The International

CapitalMarkets Review

Law Business Research

Sixth Edition

Editor

Jeffrey Golden

The International

Capitalmarkets Review

Sixth Edition

EditorJeffrey Golden

Law Business Research Ltd

PUBLISHER Gideon Roberton

SENIOR BUSINESS DEVELOPMENT MANAGER Nick Barette

BUSINESS DEVELOPMENT MANAGER Thomas Lee

SENIOR ACCOUNT MANAGERS Felicity Bown, Joel Woods

ACCOUNT MANAGER Jessica Parsons

MARKETING COORDINATOR Rebecca Mogridge

EDITORIAL ASSISTANT Gavin Jordan

HEAD OF PRODUCTION Adam Myers

PRODUCTION EDITOR Anne Borthwick

SUBEDITOR Gina Mete

CHIEF EXECUTIVE OFFICER Paul Howarth

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The information provided in this publication is general and may not apply in a specific situation, nor does it necessarily represent the views of authors’ firms or their clients. Legal

advice should always be sought before taking any legal action based on the information provided. The publishers accept no responsibility for any acts or omissions contained

herein. Although the information provided is accurate as of November 2016, be advised that this is a developing area.

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i

The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:

ACKNOWLEDGEMENTS

AFRIDI & ANGELL LEGAL CONSULTANTS

ALLEN & OVERY

BHARUCHA & PARTNERS

BORENIUS ATTORNEYS LTD

DE PARDIEU BROCAS MAFFEI

DLA PIPER MARTÍNEZ BELTRÁN

FENXUN PARTNERS

G ELIAS & CO

HOGAN LOVELLS BSTL, SC

INTERNATIONAL COUNSEL BUREAU

KING & WOOD MALLESONS

KOLCUOĞLU DEMİRKAN KOÇAKLI ATTORNEYS AT LAW

MAPLES AND CALDER

MIRANDA & AMADO ABOGADOS

MKONO & CO ADVOCATES

MONASTYRSKY, ZYUBA, STEPANOV & PARTNERS

MORRISON & FOERSTER LLP / ITO & MITOMI

NIELSEN NØRAGER LAW FIRM LLP

PETER YUEN & ASSOCIATES IN ASSOCIATION WITH FANGDA PARTNERS

Acknowledgements

ii

PINHEIRO NETO ADVOGADOS

P.R.I.M.E. FINANCE FOUNDATION

REED SMITH

RUSSELL MCVEAGH

SIDLEY AUSTIN LLP

SYCIP SALAZAR HERNANDEZ & GATMAITAN

TOKUSHEV AND PARTNERS

URÍA MENÉNDEZ ABOGADOS, SLP

VIEIRA DE ALMEIDA & ASSOCIADOS, SOCIEDADE DE ADVOGADOS, SP RL

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Editor’s Prefaces ..................................................................................................vii Jeffrey Golden

Chapter 1 AUSTRALIA ............................................................................... 1Ian Paterson

Chapter 2 BRAZIL .................................................................................... 22Ricardo Simões Russo, Gustavo Ferrari Chauffaille and Luiz Felipe Fleury Vaz Guimarães

Chapter 3 BULGARIA ............................................................................... 30Viktor Tokushev and Nataliya Petrova

Chapter 4 CHINA ..................................................................................... 40Xusheng Yang

Chapter 5 COLOMBIA ............................................................................. 56Camilo Martínez Beltrán and Sebastian Celis Rodríguez

Chapter 6 DENMARK .............................................................................. 66Thomas Weisbjerg and Peter Lyck

Chapter 7 FINLAND ................................................................................ 77Juha Koponen, Janni Hiltunen, Mark Falcon and Matias Keso

Chapter 8 FRANCE .................................................................................. 87Antoine Maffei and Olivier Hubert

Chapter 9 GERMANY ............................................................................. 115Kai A Schaffelhuber

Chapter 10 HONG KONG ....................................................................... 126Vanessa Cheung

CONTENTS

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Chapter 11 INDIA .................................................................................... 139Vishnu Dutt U

Chapter 12 IRELAND ............................................................................... 150Nollaig Murphy

Chapter 13 JAPAN .................................................................................... 173Akihiro Wani and Reiko Omachi

Chapter 14 KUWAIT ................................................................................ 187Abdullah Al Kharafi and Abdullah Alharoun

Chapter 15 LUXEMBOURG ..................................................................... 198Frank Mausen and Henri Wagner

Chapter 16 MEXICO ................................................................................ 220René Arce Lozano, Mayuca Salazar Canales and Elías Muñoz García

Chapter 17 NEW ZEALAND .................................................................... 231Deemple Budhia and John-Paul Rice

Chapter 18 NIGERIA ................................................................................ 240Fred Onuobia and Bibitayo Mimiko

Chapter 19 PERU ...................................................................................... 249Nydia Guevara V and Álvaro del Valle R

Chapter 20 PHILIPPINES ......................................................................... 256Maria Teresa D Mercado-Ferrer, Joan Mae S To and Jo Marianni P Ocampo

Chapter 21 PORTUGAL ........................................................................... 274José Pedro Fazenda Martins, Orlando Vogler Guiné and Sandra Cardoso

Chapter 22 RUSSIA ................................................................................... 286Vladimir Khrenov

Contents

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Chapter 23 SPAIN ..................................................................................... 301David García-Ochoa Mayor and José María Eguía Moreno

Chapter 24 TANZANIA ............................................................................ 312Kenneth Mwasi Nzagi

Chapter 25 TURKEY ................................................................................ 317Umut Kolcuoğlu, Damla Doğancalı and Aslı Tamer

Chapter 26 UNITED ARAB EMIRATES ................................................... 327Gregory J Mayew and Silvia A Pretorius

Chapter 27 UNITED KINGDOM ............................................................ 341Tamara Box, Ranajoy Basu, Claude Brown, Nick Stainthorpe, Caspar Fox, James Wilkinson, Jacqui Hatfield, Winston Penhall and Daniel Winterfeldt

Chapter 28 UNITED STATES................................................................... 370Mark Walsh and Michael Hyatte

Appendix 1 ABOUT THE AUTHORS ...................................................... 387

Appendix 2 CONTRIBUTING LAW FIRMS’ CONTACT DETAILS ........ 405

Contents

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EDITOR’S PREFACE TOTHE SIXTH EDITION

There is a lesson from the international capital markets that took me, as a young ICM lawyer, a measure of time to both comprehend and appreciate. It was namely this: in matters legal, market participants have a marked preference for certainty above almost anything else. Even sometimes ahead of justice!

Market participants need to know where they stand.You see, you can trade or structure around a position that you know to be certain,

however undesirable that position may be, and whether or not you believe it to be fair. What is abhorred is not knowing what your position is. Eventually being told by a court after months or years of litigation, for example, that you were correct in your earlier view does not give a lot of comfort if, waiting on that answer, you stood ‘naked’ to a market that has moved on and significantly against you while you remained uncertain whether, when and to what extent to hedge your exposure or otherwise move in reliance on the position you had previously assumed.

