Legal Practice Notes

Background to the Volcker Rule and implementation US regulators signed off regulations arising from the so‑called Volcker Rule elements of the Dodd‑ Frank Wall Street Reform and Consumer Protection Act 2010 ( Dodd‑ Frank) on 10 December 2013, and the rules then came into force on 1 April 2014. At its core, the Volcker Rule removes the capacity of US banks to deal as principal in particular trading or investment fund‑related activities. The final rule also provided a conformance window running until 21 July 2015, allowing banking entities time to come into compliance with its prohibitions on proprietary trading and on covered fund ownership and sponsorship, as set out in the rule. General requirements of the final rule Section 619 of Dodd‑ Frank inserted a new section 13 into the Bank Holding Company Act of 1956 ( BHC Act). Under that section, in general terms, any...

ARCHIVED: This Practice Note has been archived and is no longer maintained. First prepared for Lexis Practice Advisor in the United States, it sets out an overview of federal trade dress protection and enforcement under the Lanham Act. It considers the potential categories of trade dress, the conditions for protection—distinctiveness and non‑functionality—the benefits of federal registration, and enforcement options, including infringement, dilution, and counterfeiting claims. It also underscores the value of an integrated protection strategy combining trade dress with copyright and design patent protection, where feasible... Trade dress basics Broadly, trade dress captures the overall look and general impression of a product or service. It can encompass features such as: size shape colour or colour combinations texture graphics sounds, scents, and flavours motion and moving images particular business techniques the look and feel of a...

Practice Note This Practice Note offers a concise overview of the equity and incentive compensation schemes and agreements that US startups routinely use to recruit and retain essential personnel. Although it focuses on US companies, many of the matters highlighted are equally pertinent to a non- US company in the early phases of development. To effectively advise US startups, and the investors who frequently fund them, it is crucial to understand startup equity and incentive pay structures, and the reasons they may differ from those found in more established businesses. The discussion below broadly surveys remuneration practices among investor-backed, Kickstarter-funded, and bootstrapped startup ventures, where founders aim to scale the company swiftly (and enhance its value) with a view to an exit or liquidity event via an initial public offering ( IPO) or a sale. This environment is...

What is social inflation? Social inflation is a phrase often cited in recent insurance debates, yet it lacks a precise definition. In broad terms, it describes claim costs for defendants or insurers rising faster than general economic inflation. More specifically, it captures the uplift in settlement amounts and jury awards, together with a widening of defendants’ and insurers’ liability exposure, driven by influences beyond the courtroom... Shifts in attitude as the public becomes more alert to social and financial inequalities; Changing views on who ought to shoulder risk and the scope of the duty of care owed to the public; An assertive, organised national plaintiffs’ bar that exchanges knowledge and methods to shape public opinion and potential jurors’ world view, including the use of reptile tactics at trial; Extensive use of social media and technology, such as...

Organisations routinely use equity awards and cash bonuses to motivate key personnel. The opening section of this Practice Note examines principal issues for awards designed to persuade a crucial hire to take up a role with the employer (i.e., a sign-on bonus or sign-on equity awards). The following section considers short- and long-term cash incentives aimed at encouraging executives to stay and/or concentrate on defined performance targets. This Practice Note is organised into the following parts: Sign-on bonuses and sign-on equity awards Short-term cash incentives Long-term cash incentives For guidance on equity incentives that help retain key employees, refer to Practice Notes: Understanding types and taxation of US equity compensation, Designing a US public company equity compensation plan, and Drafting a US private company equity compensation plan. Sign-on bonuses and sign-on equity awards Sign-on bonuses Sign-on bonuses most often arise where an employee would lose equity, deferred...

The Practice Note is organised into these sections: Fundamentals of ESPPs ESPP qualification requirements Optional ESPP terms and design considerations Tax treatment of ESPP awards ESPPs and corporate transactions ESPPs and securities laws Fundamentals of ESPPs An employee stock purchase plan ( ESPP) that satisfies section 423 of the US Internal Revenue Code ( IRC) enables a sponsoring corporation to give employees of the company and participating corporations rights to buy its stock (or stock of a related parent or a related subsidiary) at a price below FMV. These rights are sometimes called stock options or purchase rights, and the framework setting out the terms on which such rights are granted is often described as an offering. In this Practice Note, these tax-qualified employee stock purchase plans are referred to simply as ESPPs; however, not all employee stock...

What does this Practice Note cover? This Practice Note examines transactions that rely on Regulation S under the Securities Act of 1933, as amended (15 USC § 77a) (the Securities Act). Regulation S removes from the section 5 (15 USC § 77e) registration regime offers and sales of securities conducted outside the US. The note provides an outline of Regulation S, addressing the issuer and resale safe harbours, typical Regulation S deal structures, and practical guidance for lawyers working on . What is Regulation S? Under section 5 of the Securities Act, it is unlawful to use any means or instruments of interstate commerce to offer, sell, or deliver a security unless a registration statement for that security has been filed with, and declared effective by, the Securities and Exchange Commission ( SEC). As ‘interstate commerce’ in section 2(a)(7) of the Securities Act (15 USC §...

