Federal Securities Law Blog : Federal Securities Lawyer & Attorney : Porter Wright Law Firm : Securities Exchange Law : Serving Ohio, Washington DC, Florida

The NYSE has extended until June 30, 2009 the temporary lowering of its market-capitalization standard for listed companies. In addition, the NYSE has temporarily suspended the $1 minimum price requirement. The NYSE stated that its actions reflect the Exchange's “determination that suitable companies should remain listed during the current period of unusual market volatility and decline.”

On January 23, 2009, the NYSE changed the minimum global market capitalization required of listed issuers from $25 million to $15 million. The new order extends this change to June 30, 2009; otherwise it would have expired on April 22. The new order also suspends the requirement that a listed issuer’s stock price not fall below $1 over a consecutive 30-day trading period.

The NYSE has submitted the proposed temporary changes to the SEC and has asked the SEC to waive the 30-day operative delay. The NYSE expects the SEC to take prompt action to effectuate the waiver.
 

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As reported at The Corporate Counsel earlier this week, SEC Commissioner Luis Aguilar has recently lamented the fact that there was a sharp decrease last year in the number of retail investors who voted their proxies. The drop is attributed to the new e-proxy rules. Apparently, most retail shareholders are less likely to participate in the voting process if they get their materials via e-proxy as opposed to the mail. And, when they do vote using e-proxy, a substantial amount do not click on the proxy statements and annual reports posted online.

Electronic voting has allowed us to confirm that a large portion of shareholders do not read proxy materials, even when they vote. The SEC calls this troubling, but the reality is that retail shareholders rely on institutional investors to police the companies in which they invest.
 

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Senators Grassley and Levin have introduced a bill that would require certain hedge funds to register under the Investment Company Act and the give the SEC the long-desired power it needs to examine them. The SEC tried to regulate hedge funds under the Investment Advisers Act a few years ago, but the D.C. Circuit ruled the SEC had exceeded its power. The Hedge Fund Transparency Act of 2009 is a proposed congressional response to the D.C. Circuit opinion.

Regulation of hedge funds was opposed by several members of Congress, President Bush, and many hedge fund managers when regulation was first attempted, but the current financial crisis has changed the debate. Hedge funds are traditionally small groups of private investors with significant net worth. Many argue these are not the type of investors who need the help of SEC oversight. However, given the power of institutional investors like hedge funds to move markets and affect prices for securities, a general feeling is growing that small investors want to know what hedge funds are doing.

The proposed bill would require hedge funds to register but would not subject them to the same requirements of an average public mutual fund (a traditional registered investment company). The newly registered funds would have to maintain books and records for inspection by the SEC and would need to disclose the names of all owners and explain the structure of ownership interests.

The big concern is how broad will the registration requirements be? The proposed bill eliminates the exemptions from Investment Company Act registration for investment companies with less than 100 beneficial owners and investment companies held solely by qualified purchasers. Any entity relying on those exemptions would have to register, regardless of whether it is a hedge fund.
 

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Yesterday, President Obama announced that the Treasury had adopted new guidelines for financial institutions that are receiving government assistance. The Treasury press release discusses these new restrictions.

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