Category: Regulation

SEC Sues Morningstar’s Former Credit Ratings Agency

Mary Pat Campbell

Link: https://www.thinkadvisor.com/2021/02/17/sec-sues-morningstars-former-credit-ratings-agency/

Excerpt:

In a rebuke to the SEC lawsuit, Morningstar issued a press release on Feb. 17, saying that MCR “complied with the regulatory requirements in question” while the SEC’s position is “inconsistent with its own rules and … policies” and that the agency has “overstepped its regulatory limitations by imposing requirements that would regulate the substance of credit rating methodologies.”

In an accompanying position paper, Morningstar said that by questioning MCR’s use of qualitative factors in its legacy CMBS ratings model, the SEC is “attempting to dictate the substance of MCR’s rating methodology,” which it is prohibited to do by law. “If the SEC believes additional rules are required — consistent with the analytical independence of a credit rating agency — the agency should go through the rule-making process, not file an action against MCR.”

Author(s): Bernice Napach

Publication Date: 17 February 2021

Publication Site: Think Advisor

NAIC Reveals 5 Regulatory Priorities for 2021

Mary Pat Campbell

Link: https://insurance-forums.com/health/long-term-care/naic-reveals-5-regulatory-priorities-for-2021/

Excerpt:

Race & Insurance — The insurance regulatory system, and insurance in general, reflects the society it protects. Through our special committee on race and insurance we will continue to ensure the availability and affordability of insurance products for persons of color and historically underrepresented groups and promote diversity and inclusion within our sector.

Climate Risk & Resiliency — The NAIC is committed to working with state, federal and international stakeholders to coordinate climate-related risk and resiliency assessments, disclosures, and evaluation initiatives so that each state has the information, policies, and tools that promote resiliency and ensure stable insurance markets for its citizens.

Author(s): Insurance Forums Staff

Publication Date: 17 February 2021

Publication Site: Insurance Forums

Many Businesses Support a Minimum-Wage Increase—Just Not Biden’s $15-an-Hour Plan

Mary Pat Campbell

Link: https://www.wsj.com/articles/many-businesses-support-a-minimum-wage-increasejust-not-bidens-15-an-hour-plan-11614604077

Excerpt:

Still, a higher minimum wage puts pressure on smaller businesses that can’t raise wages as easily as large companies, which can adapt by deploying labor-saving technology or modestly adjusting hours for large workforces, said Jonathan Meer, an economist at Texas A&M University.

“It’s a lot harder for Joe’s Hardware,” he said. “We should take note that Amazon — the place with no cashiers — is the one calling for a higher minimum wage.”

Fewer than 250,000 people in the nation’s workforce of 140 million last year were paid exactly the federal minimum wage, which hasn’t changed since 2009, the Labor Department said last week.

Author(s): Eric Morath and Heather Haddon

Publication Date: 1 March 2021

Publication Site: Wall Street Journal

Recent Judge Rakoff Decision May Curb Private Equity Leverage Abuses By Pinning Liability on Directors of Selling Company

Mary Pat Campbell
Recent Judge Rakoff Decision May Curb Private Equity Leverage Abuses By Pinning Liability on Directors of Selling Company

Excerpt:

For decades, authorities and experts have tried restricting excessive borrowing by private equity investors, since it’s been repeatedly shown that they leave lots of bankruptcies in their wake. And these abuses continue because private equity looting fee structures result in general partners making out handsomely whether or not the business does well. In 1987 (no typo), the Treasury proposed limiting the deduction of interest on highly leveraged transactions. That idea went by the wayside thanks to the 1987 crash. Other proposals to restrict debt levels have similarly not gone anywhere. Yet now an important ruling looks set to deliver where regulators and legislators have failed.

The decision is related to bankruptcy ruling, In re Nine West LBO Securities Litigation, in early December. I’m late to it; several readers called it to my attention via a William S. Cohan op ed in the New York Times, The Private Equity Party Might Be Ending. It’s About Time. I think Cohan is overstating its significance; investment bankers and lawyers are prone to howling loudly about anything that might reduce the size of their meal tickets while working full bore to preserve them. But Nine West does appear likely to restrict very highly leveraged deals by pinning the liability tail for likely insolvencies on the directors and officers of the selling company.

The very short version of this story is that the directors of the selling company approved a sale transaction that they knew would saddle the company, renamed Nine West, with more debt than its own bankers had said it could support while removing its best assets. They sat pat as the buyer revised the deal to load even more borrowings on the acquisition, despite having a fiduciary “out” clause.