Let me give you an extreme example of this preference for certainty over justice as it is reflected in the terms widely used by the derivatives markets when structuring a trade under my favourite contract form, the ISDA Master Agreement. There, a library of product-specific definitional booklets provide various terms tied to particular product markets, including details of pricing sources, relevant market conventions, and fallbacks and adjustments for when a given source may not be available and for other market disruptions. Relevant booklets can be incorporated into the parties’ trade confirmations and thus added to the parties’ contract on an ‘as and when needed’ basis.

Many of these booklets include a provision that is widely embraced for trades that base their prices on published and displayed screen rates. It provides, for example, that where a relevant rate for a pricing date is based on information from certain sources such as a Reuters screen page the rate is, as you might expect, subject to corrections made by that source – but only if the correction is made within one hour of the time when the

relevant rate is first displayed.1 After that, even if the displayed rate has an extra zero in it, and even if it is later corrected, the rate as it stood one hour out becomes the irrevocable basis for the relevant pricing of the transaction. That is the potentially harsh but, in order to ensure certainty, market-preferred position.

This desire for timely and reliable answers can also be seen by the considerable contractual privilege and discretion afforded, for example, to a non-defaulting party by allowing it to self-determine a close-out amount following its counterparty’s default. That determination is subject to good faith and reasonableness. However, a conscious decision was taken that the number of issues subject to referral to court for determination, and the evidentiary basis on which those issues should be decided, would, in each case, be narrow. It was intended that it should be of no consequence if, perhaps with the benefit of hindsight, a better answer could be determined by the court. It was thought more important by the markets that an answer honestly derived by a party could be relied upon as final so that the party could move on.

Whether it is the measure of their claims following a default, the scope of their exposure to market risk, or the strength of their collateral credit support, market participants hate surprises. They need to know where they stand. They seek authoritative answers that can be relied upon. And they trust in the rule of law.

My former law partner, Philip Wood CBE, QC (Hon) recently published a fascinating book.2 In it, Philip argues that the challenge set for our planet is survival, that the rule of law has supplanted religion in providing the basis for a morality that will be necessary to ensure that survival, and that it falls to lawyers to form a ‘priesthood’ capable of providing relevant answers, as well as preserving the certainty and order, that can contribute to that quest for survival.

And yet we look out at a marketplace with more than a little uncertainty at the moment (Brexit, a worrying US presidential election looming, equally worrying ongoing world political tensions and even conflict, a systemically relevant global financial institution facing crippling fines and a crisis of confidence, cyber insecurity, etc.). Perhaps not surprisingly then, the press reports that the value of initial public offerings has fallen by about a third this year when compared with last year in this period of market volatility and political uncertainty.

That is where this book comes in (with a new jurisdiction, Hong Kong, having been added). Our legal experts who have contributed have been tasked with promoting legal certainty through guidance about where matters relevant to the international capital markets stand in their home jurisdictions. They are our priests!

Join them, and take up Philip Wood’s challenge. If you are reading this book, it is almost certainly because someone is looking to you for answers – looking to you to provide the legal certainty the capital markets seek.

1 See, e.g., 2006 ISDA Definitions, Section 7.6.2 Philip R Wood, The Fall of the Priests and the Rise of the Lawyers, (Hart Publishing Ltd, 2016).

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Editor’s Preface to the Sixth Edition

My admiration for our contributing experts continues, and of course I shall be glad if their collective effort proves helpful to our readers when facing the important challenge of framing the correct answers.3

Jeffrey GoldenP.R.I.M.E. Finance FoundationThe HagueNovember 2016

3 Did I finally make it through a preface without mentioning the Global Financial Crisis?

Editor’s Preface to the Sixth Edition

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Chapter 28

UNITED STATES

Mark Walsh and Michael Hyatte1

I INTRODUCTION

Regulation of the capital markets in the United States is principally conducted by federal government agencies, particularly the Securities and Exchange Commission (SEC).

The Securities Act of 1933 (Securities Act) requires that all offers and sales of securities in the United States be made either pursuant to an effective registration statement or an explicit exemption from registration. In addition, any class of securities listed on a US exchange must be registered under the Securities Exchange Act of 1934 (Exchange Act), and the issuer of the relevant class is required to file annual and other reports with the SEC. Exchange Act registration and reporting also apply to unlisted equity securities held by a sufficiently large population of US record holders, requirements that can apply to companies organised and traded outside the United States. Companies with securities registered under the Exchange Act are also subject to the SEC’s rules on ownership reporting and tender offers.

The perspective of the SEC statutes is that persons making investment decisions in regulated transactions should have complete and reliable information. The detailed disclosure requirements that apply to such transactions are found in the rules promulgated by the SEC under the securities laws.

In addition to the SEC, other federal and state regulators and self-regulatory organisations, such as the Financial Industry Regulatory Authority (FINRA), play important

1 Mark Walsh is a partner and Michael Hyatte is a senior counsel at Sidley Austin LLP. The authors would like to thank their colleague, Ria Dutta, for her assistance with this chapter. They would also like to thank their colleagues William Shirley (Volcker Rule and CFTC matters); Daniel McLaughlin, Barry Rashkover and Nader Salehi (litigation and enforcement); Bryan Krakauer and Jilllian Ludwig (bankruptcy); and Nick Brown and Tim Manion (tax).

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roles in the oversight of the securities activities of banks, insurers and broker-dealers, in particular. Finally, the Commodities Futures Trading Commission (CFTC) continues to adopt and propose important rules relevant to the securities industry and the capital markets.

Wide-ranging SEC rule changes have been adopted in recent years under the post-crisis Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) and the Jumpstart our Business Startups Act of 2012 (JOBS Act). These two laws have furthered apparently competing objectives. The Dodd-Frank Act, generally, sought to increase investor protection through substantive market regulation. The JOBS Act, in contrast, was intended to ease burdens associated with capital raising in the United States with liberalised advertising rules and disclosure standards. Most of the required rule changes under these Acts have now been adopted. Not all of the rule changes (and related SEC staff interpretations) apply to non-US issuers.

This chapter summarises some of the more important rule changes and proposals over the past year, as well as some of the more important litigation, tax and other developments likely to be of interest to capital markets practitioners outside the United States.

II THE YEAR IN REVIEW

i Developments affecting debt and equity offerings

In 2016, both the SEC and FINRA made rule changes and proposals of relevance to domestic and international capital markets lawyers. As is often the case, the SEC’s disclosure-focused initiatives under the Securities Act and the Exchange Act are of generally greater relevance to domestic issuers, but there were also developments applicable to foreign private issuers (FPIs), which we refer to below. In addition to legislation and regulatory action, there was also an important private sector initiative to address concerns in the market in relation to recent judicial interpretations of the Trust Indenture Act of 1939 (TIA).

