All items from Securities and Financial Sector Legal Review

We posted recently about the HSH Nordbank decision concerning the justifiable reliance element in fraud claims.  A recent decision from Justice Kapnick in the New York State Supreme Court Commercial Division suggests a limited application of HSH Nordbank that would not cover the situation where the fraud was not “discoverable through any publically available source of information.”  In ACA Finanacial Guaranty v. Goldman Sachs & Co., ACA alleged that Goldman Sachs induced it to provide financial guaranty insurance for a CDO transaction called ABACUS that consisted in part of a portfolio of investment securities chosen by Goldman’s hedge fund client Paulson & Co., Inc. (“Paulson”).   ACA alleged that Goldman falsely represented  that Paulson would be an equity investor in the CDO (and thereby have an economic interest in selecting securities that would perform well).

On Wednesday, regulators from the Securities and Exchange Commission and the Commodity Futures Trading Commission jointly issued new rules that define certain terms related to the swaps market and which entities will be subject to oversight.  The rules are the agencies’ latest efforts to implement part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. 
 Under the new rules, an entity is considered a swap dealer if it traded more than $8 billion in swaps over a 12-month period.  That threshold number may be lowered five years later to $3 billion after the SEC and CFTC evaluate whether the threshold should be changed.
 According to the SEC website:
 The new Rule 3a71-1 under the Securities Exchange Act defines the term “security-based swap dealer” consistent with the criteria set forth in the Dodd-Frank Act as someone who:

 
We are bringing a new feature to the blog – a monthly update on goings on in the world of corporate governance and the regulatory environment.  Our Kelley Drye Colleagues Patricia Lee and Julia Sitarz compiled the following information.
 
 
1.                  General Corporate/Securities Law Developments
(a)                Congress Passes JOBS Act
We previously posted about how the JOBS Act will allow hedge fund advertising.  Overall, the JOBS Act creates a new category of issues called “emerging growth companies” that would be exempt from, or subjected to reduced, regulatory requirements for a limited period of time in an effort to encourage them to go public in the United States.  The JOBS Act also includes other measures intended to ease significantly private capital formation and reduce public reporting requirements for small and emerging businesses.

In Credit Suisse Securities (USA) LLC, et al. v. Simmonds, the Supreme Court held, at least for now, that equitable tolling principles apply to claims asserted under §16(b) of the Securities and Exchange Act of 1934.  In doing so, the Court reversed the Ninth Circuit in an 8-0 decision and remanded the case to the district court to determine if equitable tolling should be found.  Chief Justice Roberts recused himself from the case.  Under §16(b), corporate insiders may be forced to disgorge any profits from the purchase and sale or sale and purchase of the corporation’s securities within any six-month period.  §16(b) provides that such suits must be brought within “two years after the date such profit was realized.”  15 USC §78p(b).  The Ninth Circuit, following its rule in Whittaker v. Whittaker Corp., 639 F.2d 516 (9th Cir.