilever, Vale and Tata Steel. The goal of COP15 is to agree on a global framework for the protection and restoration of global biodiversity (and is different than COP 27, taking place in Egypt starting November 6, which focuses on limiting global warming).
Deputy Governor of the Banque de France, the French central bank, Sylvie Goulard, stated in a speech on October 24 that central banks need to take more aggressive action regarding nature-related risk. She posited that “monetary assessments of ecosystem services have many limitations,” in part because of their complexity and also because “shocks” in one sector can have significant impacts on other sectors.
The UK’s Financial Conduct Authority (FCA) has announced a proposal for regulating sustainability claims by investment firms. In its accompanying consultation paper, the FCA proposed three sustainable fund labels as part of its wider anti-greenwashing policy.
On October 24, the European Banking Authority (EBA) announced the publication of its report on incorporating ESG risks into the supervision of investment firms. The report is intended to establish foundations for the integration of ESG risk considerations into the supervisory process of investment firms and covers elements including: (a) business model analysis; (b) assessment of internal governance and risk management; and (c) assessment of risks. According to the EBA, proportionality is a “key element” of the supervisory approach and competent authorities should consider elements such as an investment firm’s “business model, size, internal organization and the nature, sale and complexity of its servi
The SEC’s proposal to amend the “Names Rule,” first announced in May 2022, has elicited significant comment from industry. With these changes, the SEC’s goal is to improve standards of marketing by ensuring that funds are able to show that 80% of their holdings match the fund’s name. Over 100 companies and investors have submitted public comments ahead of the deadline next week, and the SEC reports holding 11 meetings with industry groups.
A major financial institution has established a series of emissions reduction targets for four carbon-intensive sectors. On October 21, the bank announced that the “targets represent a core element of [its] sustainability strategy and reflect the bank’s commitments as a founding member of the Net Zero Banking Alliance.”
Cadwalader attorneys Rachel Rodman, Keith Gerver and Ken Bergman analyze the broad impact of a Fifth Circuit ruling that the Consumer Financial Protection Bureau’s funding structure is unconstitutional.
The International Sustainability Standards Board (ISSB), a standard-setting organization created by the International Financial Reporting Standards (IFRS) Foundation to promote consistent and reliable climate-related disclosures, has unanimously decided on a recommendation that companies disclose information on Scopes 1, 2 and 3 greenhouse gas emissions starting in early 2023. “Scope 1 covers direct emissions from a company; scope 2 covers indirect emissions from electricity purchased and used; and scope 3 covers all other indirect emissions from the value chain.” The ISSB also intends to develop relief provisions to assist companies applying Scope 3 requirements, which may include additional time to make disclosures and safe-harbor provisions. &nb
On Thursday, Britain’s biggest domestic bank announced it would stop direct financing to develop new oil and gas fields. Alongside its announcement, Lloyds updated its climate policy, which now prevents project financing or reserve-based lending to greenfield (i.e., new) oil and gas projects.
Last week, Tracey McDermott, the Steering Group Chair of the Net Zero Banking Alliance (NZBA), a UN-convened banking industry coalition, wrote an open letter to NZBA members. The letter reported that since its founding in April 2021, the NZBA’s membership had grown from 43 to 119 financial institutions and highlighted the publication of its Transition Finance Guide. The non-binding Guide provides suggestions and guidance on actions the banking sector can take in terms of financing efforts to transition to a green economy.
On October 19, the Loan Market Association (LMA) and the European Leveraged Finance Association (ELFA) published the second edition of their Guide for Company Advisors to ESG Disclosure in Leveraged Finance Transactions. The Guide is intended to serve as a “practical tool for company advisers to use in support of their incorporation of the information contained in ESG Fact Sheets into company offering materials and ongoing financial reports,” and follows a January 2022 workshop where borrowers, banks, law firms, and other industry participants met to discuss challenges and give feedback on the previous iteration of the Guide.https://www.cadwalader.com/cwt-climate/index.php?eid=32&nid=5
South Pole, a Swiss carbon finance consultancy, has published a report which suggests that one in four companies around the globe have decided not to publicize details of their climate targets. This development has been described as “green hushing” and appears to be a response by some companies to fears of greenwashing allegations and non-compliance with legislation.
The UK’s Advertising Standards Authority (ASA) has ruled that two UK retail banking advertisements, which made claims about the financial institution’s green credentials, were “misleading” and “omitted material information.”
A large financial services organization and its asset-management arm are the subject of a complaint letter sent to the UN Principles for Responsible Investment (PRI) by almost 300 academics. TIAA and Nuveen collectively manage approximately $1.2 trillion and allegedly have approximately $78 billion of AUM invested in fossil fuels. PRI is an investor group, working in collaboration with the United Nations, whose signatories (including TIAA and Nuveen) commit to incorporate PRI’s six principles into asset management decisions. The letter requests that PRI launch a formal investigation into TIAA’s investment practices and, if PRI finds that such investments violate PRI’s principles, expel TIAA from PRI’s global sustainable investment initiative.
Grit Real Estate Income Group has raised $306 million in sustainability-linked debt in the largest real-estate industry transaction to date in sub-Saharan Africa (excluding South Africa). The lower rates on the term loan and revolving credit facility, which was arranged solely by Standard Bank, are linked to the Group’s ESG, carbon-emissions reduction and gender-equality targets. The Group intends to utilize the proceeds both to replace existing debt and to fund a re-development project in Senegal.
On October 11, the EC Platform on Sustainable Finance (PSF), an advisory group to the EC, published a report on its recommendations to resolve data and user difficulties that have been encountered while attempting to implement EU regulatory guidance on sustainable finance disclosures and reporting under the EU taxonomy.
A group of Democratic senators have written a comment letter to the Commodity Futures Trading Commission (CFTC) asking for improved regulation of the market for carbon offsets in response to the CFTC’s June 2022 request for information on climate-related financial risk. The senators include Bernie Sanders, Elizabeth Warren, Cory Booker and Kirsten Gillibrand.
On October 13, the Task Force on Climate-Related Financial Disclosures (TCFD) published its 2022 Status Report. The TCFD was established by the Financial Stability Board to give guidance on climate-related financial disclosure. The report marks five years since the TCFD published its final recommendations and it assesses progress made since then. The TCFD reviewed disclosure from over 1,400 companies across eight industries and five regions to assess the state of climate-related financial disclosure practices.
