Banking and Finance Law Articles
Articles written by attorneys and experts worldwide
discussing legal aspects related to Banking and Finance.
Advantages of Using Cayman Islands Exempted Companies for Investment Purposes and Finance Transactions
By Loeb Smith
The Cayman Islands exempted company is the corporate vehicle of choice among international investment fund managers and investors. The popularity of the exempted company is principally as a result of the Cayman Islands being rightly recognized as a stable jurisdiction for structuring international investments owing to the following features.
On the 15th July 2013, the Malta Financial Services Authority (MFSA) issued a Notice for the purpose of formally notifying all Financial Services License Holders of the recent publication of the Malta Financial Intelligence Analysis Unit (FIAU) Annual Report for 2012, issued in terms of Article 42(1) of the Prevention of Money Laundering Act (Chapter 373, Laws of Malta).
Traditionally, private companies become publicly traded by registering an offering under the Securities Act of 1933, as amended. Another established method for private companies to obtain public company status is through a Reverse Merger (“Reverse Merger”) with a public shell company.
OTCMarkets Group operates the world’s largest electronic inter-dealer quotation system for broker-dealers to trade unlisted securities. The OTCMarkets Group categorizes issuers into three tiers to fit the wide spectrum of OTC issuers.
Companies who go public can list on national securities exchanges such as NASDAQ, the American Stock Exchange or the New York Stock Exchange. The securities of companies who go public can also be quoted by The OTCMarkets Group, Inc. (“OTCMarkets”).
An Initial Public Offering (“IPO”) is often used by a private issuer seeking to go public as part of its going public transaction. An IPO involves registration with the SEC of an offering of securities by a private issuer.
Many private companies are unable to locate an underwriter prior to going public. A direct public offering (“Direct Public Offering”) provides a viable solution to this dilemma.
On the 28th June 2013, the Malta Financial Services Authority (MFSA) issued a Circular to the Financial Services Industry on the proposal by the European Commission for the implementation of a new investment fund framework designed for investors desirous of effecting long-term investments into corporate entities and projects.
On the 17th July 2013, the Malta Financial Services Authority (MFSA) issued a Circular to the financial services industry confirming its position in respect of investment services provided in relative to binary options. The Circular follows clarification by the European Commission of the relevant issues in terms of the Markets in Financial Instruments Directive, 2004/39/EC, (MiFID) and expressly confirms that binary options do fall within scope of the said MiFID Directive.
We are a custodian bank based outside the EU currently considering establishing a presence in Malta with a view towards servicing Malta-licensed alternative investment funds. When should we expect Malta-based funds to be required to engage the services of a Malta-based depositary in conformity with the new AIFMD requirements? Are there any exceptions that apply, permitting other non-Maltese depositaries to service Malta-licensed funds?
By Loeb Smith
As 22 July 2013 looms ever closer, as part of our continuing legal update series on this topic, this Guidance Note seeks to consider the impact of the Alternative Investment Fund Managers Directive (the “Directive”) for non-EU Managers who manage Cayman Islands domiciled funds.
On July 10, 2013, the Securities and Exchange Commission (“SEC”) adopted a new rule to implement a JOBS Act requirement to lift the ban on general solicitation or general advertising for certain private securities offerings. The SEC also adopted rules that disqualify felons and other bad actors from participating in certain securities offerings as required by the Dodd-Frank Act.
The European Central Bank ("ECB") and the Economic and Monetary Affairs Committee ("ECON") have issued opinions following the adoption by the European Commission, on 5th February 2013, of a Proposal for a Fourth Anti-Money Laundering Directive and a Proposal for a Regulation on Information Accompanying Transfers of Funds, to reinforce the EU's existing rules on anti-money laundering and fund transfers.
A spin-off (“Spin-off”) involves a transaction in which a parent company (“Parent”) distributes shares of its subsidiary (“Subsidiary”) to the Parent’s shareholders so that the Subsidiary becomes a separate, independent company.
Registration of securities on Form S-8 (“Form S-8”) is a short-form registration statement under the Securities Act of 1933, as amended (the “Securities Act”).
The Securities Act of 1933, as amended (the “Securities Act”) requires the sale of a security to be registered under the Securities Act, unless the security or transaction qualifies for an exemption from registration.
On June 26, 2013, the Securities and Exchange Commission (“SEC”) suspended trading in the stock of Norstra Energy, Inc. (NORX).