Disclosure Effectiveness Initiative As mandated under Section 108 of the JOBS Act, in late 2013 the SEC issued a Report on Review of Disclosure Requirements in Regulation S-K2 ‘to determine how SEC disclosure requirements can be updated to modernize and simplify the registration process and reduce the costs and other burdens associated with these requirements for issuers’. Among other things, the report recommended a comprehensive review of the disclosure requirements for registrants with a view towards streamlining them based on standards of materiality and usefulness to investors while eliminating duplicative disclosure. On the basis of this report, the Division of Corporation Finance launched a Disclosure Effectiveness Initiative to examine disclosure reform.

On 13 July 2016, the SEC announced proposed rule amendments to eliminate certain redundant, overlapping, outdated or superseded provisions, in light of subsequent changes to disclosure requirements, US Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS) and current technology.3 The proposed

2 SEC, Report on Review of Disclosure Requirements in Regulation S-K, December 2013 (www.sec.gov/news/studies/2013/reg-sk-disclosure-requirements-review.pdf ).

3 SEC, Business and Financial Disclosure Required by Regulation S-K, Securities Act Release No. 33-10064, Exchange Act Release No. 34-77599, 17 C.F.R. Parts 210, 229, 230, 232,

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rules will affect the various types of registrants (e.g., large accelerated filers, accelerated filers, non-accelerated filers, FPIs) differently. On a high level, the rule proposals focus principally on financial statement disclosures. Among other things, the proposed rules include the following:a Elimination of certain redundant or duplicative disclosure requirements that are

substantially the same as or convey reasonably similar information as required under GAAP, IFRS or other disclosure requirements.

b Deletion of certain disclosure requirements that require disclosures that convey reasonably similar information to or are encompassed by the disclosures that result from compliance with the overlapping GAAP, IFRS or other disclosure requirements and integration of disclosure requirements that overlap with, but require information incremental to, other disclosure requirements.

c Solicitation of comments on certain disclosure requirements that overlap with, but require information incremental to, GAAP to determine whether to retain, modify, eliminate or refer them to the Financial Accounting Standards Board for potential incorporation into GAAP.

d Amendment of disclosure requirements that have become obsolete as a result of the passage of time or changes in the regulatory, business or technological environment.

e Amendment of disclosure requirements to reflect recent legislation, more recently updated SEC disclosure requirements or more recently updated GAAP requirements

The comment period for the proposed rule changes ended on 3 October 2016. Although the rule proposal is focused on Regulation S-X (which applies only to FPIs

to the extent they elect to file on forms used by domestic issuers), there are also proposed amendments to Form 20-F (the key disclosure form for FPIs), such as streamlining disclosures in relation to research and development activities, and the elimination of duplicative disclosure in relation to dividend restrictions.

In connection with the Disclosure Effectiveness Initiative, the SEC also sought comment in a concept release on modernising certain business and financial disclosure requirements in Regulation S-K more broadly.4 The agency has also separately requested comment on the financial disclosure requirements in Regulation S-X for entities other than issuers of securities and on the disclosure requirements for mining properties.5 Taken together, these initiatives are intended to result in the simplification of the disclosure regime for a broad range of issuers and industries in the years ahead.

239, 240 and 249, proposed 13 April 2016 (www.sec.gov/rules/concept/2016/33-10064.pdf ); see Sidley Austin LLP, Sidley Update: SEC Issues Concept Release on Business and Financial Disclosure Required by Regulation S-K, 20 April 2016 (www.sidley.com/~/media/update-pdfs/2016/04/sidley-update-re-reg-sk-concept-release-april-2016.pdf ).

4 Ibid.5 SEC, Request for Comment on the Effectiveness of Financial Disclosures About Entities

Other than the Registrant, Securities Act Release No. 33-9929, Exchange Act Release No. 34-75985, 17 CFR Part 210, proposed 25 September 2015 (www.sec.gov/rules/other/2015/33-9929.pdf ).

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Presentation of non-GAAP informationConsistent with the SEC’s focus on disclosure reform, on 17 May 2016, the Division of Corporation Finance published updated Compliance & Disclosure Interpretations (C&DIs) relating to the use of non-GAAP financial measures. Notably, these C&DIs reflect a change in the SEC’s approach to the use of non-GAAP financial measures and a more prescriptive, and less permissive, approach than previously.6

Non-GAAP financial measures have always been potentially subject to Exchange Act Section 10(b) liability regarding use of manipulative or deceptive devices. However, in response to major corporate scandals (such as Enron, Tyco International and WorldCom) and the resulting Sarbanes-Oxley Act of 2002, the SEC adopted Item 10(e) of Regulation S-K and promulgated Regulation G, which apply to all public disclosures by Exchange Act reporting companies of material information that includes non-GAAP financial measures.

C&DI Question 102.10 requires that, whenever a non-GAAP financial measure is included in an SEC filing or an earnings release furnished to the SEC, the most directly comparable GAAP measure must be presented with equal or greater prominence. The SEC provides the following examples of disclosure where it would consider the non-GAAP measures as being more prominent (and thus improper): a presenting an income statement of non-GAAP measures or presenting a non-GAAP

income statement when reconciling non-GAAP measures to the most directly comparable GAAP measures;

b including only non-GAAP measures in an earnings release headline or caption;c including a non-GAAP measure that precedes the most directly comparable GAAP

measure, or presenting a non-GAAP measure using a style of presentation that emphasises the non-GAAP measure over the comparable GAAP measure;

d providing a prominent descriptive characterisation of a non-GAAP measure, for example, ‘record performance’ or ‘exceptional’, without providing an equally prominent descriptive characterisation of the comparable GAAP measure;

e providing tabular disclosure of non-GAAP financial measures without preceding it with an equally prominent tabular disclosure of the comparable GAAP measures or including the comparable GAAP measures in the same table;

f including forward-looking information on a non-GAAP basis only without explaining the ‘unreasonable efforts’ preventing the issuer from presenting the forward-looking information on a GAAP basis; and

g providing discussion and analysis of a non-GAAP measure without including a similar discussion and analysis of the comparable GAAP measure.

As an interpretation, this guidance became effective immediately and is thus applicable to all issuers, including FPIs.

6 See SEC Division of Corporation Finance, Compliance & Disclosure Interpretations: Non-GAAP Financial Measures, updated 17 May 2016 (www.sec.gov/divisions/corpfin/guidance/nongaapinterp.htm); see also Sidley Austin LLP, Sidley Update: Updated SEC Guidance Will Require Many Public Companies to Revise their Presentation of Non-GAAP Information, 20 May 2016 (www.sidley.com/~/media/update-pdfs/2016/05/52016-corporate-governance-update.pdf ).

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In practice, the SEC’s review of FPIs is largely limited to Item 10(e) of Regulation S-K and Regulation G, which apply to FPIs, although to a lesser extent than they do to domestic issuers. While FPIs otherwise are generally allowed to use non-GAAP financial measures where such measures are ‘expressly permitted’ by the relevant standard-setter, the C&DI appears to suggest that the SEC may view potentially misleading presentations under a more exacting standard.

In addition, in light of recent European Securities and Markets Authority guidance on the use of alternative performance measures,7 FPIs should also pay particular attention to their use of non-GAAP or alternative performance measures, and the ways in which their SEC disclosure obligations may conform to or differ from applicable requirements of their other securities regulators.

