Earlier this week, four Indian brokerage houses entered into settlements with the US Securities and Exchange Commission (SEC) for charges of carrying on brokerages services to institutional investors in the United States (US) without registration under the US Securities Exchange Act of 1934 (the Exchange Act). The SEC’s press release and the orders pertaining to the four brokerages are available...
Australian Court on Rating Complex Financial Instruments
The Federal Court of Australia has delivered an important ruling that pertains to the liability of credit rating agencies. In Bathurst Regional Council v. Local Government Financial Services Pty Ltd, the court found that Standard & Poors (S&P) was liable to several local councils in Australia for a AAA rating provided in connection with their investment in complex financial instruments...
Rajat Gupta’s Sentencing Order
The order of the United States District Court, Southern District of New York, sentencing Rajat Gupta to 2 years’ imprisonment and US$ 5 million fine for insider trading is one that is carefully crafted and likely to be of significance in sentencing jurisprudence as far as securities law violations are concerned. The order, pronounced by Judge Rakoff is detailed and well-considered, given that the...
Lord Saville: 15 Years of the English Arbitration Act
The UKSC Blog has highlighted a speech by Lord Saville, “Reflections on the English Arbitration Act 1996 after fifteen years”. Lord Saville, who was intimately connected with the drafting of the English Act, makes several interesting points. He deals with the narrow right of appeal on questions of law u/s 69 of the English Act. In does so, he addresses the argument that having a narrow right of...
Prepayment fees in loan transactions
It is common practice for loan agreements to provide for a fee/ premium where a loan is repaid earlier than its contractual due date. The said fee is designed to compensate the lender/s for the loss of anticipated income from the transaction and is usually expressed as a percentage of the principal amount prepaid. While the loan agreement sets out the circumstances in which the prepayment fee...
Ostensible Authority and Estoppel
The Privy Council in Kelly v. Fraser, [2012] UKPC 25, recently revisited the issue of whether an agent can be said to have ostensible authority on the basis of his own representations. Mr. Fraser, the Respondent, became the CEO of Island Life Insurance Company on 1st February, 2000, and shortly after that became a member of the Salaried Staff Pension Plan (“SSP”) of the company. The SSP was...
The LIBOR Crisis and Corporate Governance
Whenever a corporate crisis erupts (a phenomenon all so common these days), questions quickly emerge regarding the role of governance (or failure thereof) at the companies involved. On a similar note, questions are being raised regarding the failure of board oversight, risk management systems and internal controls at banks such as Barclays that failed to curb manipulation in “fixing” the LIBOR...
Shareholder Power: Say-on-Pay
Recent Developments in the US: Dodd Frank Act, section 951, requires companies to approach shareholders for their non-binding vote on executive compensation and golden parachutes. Recent Developments in the UK: A new proposal would require companies to approach their shareholders for a binding vote on executive pay. Existing Position in India: Managerial remuneration has been historically...
Insider Trading Enforcement
Rajat Gupta’s conviction by a New York court for insider trading has sparked off a debate about the state of insider trading enforcement in India. While several cases have been pursued by SEBI in the last two decades since insider trading has been prohibited by regulation, the rate of successful convictions or regulatory sanctions has been minimal. An editorial in the Business Standard states...
Delaware Courts Allow Litigation to Move at the Speed of Business
[The following post comes to us from Andrea Tinianow, who is a vice president and assistant general counsel at Corporation Service Company. She is also a Delaware attorney. This post relates to the Delaware Supreme Court’s decision upholding the Chancery Court in Martin Marietta Materials inc. v. Vulcan Materials, Inc. We had earlier discussed some of the substantive aspects of the Chancery...
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