Author(s): Yves Smith

Publication Date:

Publication Site: naked capitalism

Eviction Moratorium Deemed Unconstitutional by Federal Judge in Texas

Mary Pat Campbell
Eviction Moratorium Deemed Unconstitutional by Federal Judge in Texas

Excerpt:

Judge J. Campbell Barker of the Eastern District of Texas, sided with plaintiffs who challenged the CDC’s eviction moratorium on Constitutional grounds. We’ve embedded the opinion for Terkel v. Centers for Disease Control and Prevention at the end of this post. Even though some will be inclined to dismiss the ruling as politically-motivated (Barker was a Trump nominee), recall that it was the Trump Administration that first launched the eviction freeze. It initially ran through December 31, and covered tenants who gave their landlord a declaration attesting that the made less than $100,000 a year, had suffered a large hit to their income, were seeking assistance and would pay as much rent as they could. The Biden Administration planned to extend the moratorium to the end of March.

Bear in mind that the eviction halt dumped the cost of keeping coronavirus-whacked workers housed on landlords, rather than having the government provide income or rental subsidies.

Before we turn to the reasoning of the ruling, keep in mind that Judge Barker did not issue an injunction against the CDC’s moratorium, since the CDC apparently made noises at trial that they’d withdraw the moratorium if they lost. However, Barker told the plaintiffs they could come back and seek an injunction if the CDC didn’t play nice. There is no indication yet as to whether the Administration will appeal.

Author(s): Yves Smith

Publication Date: 26 February 2021

Publication Site: naked capitalism

Pension Crisis Is Challenge DOL Nominee Is Positioned to Handle

Mary Pat Campbell

Link: https://news.bloomberglaw.com/daily-labor-report/pension-crisis-is-challenge-dol-nominee-is-positioned-to-handle

Excerpt:

Boston Mayor Marty Walsh has vowed to work with both parties as Labor Department secretary to address the hundreds of underfunded multiemployer pension plans in the U.S. that are now in danger of collapsing.

The big problem standing in his way? Congress has that power, not the U.S. Labor Department, according to labor attorneys and industry insiders. Which means that if Walsh is confirmed by the full Senate for the Cabinet spot, the two-term mayor will have to rely on his organized-labor background and a unique propensity to bridge divides and broker deals outside DOL’s scope to help rescue the tapped-out plans.

“The thing that is going to be pretty neat about going in to see Secretary Walsh is you’re not going to spend the first 20 minutes trying to explain what the heck a multiemployer pension plan is,” said Timothy Lynch, a senior director at Morgan Lewis in Washington who testified in 2018 before the now-defunct Joint Select Committee on the Solvency of Multiemployer Pension Plans.

Author(s): Austin R. Ramsey

Publication Date: 1 March 2021

Publication Site: Bloomberg Law

The COVID-19 Pandemic—An Opportune Time to Update Medical Licensing

Mary Pat Campbell

Link: https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2775345?guestAccessKey=759005fe-3396-4df8-b388-110fefb7e499&utm_source=silverchair&utm_medium=email&utm_campaign=article_alert-jamainternalmedicine&utm_content=etoc&utm_term=030121

Excerpt:

Congress could regulate telemedicine across state lines as interstate commerce and establish the “place of service” of a telehealth visit as the location of the clinician, not the location of the patient.5 This definition would allow physicians to provide telehealth services if licensed by the state from which they would conduct telehealth visits. Such legislative action would not override state licensure or insurance regulations but would increase access to telehealth services by removing state licensing as a barrier.

State-based medical licensing is inherently linked to state-based consumer protection, including oversight by state licensing boards and the recourse of malpractice litigation in state courts. Therefore, if telemedicine were regulated as interstate commerce, Congress would need to provide a framework for consumer protections, in particular to guard against states protecting the interests of in-state physicians against claims from out-of-state telehealth patients. For example, Congress could decide that a physician’s home state medical board would be responsible for disciplinary investigations, while the state in which the patient lives would be the jurisdiction for malpractice litigation.

Author(s): Samyukta Mullangi, MD, MBA; Mohit Agrawal, MS, MBA; Kevin Schulman, MD

Publication Date: 13 January 2021

Publication Site: JAMA

Protection from COVID-19 lawsuits in the works for Illinois businesses

Mary Pat Campbell

Link: https://www.thecentersquare.com/illinois/protection-from-covid-19-lawsuits-in-the-works-for-illinois-businesses/article_436193cc-7877-11eb-96e9-bbda0809a9b2.html#new_tab

Excerpt:

Protection from COVID-19 related lawsuits may be on the way for Illinois businesses through House Bill 3003.

Known as the COVID-19 Liability Act, the legislation was filed in the House of Representatives on Feb. 18. If passed, the bill would offer protection to businesses from people claiming they were infected at a business and therefore the business is liable for medical costs, pain and suffering or more.