To offer and sell securities in the United States, an issuer must comply with the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), or must offer and sell the securities pursuant to an exemption from the registration statement requirements.
With approximately a month to go from the transposition deadline, Malta has announced that it is first member state to have fully transposed the Alternative Investment Fund Management Directive (“AIFMD / Directive”).
Many companies file a registration statement filing with the SEC in connection with their going public transaction. The most commonly used registration statement form is Form S-1.
Public companies with a class of securities registered under Section 12 or subject to Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are subject to the periodic and current reporting requirements of Section 13 or 15(d) of the Securities Exchange Act.
On June 26, 2013, the Securities and Exchange Commission (“SEC”) filed an enforcement action charging Imaging3, Inc. (IMGGQ), and Dean Janes, its CEO, with securities fraud, accusing Janes of misleading shareholders about actions taken by the Food and Drug Administration (“FDA”) in connection with the company’s product.
Shell brokers continue to tout the virtues of reverse merger transactions, despite recent rule changes that eliminate many if not all of the benefits once conferred by them.
On the 18th June 2013, the Malta Financial Services Authority (MFSA) issued a Note for Consultation on the proposed implementation of the Alternative Investment Fund Managers Directive (‘AIFMD’).
The Jumpstart Our Business Startups Act (the “JOBS Act”) allows an “emerging growth company” to submit a draft of its registration statement and exhibits to the Securities and Exchange Commission (the “SEC”) on a confidential basis.
The JOBS Act includes provisions to allow intermediaries known as “Crowdfunding Portals” to assist companies with raising capital using the internet. Crowdfunding Portals will serve as attractive capital raising centers for private companies seeking to go public in need of seed capital.
The Jumpstart Our Business Startups (“JOBS”) Act was signed into law by President Obama on April 5, 2012. The JOBS Act requires the Securities and Exchange Commission (the “SEC”) to issue final regulations regarding the portions of the JOBS Act relating to crowdfunding within 270 days of the law’s enactment on December 31, 2012.
The OTC Bulletin Board (“OTCBB”) is an electronic quotation system that provides real-time quotes, last-sale prices, and volume information for some over-the-counter securities not listed on a national securities exchange such as NASDAQ.
The last step in going public transactions is for the soon-to-be-public company to obtain a stock trading or ticker symbol. In order to obtain a ticker symbol, the company seeking to go public’s stock must first be listed on a national securities exchange or qualify for quotation on the OTCMarkets’ Pink Sheets, OTCQB, or OTCQX markets.
The Jumpstart Our Business Startups (“JOBS”) Act was signed into law by President Obama on April 5, 2012. The JOBS Act requires the Securities and Exchange Commission (the “SEC”) to issue final regulations regarding the portions of the JOBS Act relating to crowdfunding within 270 days of the law’s enactment on December 31, 2012. As of May 5, 2012, the SEC still has not issued the required JOBS Act’s final regulations concerning crowdfunding.
Rule 144(c) of the Securities Act of 1933, as amended (the “Securities Act”) requires that stockholders of public companies relying upon Rule 144 satisfy its adequate current public information requirement. The requirements depend upon whether the issuer is a reporting or non-reporting company.
Many private companies that go public are opting for the listing on the OTCMarket’s Pink Sheets due to the increased costs and more stringent regulations associated with Securities and Exchange Commission (“SEC”) reporting.
The OTCMarkets Group operates an electronic inter-dealer quotation system called OTC Link that broker-dealers use to trade securities not listed on a national securities-related exchange. OTCMarkets rank issuers in tiers; each issuer’s rank depends upon the amount of disclosure provided. Issuers using SEC Rule 15c2-11 qualify for the “OTC Pink Current Information” tier.
Going public is a big step for any company. The process of “going public” is complex and at times precarious. While going public offers many benefits it also comes with risks and quantities of regulations with which issuers must become familiar.
The OTCMarkets describes its OTCQX marketplace as the premier tier of the U.S. Over-the-Counter (OTC) markets, providing investors with an objective measure to ide3ntify exceptional OTC-traded companies.
Why Both Private and Public Companies Need a Securities Attorney
Broker-dealers are subject to regulation by the SEC, FINRA, Self Regulatory Organizations (“SROs”) such as stock exchanges, and the states in which they do business.
Bogus State Court Actions Used in $28 million fraud Lead to Indictments
State Blue Sky laws play a significant role in the enforcement of the securities laws. Each State has its own securities laws and regulations.
