Foley Hoag LLP

SUMMARY

On October 15, 2008, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted an interim temporary final rule (.pdf) (the “Interim Rule” or “Rule 10a-3T) requiring institutional investment managers (those required to file Form 13F) to report information concerning daily short sales of securities. The previous emergency order regarding the filing requirements was due to terminate on October 17, 2008. The Interim Rule will take effect beginning October 18, 2008 and extend until August 1, 2009 unless it is terminated or extended... (continues)

SUMMARY

Borrowers Need to Monitor Whether to Elect Prime Rate rather than LIBOR under Credit Facilities

U.S. Companies that borrow under bank credit facilities that provide for the borrower to elect payment of interest at either a LIBOR-based rate (sometimes called a "Eurodollar" loan) or a Prime Rate-based rate (sometimes called a "Base Rate" loan) need to be aware of a significant development resulting from the recent turmoil in the world’s credit markets...

SUMMARY

On October 7, 2008, the Securities and Exchange Commission (“SEC” or the “Commission”) released a statement regarding the expiration of the emergency order (the “Order”) prohibiting persons from short selling in the securities of financial companies.

On Friday, October 3, 2008, the President signed the Emergency Economic Stabilization Act of 2008 (the “Legislation”), aimed at stemming the credit crisis. When the Order was extended, the SEC stated that the Order would expire on the third business day after enactment of the Legislation. Accordingly, the Order will expire at 11:59 p.m. ET on Wednesday, October 8, 2008.

SUMMARY

As a result of the $700 billion bailout bill passed by Congress and signed into law on October 3, 2008, US fund managers will no longer be able to defer income from offshore funds.

The bill includes a new section of the Internal Revenue Code (Section 457A) that disallows deferrals of compensation from offshore entities that are not subject to either US income tax or "comprehensive" foreign income tax, which includes most offshore funds.

Income earned for years beginning January 1, 2009 and later cannot be deferred.

Any deferrals currently in place for amounts earned (or to be earned) prior to January 1, 2009, may remain deferred, but only until 2017.  Any deferral elections currently in place that provide for payment later than December 31, 2017  (or, for fiscal year entities, the end of the last taxable year beginning before 2018) must be amended to provide for earlier payment; guidance is expected shortly as to the deadline for making such changes.

SUMMARY

Foley Hoag LLP’s interdisciplinary team counsels and protects the interests of its clients facing new realities, challenges and risks framed by today’s tumultuous economic and market conditions. By maintaining an active and engaged dialogue with our clients during this period of economic distress, our lawyers are better able to adapt to the changing legal needs of clients affected in the short term. More importantly, our immersion in their businesses and industries enables our lawyers to provide sound, strategic counsel to protect our clients’ interests in the longer term. The Economic Crisis Team delivers forward-thinking advice, focusing on long-standing core, integrated strengths of the firm.

Topics include:

• Financial investigations, enforcement proceedings and litigation
• Federal and state securities regulation
• Deal-making, corporate finance and investment restructuring
• Bankruptcy, corporate reorganization and financial disputes

SUMMARY

Extenders for a series of key tax credits aimed at supporting the development of renewable energy generating facilities were passed today by the House 263 to 171 as part of the financial rescue bill, H.R. 1424 (the “Bill”), aimed at addressing the recent credit crisis. The renewable energy production tax credit (“PTC”) gives qualified facilities placed into service by a statutory cutoff date a tax credit equal to 1.5 cents per kilowatt hour of electricity generated. The PTC cutoff date had been set for January 1, 2009, and legislation to extend that cutoff date had been stalled in Congressional negotiations. The PTC extenders were among the amendments added by the Senate, which took up the Bill after the House failed to pass its version of a financial rescue bill on September 29, 2008. The President is expected to sign the Bill.

SUMMARY

1. Prohibition on Short Selling in Financial Companies

On October 1, 2008, the Securities and Exchange Commission (“SEC” or the “Commission”) extended the emergency order (the “Order”) prohibiting short selling in the securities of financial companies. The Order was issued pursuant to the Commission’s authority under Section 12(k)(2) of the Securities Exchange Act of 1934.