The London Stock Exchange (LSE) has announced the launch of its voluntary carbon market (VCM) together with the publication of its final admission and disclosure standards for companies to be eligible to participate. The LSE first announced its intention to establish a VCM marketplace in November 2021. The new market is open to closed-ended investment funds and operating companies admitted to LSE’s markets. It permits qualified funds or companies to raise funds through the VCM for climate mitigation projects.
Mercedes-Benz announced last week that it has converted an €11 billion revolving credit facility into a sustainability-linked loan (SLL), with its commitment fee tied to certain KPIs aligned with the company’s sustainability strategy. The Revolving Credit Facility was arranged for risk-management purposes to provide additional liquidity.
The Swiss government announced the completion of its inaugural green bond issuance, raising CHF766 million ($USD766 million). These funds will be utilized to support environmental goals in areas including clean transportation and biodiversity.
A large institutional investment manager has lost over $1 billion of assets under management in Republican-controlled states unhappy with the company’s consideration of ESG issues in investment decisions and perceived activism in the space. South Carolina state treasurer, Curtis Loftis, stated his intention to withdraw $200 million from BlackRock by the end of the year.
On October 11, the EU Platform on Sustainable Finance (PSF) published a final report on minimum safeguards under the Taxonomy Regulation Articles 3 and 18. Climate-related taxonomies classify businesses or products according to whether they should be considered sustainable.
On October 10, Institutional Shareholder Services (ISS) published the results of its annual Global Benchmark Policy Survey, which included questions on ESG topics. A significant majority of respondents stated that they would consider there to be a material governance failure if a company, that is considered to be a significant contributor to climate change, is not providing adequate disclosure with regard to climate-related oversight, strategy, risks and emissions-reduction targets.
Texas Natural Gas Securitization Finance Corp., a state public authority, announced that it had excluded a financial advisor from the underwriting syndicate of a $3.4 billion municipal bond transaction. The underwriters on the deal were initially approved in May. However, UBS Group, along with nine other financial institutions, was included on a list of “Financial Companies that boycott energy companies.” The Comptroller claimed that there was a “lack of transparency” and “use of doublespeak” by the companies and that they were acting differently behind closed doors when compared to their “anti-oil and gas rhetoric” in public.
Munich Re, the world’s largest reinsurer, has announced that starting April 1, 2023, it will no longer invest in or insure contracts or projects exclusively covering: (1) new oil and gas fields; (2) new midstream oil infrastructure; and (3) new oil fired power plants.
On October 6, Carbon Tracker, a financial think tank that analyses the impact of the energy transition on capital markets, published its report, titled “Still Flying Blind: The Absence of Climate Risk in Financial Reporting.”
The Green Technical Advisory Group (GTAG) has recommended that the UK green taxonomy should diverge from the EU’s as little as possible. GTAG was established last year by the UK government to provide independent advice, oversee the delivery of the UK green taxonomy and tackle greenwashing.
Lombard v. Skyjets: Key Takeaways for Lenders and Restructuring Professionals
US and global regulators are once again focused on having market participants design and implement business continuity and disaster recovery (BCDR) plans, as well as corresponding policies and procedures.
Without an apparent hitch, Ethereum effected its Merge on Thursday, September 15, 2022 whereby the blockchain platform switched its validation from proof-of-work (“POW”) to proof-of-stake (“POS”). The switch will reduce the high environmental impact of POW by removing the need for massive computer power to solve the mathematical problems associated with POW validation. Whether other benefits result (such as reducing transaction costs and increasing capacity) remains to be seen.
On August 4, the U.S. Commodity Futures Trading Commission (“CFTC”) had withdrawn its no-action letter (i.e., permission to operate) with respect to PredictIt, an online prediction market operated by the University of Wellington, New Zealand and ordered PredictIt to shut down its operations as of February 15, 2023. This no-action letter was issued in 2014 and allowed the University of Wellington to operate a small-scale, not-for-profit market in futures or swaps event contracts for educational purposes, without registration as a designated contract market, foreign board of trade, or swap execution facility (i.e., an exchange), and without registration of its operators.
On September 8, the UK’s Financial Conduct Authority (“FCA”) published a “Dear CEO” letter setting out its strategy and supervisory priorities for overseeing benchmark administrators under the UK Benchmark Regulations (“UK BMR”) and applicable FCA Principles and Rules. This form of letter is a common tool utilized by the FCA to focus the attention of firms’ senior managers on particular issues.
As we reported in May, the Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve Board (“FRB”) and the Office of the Comptroller of the Currency (“OCC”) (together, the “Agencies”) issued a notice of proposed rulemaking to amend and update the rules implementing the Community Reinvestment Act (“CRA”). The comment period on the proposal ended on August 5. We held off summarizing the comments until most people returned from, hopefully, some restful end-of-summer R&R.
A series of significant UK corporate failures, including BHS (2016), Carillion (2018), Patisserie Valerie (2018) and Thomas Cook (2019), each of which collapsed unexpectedly and not long after receiving clean bills of health from their respective auditors, served as a catalyst for a process of independent review, consultation and recommendations on ‘Restoring Trust in Audit and Corporate Governance’.
Federal Reserve Vice Chair of Supervision Michael Barr gave remarks yesterday to the Brookings Institution in Washington, D.C. The speech was his first since being sworn in at the end of July and served as a good indicator of his policy agenda.
The federal banking regulators have guidance in place regarding the advertising of credit pre-approvals, and, of course, Regulation Z and the Truth In Lending Act have provisions regarding how and when a pre-approval can be communicated to customers. Further, a “pre-approval” for credit is a standard that is supposed to mean that the consumer’s credit has been evaluated at some level by the creditor (usually via so-called prescreening, or because the customer agreed to an initial evaluation), and that the consumer will be approved for the credit product, assuming an intervening bankruptcy or other extremely adverse credit event has not occurred.
In many corners of financial services, Environmental, Social and Governance (“ESG”) concerns are driving innovation, SEC disclosure requirements, and even risk and compliance assessments. However, first among the prudential banking regulators, the FDIC on September 2 released a consumer advisory on ESG considerations, specifically regarding the impact of “Banking on the Environment.”
The U.S. Bankruptcy Code’s safe harbor provisions provide comfort to financial institutions that transfers made under protected financial contracts will generally not be subject to avoidance or “clawback” if the transferor subsequently files for bankruptcy protection under Chapter 7 or Chapter 11 of the U.S. Bankruptcy Code. But is the same true where the transferor is a foreign debtor whose main insolvency proceeding is occurring outside the United States, and whose representatives merely petition for “recognition” of the foreign proceeding in the United States under Chapter 15 of the Code? The U.S. District Court for the Southern District of New York recently confirmed that the safe harbors provide protection under this circumstance as well, even with respect to foreign law claims based on foreign transactions. See Fairfield Sentry Ltd. v. Citibank, N.A. London, 2022 WL 3644436 (S.D.N.Y. Aug. 24, 2022).