The key United States ( US) regulators and regulations that govern structured products and securitisations issued outside the US are summarised below. Regulatory bodies Securities and Exchange Commission ( SEC) The SEC, a federal agency, is responsible for the principal US securities laws: the Securities Exchange Act of 1934, the Securities Act of 1933, the Trust Indenture Act of 1939, the Investment Companies Act of 1940, the Investment Advisers Act of 1940 and the Sarbanes- Oxley Act of 2002. Established by the 1934 Act after the 1929 Wall Street crash, it regulates securities markets and stock exchanges, can bring civil actions for breaches of its rules, and may pursue criminal prosecutions alongside law enforcement agencies. Commodity Futures Trading Commission ( CFTC) The CFTC, an independent federal agency, regulates futures and option markets. Its role is to protect market users and the public from fraud,...

Designing equity compensation plans for public companies This Practice Note examines how publicly held companies structure equity compensation plans. Such businesses commonly issue equity awards to senior leaders and other key staff (and, in many cases, even to relatively junior employees) to align their interests with shareholders. Equity compensation covers non-cash remuneration for employees and other service providers, including non-executive directors and contractors. This Practice Note outlines the principal legal and practical considerations associated with these arrangements. Equity awards help reduce cash expenditure, which is particularly appealing for start-ups with limited funds seeking to attract top talent, and they also encourage recipients to engage in the company’s growth. For equity incentive plans relating to privately held companies, see Practice Note: Drafting a US private company equity compensation plan. Types of equity compensation Share options Restricted shares Restricted share units Employee share...

US privately held businesses frequently motivate senior leaders and other pivotal staff with equity awards, aligning their aims with the company’s owners. While these equity arrangements often mirror public company programmes (see Practice Note: Designing a US public company equity compensation plan), important distinctions arise from the shares’ lack of liquidity. Notably, there is now a route for some award holders to postpone income tax for up to five years under US section 83(i) of the Internal Revenue Code ( IRC), introduced by the 2017 tax reforms (section 83(i))... This Practice Note is organised as follows: Legal issues Plan drafting Section 83(i) eligible plans US tax issues Beyond the IRC and the s 409A considerations outlined later, two key US tax topics often relevant to equity awards in private companies are tax‑favoured incentive stock options ( ISOs) and the new section 83(i)...

ARCHIVED: This Practice Note is archived and not maintained. It was originally prepared for Lexis Practice Advisor®, in the US. What is a patent? Under the US Patent Act 1952 ( Patents Act), patents are issued by the US Patent and Trademark Office ( USPTO). A patent owner holds a time-limited right to stop others from practising the claimed invention within the United States. The most common form is the utility patent, typically claiming a tangible thing or a set of steps. Design patents protect the ornamental appearance of an article of manufacture. Plant patents safeguard a plant variety produced through grafting, budding, or comparable methods (rather than by seed). Importantly, eligible subject matter must be stated in the patent claim itself; a disclosure in the specification alone is not enough. See Two- Way Media Ltd v Comcast Cable Communs, LLC, 874 F.3d 1329,...

Relevance of non-qualified deferred compensation arrangements and Section 409A In the United States, deferred compensation schemes are attractive to senior executives and other top earners because they let them delay recognising income and associated taxes until a later year. A qualified arrangement—such as a 401(k) plan—offers one route to defer pay. Yet for executives, these qualified plans have limited utility owing to ceilings on how much can be deferred and other constraints that apply to them. By contrast, non-qualified deferred compensation arrangements have no formal caps on deferrals and are not bound by the various restrictions that govern qualified plans. Although non-qualified plans do not restrict the sums employees may put aside, they are not without hazard. The assets backing the promise must stay available to satisfy the sponsoring employer’s creditors until benefits are ultimately paid, potentially many years or even decades hence. They must also...

What is an LLC and how is it different to other forms of business organisation? A limited liability company ( LLC) is a legal form of business organisation in the US. It is essentially a hybrid structure, blending characteristics of a corporation and a partnership together. Comparable to a UK private limited company, it grants owners limited liability protection, whilst, subject to elections made by the entity, it may potentially be treated as fiscally transparent for tax, much like a partnership. Where an LLC is regarded as, or elects to be, tax transparent, all profits and losses flow directly to its owners—who are members rather than shareholders—and tax is therefore charged on the members instead of the entity itself. Nonetheless, despite the potentially advantageous tax position of LLCs, the treatment of LLC members for tax across different jurisdictions is not always simple in practice. By way of...

This Practice Note sets out essential tips for advising a client weighing a liability management transaction. Amid recurring market swings, issuers across numerous sectors periodically assess options such as debt buy-backs, tender or exchange offers, and consent solicitations. Such transactions enable an issuer to refinance or reorganise outstanding obligations and, in certain circumstances, to satisfy accounting, regulatory, or tax aims. The potential advantages can be considerable, ranging from signalling confidence to the market to avoiding more drastic measures. Extending debt maturities Recognising an accounting gain Deleveraging Securing possible regulatory capital benefits Enhancing financing flexibility Potentially forestalling a deeper restructuring or bankruptcy Demonstrating a positive outlook in an uncertain market environment Selecting the most suitable liability management route is critical, requiring issuer and counsel to weigh multiple considerations, as outlined below. Deciding between repurchases, tender or exchange offers, and consent solicitations will turn on the issuer’s objectives,...