The Securities and Exchange Commission recently approved the Financial Industry Regulatory Authority (“FINRA”) proposals to amend Rule 5123 governing FINRA members who participate in private offerings of securities (“Rule 5123″).
On February 27, 2013, in the case of Gabelli v. Securities and Exchange Commission, the U.S. Supreme Court unanimously concluded that the statute of limitations for SEC enforcement actions seeking civil penalties expires 5 years after the time when the alleged fraud takes place, not when it is discovered.
Recent actions by the Securities and Exchange Commission (the “SEC”) and the media have alerted the public to fraud involving reverse mergers and Chinese issuers.
On March 8, 2013, the Securities and Exchange Commission (the “SEC”) charged Brian Reiss, a California securities lawyer, with churning out baseless legal opinions for penny stocks traded on the OTC Markets platform.
The Securities Act of 1933 (the “Securities Act”) provides for a private offering or private placement exemption from federal securities registration which is increasingly being used by both public companies and private companies seeking to go public to raise capital during market downturns and in times of market uncertainty.
On March 7, 2013, the Financial Industry Regulatory Authority (“FINRA”) barred Jeffrey Rubin of Lighthouse Point, Florida, from the securities industry.
Familiar to everyone in connection with real property, squatting consists of occupying an abandoned or empty property that the squatter does not have lawful permission to use.
The Investment Services Act (CHAP. 370 of the laws of Malta) currently defines collective investment schemes as arrangements which, inter alia, “operate according to the principle of risk spreading”. By virtue of this definition, the requirement of risk spreading has been imposed on all licensed collective investment schemes alike and this irrespective of the type of collective investment scheme licence.
It has become routine for public companies and private companies seeking to go public to place restrictive legends (“Restrictive Legends” on the certificates representing their Restricted Securities not covered by a registration statement under the Securities Act of 1933, as amended (the “Securities Act”).
A Wells Notice is sent to subjects of a Securities and Exchange Commission (“SEC”) investigation when Enforcement staff has substantially completed its investigation and intends to recommend that an enforcement be pursued.
The author answers the most frequently asked questions on OTC Pink Current Disclosures.
The author answers the most common questions on Form S-8.
Short selling can be a legitimate trading strategy. It is often endorsed for its beneficial effects on the securities markets, which include increasing liquidity. It is also criticized. Short sellers profit by identifying companies that are weak or overvalued, and companies whose shares have been manipulated to rise to artificially high share prices.
SEC Charges Laidlaw and Its CEO for Securities Violations
Recent SEC amendments to FINRA Rule 6440, grant authority for FINRA to initiate trading and quotation halts in OTC equity securities when it is deemed necessary to protect investors. As amended, Rule 6440 grants FINRA the authority to impose foreign regulatory halts, derivative halts and extraordinary halts.
The author answers the most common questions on Rule 144.
Corporate hijackings of public shell companies–also called corporate identity theft–has been around for more than two decades. The public companies taken over in hijackings have become a valuable assets for shell peddlers (frequently securities lawyers & accountants) seeking reverse merger companies for their clients. They have also become a new target for the SEC.
How FINRA Rule 6490 lmpacts Reverse Mergers
The securities laws provide numerous benefits to issuers who qualify as foreign private issuers including but not limited to reduced disclosure obligations and relaxed financial statement requirements.
Foreign private issuers may raise capital in the U.S. using an offering registered on a registration statement under the Securities Act or by selling securities that are exempt from the SEC’s registration requirements.
On June 10, 2013, the Securities and Exchange Commission (the “SEC”)announced that it had suspended the trading in the securities of Polar Petroleum Corp. a company quoted on the OTC Markets with the symbol POLR.
Private companies in going public transactions that intend to be quoted on the OTC Markets OTCQB must first become reporting with the Securities and Exchange Commission (the “SEC”). This is typically accomplished by the private company filing a Form S-1 registration statement under the Securities Act of 1933, as amended (the “Securities Act”).
The Supreme Court on Friday, 7 of March, delivered its long-awaited decision with regard to the appeals lodged by Laiki’s and BoC’s depositors who lost part of their money in the €10 billion bail-in plan for Cyprus. More than 3.000 appeals of uninsured depositors were filed before the Supreme Court requesting the decision to be revoked.