Cadwalader's Mark Beardsworth, Kevin Roberts and Duncan Grieve discuss the UK sanctions landscape and new guidance issued by the Office of Financial Sanctions Implementation.
Decentralized finance platforms (DeFi) are designed to operate in a decentralized manner primarily through the utilization of smart contracts. Smart contracts are simply a name given to small “if/then” statements written in computer code that are self-executing. Smart contracts are used throughout the cryptocurrency and blockchain space, are an integral component in non-fungible tokens (NFTs), and can allow for things to happen automatically, without human intervention. For example, a smart contract could be coded such that payment for an item could be released upon receipt of a shipment, so if the shipment is received, then payment is released.
The DOJ recently published an opinion from the Office of Legal Counsel (“OLC”) regarding the FDIC Board. The OLC opinion concluded that “the Chairperson of the FDIC Board does not have the authority to prevent a majority of the Board from presenting items to the Board for a vote and decision.”
On August 19, the European Securities and Markets Authority (“ESMA”) announced the publication of its response to a consultation on the European Commission’s (the “Commission”) proposals to amend the regime for the provision of “third country” (meaning non-EU) benchmarks into the EU under the Benchmarks Regulation (“BMR”). The Commission’s consultation, which concluded on August 12, 2022, asked for views on whether the rules applicable to the use of benchmarks administered in a third country, which will fully enter into applicati
The uncertainty, global and local shocks, and volatility of the last few years have not yet led to a significant slowdown in dealmaking, according to GlobalData’s Q2 2022 report, but the Berkeley Research Group in its 2021 report notes a trend toward more disputes between buyers and sellers in the M&A context, and more renegotiation on price by buyers after the signing of a deal. For parties currently negotiating their sale agreements, now is a good time to review the contractual language creating ‘deal certainty’.
Compliance deadlines for Local Law 97 of 2019 are steadily approaching, with the first reporting date being May 1, 2025, at which time owners of buildings covered by the law will be required to report compliance with the prior 2024 fiscal year mandates. Conformity to the carbon emission requirements will require building owners in New York City to undertake immediate action, if not already started.
The Economic Crime (Transparency and Enforcement) Act 2022 (the “ECA”) came into force on 1 August 2022 and places new obligations on overseas entities holding real estate in the United Kingdom.
In our July edition of REF News and Views we began our deep dive into the Sustainability-Linked Loan Principles (“SLLP”) core components (“Core Components”).
Two recent OFAC enforcement actions highlight real-world challenges that financial institutions and other companies may face in their efforts to implement an effective sanctions compliance program.
A couple of weeks ago, we reported on the FDIC and the Federal Reserve Board sending a cease and desist (“C&D”) letter to Voyager Capital to stop representing that customer funds were protected by deposit insurance. This past week, the FDIC sent five more letters to cryptocurrency-related companies on the same issue.
As we previously wrote in June, the Federal Deposit Insurance Corporation (“FDIC”) proposed amendments to the Deposit Insurance Fund (“DIF”) restoration plan originally adopted in September 2020 to implement a universal increase in initial base deposit insurance rates of 2 basis points. The FDIC noted in the proposal that it believes it needs to amend the restoration plan to ensure it meets the statutory minimum for the designated reserve ratio (“DRR”) of 1.35%. As of March 31, 2022, the DRR stood at 1.27%.
On August 18, the Federal Deposit Insurance Corporation (“FDIC”) issued Financial Institutions Letter 40-2022 (“FIL 40-2022”), which provided supervisory guidance for state non-member banks and multiple non-sufficient funds (“NSF”) fees. FIL 40-2022 and its attached guidance is similar in content to an issue the FDIC highlighted in its March Consumer Compliance Supervisory Highlights.
The latest in a series of rulemaking that is supportive of the financial industry’s transition away from interbank benchmarks, the new final rule adjusts CFTC clearing requirements to reflect this change.
This week, the Federal Reserve Board (“FRB”) made two announcements of particular interest to the crypto-asset sector. First, on August 15, the FRB announced its final guidelines establishing factors for Reserve Banks to use in reviewing requests to access FRB accounts and payment services. Second, on August 16, the FRB issued SR/CA Letter 22-6 regarding engagement in Crypto-Asset-Related Activities by Federal Reserve-Supervised Banking Organizations.
In the heat of summer, the nation’s top consumer protection agencies have issued startling and transformative statements and rules regarding data practice.
Bipartisan crypto legislation was introduced by Senators Pat Toomey (R-PA) and Kyrsten Sinema (D-AZ) on July 26, 2022. If enacted, the Virtual Currency Tax Fairness Act would exclude from gross income gain on certain de minimis “virtual currency” transactions where the total value and total gain is less than or equal to $50, adjusted for inflation after 2023
Christopher Gent, a former CEO of Vodafone Group plc and non-executive Chairman of GlaxoSmithKline plc, was appointed as the non-executive Chairman of ConvaTec Group Plc (“ConvaTec”), a company admitted to trading on the London Stock Exchange (“LSE”), in October 2016 and held this position until retirement in May 2019. In his role, Mr. Gent was responsible for governance over, and closely involved in the preparation of, ConvaTec’s issuance of key company news (“RNS”) announcements to the LSE. In October 2018, Mr. Gent previewed the release of an expected RNS announcement relating to the downward revision of ConvaTec’s financial guidance and the retirement of ConvaTec’s CEO before such information had been announced to the market.
Following the Consumer Financial Protection Bureau’s supervisory observations that the auto finance industry seemed to be struggling with providing adequate consumer protections to servicemembers, the CFPB has joined with the Department of Justice to reach out directly to auto finance companies, emphasizing the importance of compliance with the Servicemembers Civil Relief Act ("SCRA"). While the DOJ is responsible for enforcing the SCRA, the CFPB provides support in terms of educating consumers and industry on how to comply with it, and may use its unfair, deceptive or abusive act or practice authority under the Consumer Financial Protection Act to itself address the failure to comply with the SCRA.