ARCHIVED: This Practice Note has been archived and is not maintained. This Practice Note was originally prepared for Lexis Practice Advisor®, in the US. It addresses trade mark infringement and false designation of origin under the Lanham Act, including standing to sue, the elements needed to prove such claims, and possible remedies (such as injunctive relief, damages, and attorneys’ fees). It also summarises defences commonly raised in trade mark litigation. Trade mark owners may bring proceedings to prevent others from using, imitating, or otherwise harming their trade marks or service marks (collectively, trade marks or marks). Indeed, trade mark owners (and in some cases exclusive licensees) have a legal obligation to monitor and enforce their rights. Failing to do so can result in loss of those rights. Owners should consider issuing a claim when: swift intervention is required to protect the mark from...

This Practice Note This Practice Note outlines the framework for the executive pay deduction cap under IRC, s 162(m), as revised by the Tax Cuts and Jobs Act ( Pub. L. No. 115-97) ( TCJA) and the American Rescue Plan Act ( Pub. L. No. 117-2), s 9708. In general, IRC, s 162(m) limits to $1m the annual deduction a public corporation, or certain other reporting entities, may claim for remuneration paid to designated covered employees. Practitioners should grasp these rules—including the full reach of the TCJA amendments (effective for tax years beginning after 31 December 2017) and ARPA’s expanded covered employee definition (effective for tax years beginning after 31 December 2026)—to help their public and reporting company clients craft senior executive pay packages that reduce unfavourable tax outcomes under IRC, s 162(m). This Practice Note is organised in the following...

ARCHIVED: This Practice Note is archived and no longer updated. It was initially prepared for Lexis Practice Adviser, in the US. It outlines similarities and differences between the protections available for typical categories of IP, such as literary works (copyright and trade secret); marketing imagery, characters and slogans (copyright and trade mark); product designs (design patent, copyright and trade dress) and inventions (patent and trade secret). It addresses coverage and duration, as well as scope and eligibility requirements too. Literary works—copyright versus trade secret protection For information to amount to a trade secret, it must truly be confidential, the proprietor must take steps to preserve that confidentiality, and it must confer a competitive economic benefit on the owner. Trade secrets usually comprise commercial or business information and may endure without limit, provided the secrecy is maintained. Copyright, by contrast, applies to subject matter such as...

ARCHIVED: This Practice Note is archived and no longer updated. It is provided for background reference only. The Customer Code The Finance Industry Regulatory Authority ( FINRA) maintains two Codes of Arbitration Procedure. One is the Code of Arbitration Procedure for Customer Disputes (the Customer Code), which oversees arbitrations between investors and industry participants. For details on starting an arbitration under the alternative code, the Code of Arbitration Procedure for Industry Disputes (the Industry Code), see Practice Note: FINRA—commencing an arbitration under the Industry Code. Starting an arbitration When an investor dispute occurs, FINRA arbitration will be obligatory in defined scenarios. In other situations, the parties may choose to arbitrate under the Customer Code. In every case, claims must be brought within six years of the events underpinning the dispute (the Customer Code, Pt II, r 12206). Under the Customer Code, Pt II, r 12200, FINRA...

ARCHIVED: This archived Practice Note is not being maintained. Today, most global businesses work with third parties, tapping into vital capabilities that help them operate across markets. Yet those relationships can also carry significant corruption exposure, potentially resulting in breaches of the Foreign Corrupt Practices Act ( FCPA). With the right diligence, tailored contractual terms, targeted training, and robust oversight, organisations can manage FCPA risk while still benefiting from third-party contributions to their operations. The FCPA bars corrupt payments made through intermediaries when a company is ‘knowing’ that some or all of the money will be passed to a foreign government official. It is not necessary to have actual knowledge of a third party’s conduct; wilful blindness can be enough to attribute knowledge. In practice, businesses cannot look the other way or disregard indications of possible bribery by those they engage. Agents,...

ARCHIVED: This archived Practice Note is not being maintained. When is a parent corporation liable for the acts of its subsidiaries under the Foreign Corrupt Practices Act ( FCPA)? Under long-standing principles of US corporate law, a parent may be held to account for a subsidiary’s conduct when courts pierce the corporate veil on limited grounds. Two recognised theories support veil piercing, each demanding exacting proof, and judges emphasise that this power should be used reluctantly and with caution. Alter ego Agency Worryingly, the Securities and Exchange Commission ( SEC) has indicated that a parent could face liability for a subsidiary’s misconduct even where the parent lacked awareness of the wrongdoing or did not exercise an improper degree of control over that entity. In the 2013 Ralph Lauren Corporation ( RLC) resolution, the Department of Justice ( DOJ) aligned itself with the SEC’s broader conception of parental...