Clark Kaericher, vice president of Government Affairs at the Illinois Chamber of Commerce, says so far, there have been two crises proceeding from the coronavirus: a public health crisis and an economic crisis.

Author(s): Elyse Kelly

Publication Date: 27 February 2021

Publication Site: The Center Square

Covid-19 Vaccine ‘Passports’ Raise Ethics Concerns, Logistical Hurdles

Mary Pat Campbell

Link: https://www.wsj.com/articles/covid-19-vaccine-passports-raise-ethics-concerns-logistical-hurdles-11614335403

Excerpt:

In Israel, a vaccine passport was launched last week allowing those who are inoculated to go to hotels and gyms. Saudi Arabia now issues an app-based health passport for those inoculated, while Iceland’s government is doling out vaccine passports to facilitate foreign travel. Last month, President Biden issued executive orders asking government agencies to assess the feasibility of creating digital Covid-19 vaccination certificates.

Proponents of the plans say they will enable battered economies to reopen, even as vaccines are still being rolled out, allowing people to enjoy leisure activities and go to work safe in the knowledge they aren’t harming others or at risk themselves. It could also act as an incentive for people to get the shot.

The concept is potentially fraught with pitfalls. It could discriminate against minority communities, who are less likely to accept the vaccines, according to national surveys, or young people, who are less likely to be given priority to receive them.There are questions about the ethics of granting businesses access to peoples’ health records.

Author(s): Max Colchester, Felicia Schwartz

Publication Date: 26 February 2021

Publication Site: Wall Street Journal

Nasdaq Amends Its Diversity Plan

Mary Pat Campbell

Link: https://www.wsj.com/articles/nasdaq-amends-its-diversity-plan-11614547707

Excerpt:

We have listened closely to all the feedback, and we’re making some changes to strengthen our proposal in response. For example, we heard from companies with smaller boards, as well as from several small-cap investors, that meeting the diversity objective would be more challenging for them. As a result of that feedback, we’re now proposing that companies with five or fewer directors may satisfy the recommended objective with one director from a diverse background rather than two. We’re also providing a one-year grace period in the event a vacancy on the board brings a company under the recommended diversity objective.

Overall, our proposal seeks to demonstrate that, with proper disclosure and clear objectives, companies and investors can create momentum toward an approach to capitalism that offers more opportunity to more people. We believe this can be accomplished through a market-driven solution — rather than government intervention.

Author(s): Adena T. Friedman, president and CEO of Nasdaq Inc.

Publication Date: 28 February 2021

Publication Site: Wall Street Journal

Private Equity Pays To Silence Investor-Whistleblowers Aware Of Fraud

Mary Pat Campbell

Link: https://www.forbes.com/sites/edwardsiedle/2021/02/28/private-equity-pays-to-silence-investor-whistleblowers-aware-of-fraud/?sh=45191ea71cee

Excerpt:

For fiduciaries overseeing other people’s money, private equity’s disparate treatment of investors, abusive industry practices and alarming lack of transparency should be deal-breakers. To the contrary, pensions in recent years have dramatically increased their allocations to private equity funds—either because they don’t understand the dangers lurking in the shadows or simply don’t care as long as above-market returns are promised (which will supposedly reduce severe pension underfunding).

….

Securities and pension regulators have paid little attention to the “side letter” agreements private equity funds enter into with investors granting preferential treatment. It’s no secret that these agreements exist—the practice of entering into them is disclosed in offering memoranda and is openly discussed throughout the industry. As a result of increasing institutional investor domination of private equity, and the regulation applicable to these investors, it is now standard practice in the industry for each investor to demand its own side letter. As a consequence, there has been a proliferation of the number of side letters being negotiated with investors, as well as the kinds of arrangements and provisions included in them.

Author(s): Edward Siedle

Publication Date: 28 February 2021

Publication Site: Forbes

Senate Republicans oppose Nasdaq diversity rule

Mary Pat Campbell

Link: https://www.pionline.com/governance/senate-republicans-oppose-nasdaq-diversity-rule

Excerpt:

Sen. Pat Toomey, R-Pa., was among a group of Republicans calling on the SEC to reject Nasdaq’s board diversity proposal.

Republican members of the Senate Banking Committee told the Securities and Exchange Commission to reject a Nasdaq proposal allowing it to require listed companies to publicly disclose the gender and racial diversity of their boards and eventually to have at least two diverse directors, citing a connection between diverse boards and corporate performance.

Author(s): HAZEL BRADFORD

Publication Date: 12 February 2021

Publication Site: Pensions & Investments