An appointed representative (“AR”) is a firm or person who carries on a regulated activity, or activities, under the responsibility of an authorized financial services firm. An authorized firm that appoints representatives in this way is referred to as a “principal.” In appointing an AR, the principal assumes responsibility for the regulated activities carried on by the AR that have been agreed with the AR in writing. The appointed representatives regime dates back to 1986, but as the perimeter of UK financial regulation has extended, the market significance of ARs has grown. At present, some principals have responsibility for a large number of ARs, especially in the fintech and asset management markets.
Last week, the Federal Reserve Board (“FRB”) announced the individual capital requirements for all large banks, effective on October 1. This announcement follows the June announcement on the results of the supervisory stress test (also known as the Dodd-Frank Act Stress Test or DFAST, as these tests are required by Section 165 of the Dodd-Frank Act), which assesses whether banks are sufficiently capitalized to absorb losses during a severe recession.
On August 3, Senate Agriculture Committee Chairwoman Debbie Stabenow, a Democrat from Michigan, and John Boozman, the top Republican on the committee, introduced a bipartisan bill aimed at regulating digital assets.
On July 26, the United States Department of Labor (“DOL”) issued proposed amendments to Prohibited Transaction Class Exemption 84-14, the so-called “QPAM Exemption.” The QPAM Exemption is an important prohibited transaction class exemption widely utilized by asset managers to provide relief for potential prohibited transactions that could arise in transactions between plans subject to ERISA and/or Section 4975 of the Code and financial services and other firms that are “parties in interest” under ERISA or “disqualified persons” under the Code (e.g., fiduciaries, plan sponsors, service providers and entities related to the foregoing by ownership) to such plans.
Last week, the Federal Deposit Insurance Corporation (“FDIC”) was part of two releases clarifying that only insured banks and thrifts enjoy FDIC insurance, notwithstanding what some non-banks may say in their marketing materials. The first release, together with the Federal Reserve Board (“FRB”), is a cease-and-desist letter to Voyager Digital (the “Joint C&D Letter”). The second is an FDIC Advisory to FDIC-Insured Institutions Regarding FDIC Deposit Insurance and Dealings with Crypto Companies.
On August 1, the UK’s Financial Conduct Authority (“FCA”) published a policy statement on strengthening its financial promotion rules for high-risk investments and firms approving financial promotions (the “policy statement”).
Fund finance provides a rich variety of liquidity options, say Cadwalader’s Samantha Hutchinson, Michael Hubbard, Angela Batterson and Brian Foster.
In this Part 3 of our series, we will focus on (1) selection of KPIs and (2) calibration of SPTs of the Core Components (and, in next month’s edition of REF News and Views, we will dive deeper into (3) loan characteristics, (4) reporting progress against SPTs, and (5) verification).
A ground lease is both a conveyance and a contractual agreement between a landlord (the ground lessor) and a tenant (the ground tenant) pursuant to which the ground lessor, as the fee owner of the real property, conveys a leasehold interest in the property to the ground tenant subject to the terms and conditions of the ground lease.
The Commodity Futures Trading Commission (“CFTC”) has two levels of jurisdiction under the Commodity Exchange Act (“CEA”).
On July 21, the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Attorney’s Office for the Southern District of New York announced parallel civil and criminal actions (here and here) against a former product manager at Coinbase Global, Inc. (“Coinbase”), the largest cryptocurrency exchange in the United States, as well as his brother and his friend, for an alleged scheme to trade ahead of announcements that certain crypto assets would be “listed” on the exchange. The U.S. Attorney’s Office charged the defendants with a criminal wire fraud conspiracy and wire fraud, while the SEC alleged the insider trading scheme constituted securities fraud in violation of the Securities Exchange Act and Rule 10b-5.
In an opinion written by U.S. District of Delaware circuit judge Stephanos Bibas that begins, “A good template serves as a guide, not gospel,” Del-One Federal Credit Union was denied the safe harbor typically proffered by use of model forms in a potential class action regarding its overdraft fees.
On July 25, the Federal Deposit Insurance Corporation (“FDIC”) announced amendments to its Enforcement Actions Manual. The amendments to chapters 1 and 4 update and clarify the FDIC’s approach to terminating cease-and-desist orders and consent orders issued under section 8(b) of the Federal Deposit Insurance Act (“FDI Act”).
On July 21, the UK Treasury and the City of London Corporation (“CLC”) published a report on their first annual review of the UK financial services sector (the “Report”). The Report sets out findings from a review of the attractiveness and international competitiveness of the UK financial services sector. It was prepared in response to the recommendation made in the 2021 UK Listing Review where it was suggested that the Government present an annual report covering this topic.
In a lengthy, numbers-heavy blog post, the Consumer Financial Protection Bureau (“CFPB”) showed off its math skills by analyzing fees that banks collect from their retail deposit customers, with a particular focus on overdraft fee trends.
On July 19, the Federal Reserve issued a notice of proposed rulemaking (“NPR”) that would implement the Federal LIBOR Act.
The Consumer Financial Protection Bureau (“CFPB”) has issued several statements affecting the credit reporting industry in the last few months, including one on medical debts and one on auto financing, while at the same time emphasizing that the definition of a consumer reporting agency (“CRA”) should be interpreted broadly to include not just credit reporting companies and tenant screeners but also “other data brokers.” This means that any company collecting “Big Data” and hoping to convert that data into profit by offer
Once in a while, a Commodity Futures Trading Commission (“CFTC”) enforcement action confirms market participants’ worst fears that the CFTC is prepared to, and is able to, find violations of the Commodity Exchange Act (“CEA”) where no such violations had previously existed. The July 19, 2022 CFTC settlement order involving Powerline Petroleum and its principals is one such case.
On July 19, Federal Reserve Board (“FRB”) Vice Chair Lael Brainard gave remarks to the National Native Coalition Virtual Series sponsored by the National Congress of American Indians. Her remarks focused on the joint proposal from the FRB, Federal Deposit Insurance Corporation (“FDIC”), and the Office of the Comptroller of the Currency (“OCC”) (together, “The Agencies”) to modernize the Community Reinvestment Act (“CRA”). As we mentioned briefly in our newsletter in May, the comment period on the proposal will be open until August 5, 2022.
On July 20, the Financial Services and Markets Bill (the “Bill”) was introduced in the UK’s House of Commons (“HoC”). This first formal stage in the legislative process (called the “first reading”) does not allow for debate of the Bill.
On July 15, the Federal Deposit Insurance Corporation (“FDIC”) issued an updated Q&A regarding how companies involved in managing deposits can determine whether such deposits should be considered brokered, and/or whether they are deposit brokers themselves.