Proposed amendment to SEC exhibit filingsThe SEC requires registrants to file a wide range of documents (material contracts, CEO and CFO certifications, etc.) as exhibits to their Securities Act and Exchange Act filings (e.g., registration statements, annual and periodic reports). On 31 August 2016, the SEC proposed a final rule and amendments to Securities and Exchange Act forms to require registrants to include hyperlinks to such exhibits in their filings and to submit these filings in HTML format.8 The proposed amendment would apply to any exhibits filed under Item 601 of Regulation S-K or that are filed under Forms F-10 (Canadian FPIs) or 20-F (FPIs, generally). The proposed amendments are intended to make it easier for investors, among others, to locate documents filed as exhibits to SEC filings. The public comment period is open until 27 October 2016.

New FINRA equity and debt research rulesResearch reports were the subject of significant regulatory activity in the early 2000s, culminating in the Global Analyst Research Settlements in 2003. After a decade of relative quiet with respect to regulatory oversight of research reports, in 2015, FINRA enacted new FINRA Rules 2241 (New Equity Research Rule) and 2242 (New Debt Research Rule).9

Before promulgating the new research rules, FINRA engaged in a lengthy rulemaking process for revising its existing equity research rule and proposing a debt research rule and sought the views of industry actors before announcing the new research rules. In particular, the proposed rules attempted to address the conflicts unique to debt research and endeavoured to calibrate the New Debt Research Rule to the institutional debt market.

The New Equity Research Rule, FINRA Rule 2241, incorporates discrete, but significant, changes from the current NASD Rule 2711. Among other things, the New

7 European Securities and Markets Authority, Guidelines: ESMA Guidelines on Alternative Performance Measures, 5 October 2015 (www.esma.europa.eu/press-news/esma-news/esma-publishes-final-guidelines-alternative-performance-measures).

8 SEC, Exhibit Hyperlinks and HTML Format, Securities Act Release No. 33-10201 and Exchange Act Release No. 34-78737, 17 CFR Parts 229, 232, 239 and 249, proposed 31 August 2016 (www.sec.gov/rules/proposed/2016/33-10201.pdf ).

9 See Sidley Austin LLP, Sidley Update: FINRA’s New Debt and Equity Research Rules Herald Wide-Ranging Changes for Firms, 12 November 2015 (www.sidley.com/~/media/update- pdfs/2015/11/20151112-sder-update.pdf ).

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Equity Research Rule allows for additional flexibility, including a small firm exception and personal trading restrictions with respect to quiet periods. In other respects, the provisions are stricter. For example, investment banking personnel are no longer permitted to fact check a research report. Significantly, the anti-retaliation provisions are expanded to include all firm personnel, not just investment bank personnel. The New Equity Research Rule also codifies certain existing interpretations, most notably guidance that firms may issue different research products for different customer classes, provided that such are not inconsistent with published research and products are not differentiated based on timing of publication of the research.

The New Debt Rule, FINRA Rule 2242, addresses conflicts of interest that relate to the publication and dissemination of research reports relating to debt securities. The New Debt Research Rule enacts requirements generally comparable to those contained in the New Equity Research rule, subject to certain exemptions and modifications responsive to the difference in the debt market as compared to the equity market. Of note, the New Debt Rule, in comparison to the New Equity Research Rule, includes exemptions for limited investment banking activity, limited principal trading and institutional debt research.

Specifically, firms that in the previous three years, on average per year, have participated in 10 or fewer investment banking transactions as a manager or co-manager and generated US$5 million or less in gross investment banking revenue are exempted from certain provisions regarding the supervision and compensation of debt research analysts. Firms that in absolute value on an annual bases have trading gains or losses on principal trades in debt securities of US$15 million or less over the previous three years, on average per year, and that employ fewer than 10 debt traders, are also exempted from certain provisions regarding supervision and compensation of debt research analysts. Finally, debt research distributed solely to eligible institutional investors under specified conditions is exempt from most provisions regarding supervision, coverage determinations, budget and compensation determinations and all of the disclosure requirements that are applicable to debt research reports distributed to retail investors. The exemption requires that eligible institutional investors ‘opt in’ to receive ‘institutional’ debt research.

Both the New Equity Research Rule and New Debt Research Rule include conflicts of interest provisions. However, while the New Debt Research Rule requires conflicts management procedures and disclosures similar to the New Equity Research Rule, it also reflects FINRA’s recognition that the market for debt research is largely institutional and that credit research analysts have a primary role in advising traders, and includes an exemption that allows institutions to opt out of full disclosures (or opt in if they are sufficiently large).

The New Equity Research Rule was fully implemented as of 24 December 2015 and the New Debt Research Rule was implemented as of 22 February 2016. Of note to observers, the New Equity Research Rule and the New Debt Research Rule, along with increasing enforcement actions and active examinations, appear to signal a renewed regulatory interest in research and may continue to be an area of focus in the future.

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Marblegate Opinion White PaperIn 2015, in Marblegate Asset Management v. Education Management Corp (Marblegate),10 the District Court for the Southern District of New York found that an out-of-court restructuring that left the contractual right to payment in place under the governing trust indenture, but impaired the practical ability of noteholders to receive payments of principal and interest, violated Section 316(b)11 of the TIA. Section 316(b) had previously been construed to protect only the contractual rights to payment. The ruling generated significant concern among securities lawyers.

In particular, Marblegate can be read to prohibit amendments to an indenture that would impair the issuer’s ability to pay amounts due on the debt securities even if those amendments are otherwise expressly permitted by the indenture. In practice, such amendments are typically conditioned on the delivery of an opinion of counsel to the effect that the proposed amendment complies with the indenture and the TIA. Marblegate and two other related cases12 have called into question whether such opinions can be delivered in connection with a debt restructuring or in other circumstances where the issuer may be in financial distress. In response to this uncertainty, on 25 April 2016, several prominent US law firms issued an Opinion White Paper (White Paper) that provides guidance to law firms rendering legal opinions in these situations.13 Of note, the White Paper is informational and not binding.

The White Paper notes Marblegate is implicated when there is an amendment to an indenture that affects the ‘‘core terms’ – that is, payment terms’ or there is collective action that constitutes a debt restructuring [[that has the effect of impairing the ability of the issuer to make all future payments of principal and interest to non-consenting noteholders when due’.14 The White Paper goes on to state that absent unusual circumstances, a law firm should be able to render an unqualified legal opinion in connection with proposed amendments to one or more ‘non-core’ terms of an indenture either outside of a debt restructuring or in the context of a debt restructuring where the law firm has received satisfactory evidence that the issuer will likely be able to make all future payments of principal and interest when due to

10 Marblegate Asset Management v. Education Management Corp, 2015 WL 3867643 (SDNY 2015); see also Marblegate Asset Management v. Education Management Corp, 2014 WL 7399041, 75 FSupp 3d 592 (SDNY 2014).