An investment company with variable share capital (“SICAV”) is by far the most common vehicle utilised by promoters for the licensing of Collective Investment Schemes in Malta. This is attributable to the flexibility associated with such vehicles, as provided by the Companies Act (Investment Companies with Variable Share Capital) Regulations (the “Regulations”).
The judicial proceedings against the haircut on Laiki and Bank of Cyprus’ depositors are ongoing. The objective of the applications filed for judicial review is to annul the governmental decrees by which deposits in excess of €100.000 in Laiki and BoC were subjected to massive reductions.
Law 67 implements a multiple institutional coordination and cooperation system between regulatory entities as a multilateral board that gathers Panamanian regulatory government agencies.
A registered agent shall at all times retain physical possession of the bearer shares certificate, whether he deals directly with the end-user customer or with a professional intermediary customer.
MFSA Publishes a Self-Assessment Questionnaires for Fund Managers & Self-Managed Collective Investment Schemes - Malta
In view of the AIFMD coming into force on 22nd July 2013, Category 2 Licence Holders authorised to provide investment management services to collective investment schemes; Self-Managed Retail Non-UCITS Schemes; and Professional Investor Schemes licensed in terms of the Investment Services Act, 1994 (the “Act”), will be issued with a revised licence to operate as AlFMs, unless they opt for the ‘de minimis’ classification in accordance with the provisions of the AIFMD.
In few months the Rules of the game for Panamanian Corporations could be changed.
Several banking giants, such as HSBC and Standard Chartered, are currently being investigated by US regulators for alleged failings in anti-money laundering (AML) compliance. All fingers point to lapses involving outsourcing units operating without adequate oversight.
The authors offer an overview of the process to obtain a bank account in Panama.
On the 16th April 2013, Fitch Ratings issued a statement regarding a special report published by Fitch, highlighting the main differences between the Maltese and Cypriot banking systems and concluded that these differences far outweigh the similarities and that, as such, ‘Malta Does Not Face Same Bank System Risks as Cyprus’ meaning the Maltese banking sector does not present the same level of risk to the sovereign that was seen in Cyprus.
Stability is important to consider when you decide to open an offshore bank account…Why Panama?
Here is a quick outline to help you avoid personal liability from your business. You’ll see that most of the authors advice derives from an informed use of corporations and corporate law, which is why…
On 27th March 2013, the Permanent Representatives Committee approved the compromise text on the Capital Requirements Directive, better known as the “CRD 4” package proposed to amend and replace the existing rules on capital requirements, applicable to banks and certain investment firms. The new proposals come in the form of a Directive that governs access to deposit-taking activities and a Regulation that establishes the prudential requirements that institutions need to respect.
While banks and other financial institutions are already preparing for the introduction of FATCA, the system is less commonly known by banking clients. The objective of this article is to summarise the most important changes and decision points the introduction of the FATCA system will mean to clients holding their bank accounts with non-US banks.
On the 22nd March 2013, the Malta Financial Services Authority (MFSA) issued a Consultation Document on the proposed rulebook applicable to De Minimis Licence Holders in terms of Article 3 of the Alternative Investment Fund Managers Directive (‘AIFMD’), which provides for exemptions and lays the foundations for the said de minimis regime.
A brief overview of the emergency measures approved by the Cypriot parlament in relation to the banking sector.
This article is a comparative study which points the differences between the Law on Financial Leasing, Factoring and Financing Companies and the repealed Financial Leasing Law.
Cyprus is struggling with the worst crisis in its history since the 1974 invasion by Turkish military forces that divided the country in two.
OHADA is the Organisation for the Harmonisation of Business Law in Africa. With this law, doing business has become secured in 17th African members countries including the DR. Congo. This has many advantages not only for local economic operators but also for foreign investors who wish to invest in the OHADA states such as the Democratic Republic of Congo.
Saudi economist warned that the defaulting tendency would only worsen unless the local and global economy made a rapid recovery. He, however, expressed satisfaction over the present practice of banks to set tough conditions for granting loans.
Chasing payment of dues is a mundane yet critical element of every business process. Hugely time consuming, it could expose any activity large or small to counter-party risk, even more so in times of economic crisis.
Many investors have been "left out in the cold," so to speak, after they were left holding an unsalable product they were told was safe, secure, and "as good as cash." Investors were told that Schwab's Auction Rate Securities (ARS) were both liquid and safe when they were anything but. The economy's collapse in 2008 left investors out in the cold;t these illiquid assets could no longer be touched and they were in assets worthless.
