LEGAL
Non-EU issuers should review new EU market abuse regulations that may cover their securities, even if the issuer’s securities have not traded on any EU national stock exchanges.
On July 3, 2016, the EU’s new Market Abuse Regulation (MAR) repealed and replaced the existing Market Abuse Directive (MAD) and related implementing legislation in each EU Member State. MAR expands and strengthens the EU’s current market abuse regime and considerably increases the extraterritorial reach of the regulations.
MAR defines market abuse as “a concept that encompasses unlawful behavior on the financial markets.” This includes:
In addition to applying to securities traded on EU regulated markets, such as national stock exchanges (as under MAD), MAR extends the scope of the EU’s market abuse regime to cover any financial instruments:
The price or value of which depends or has an effect on the price or value of any covered financial instrument, such as credit default swaps or certain derivative instruments
Due to these changes, MAR is expected to apply to far more non-EU issuers and market participants. For example, many non-EU issuers may have high-yield bonds trading on an MTF within the EU without otherwise having any of their securities trading on EU-regulated markets. These issuers will now be subject to MAR and need to be aware of the significantly different treatment of issues, such as insider dealing and disclosure of inside information, that may exist between MAR and the regulations of their home jurisdictions.
For more information on the EU’s new market abuse regime, see Practice Note, Market Abuse Regulation (MAR): Overview.
A report from the International Commercial Disputes Committee of the New York City Bar Association addresses the increased use of advance waivers of arbitrator conflicts of interest in international commercial arbitrations seated in New York.
During the arbitrator appointment process, arbitrators are required to disclose potential conflicts of interest and any facts that may give rise to an appearance of partiality. During that process, some arbitrators (particularly those in global law firms) may seek from the parties an advance waiver in which they agree that the arbitrator may continue to serve even if certain conflicts of interest arise in the future. The use of advance waivers is consistent with the principle of party autonomy and the freedom of the parties to select their desired arbitrator. However, advance waivers may be perceived to undermine the integrity of the arbitral process by:
The report notes that most major international arbitral institutions have not issued formal guidelines on advance waivers, other than the International Chamber of Commerce International Court of Arbitration (ICC). The ICC’s guidelines caution that an advance waiver may not discharge the arbitrator’s ongoing duty to disclose a conflict when it arises. Summarizing a survey of other major arbitral institutions’ practices, the report found that most were skeptical of advance waivers of the ongoing duty to disclose. These institutions generally consider challenges to advance waivers on a case-by-case basis and are unlikely to consider themselves bound to enforce an advance waiver.
New York courts have not yet specifically considered the validity or effect of advance waivers of future conflicts. Discussing the caselaw, the report suggests that the Second Circuit would likely enforce these waivers.
An advance waiver is a potentially useful tool for overcoming conflicts issues. However, as the report makes clear, there remains uncertainty about whether arbitral institutions and courts will ultimately embrace them.
For more information on arbitration, see the US Arbitration Toolkit.
Parties to a merger or an acquisition should be aware that the FTC has issued revised thresholds for premerger notification filings under the Hart-Scott-Rodino (HSR) Act. The new thresholds became effective on February 25, 2016.
If the HSR thresholds are triggered and no exemption applies, parties to a merger or an acquisition must:
The HSR thresholds are revised annually based on changes to the gross national product. The minimum size-of-transaction threshold increased from $76.3 million to $78.2 million. The size-of-person thresholds increased from $15.3 million to $15.6 million and $152.5 million to $156.3 million. Generally, the size-of-person test requires one party to have at least $156.3 million in annual net sales or total assets, and the other party to have at least $15.6 million in annual net sales or total assets.
The FTC also announced revisions to the thresholds under Section 8 of the Clayton Antitrust Act dealing with illegal interlocking directorates. Section 8 prohibits a person from serving as a director or an officer of two competing corporations if certain thresholds are met. A Section 8 violation occurs when, among other things, both of the following revised thresholds are triggered:
Parties should also note that the filing thresholds are high and antitrust implications may still exist for deals that fall below the thresholds. In addition to government action, parties should consider the possibility of third-party complainants to nonreportable transactions.
For guidance on determining whether a transaction is reportable under the HSR Act, see Practice Note, Determining Hart-Scott-Rodino Applicability.
For a comprehensive list of adjustments to the HSR thresholds since March 2, 2005, see Checklist, Annual HSR Threshold Adjustments Chart.
This look at the major issues on the horizon for corporate counsel comes from Practical Law – an online legal know-how service. View all the looming issues now – compliments of Practical Law The Journal, which covers the latest transactional and compliance topics that impact your practice. To gain access to more related know- how resources, please visit us.practicallaw.com.
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