The European Commission today published a communication addressing the possible consequences of a hard Brexit.^[1] In it, they discuss the long-standing question of the continuity of contracts that straddle the Brexit date. This issue has become an increasing focus of market associations and financial businesses, who have been worried that the lack of an EU licence or registration for a U.K. business might frustrate existing contracts, preventing their performance.

Partner Brian Burke (New York/Shanghai-Litigation) was featured in a recent episode of the FCPA Compliance Report, a bi-weekly podcast on compliance and ethics issues, discussing the impact of the U.S. Department of Justice’s Corporate Enforcement Policy on the appropriate retention of business records for companies.

On June 20, 2018, the United States Bankruptcy Court for the District of Delaware issued a decision sustaining the debtors’ objection to the proof of claim filed by Contrarian Funds, LLC. The bankruptcy court found that the relevant anti-assignment clause in certain promissory notes that were the subject of the proof of claim was enforceable under Delaware law, general tenets of contract law, and the Uniform Commercial Code (“UCC”). As a result, the assignment was of no force and effect and the assignee had no valid claim in the bankruptcy case.

In this week's newsletter, we provide a snapshot of the principal U.S., European and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructure providers, asset managers and corporates.

This quarter, companies around the globe prepared to exit Iran-related business in the wake of U.S. sanctions snap-back.  Meanwhile, OFAC provided a path to relief to designated Russian entities, extending several deadlines to allow for the continued divestment by their oligarch owners.  The U.S. took no new sanctions actions against North Korea as the two countries entered highly anticipated negotations surrounding denuclearization.  Finally, in its first enforcement action of the year, OFAC stressed the importance of empowering compliance personnel to prevent prohibited transactions.

Shearman & Sterling’s bi-annual Trends & Patterns in FCPA Enforcement report provides insightful analysis of recent enforcement trends and patterns in the US, the UK and elsewhere, as well as helpful guidance on emerging best practices in FCPA and global anti-corruption compliance programs.

When it comes to voting on a plan, Section 1126(e) of the Bankruptcy Code provides that a bankruptcy court may designate (or disallow) the votes of any entity whose vote to accept or reject was not made in “good faith” (a term that is not defined in the Bankruptcy Code). On June 4, 2018, the United States Court of Appeals for the Ninth Circuit issued a decision reversing that of the lower courts and holding that a bankruptcy court may not designate claims for bad faith simply because (1) a creditor offers to purchase only a subset of available claims in order to block a plan of reorganization, and/or (2) blocking the plan will adversely impact remaining creditors. This decision confirms that a creditor may cast its votes in order to protect its own interests. On the other hand, bad faith may be found where a creditor votes in order to obtain some benefit to which it was not otherwise entitled or for some ulterior purpose unrelated to its role as creditor.

In wide-reaching remarks at the Yahoo Finance All Markets Summit: Crypto on June 14, 2018, William Hinman, the director of the SEC’s Division of Corporation Finance, affirmed that lawyers and promoters should focus on to the economic substance of a digital transaction, rather than to the label in analyzing whether the U.S. securities laws apply.

In this week's newsletter, we provide a snapshot of the principal U.S., European and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructure providers, asset managers and corporates.

The U.K.’s HM Treasury has set out its approach to the grandfathering of EU27 businesses on Brexit and to how existing EU financial services directives and regulations are to be adopted into U.K. law at the moment of Brexit (“onshoring”).