In October 2012, the Hong Kong Stock Exchange (“HKEx”) published two guidance letters on Pre-IPO investments and Pre-IPO investment in convertible instrument respectively. The purpose of the two guidance letters is to consolidate previous HKEx’s listing decisions on Pre-IPO investments and to set out its current practice when dealing with convertible instruments issued to Pre-IPO investors.
The Malta Financial Services Authority has issued a Circular addressed to the investment services industry regarding the Prevention of Money Laundering and Funding of Terrorism (Amendment) Regulations 2009, following the revision of Part I of the Implementing Procedures which changes are being introduced through the inclusion of a new Chapter 9 and additional paragraphs to Section 6.1 of the Implementing Procedures.
On 8th February 2013, the International Organization of Securities Commissions (IOSCO) published a consultation paper on recommendations regarding the protection of client assets – Consultation Report CR02/13.
New York City is known as the nation capital for federal securities and investment fraud investigations and prosecutions. The most common claims in arbitration filed in New York include Breach of Fiduciary Duty, Negligence, Fraud/Misrepresentation, Failure to Supervise and Breach of Contract.
On 19 October 2012, the FATF (Financial Action Task Force) has decided to suspend Turkey’s membership on 22 February 2013 unless the following conditions are met before that date: (1) Turkey adopts legislation to adequately remedy deficiencies in its terrorist financing offence; and (2) Turkey establishes an adequate legal framework for identifying and freezing terrorist assets consistent with the FATF Recommendations.
Banking Business and Conditions of Approval of a Financial Institution in the Democratic Republic of Congo
This article discusses conditions conditions of approval of a Financial Institution in the Democratic Republic of Congo and how to open a bank in that country.
By Cai & Lenard
Multilateral Investment Guarantee Agency (MIGA) provided guarantees for funding in Ukraine
By Murray LLP
PLLCs (Professional Service Limited Liability Companies) are a popular choice for professionals in New York wishing to conduct business.
This paper seeks to discuss the hotly debated topic of customer identification program.
Are you worried about an Internal Revenue Service (IRS) tax audit? Does that worry make you keep records too long and clutter your living quarters? If a mountain of financially related documents is threatening to overwhelm your space and your sanity, it is time to de-stress.
On the 3rd of July, 2012, the European Commission adopted a proposal for the revision of the Insurance Mediation Directive (“IMD”) which is part of a wider legislative package focusing on consumer protection related issues.
A new regulation has been promulgated in the Official Gazette dated December 8, 2012, numbered 28491, which determine the criteria for permission to operate at Istanbul Stock Exchange (“Stock Exchange”), and the liabilities of the members. The regulation is highly functional as it is in line with the principles of corporate governance in the new Turkish Commercial Law.
The Financial Services Chief of the European Union Michael Barnier declared on the 27th November 2012 that credit rating agencies are to follow stricter rules so as to make them accountable for mistakes in case of negligence or intent.
A judgment may be enforced in the Country or State of its origin. Obtaining a judgment in Country A and having to enforce it in Country B, as the debtor has its assets in that Country isn't that easy as a legal decision of a foreign State will not automatically be accepted as a legal title. Most of the time (and unless treaties have been signed to facilitate things) it will be necessary to obtain a decision of the other Country. This is called the EXEQUATUR of a foreign decision.
By Amaris Law
In August 2012, the Ministry of Commerce of PRC (COFCOM) has issued the Regulatory Requirements on the Pawn Industry (draft) for collecting opinions from the public (“Requirements”). Such Requirements tighten the control on the regulations of Pawn Industry. However, in view of the rapid growth of such an industry in recent years, this article will discuss the chance, feasibility and way of foreign investments entering this industry and sharing its prosperity.
Small Businesses are very important to our economy. Easing their burden will certainly help economic growth. Current Rules of DTCC that provide remedies for SBs, supposedly enforced by the SEC, are not enforced, and this is having an immediate impact on SBs everywhere. This article points out these flaws and appeals for simple enforcement of existing rules so that SBs will not continue to be hamstrung or destroyed in the marketplace.
According to a Circular issued by the Malta Financial Services Authority (MFSA) on the 30th October 2012, addressed to the investment services industry, the MFSA is in the process of finalising the relative rules on cross sub-fund investments to be included in the Investment Services Rules for Professional Investor Funds.