Private Equity

By Derrick Cephas & Dimia Fogam

On March 22, 2013, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB) and the Federal Deposit Insurance Corporation (FDIC) (collectively, the “bank regulators”) released their final guidance on leveraged lending activities.1 The final guidance does not deviate significantly from the proposed guidance released last year on March 26, 2012, but does attempt to provide clarity in response to the many comment letters relating to the proposed guidance received by the bank regulators. The final guidance is the latest revision and update to the interagency leveraged finance guidance first issued in April 2001.2
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Two years ago, on July 21, 2010, President Obama signed into law a package of financial regulatory reforms unparalleled in scope and depth since the New Deal. The Dodd-Frank Act was intended to restructure the regulatory framework for the US financial system, with broad and deep implications for the financial services industry where the crisis started. But its impact also was intended to be felt well beyond the financial sector, extending federal regulation into areas of corporate governance applicable to all US public companies.

Few provisions of the Dodd-Frank Act took effect in the summer of 2010. Instead, the specifics of the Act were intended to be developed through the federal rulemaking process, as the Act mandated the development and implementation of nearly 400 separate regulations to be enacted by, or coordinated among, nearly a dozen federal departments or agencies. To date, the deadlines for more than half of the required rulemakings have expired. But even with these delays, the last two years have witnessed the promulgation of more than 100 rules and the issuance of many additional proposed regulations for public comment. This Report discusses the many strides that have been made pursuant to the Act to date and forecasts what is yet to come.

Click here for a PDF of the full report.

Heath P. Tarbert, partner and head of Weil’s Financial Regulatory Reform Working Group, was quoted on BankDirector.com regarding the predicted effect of the Dodd-Frank Act’s Volcker rule. The Volcker rule goes into effect next month and will place two significant restrictions on financial institutions: (1) a prohibition on proprietary trading; and (2) a ban on certain hedge fund and private equity activities.

Mr. Tarbert was quoted as follows: 

I am generally skeptical of the Volcker rule’s purposed benefits to bank safety and soundness. I think appropriate capital, leverage, and liquidity requirements—when combined with a robust risk management framework and culture inside each institution—will do far more to lower the risk profile of large banks. Moreover, the Volcker rule in its current form only compounds the problem by requiring regulators and market participants to make, in some cases, spurious distinctions between and among proprietary trading, market making and hedging.

The June 26, 2012 article, entitled “Volcker Rule: Hero or Villain?” was written by Kelsey Weaver and was published on BankDirector.com.

On April 5, 2012, President Obama signed into law the Jumpstart Our Business Startups Act (the JOBS Act).  The new legislation enlarges the menu of choices that private companies will have to raise capital while also reducing the burdens on “emerging growth companies” that ultimately resort to the public markets.  It also offers benefits for private investment funds. Many aspects of the JOBS Act are effective immediately; others require rulemaking by the SEC, generally on an expedited basis.

To read this alert please follow this link.

By Heath Tarbert, Sylvia Mayer and Derrick Cephas

Click here for a PDF of this Weil Alert

Click here for a PDF of the related article A SIFI in Three Easy Steps?  FSOC Approves Final Rule for Nonbank SIFI Designations appearing in The Banking Law Journal, May 2012

On April 3, 2012, the Financial Stability Oversight Council (“FSOC”) voted to approve its long-awaited Final Rule implementing Section 113 of the Dodd-Frank Act, the controversial provision that directs the federal government to identify systemically important financial institutions (“SIFIs”) outside the traditional banking sector that could pose a threat to the U.S. financial system.[1] Once designated by a two-thirds majority of the FSOC (including an affirmative vote of the Treasury Secretary), each “nonbank financial company,” often referred to in short-hand as a “nonbank SIFI,” would be placed under Federal Reserve Board (“Fed”) supervision, as well as become subject to a host of enhanced prudential measures—including capital, liquidity, leverage, stress testing, resolution planning, and risk management requirements. The FSOC’s recent approval of the Final Rule—as well as its accompanying interpretive Guidance[2]—marks the start of an important first step in the application of enhanced SIFI regulation beyond large bank holding companies with assets of $50 billion or greater.[3]

The FSOC issued its Final Rule following consideration of over forty public comments to its Notice of Proposed Rulemaking (the “Proposed Rule”), released in October, 2011.[4]

Overview

The Final Rule establishes a three-step process comprising three individual “stages” by which the FSOC will apply two “Determination Standards” (one based on actual or potential material financial distress and the other based on the nature, scope, size, scale, concentration, interconnectedness or mix of activities) to analyze whether a company may pose a threat to the financial stability of the U.S., along with a six-category analytic framework to determine whether a company should be deemed a nonbank SIFI. In an effort to increase the transparency of the process, the FSOC issued accompanying Guidance providing additional [click to continue…]