The Order will be extended beyond its currently scheduled expiration to allow time for completion of work on the anticipated passage of the Economic Stabilization Act of 2008 (the “Legislation”). The Order will now expire at 11:59 p.m. ET on the third business day after enactment of the Legislation, but in any case no later than 11:59 p.m. ET on Oct. 17, 2008.

2. Requirement of Institutional Investment Managers to Report New Short Sales

On October 1, 2008, the SEC also extended the emergency order (the “Second Order”) requiring institutional investment managers (those required to file a Form 13F) to report information concerning daily short sales of securities. The Second Order was also issued pursuant to the Commission’s authority under Section 12(k)(2) of the Securities Exchange Act of 1934.

The Second Order will also be extended to 11:59 p.m. ET on Oct. 17, 2008, but the Commission intends that the reporting requirement will continue in effect beyond that date without interruption in the form of an interim final rule. The Commission will seek comments on all aspects of the anticipated rulemaking. The SEC has also now indicated that disclosure of short positions reported under the Second Order will be made only to the SEC. This is a modification of the Second Order and will avoid public disclosure. It is unclear whether public disclosure will be required under any final rule.

SUMMARY

As a follow up to our Foley Adviser on September 19, 2008, we have prepared answers to the following frequently asked questions regarding the Securities and Exchange Commission’s (“SEC” or the “Commission”) emergency order (the “Order”) requiring institutional investment managers to report information concerning daily short sales of securities.

Questions Include:

• What is Form SH?
• Who must file?
• When is the filing required?
• How is the filing made?
• How soon will Form SH information be publicly available?
• What transactions are reportable?
• Are small short sales reportable?
• What must be disclosed on Form SH?
• What about pre-existing short positions?
• What if I increase a pre-existing short position?

SUMMARY

Section 409A is an extremely broad law that covers many arrangements not generally considered deferred compensation, such as stock options, bonus plans, and severance and change in control agreements. In general, 409A governs any arrangement where an employee or consultant has a vested right to compensation in one year that will be paid in a later year, unless the arrangement fits into one of the exemptions to 409A. Arrangements subject to 409A must comply with strict rules as to the time and form of payment, and it is very difficult to make changes to an arrangement once it is in place. Any deferred compensation arrangement that does not comply with 409A will subject the employee or consultant to income tax liability at the time that the right to payment vests (even if there is no right to receive payment at that time), together with a 20% penalty tax on the deferred amount. (continues)

SUMMARY

SEC Issues Emergency Order to Prohibit Short Selling of Financial Stocks to Protect Investors and Markets

On September 19, 2008, the Securities and Exchange Commission (“SEC” or the “Commission”) issued an emergency order (the “Order”) to prohibit short selling in the securities of 799 financial companies (the “Securities”), which are identified in Exhibit A. The Order was issued pursuant to the Commission’s authority under Section 12(k)(2) of the Securities Exchange Act of 1934.

Under the Order, all persons are prohibited from short selling the Securities except for registered market makers, block positioners, or other market makers obligated to quote in the over-the-counter market. The Order will be immediately effective and will terminate at 11:59 p.m. ET on October 2, 2008. The SEC may extend the Order beyond 10 business days if the SEC determines that the continuation of the Order is necessary in the public interest and for the protection of investors, but not for more than 30 calendar days in total duration. (continues...)

SUMMARY

The Supreme Judicial Court (SJC) recently provided important guidance for determining whether a Massachusetts organization is properly classified as a nonprofit entity for exemption from local property tax.

SUMMARY

The Office of Chief Counsel, Division of Investment Management of the Securities and Exchange Commission (the “SEC”) has issued an Interpretative Letter (the “Interpretative Letter”) dated July 15, 2008, clarifying its position concerning the applicability of Rule 206(4)-3 under the Investment Advisers Act of 1940 (the “Advisers Act”) in the context of a fund or other investment pool. In the Interpretative Letter, the SEC indicated that it believes Rule 206(4)-3 does not generally apply to a registered investment adviser’s cash payment to a person for soliciting or referring investors for an investment pool managed by that adviser since these investors are not “clients” of the investment adviser.