11 Of relevance, Section 316(b) of TIA provides that an indenture may not be amended to impair or affect the right of a noteholder to receive payment of principal and interest on the payment dates stated in the indenture or security, respectively, without the consent of the noteholder.

12 E.g., Meehancombs Global Credit Opportunity Funds, LP v. Caesars Entertainment Corp, 80 FSupp 3d 507 (SDNY 2015) and BOKF, NA v. Caesars Entertainment Corp, 2015 WL 5076785 (SDNY 2015).

13 Opinion White Paper, 25 April 2016 (www.sidley.com/~/media/update-pdfs/2016/04/tia-316b-opinion-white-paper--execution-copy752478727ny.pdf.); see Sidley Austin LLP, Sidley Update: Debt Restructurings and Indenture Amendments in Light of Recent Trust Indenture Act Cases: White Paper Guidance for Required Legal Opinions, 25 April 2016 (www.sidley.com/~/media/update-pdfs/2016/04/debt-restructuring-opinion-white-paper214397030v11.pdf ).

14 See Opinion White Paper at 1-2.

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non-consenting noteholders, taking into account any related transactions. The White Paper then notes that, where the circumstances above are not met, a law firm may determine that it cannot give an unqualified opinion, or that their option should make reference to recent cases (e.g., Marblegate and related cases), or both.

Of note, while only indentures relating to SEC-registered offerings of debt securities are required to be qualified under the TIA, in practice many issuers have used, and choose to use, indentures that substantially comply with the requirements of the TIA. Therefore, the holding of Marblegate and the position of the White Paper may be of relevance to non-US issuers, particularly if they have TIA-qualified or compliant indentures or are considering debt issues pursuant to such.

Fixing America’s Surface Transportation Act (FAST Act)The FAST Act came into effect on 4 December 2015. While the FAST Act primarily relates to transportation issues in the United States, it also includes certain changes to SEC statutes affecting emerging growth companies (EGCs).15 The FAST Act reduces certain disclosure requirements for EGCs and smaller reporting issuers. It also adopted a new exemption from registration for resales of securities by persons other than the issuer. During 2016, the SEC implemented the relevant provisions of the FAST Act.16 It will be interesting to see the extent to which the JOBS Act and FAST Act provisions result in EGCs making greater use of the streamlined SEC registration procedures available to them.

ii Developments affecting derivatives, securitisations and other structured products

In late 2015 and 2016, the CFTC and other federal agencies and authorities continued their implementation measures in relation to the Dodd-Frank Act. These included implementation measures relating to the cross-border margin requirements introduced previously and an extension to the conformance period for compliance with specified Volcker Rule requirements. In addition, in 2016, the SEC staff issued guidance in relation to post-crisis Regulation AB II, adopted in late 2014.

Margin requirements for uncleared swapsThe Dodd-Frank Act mandates the margining of bilateral swaps and security-based swaps that are not cleared by either a registered derivatives clearing organisation or a registered clearing agency, and required US financial regulators to adopt implementing rules for collecting and posting mandated initial and variation margin by the registered swap entities (i.e., swap dealers and material swap participants).

To implement these requirements, five US prudential regulators adopted a joint final rule on 22 October 2015. The rule covers swap entities that are supervised by one of the

15 See Sidley Austin LLP, Practice Note: The FAST Act’s Amendments to the Securities Act: Practical Implications for Issuers and Underwriters, 31 March 2016 (www.sidley.com/~/media/update-pdfs/2016/03/practice-note--the-fast-acts-amendments-to-the-securities-act.pdf ).

16 See, e.g., Id.; SEC, Simplification of Disclosure Requirements for Emerging Growth Companies and Forward Incorporation by Reference on Form S-1 for Smaller Reporting Companies, Securities Act Release No. 33-10003, 17 CFR Parts 29 and 239, proposed 13 January 2016 (www.sec.gov/rules/interim/2016/33-10003.pdf ).

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prudential regulators. On 16 December 2015, the CFTC adopted its own final rule, which covers swap entities that are not supervised by one of the prudential regulators if they are registered with the CFTC. The SEC is expected to adopt an implementing rule covering non-bank swap entities registered with the SEC.17

The rules closely follow the prudential regulators’ and CFTC’s respective 2014 rule proposals. They are also largely consistent with the policy framework establishing minimum standards for margin requirements for non-centrally cleared derivatives published in March 2015 by the Basel Committee on Banking Supervision (BCBS) and the Board of the International Organization of Securities Commissions (IOSCO).

The rules address both initial margin and variation margin. Initial margin is collateral collected or posted to secure potential future exposure under one or more uncleared swaps. Variation margin is collateral provided by one party to its counterparty in light of changes in value of the underlying swap obligations since trade execution. The rules apply directly to swap entities, such as CFTC-registered swap dealers, and do not directly impose requirements on their counterparties. However, swap entities must collect margin from, and post margin to, certain counterparties, and they must generally arrange for initial margin posted by either counterparty to be held with an independent third-party custodian; accordingly, counterparties will in effect become subject to the new margin requirements.

The rules include the following phase-in periods (which are consistent with those in the BCBS/IOSCO standards):a initial margin: four-year phase-in period, starting on 1 September 2016 and ending

on 1 September 2020. Initial margin requirements are phased in as a function of the average daily aggregate notional amount of uncleared swaps, foreign exchange forwards and foreign exchange swaps of each of the swap entity and its counterparty (each on a consolidated basis with affiliates) for March, April and May of the year during which the annual 1 September compliance date occurs; and

b variation margin: six-month phase-in period, beginning on 1 September 2016 and ending on 1 March 2017. Variation margin requirements are also phased in based on the average daily aggregate notional amounts. 

In general, the phase-in thresholds mean that uncleared swaps only between the largest swap entities will be subject to initial margin requirements in 2016. Uncleared swaps executed by a swap entity and a given counterparty before the applicable phase-in date will be effectively grandfathered.

The rules establish four categories of counterparties for purposes of applying margin requirements to the uncleared swaps of swap entities: a other swap entities;b ‘financial end users’ with ‘material swaps exposure’;c ‘financial end users’ without ‘material swaps exposure’; andd other counterparties, including non-financial end users, sovereigns and multilateral

development banks.

17 Sidley Austin LLP, Sidley Update: Prudential Regulators and CFTC Adopt Margin Rules for Non-Cleared Swaps, 20 January 2016 (www.sidley.com/~/media/update-pdfs/2016/01/ 20160120-derivatives-updatev3.pdf ).

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Swap entities are required to post and collect both initial margin and variation margin with respect to uncleared swaps entered into with other swap entities and with financial end users with material swaps exposure. In addition, swap entities must post and collect variation margin (but not initial margin) with respect to financial end users without material swaps exposure. The rules do not impose specific margin requirements with respect to other counterparties. 