As the IRS ponders its approach to taxing cryptocurrency and NFTs, states are increasingly imposing taxes on some digital asset transactions, including the use of cryptocurrencies.
In yet another development for the UK cryptocurrency sector, on 5 July 2022 the UK Government announced a consultation as to the taxation of cryptoasset loans and “staking” within the context of decentralised finance (“DeFi”). In particular, the UK Government is interested in ascertaining whether administrative burdens and costs could be reduced for taxpayers engaging in DeFi lending and staking as well as seeking to understand whether the tax treatment of such activities can be better aligned with the underlying economics of the transactions involved.
The last week has seen a number of announcements or statements from financial regulators calling for more oversight of crypto-assets, particularly stablecoins.
In last week's Cabinet News and Views, we examined the U.S. regulators' approach to the digital asset space, with a focus on the assertion of jurisdiction by the CFTC, the SEC, prudential regulators, state executive and legislative branches, and Congressional initiatives. This week, our focus shifts to enforcement − what actions the various regulators are taking in the digital asset space and what we can expect to see in the near future.
Be it fair use in copyright, government liability in patent cases, ethics or substantive patent law issues, a number of pending cases for the second half of 2022 address important aspects of intellectual property law, say Cadwalader’s Dorothy R. Auth and Howard Wizenfeld. They spotlight cases involving Andy Warhol art and Moderna’s Covid-19 vaccine, among others.
As more market participants, from retail consumers to major financial institutions and central banks of various countries, become active in the digital asset space, the U.S. regulators are ramping up their oversight activity related to digital assets.
Capital markets partner Sabah Nawaz authored an article on the current state of the European commercial real estate structured finance market.
The U.S. Court of Appeals for the Seventh Circuit has issued a decision interpreting the Bankruptcy Code’s definitions of “statutory lien” and “judicial lien,” holding that a lien imposed by the Chicago Municipal Code was “judicial” rather than “statutory” because it arose partly as the result of a “quasi-judicial” process rather than “solely by force of a statute.”
On March 30, 2022, the New York State Supreme Court, New York County decided in Times Square JV LLC v. Walber Broadway LLC that a ground lease-tenant that is in default under the ground lease for failure to pay the landlord rent does not per se invalidate the tenant’s right of first refusal under the lease to purchase from landlord the land on which the leased premises is situated.
In this next article in our Sustainability-Linked Loans Series, we further explore this growing field by introducing and outlining the Sustainability-Linked Loan Principles and the SLLP Core Components.
The UK Government has announced a public consultation regarding the possible expansion of the UK’s investment manager exemption (“IME”) to encompass crypto-assets.
On June 7, 2022, U.S. Senators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-WY) introduced the Lummis-Gillibrand Responsible Financial Innovation Act (the “Act”), a comprehensive legislative scheme for the regulation of crypto that includes important tax relief measures. Tax proposals introduced by Sections 201-206 and 208 of the Act are described below.
In August 2021, the Financial Conduct Authority (FCA) brought in changes to the Listing Rules which were aimed at making London a more hospitable listing venue for new special purpose acquisition companies (SPACs). The impetus for doing so was to allow London to participate in the undoubted SPAC ‘boom’, which had at that point been raging in the US over the previous year.
On May 24, the CFPB launched a new office, the Office of Competition and Innovation. The stated purpose of the new office is to promote competition and innovation that benefits consumers in the financial products and services market. Specifically, the Office of Competition and Innovation will (1) explore ways to reduce barriers to consumers’ ability to switch accounts and providers, (2) research market-structure problems that create obstacles to innovation, and (3) work with stakeholders to identify and challenge existing market structures that harm consumers. The office will be housed in the CFPB’s Division of Research, Markets & Regulations.
Accurate and timely reporting of swap data is the cornerstone of swap regulation. The CFTC had promulgated its swap reporting rules in 2012, and were after 2012 among the first rules implementing the Dodd-Frank Act to require, among other things, the anonymized real-time reporting of swap data (Part 43 of CFTC regulations) as well as more detailed regulatory reporting of swap data (Part 45) to swap data repositories (“SDR”).
On June 15, the Basel Committee on Banking Supervision (“BCBS”) issued its Principles for the effective management and supervision of climate-related financial risks (the “Principles”). In its release, the BCBS stated that it “aims to promote a principles-based approach to improving both banks’ risk management and supervisors’ practices related to climate-related financial risks.” The publication of the Principles follows an initial consultation document issued in November 2021.
On 1 June 2022, the French Presidency published its “final” compromise text in relation to the revision to the EU Alternative Investment Fund Managers Directive (known as “AIFMD2”).
Over the last 18 months, we’ve seen a sharp uptick in inquiries from U.S. banks about how to use capital relief trades to manage regulatory capital constraints. Here, we set out our responses to some of the frequently asked questions we’ve received on this topic. If you’re interested in learning more, we invite you to join us for a free webinar series beginning on June 22, where we’ll discuss capital relief trades in greater detail.
Cadwalader's Michele Maman, Tom Curtin and Marc Veilleux discuss a recent ruling from the Third Circuit that serves as a useful reminder to both junior creditors and senior creditors alike as to how their dealings in an intercreditor arrangement may play out following a debtor's bankruptcy, and provides important insight into the potential remedies that a senior creditor may have available should a junior creditor breach a turnover provision.
In the last week, the Federal Reserve has announced two forthcoming dates when the Fed would be releasing two important announcements: (1) the results of its annual bank stress tests will be released on June 23 at 4:30 p.m. EDT; and (2) a second tool to help community financial institutions implement the Current Expected Credit Losses (“CECL”) accounting standard will be released as part of a June 16 “Ask the Fed” webinar.
Earlier this week, U.S. Sens. Kirsten Gillibrand (D-N.Y.) and Cynthia Lummis (R-Wyo.) introduced the first comprehensive legislation to establish a regulatory framework for digital assets to promote innovation, delineate regulatory jurisdiction, provide customer protection, ensure transparency and integrate digital assets into the existing regulatory regimes (the Responsible Financial Innovation Act, or the “RFI”). Many of the principles laid out in the RFI were first articulated in President Biden’s March 3, 2022 Executive Order on Ensuring Responsible Development of Digital Assets.
On May 31, 2022, the UK Treasury announced a consultation on the government’s proposals to manage the failure of systemic digital settlement asset (“DSA”) (including stablecoin) firms by adapting the existing Financial Market Infrastructure Special Administration Regime (“FMI SAR”).
