Proskauer’s Practical Guide to the Regulation of Hedge Fund Trading Activities offers a concise, easy-to-read overview of the trading issues and questions we commonly encounter when advising hedge funds and their managers. It is written not only for lawyers, but also for investment professionals, support staff and others interested in gaining a quick understanding of the recurring trading issues we tackle for clients, along with the solutions and analyses we have developed over our decades-long representation of hedge funds and their managers.
Primarily Non-Financial Corporate Reporting: Climate Change
Version 2.0 following publication of the U.S. Securities and Exchange Commission (“SEC”) Climate-Related Disclosure Rules
A wave of new legislation and regulation in the U.S. and Europe has the potential to significantly impact the non-financial reporting obligations of U.S. companies. With the myriad of requirements overlaid with varying timelines, it can be challenging to understand
Court Temporarily Stays New SEC Climate Change Disclosure Rules Amidst Widening Legal Challenges
Multiple legal challenges have already been launched against the SEC’s new climate change disclosure rules. Plaintiffs include Attorneys General from several states, a large business trade organization and a private energy company. To date, these suits span across six different federal courts, and the array of these challenges is expected to trigger a lottery process in which one court would handle a consolidated case addressing all the claims.
SEC Settlement Highlights Risks for 13G Filers When Moving from Passive to Active Status
The SEC’s recent enforcement settlement involving a fund manager highlights the SEC’s focus on an investor’s “control purpose” triggering the requirement to file on a Schedule 13D as opposed to a short-form 13G. At issue was HG Vora Capital Management’s 5% interest in a public company, and whether it had complied with its obligations to supersede its existing filing with a long-form Schedule 13D filing within 10 days of no longer being “passive.”
The SEC Adopts Extensive Climate Change Disclosure Rules
Two years after proposing rules on climate change disclosure, the SEC has adopted new rules, predictably by a split 3-2 vote. The adopted rules maintain the core of the original proposals, requiring that both domestic companies and foreign private issuers disclose the actual and potential impacts of climate change as well as management and governance processes to address those impacts. In the face of public comments highlighting the costs, burdens, and practicality of some aspects of the proposals, and political opposition, the SEC materially paired back the proposals, most significantly dropping the requirement to disclose Scope 3 greenhouse gas (GHG) omissions data relating to downstream and upstream sources, such as by vendors and customers. However, as described in our recent report, California’s new rules will require Scope 3 information for companies doing business in California if implemented in their current form.
SEC Adopts New SPAC Rules
On January 24, 2024, the SEC adopted new rules that apply to SPAC transactions and the adopted rules largely track the agency’s proposals with some notable exceptions. The new rules will become effective 125 days after publication in the Federal Register and will apply to transactions that are ongoing at that time, even if they
The SEC’s New Corporate Buy-Back Rules Have Been Formally Vacated By the U.S. 5th Circuit Court of Appeals: Issuers May Suspend Plans to Comply But Should Consider Providing Some Additional Voluntary Disclosures on the Subject
On December 19, 2023, the Fifth Circuit formally vacated the SEC’s buy-back disclosure rules. While it is unclear what, if any, action the SEC may take in response to this definitive ruling, the realistic options appear to be commencing a new process to propose and adopt new rules, or to abandon the rule-making project for
SEC Sued Over New Short Sales and Securities Lending Disclosure Rules: Second Lawsuit Filed This Year in 5th Circuit Challenging SEC Action
The SEC has been sued again in the U.S. Court of Appeals for the Fifth Circuit, on the heels of that Court’s recent invalidation of the SEC’s newly-minted corporate buy-back rules. The new legal action asks the Court to invalidate the newly-adopted short sales and securities lending disclosure rules (see our client alert here on the
Update: SEC Stays Effectiveness of New Buyback Rules
In May 2023, the SEC adopted final rules amending disclosure rules for public companies engaged in equity buy-back programs. We have detailed those rules in our client alert available here.
The new rules were challenged in court, and on October 31, 2023, the Fifth Circuit Court of Appeals held that the SEC acted arbitrarily and capriciously, in violation of the Administrative Procedures Act (APA), because it did not respond to petitioners’ comments submitted to the SEC on its then-proposed rules, and failed to conduct a proper cost-benefit analysis in adopting final rules. The petitioners’ comments suggested ways to obtain relevant data on the costs and benefits of the then-proposed rules.
SEC Adopts New Securities Lending Reporting Rule
On October 13, 2023, the Securities and Exchange Commission (the “SEC”) adopted new Rule 10c-1a (the “Securities Lending Rule”), requiring the reporting of certain securities lending transactions. Certain material terms of securities lending transactions relating to “reportable securities” are required to be reported to a registered national securities association (“RNSA”) by the end of the day on which the loan is agreed or modified. The RNSA is required to make the information – other than that deemed confidential as defined below – public on the morning of the next business day. The amount of the loan is to be made public on the 20th business day following submission of the report. Of note, currently the Financial Industry Regulatory Authority (“FINRA”) is the only registered RNSA and is expected to accept the securities lending reports once the Securities Lending Rule is effective.