In general, the kinds of entities that are covered by the definition of ‘financial end user’ include the following (subject to the definition’s specific terms):a depository institutions;b bank holding companies and their affiliates (and savings and loan equivalents);c credit or lending entities and money services businesses that are licensed or registered

under state law;d securities holding companies, broker-dealers and investment advisers;e entities that are registered as investment companies with the SEC, certain entities that

rely on specific exemptions from registration under the Investment Company Act of 1940 (Section 3(c)(5)(C) or Rule 3a-7) and private fund entities;

f commodity pools, commodity pool operators, commodity trading advisers, floor brokers, floor traders, introducing brokers and futures commission merchants;

g certain employee benefit plans;h insurance companies; and i certain entities and arrangements that invest or trade in loans, securities, swaps, funds

or other assets.

A financial end user entity has ‘material swaps exposure’ if, on the applicable compliance date, the entity and its affiliates have an average daily aggregate notional amount of uncleared swaps, foreign exchange forwards and foreign exchange swaps with all counterparties for June, July and August of the previous calendar year that exceeds US$8 billion. Financial end users below that threshold are not subject to initial margin requirements. The US$8 billion level, increased from US$3 billion in the 2014 rule proposals, is generally consistent with the €8 billion threshold under the BCBS–IOSCO standards.

The rules include various detailed provisions that determine the amount, timing and nature of posted margin (both initial and variation).

The prudential regulators and the CFTC adopted separate, though similar, rules that determine cross-border application of the margin requirements.18 In some circumstances, the cross-border rules entirely exclude swap transactions from application of the margin requirements. In other circumstances, substituted compliance may be available – either for all purposes or only for a swap entities’ obligation to post or to collect initial margin. In circumstances where the cross-border rules provide for neither exclusion nor substituted compliance, the rules may nonetheless permit limited relief with respect to non-US legal systems under which margin segregation requirements are problematic or the enforceability of netting agreements is subject to doubt.

18 See Sidley Austin LLP, Sidley Update: CFTC Adopts Cross-Border Margin Rule for Non-Cleared Swaps, 4 August 2016 (www.sidley.com/~/media/update-pdfs/2016/08/ 20160804-derivatives-update.pdf ).

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The Volcker RuleThe Volcker Rule under the Dodd-Frank Act prohibits covered financial institutions from engaging in ‘proprietary trading’, and from acquiring or retaining ownership interests in, or sponsoring, hedge funds, private equity funds and certain other private funds (subject to certain exceptions). On 21 July 2015, with an important exception relating to ‘legacy covered funds’, compliance with the rule became mandatory. The Federal Reserve and other US agencies have published their interpretation regarding the scope of an exception for certain covered fund investment activities of foreign banking organisations.

An order published in July 2016 extended the conformance period under the Volcker Rule until 21 July 2017 (from 21 July 2016) for purposes of permitting banking entities additional time to conform investments in, and relationships with, ‘covered funds’ and certain foreign funds (legacy covered funds).19 The order (as in the case of its predecessor order) applies to banking entities only with respect to investments in, and relationships with, legacy covered funds that were in place prior to 31 December 2013. The order continues to provide conformance period relief to banking entities with respect not only to such ‘legacy’ covered funds (as defined under the Volcker Rule), but also to a second category of legacy funds that the order describes as ‘foreign funds that may be subject to the provisions of ’ the Volcker Rule. Although the order did not elaborate on the second category, the category would seem to be designed for foreign funds that are not covered funds, particularly those that may be considered banking entities themselves (and thus subject directly to the Volcker Rule).

Regulation AB IIIn late 2014, the SEC adopted final rules (Regulation AB II) regarding disclosure and registration of asset-backed securities (ABS).20 On 6 September 2016, the Division of Corporation Finance published new C&DIs relating to Regulation AB II.21

One question that has arisen in relation to Regulation AB II is the extent to which certain types of securities may be considered to be ABS for purposes of Item 1101(c) of Regulation AB or Section 3(a)(79) of the Exchange Act. C&DI Question 301.03 addresses this question insofar as it relates to funding agreement backed-notes. The transaction in question involved an insurance company that created a special purpose vehicle (SPV) to issue a single note. The funding agreement in the transaction was an insurance product, and the direct liability of the insurance company and payments on the agreement were backed by the general account of the insurance company. Further, the terms of the notes were identical

19 See Sidley Austin LLP, Sidley Update: Volcker Rule: Final Extension of Conformance Period for Certain Legacy Covered Funds, 14 July 2016 (www.sidley.com/~/media/update-pdfs/2016/07/20160714-bfs-update.pdf ).

20 SEC, Asset-Backed Securities Disclosure and Registration, Securities Act No. 33-9638, Exchange Act Release No. 34-72982, 17 CFR Parts 229, 230, 232, 239, 240, 243, and 249, proposed 4 September 2014 (www.sec.gov/rules/final/2014/33-9638.pdf ).

21 See SEC Division of Corporation Finance, Compliance & Disclosure Interpretations: Regulation AB and Related Rules, updated 6 September 2016 (www.sec.gov/divisions/corpfin/guidance/regulation-ab-interps.htm).

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to the underlying funding agreement (i.e., no credit enhancement). Finally, amounts paid by the insurance company to the SPV under the funding agreement solely are used to make payments due under the notes.

The SEC concluded that such notes were not ABS under Item 1101(c) of Regulation AB or Section 3(a)(79) of the Exchange Act. The analysis of whether a security is an ABS turns on the question of whether the security is serviced by cash flows of a discrete pool of receivables or other financial assets, for Item 110(c), and whether the security is collateralised by a self-liquidating financial asset. The SEC explained that the structure of the notes was intended to replicate payments made by the insurance company under the funding agreement, which was a direct liability of the insurance company, and that the payments on the notes were based solely upon the ability of the insurance company to make payments.

This and other C&DIs should assist issuers and underwriters in their assessment of other structured transactions to which Regulation AB II potentially applies.

iii Cases and dispute settlement

Although litigation involving FPIs arising directly from the global financial crisis is now less evident, the US courts continue to attract plaintiffs seeking to assert jurisdiction over FPIs in relation to their non-US capital-raising activities, and the SEC and the Department of Justice continue to vigorously enforce those laws (including the Foreign Corrupt Practices Act, or FCPA) to which FPIs are subject. See also subsections iv (in relation to insolvency) and v (other strategic considerations), infra.

Jurisdiction over FPIsAfter the US Supreme Court’s 2010 decision in Morrison v. National Australia Bank,22 US courts have generally held that foreign issuers whose securities are traded in the US via American depositary receipts (ADRs) or American depositary shares (ADSs) cannot be sued under Section 10(b) of the Exchange Act and Rule 10b-5 by purchasers or sellers of the company’s stock traded abroad, but can be sued by buyers or sellers of ADRs23 if the suit is based on a purchase or sale on a US exchange or otherwise takes place in the US (such as an over-the-counter (OTC) trade or private placement in which the parties commit to the trade within the US). However, the decision of the US District Court for the Central District of California in Stoyas v. Toshiba Corporation was the first to expressly rule on how Morrison applies to unsponsored ADR facilities.24 Stoyas held that a foreign issuer’s lack of involvement in the unsponsored facility means it cannot be sued for statements it made to the markets overseas.