On June 2, 2022, the Commodity Futures Trading Commission (“CFTC”) convened for the first time market participants to discuss the state and the challenges of the U.S. voluntary carbon credit (“VCC”) markets and, at the end of the meeting, published a Request for Information (“RFI”) on Climate-Related Financial Risk. This convening was an important step in CFTC’s broader initiative to conceptualize its jurisdictional reach over environmental, social and governance (“ESG”) commodity markets generally.
Federal Reserve Board Chair Jay Powell had a meeting at the White House earlier this week with President Biden and Secretary of the Treasury Yellen to discuss inflation.
The Consumer Financial Protection Bureau (“CFPB”) released a regulatory Circular providing guidance regarding the use of “complex algorithms” to assess whether a consumer should be extended credit. Often referred to as “black box” solutions, which may include artificial intelligence protocols, the CFPB has stated that full compliance with obligations is required, regardless of the technology used.
On May 27, OFAC announced a civil settlement with a Puerto Rico-based bank in connection with apparent violations of the Venezuela Sanctions Regulations. While the settlement amount of $255,938 is a fraction of the blockbuster fines paid by some banks in recent years, the case nonetheless serves as an important reminder that sanctions requirements vary from program to program, and compliance procedures must be tailored accordingly.
In a blog post, the Consumer Financial Protection Bureau (“CFPB”) revealed that it had sent letters requesting information from credit card issuers as to the reasons why actual payment histories are often not being reported to credit bureaus.
In Kelley v. Safe Harbor Managed Account 101, Ltd., the Eighth Circuit Court of Appeals endorsed a broad view of parties protected from avoidance claims related to certain derivative and financial contracts (“QFCs”), including a securities contract (e.g., purchase and sale of securities).
When the interest rate on a mortgage financing is not fixed, the amount that a borrower may be required to pay may fluctuate depending on changes in the underlying index to which the “margin” or “spread” is tied. While a lender may be comfortable with its underwriting of a financing and the ability of its borrower to service its debt at closing, if the underlying index of a floating rate loan changes over time, the lender’s comfort and the ability of its borrower to service its debt will obviously change. To combat against interest rate volatility, borrowers and lenders usually agree to hedge the interest rate against the uncertainty in the market for floating rate loans. The most common form of such hedging is an “interest rate cap.”
In our last few editions of REF News and Views, we featured the Green Loan Series of articles in which we discussed the emergence of “green loans” and the Green Loan Principles − those principles that form the proposed framework for market standards, guidelines and methodology to be adopted across the green loan market.
The Securities and Exchange Commission (the “SEC”) yesterday proposed amendments to rules and forms relating to ESG disclosures for investment advisors and investment companies. Specifically, the proposed changes seek to expand U.S. funds’ disclosure requirements to clients and shareholders and to prevent misleading and deceptive claims relating to ESG qualifications.
The Consumer Financial Protection Bureau ("CFPB") issued an interpretive rule on May 19, reiterating the authority that states have to pursue companies and individuals that violate federal consumer financial protection laws, including the Consumer Financial Protection Act of 2010 ("CFPA").
On May 25, 2022, the U.S. Commodity Futures Trading Commission (“CFTC”) conducted a public hearing to consider a request from LedgerX, LLC, d.b.a. FTX US Derivatives (“FTX”), to amend its order of registration as a derivatives clearing organization (“DCO”) to allow direct clearing of listed futures contracts on Bitcoin and Ethereum and other digital assets by retail participants. This is a dramatic departure from a traditional clearing model where retail participants can trade and clear futures only through professional intermediaries – registered and heavily-regulated futures commission merchants (“FCMs”).
This week, Acting Comptroller of the Currency Michael Hsu gave remarks to the DC Blockchain Summit titled “Crypto: A Call to Reset and Recalibrate.”
The G7 Finance Ministers and Central Bank Governors recently met in Petersberg, Germany, from May 18 and 20. They were joined by the heads of the International Monetary Fund, World Bank Group, Organisation for Economic Cooperation and Development, and the Financial Stability Board (“FSB”). The Ukrainian Prime Minister and Finance Minister were also in attendance.
This article discusses “hell or high water” (HOHW) clauses in merger agreements, including a number of important HOHW risk issues that are often overlooked.
A draft report on the impact of crypto and blockchain on taxation was tabled before the European Parliament sub-committee on tax matters on 25 April 2022. The draft report consists of a motion for a European Parliament resolution, which, when passed, will be forwarded to the European Council and the European Commission. The draft resolution contains a range of recommendations for the European Commission and the EU Member States, including digital levelling-up for EU tax administrations, a European approach on the taxation of crypto-assets and enhancing crypto-asset information exchange among EU tax administrations. The draft resolution also emphasises the importance of sufficient anti-tax fraud policies in the digital and crypto space and suggests the exploration of the potential use of blockchain to facilitate tax compliance.
The District of Columbia Bar Tax Legislative and Regulatory Update Conference, a two-day conference on tax legislative and regulatory developments, included a one-and-a-half hour panel on taxation of cryptocurrencies and related reporting issues. Personnel from the U.S. Department of Treasury Office of Tax Policy (Natasha Goldvug, Attorney-Advisor, and Erika Nijenhuis, Senior Counsel), the Joint Committee on Taxation (Jeffrey Arbeit, Legislation Counsel), and the Internal Revenue Service Office of Chief Counsel (Chris Wrobel, Special Counsel to the Associate Chief Counsel, Income Tax & Accounting) participated on the panel, each speaking in an informal capacity rather than from their official positions.
The first in-person ISDA annual general meeting (“AGM”) after the COVID-19 pandemic is wrapping up today in Madrid, Spain. This conference follows the Futures Industry Association Law and Compliance (“FIA L&C”) annual conference held in Washington, D.C. at the end of April, and the topics addressed were essentially similar, albeit approached from a different angle.
The Consumer Financial Protection Bureau (CFPB) issued an advisory opinion on May 9, confirming that for purposes of the Equal Credit Opportunity Act (“ECOA”) and its implementing regulation, Regulation B, the intended breadth of the provisions prohibiting discrimination on the basis of race, color, religion, national origin, sex, marital status and age is to cover not just applicants for credit, but also customers who have already been extended credit.