SUMMARY

On July 15, 2008, the Securities and Exchange Commission (“SEC” or the “Commission”) issued an emergency order (the “Order”) to enhance investor protections against “naked” short selling in the securities of Fannie Mae, Freddie Mac and primary dealers at commercial and investment banks (the “Securities”), which are identified in Exhibit A (.pdf). The Order was issued pursuant to the Commission’s authority under Section 12(k)(2) of the Securities Exchange Act of 1934. In addition, the SEC will undertake rulemaking to address these issues across the entire market.

Under the Order, anyone effecting a short sale in the Securities must arrange beforehand to borrow the Securities and deliver them at settlement. The Order took effect at 12:01 a.m. ET on Monday, July 21, 2008 and will terminate at 11:59 p.m. ET on Tuesday, July 29, 2008. The SEC may extend the Order if the SEC determines that the continuation of the Order is necessary in the public interest and for the protection of investors, but not for more than 30 calendar days in total duration.

SUMMARY

By a vote of 233 – 189, the House of Representatives approved on June 25 amendments to the Internal Revenue Code that would tax carried interests at ordinary income rates. This change was one of several “offsets” included in the Alternative Minimum Tax Relief Act of 2008 (H.R. 6275). Other offsets include curbing the Code section 199 deduction for oil and gas companies and requiring information reporting for credit card reimbursements.

SUMMARY

Every U.S. person with a financial interest in, or signature or other authority over, any financial account outside the U.S. must file an annual report on Treasury Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts) if the aggregate value of all such accounts exceeds 10,000 USD at any time during the calendar year. Form TD F 90-22.1 must be filed on or before June 30^th each year.

SUMMARY

Established in December 1980 by the partners of law firm Foley Hoag, The Foley Hoag Foundation is a private foundation that seeks to combat racism, especially among youth, in the City of Boston. The Foundation awards grants to organizations working to improve the racial climate in Boston by addressing issues of diversity and racism. Grantee organizations achieve their goals through a variety of means, including arts and cultural activities, youth leadership and recreational programs. Other grantees provide advocacy assistance, enabling individuals to confront racism through legal or political action. Some grantee organizations work to prepare young children to live in the reality of a multicultural society, others engage teens, and a few target a primarily adult constituency.

The Foley Hoag Foundation was the first—and remains the only— foundation to focus exclusively on the improvement of race relations in Boston. The trustees are fortunate to have the unqualified endorsement of Foley Hoag, which has provided an enormous amount of financial, administrative and moral support.

SUMMARY

On February 19, 2008, the Internal Revenue Service issued Revenue Ruling 2008-12, clarifying the tax treatment of interest expense incurred by a securities-trading partnership. The Service ruled that the interest expense is not "business interest" (generally fully deductible), but rather is "investment interest," deductible by each partner only to the extent of the partner's net investment income for the year in question. This will be true whether or not the partnership elects to be treated as a "trading" partnership so that its other expenses are treated as business expenses. The ruling will apply to limited partners of a limited partnership as well as “members” of a limited liability company, other than corporations, who do not “materially participate” in the trading activity. Partners or members that are corporations, or that materially participate in the trading activity, will not be subject to the ruling.

SUMMARY

On February 13, 2008, the Securities and Exchange Commission (“SEC” or the “Commission”) proposed rule amendments requiring investment advisers to prepare and deliver to clients and prospective clients a narrative brochure written in plain English. The brochure would be made available to the general public through the SEC sponsored Investment Adviser Public Disclosure website. The SEC is proposing amendments to Part 2 of the Form ADV and related rules under the Investment Advisers Act of 1940.

SUMMARY

Engagements Include:

• Litigation and Arbitration between Sovereign States
• Arbitration between Sovereign States and Investors
• International Commercial Arbitration
• Litigation before the United States Courts

SUMMARY

• Litigios y Arbitrajes entre Estados Soberanos
• Arbitrajes entre Estados
• Soberanos e Inversionistas
• Arbitrajes Internacionales Comerciales
• Litigios ante las Cortes de los Estados Unidos