After Morrison held that Section 10(b) applies only to transactions in the United States, most of the decisions on the territorial application of Section 10(b) have focused on where off-exchange transactions take place. For example, the US District Court for the Southern District of New York, in Satyam Computer Services Ltd Securities Litigation, held that Section 10(b) did not cover the exercise of employee stock options to buy NYSE-listed ADSs in an Indian corporation because the terms of the options (as written by the company)

22 Morrison v. Nat’l Australia Bank Ltd, 561 US 247 (2010).23 ‘ADR’ and ‘ADS’ are used interchangeably.24 Stoyas v. Toshiba Corp, 2016 WL 3563084 (CD Cal 20 May 2016), appeal pending, No.

16-56058 (9th Cir).

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deemed them to be exercised only when notice was received in India.25 The fact that the company did not consent to options on its ADSs being transacted in the United States, regardless of the listing of the underlying security, was thus important in Satyam, but the Court was still addressing securities with which the company was involved. By contrast, the Second Circuit’s decision in ParkCentral Global Hub Ltd v. Porsche Automobile Holdings found that US trading alone was not sufficient if the company had no connection to the security – but ParkCentral involved swaps, not ADRs, and an unusual fact pattern in which the defendant was not the issuer but a potential acquiror.26

Stoyas presented the question squarely: the defendant, Toshiba, has only stock listed on the Tokyo and Nagoya exchanges and ADRs traded on US OTC markets pursuant to an unsponsored ADR facility set up without the involvement of the company: it did not list or trade any securities in the United States.27 The plaintiffs in Stoyas argued that it was enough that the issuer had complied with Rule 12g3-2’s disclosure requirements ‘and never objected to the sale of its securities in the United States’.28 The Court concluded that: ‘Plaintiffs have not argued or pled that Defendant was involved in th[e ADS] transactions in any way […]nowhere in Morrison did the Court state that U.S. securities laws could be applied to a foreign company that only listed its securities on foreign exchanges but whose stocks are purchased by an American depositary bank on a foreign exchange and then resold as a different kind of security (an ADR) in the United States.’29 The plaintiffs in Stoyas have appealed this decision to the Ninth Circuit.

iv Relevant tax and insolvency law

New debt and equity proposed regulations involving related party debtOn 4 April 2016, the Treasury Department (Treasury) and the Internal Revenue Service (IRS) issued proposed Treasury regulations concerning the classification of purported related party debt instruments as either debt, equity, or partially debt and partially equity, for US federal income tax purposes (Proposed Regulations).30 The Proposed Regulations target various intercompany financing structures and common tax planning techniques that the Treasury and the IRS find objectionable. Although many of these objections relate to inversions, the Proposed Regulations, if finalised in their current form, will also affect a broad range of common tax structures across all industries, including, potentially, structures used by private equity and hedge funds. The Proposed Regulations, if finalised, will generally become effective retroactively for debt issued on or after 4 April 2016. Accordingly, the Proposed Regulations are expected to have an immediate effect on tax-planning activities.

25 Satyam Computer Servs Ltd Secs Litig, 915 F Supp 2d 450, 474-75 (SDNY 2013).26 ParkCentral Global Hub Ltd v. Porsche Automobile Holdings SE, 763 F3d 198, 215-16 (2d Cir

2014).27 Id. at *1 n. 1, *5, *7 (noting that the depositary bank had to purchase the stock on a foreign

exchange).28 Id. at *8-9.29 Id. at *10.30 See Sidley Austin LLP, Sidley Update: Treasury and IRS Propose New Debt/Equity

Regulations: Significant for Tax Structures Involving Related Party Debt, 11 April 2016 (www.sidley.com/~/media/update-pdfs/2016/04/20160411-tax-update.pdf ).

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The Proposed Regulations are intended to prevent taxpayers from aggressively using debt in situations in which debt is hardly distinguishable from equity, but in which significant US tax benefits come with the use of debt rather than equity. The classic example is a foreign parent corporation that funds its wholly owned US subsidiary with a mix of interest-bearing debt and equity to minimise the US corporate tax of the US subsidiary through interest deductions. In many cases, the interest payments are not subject to US interest withholding tax under an applicable income tax treaty. Because of the control that the parent has over the subsidiary, and because the parent is both the sole equity holder and the sole lender, the economic significance of this shareholder debt (when compared with equity) is minimal or non-existent compared to the significant tax benefit of the annual interest deduction. Therefore, the Proposed Regulations, under certain circumstances, recharacterise such debt as equity. The Proposed Regulations are extremely complex and have broad application. Therefore, any related party financing arrangements generally should be analysed to determine if the Proposed Regulations apply.

It is expected that the Proposed Regulations will attract a large amount of comments. However, given the election year and the short period for comments, it is possible that the Treasury and the IRS will attempt to finalise the Proposed Regulations before the new administration takes office at the end of January 2017.

Extraterritorial application of bankruptcy lawsA split in authority has emerged recently within the New York federal courts over whether a bankruptcy trustee’s power to avoid and recover an alleged preferential or fraudulent transfer for the benefit of a debtor’s estate applies extraterritorially to foreign transfers of property. At issue are varying interpretations of Congressional intent, the court’s exercise of in personam and in rem jurisdiction, and notions of international comity. The extraterritorial application of bankruptcy avoidance powers will likely remain uncertain until the split can be reconciled by the US Court of Appeals for the Second Circuit.

Litigation concerning extraterritoriality has continued apace in the Securities Investor Protection Corporation v. Bernard L Madoff Investment Securities LLC (In re Madoff Securities) (Madoff ) adversary proceeding. Following Judge Rakoff’s July 2014 decision concluding that the Bankruptcy Code’s recovery provisions could not be applied extraterritorially to the challenged transfers among wholly foreign initial and subsequent transferees,31 the proceedings were referred back to the Bankruptcy Court. The defendants and the trustee engaged in extensive briefing as to whether the Madoff decision compels the dismissal of the complaints on either extraterritoriality or comity grounds, or whether the trustee may further amend the complaints to address the Madoff decision. Those issues were argued before the

31 See Securities Investor Protection Corp v. Bernard L Madoff Investment Securities LLC (In re Madoff Securities), 513 BR 222 (SDNY 2014) (holding that application of Section 550(a) of the Bankruptcy Code and the complementary provision in the Securities Investor Protection Act of 1970 would constitute an extraterritorial application of the statute, Congress did not intend such an application, and that even if the relevant provisions could be applied extraterritorially, such an application would be precluded by considerations of international comity).

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Bankruptcy Court in December 2015 and remain under advisement. Until such time as an order addressing dismissal of the avoidance actions is issued by the Bankruptcy Court, the Madoff decision is not subject to appellate review.