Earlier this week, Department of the Treasury Secretary Janet Yellen provided testimony and responded to questions from the Senate Banking Committee regarding volatility in cryptocurrencies that are designated to be “stablecoins,” meaning that the value is supposed to remain fixed, on a one-to-one basis with the dollar, and emphasized that a federal framework for regulating digital assets is necessary to avoid “risks to financial stability,” as reported by The Wall Street Journal.
On May 10, 2022, Prince Charles announced in the Queen’s Speech that the Government would bring in new legislation to “strengthen” the UK’s financial services industry to ensure that it acts “in the interest of all people and communities.”
As we mentioned briefly in our newsletter last week, the Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve Board (“FRB”) and the Office of the Comptroller of the Currency (“OCC”) (together, “The Agencies”) issued a notice of proposed rulemaking to amend and update the rules implementing the Community Reinvestment Act (“CRA”). The comment period on the proposal will be open until August 5, 2022.
The Securities and Exchange Commission ("SEC") has renamed and expanded a unit within its Division of Enforcement to address protection of investors in crypto markets.
In May 5, the Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve Board (“FRB”) and the Office of the Comptroller of the Currency (“OCC”) (together, the “Agencies”) issued a notice of proposed rulemaking to amend and update the rules implementing the Community Reinvestment Act (“CRA”). The comment period on the proposal will be open until August 5, 2022.
On April 25, 2022, the UK Transition Plan Taskforce (the “Taskforce”) was formally launched by HM Treasury. The goal of the independent Taskforce is to develop a “gold standard” for climate transition plans. With a two-year mandate and active involvement from regulators (to draw on the Taskforce’s findings and strengthen disclosure rules), industry leaders and academia, the Taskforce will “help to drive decarbonisation by ensuring that financial institutions and companies prepare rigorous plans to achieve net zero and support efforts to tackle greenwashing.”
The Consumer Financial Protection Bureau ("CFPB") announced in a press release issued in conjunction with the release of its latest Supervisory Highlights that it is concerned that financial institutions and other companies involved with auto financing might be incented to step up repossession of cars belonging to borrowers in default.
Alongside the slew of new sanctions imposed in response to Russia’s invasion of Ukraine, the Biden administration also has been laying the groundwork to maximize the impact of those sanctions.
This week, attendees at the FIA L&C conference are gathered in Washington, D.C., for the first time in three years to discuss several issues with significant potential impact on the markets. One such issue is redefining the concept of the trading facility for securities and derivatives.
On April 25, 2022, the UK Financial Conduct Authority (“FCA”) provided an important update relating to the future of the London Inter-Bank Offered Rate (“LIBOR”) benchmark. On its updated Benchmarks Regulation: our powers, policy and decision-making webpage, the FCA has set out the steps it intends to take regarding synthetic sterling LIBOR.
The Consumer Financial Protection Bureau (“CFPB”) recently announced that it is going to exercise authority described as “dormant” to supervise nonbanks that are not otherwise subject to the CFPB’s supervision authority.
Last week, six bank trade associations, including the Bank Policy Institute and the American Bankers Association, submitted a joint comment letter on the Federal Reserve’s re-proposed Guidelines for access to Fed accounts and services that we previously wrote about in March.
In a recent judgement, the UK Supreme Court confirmed that suspects subject to a criminal investigation are entitled, as a general rule, to a reasonable expectation of privacy regarding information relating to the investigation until they are charged.
In this article, the authors discuss a decision by the U.S. Court of Appeals for the Second Circuit in which New York City landlords alleged that certain laws enacted in response to the COVID-19 pandemic were unconstitutional.
On April 18, 2022, the New York State Bar Association Tax Section published its second report on cryptocurrency and digital assets.
On 22 March 2022, the Organisation for Economic Co-operation and Development (“OECD”) published a public consultation document proposing new and amended reporting requirements with respect to cryptoassets and electronic-money products, as well as proposed amendments to the Common Reporting Standard (“CRS”) for the automatic exchange of financial account information between countries.
Cadwalader partner Ellen Holloman discusses the importance of corporate board gender and racial diversity. Among other things, this practice note surveys state legislation on corporate board diversity and offers best practices for employers on how to create such diversity.
Cadwalader Intellectual Property attorneys Dorothy Auth, Howard Wizenfeld and Dash Cole discuss ownership of patent rights, trade secrects and other IP concerns in today's work from home economy.
On March 9, 2022, President Biden signed an executive order outlining the administration’s policy objectives with respect to cryptocurrencies and directs U.S. regulatory agencies to prepare various reports regarding cryptocurrency regulation, although it does not specify any regulatory action to be taken. The order describes six primary policy objectives regarding regulation of cryptocurrencies: protecting consumers, investors and businesses; mitigating systemic financial risk; mitigating national security risks; reinforcing U.S. financial leadership; promoting safe and affordable financial services; and supporting technological advances. The executive order also states that the Biden administration “places the highest urgency on research and development efforts into the potential design and deployment options of a United States CBDC.” CBDC stands for Central Bank Digital Currency, which is defined as a form of digital money that is a direct liability of the central bank.
Cadwalader partners Jason Halper, Rachel Rodman and Lary Stromfeld, members of the firm's LIBOR Preparedness Team, authored a Reuters article this week.
Modelled on legislation prepared by the ARRC and enacted by New York and other states, on Tuesday the President signed federal legislation addressing legacy contracts that reference LIBOR after it ceases in June 2023. While it is an extremely important part of the LIBOR transition process, the legislation should not replace proactive management of LIBOR portfolios. The attached deck provides a quick overview of the legislation.
Cadwalader attorneys provide an overview of recent securities litigation news from around the world for Lexology GTDT’s “Securities Litigation 2022.” Global Litigation Co-Chair Jason Halper is the contributing editor of the guide.
In early February, HMRC published a new chapter in its Cryptoassets Manual dealing with decentralised finance (“DeFi”). DeFi is an umbrella term encompassing a range of products which are comparable with traditional financial services. DeFi platforms can provide services such as decentralised exchanges, saving, lending and derivatives, using distributed ledger technology.
On February 3, the Proof of Stake Alliance (“POSA”), a cryptocurrency industry association, issued a press release regarding recent developments in a cryptocurrency tax case, in which the IRS approved the tax refund sought by the taxpayer, Mr. Jarrett. Jarrett v. United States, No. 3:21-cv-00419 (M.D. Tenn.). The central issue in Jarrett is the taxation of cryptocurrency Mr. Jarrett received as a reward for “staking” (Jarrett v. United States, No. 3:21-cv-00419 (M.D. Tenn.)). Mr. Jarrett’s attorneys have refused this refund because he intends to continue his pursuit of a court ruling on the taxation of staking rewards. (See related court filings.)
Across the global markets, the countdown to midnight on New Year’s Eve started long before revelers gathered in Times Square. Regulators had announced that the end of 2021 would also be the end of nearly all tenors of LIBOR in the $400 trillion global market.
The authors discuss an Illinois Court of Appeals decision holding that estoppels are enforceable against a tenant’s subsequent actions and claims.
Cadwalader partner Kevin Roberts provides a review of the recently released Practical Guide to Extradition Law Post-Brexit, published by Law Brief Publishing and edited by Myles Grandison and members of the Temple Garden Chambers.
Across the global markets, the countdown to midnight on New Year’s Eve started long before revelers gathered in Times Square. Regulators had announced that the end of 2021 would also be the end of nearly all tenors of LIBOR in the $400 trillion global market. This presented multiple challenges on two fronts: new transactions needed to find a replacement benchmark(s) as a reference for their borrowing costs and outstanding “legacy” transactions needed to function without disruption following the discontinuance of their embedded benchmark.
In this article, the authors review the elements that should be included in a nonconsolidation opinion delivered to the lender in a structured finance transaction by counsel for the special purpose entity.
Cadwalader Capital Markets partner David Quirolo and special counsel Alex Collins co-authored a chapter in the Loan Market Association’s new book “Leading The Way” The LMA: 25 Years in the Loan Market. The chapter “CLOs and the Securitisation Regulations”, focuses on the application of the Securitisation Regulations to CLOs structured as securitisations and the impact of such regulation on the underlying loans in which CLOs invest.
Dorothy Auth, Head of Cadwalader's Intellectual Property Practice, and attorneys Howard Wizenfeld and Dash Cole look at key IP cases to watch in 2022. They recommend keeping an eye on a U.S. Supreme Court case involving patent eligibility, and two potential Supreme Court cases that could affect the biotech and pharma industries, as well as a case that involves artwork by Andy Warhol.
In recent decades, economic sanctions have emerged as a critical, and sometimes favorite, tool of foreign policy for U.S. presidents and lawmakers of both political parties. With the recent release of the Department of the Treasury’s 2021 Sanctions Review, however, this longstanding trend shows signs of moderating – at least in certain areas – under President Joseph R. Biden. In fact, many of the Review’s recommendations have already been put into practice, reflecting a new approach to economic sanctions.
This article provides guidance on the recent trends in Environmental, Social, and
Governance (ESG), the #MeToo movement (#MeToo), and Black Lives Matter (BLM)
impacting corporate governance and the workplace.
Cadwalader antitrust partner Joel Mitnick and counsel Ngoc Pham Hulbig discuss the decision and its impact on future antitrust litigation, including Google Play store practices.
Cadwalader's Katie McShane discusses potential ESG regulatory reform as it relates to the Fund Finance industry.
Another decision from the FTC could raise the costs of merger reviews for both the parties and the government alike. Cadwalader's Joel Mitnick and Ngoc Hulbig provide insights here.
This practice note provides an overview of the statutes and standards governing the various legal issues implicated by the MeToo (or #MeToo) movement and addresses best practices for conducting sexual harassment workplace investigations in the MeToo era.
The Eighth Circuit recently enforced an arbitration clause despite evidence that the plaintiff never saw the clause or signed the arbitration agreement. Cadwalader's Jason Halper and Adam Magid outline the decision here.
This article provides guidance on the recent trends in the environmental, social and governance, or ESG, arena, and the #MeToo and Black Lives Matter movements influencing corporate governance and the workplace.
On August 10, the Senate passed the Infrastructure Investment and Jobs Act (IIJA), a $1 trillion bill that would fund infrastructure projects and increase cryptocurrency reporting requirements.
Cadwalader's Ellen Holloman and Hyungjoo Han provide guidance on the recent trends in Environmental, Social, and Governance (ESG), the #MeToo movement (#MeToo), and Black Lives Matter (BLM) impacting corporate governance and the workplace.
As the year 2020 was coming to a close, District Judge Rakoff issued a decision in In re Nine W. LBO Sec. Litig., No. 20 MD. 2941 (JSR), 2020 WL 7090277 (S.D.N.Y. Dec. 4, 2020) (“Nine West”) that sent some shockwaves through the M&A community with respect to the future of corporate governance in the context of director duties relating to the sale of a plainly solvent company.
Cadwalader's Michael Gambro and Michael Ruder co-authored an article in the IFLR ESG Report 2021 which highlights the following:
Challenges facing green bond issuers and investors regarding the development of common disclosure frameworks.
Legislative and regulatory steps that have been taken to address the lack of a clear definition of what qualifies as a green bond.
Risk factor disclosure best practices for green bond offerings, including a sample green bond risk factor.
In this Bloomberg Law Professional Perspective, Cadwalader partner Lary Stromfeld outlines key features of LIBOR legislative initiatives designed to avoid the uncertainty, disputes, litigation, and market disruption that could arise from the trillions of dollars of unremediated legacy transactions.
Cadwalader intellectual property attorneys Dorothy Auth, Howard Wizenfeld, and Dov Hirsch look at the potential impact of some recent and pending IP court decisions. Trends to watch include potential guidance in the areas of patent eligibility, whether AI can be an “inventor,” and protections for Covid-19 vaccines.
Cadwalader’s Joel Mitnick and Ngoc Hulbig co-authored an article in Westlaw Today which highlights the Supreme Court’s recent landmark decision regarding student athlete compensation. This article examines the relevant cases, dating back decades, that ultimately led to this decision and outlines what happens next.
Cadwalader partner Kevin Roberts and associates Duncan Grieve, Shruti Chandhok and Charlotte Glaser have co-authored a chapter titled, “Anti-Money Laundering and Cryptocurrency: Legislative Reform and Enforcement,” in Anti-Money Laundering 2021: A practical cross-border insight into anti-money laundering law, published by International Comparative Legal Guides (ICLG).
The Biden Administration has proposed to require virtual currency transactions of more than $10,000 to be reported to the IRS. The proposal notes that “cryptocurrency transactions are likely to rise in importance in the next decade, especially in the presence of a broad-based financial account reporting regime.”
CCA 202114020 addresses the tax consequences of bitcoin’s 2017 “hard fork,” which created bitcoin cash. Under the CCA, taxpayers who received bitcoin cash as a result of the hard fork had gross income when they had “dominion and control” over the bitcoin cash.