Meanwhile, other New York Bankruptcy Court and District Court judges, who are not bound to follow the Madoff decision, have reached contrary determinations regarding extraterritoriality.32 In Lyondell, Bankruptcy Court Judge Gerber found that the transfer at issue was foreign, but that Congress’ intent was to extend the scope of the Bankruptcy Code’s avoidance powers to cover such transfers. Looking to surrounding provisions of the Bankruptcy Code for context, including 28 USC Section 1334 and 11 USC Section 541(a), Judge Gerber recognised that the Bankruptcy Court has in rem jurisdiction over all of a debtor’s property, whether foreign or domestic.33 The Lyondell Court concluded that:

It would be inconsistent (such that Congress could not have intended) that property located anywhere in the world could be property of the estate once recovered under section 550, but that a trustee could not avoid the fraudulent transfer and recover that property if the center of gravity of the fraudulent transfer were outside of United States.34

The Lyondell court concluded that although it did not have personal jurisdiction over the foreign transferee, it could exercise in rem jurisdiction over the subject property, and on that basis denied dismissal of the complaint.

Bankruptcy Court Judge Chapman’s decision in ANZ, issued approximately a week prior to Lyondell, acknowledged the practical constraints inherent in the Court’s jurisdictional analysis: ‘[d]espite the bankruptcy court’s broad reach to assert jurisdiction over foreign property, the bankruptcy court’s in rem jurisdiction cannot be enforced extraterritorially without in personam jurisdiction over the defendant.’35 There, the Court found that it had only in rem jurisdiction over the debtor’s property interest in the transaction documents governing the notes and its security interests in the collateral.36 Exactly how that in rem jurisdiction would be exercised and enforced, and the relevant comity analysis, was unanswered by ANZ, except to suggest that any enforcement may require the willing assistance of a non-US court.

Finally, in Arcapita, the District Court held that the defendant bank’s selection and use of New York correspondent accounts to receive the allegedly preferential transfers were sufficient ‘minimum contacts’ on which the court could assert in personam jurisdiction in

32 See, e.g., Weisfelner v. Blavatnik (In re Lyondell Chem Co), 543 BR 127, 154-155 (Bankr SDNY 2016) (Lyondell ), Gerber, J; Slip Op, Lehman Bros Special Financing Inc v. Bank of Am NA (In re Lehman Bros Holdings Inc), No. 10-03547 (Bankr SDNY 28 December 2015) (hereinafter ANZ); Slip Op, Official Committee of Unsecured Creditors of Arcapita Bank BSC (c) v. Bahrain Islamic Bank (In re Arcapita Bank BSC (c)), Nos. 15-03828, 15-03829 (SDNY 30 March 2016).

33 Lyondell, 543 BR at 151.34 Id. at 154-155 (relying on French v. Liebmann (In re French), 440 F3d 145 (4th Cir

2006) and Jay L Westbrook, Avoidance of Pre-Bankruptcy Transactions in Multinational Bankruptcy Cases, 42 Tex. Int’l LJ 899).

35 Slip Op at *33, Lehman Bros Special Financing Inc v. Bank of Am NA (In re Lehman Bros Holdings Inc), No. 10-03547 (Bankr SDNY 28 December 2015).

36 Id. at *36.

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the avoidance litigation.37 The trustee in Madoff raised the Arcapita decision as supplemental authority with respect to the question of when and where a particular transfer occurred, focusing on the transfer to the New York correspondent bank account.

v Other strategic considerations

US regulatory authorities remain vigilant in relation to SEC registrants and other issuers seeking to avoid otherwise applicable legal and regulatory requirements through transactions that, although technically permissible, raise significant public interest concerns. The use of ‘inversions’ by a number of major US corporations to redomicile in Ireland, the United Kingdom and elsewhere outside the United States has been specifically targeted by the Treasury and the IRS, and has generated significant political concern. US regulators also remain vigilant in relation to a perceived lack of commitment by some FPIs and other issuers to respect and fully comply with those securities and other laws to which they are subject. The FCPA has long been a focus for the SEC and the Department of Justice, but cybersecurity, anti-money laundering (in relation to which several cases have been brought recently) and gatekeeper concerns are now all very much in focus.

III OUTLOOK AND CONCLUSIONS

The US capital markets remain an attractive and, in many cases, essential venue for capital raising by FPIs. However, notwithstanding the JOBS Act and FAST Act and other regulatory efforts to ease the costs and burdens associated with capital raising in the US public markets, there remains the widespread perception that SEC registration should be avoided, where possible. The perceived regulatory, litigation and compliance risks and costs associated with SEC registration remain important considerations for many such FPIs, whose need for capital can often be satisfied in the Rule 144A and other private markets. The SEC’s Disclosure Effectiveness Initiative and associated rule proposals are part of a wider effort by the SEC staff to bring the US securities regulatory framework up to date and more user friendly. Combined with the JOBS Act and FAST Act accommodations to EGCs, these improvements should help to ensure that NYSE and NASDAQ listings remain an important option for FPIs considering initial and other public offerings.

37 Arcapita, Slip Op at *7-8.

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Appendix 1

ABOUT THE AUTHORS

MARK WALSHSidley Austin LLPMark Walsh is a partner in the London office of Sidley Austin LLP where he co-heads the capital markets group and leads the US and New York law capital markets team. Mark’s practice includes the representation of issuers and investment banks on all categories of debt, equity and equity-linked capital markets transactions, including IPOs, ADRs/GDRs, ordinary and preference share offerings, regulatory capital offerings for European banks and other securities offerings. These include SEC-registered and Rule 144A offerings in the US markets, as well as Prospectus Directive-compliant and Regulation S offerings and listings in the UK, Ireland, Luxembourg and other EU markets. He also works on M&A and other corporate and partnership transactions, corporate governance and compliance (particularly for financial institutions), as well as advice on capital markets products subject to dispute or restructuring. He has worked with sovereign and quasi-sovereign issuers, as well as with companies from a broad range of industries. Mark joined the firm in 1986 and practised in the New York and Hong Kong offices before moving to London. He is qualified to practise New York, English and Hong Kong law, and is a non-practising member of the Irish Bar.

MICHAEL HYATTESidley Austin LLPMichael Hyatte is a senior counsel in the Washington, DC office of Sidley Austin LLP. Michael joined the firm in 2001 after nearly 20 years with the SEC’s Division of Corporation Finance, including more than 10 years in its Office of Chief Counsel and five years in its Office of International Corporate Finance. At the SEC, his duties included interpreting regulatory and disclosure rules in advice to the Commission, the Division staff and the public. The written record of his work for the SEC includes more than 500 no-action letters, the Trust Indenture Reform Act of 1990, Exchange Act Rule 12h-5, and provisions of the Commodity Futures Modernization Act of 2000. Reflecting his wide range of experience, Michael regularly counsels on the Securities Act of 1933, the Securities Exchange Act of

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1934, the Trust Indenture Act of 1939 and the Sarbanes-Oxley Act. Michael is a graduate of the University of Chicago and the Indiana University School of Law, and is admitted to practise in Illinois and the District of Columbia.

SIDLEY AUSTIN LLP787 Seventh Avenue New York, NY 10019 United StatesTel: +1 212 839 5300 Fax: +1 212 839 5599 mhyatte@sidley.com mwalsh@sidley.com www.sidley.com