A "How to Guide" to Basic Derivatives and Structured Products

Synopsis

Derivatives are used by most large public and many private companies, in part, to manage risk. This basic course will cover the what, when, where and why companies enter into derivatives; how the basic International Swaps Dealer Agreements (“ISDA”) and credit support agreements (“CSAs”) work; how to avoid common, costly mistakes and unintended consequences when negotiating ISDA contracts; understanding the differences among the three contract types; understanding the differences related to the five classes of underlying assets; structured products linked to common indices, such as the S&P, Russell 2000, individual company stocks and foreign indices; collateral posting and protection issues; bankruptcy and credit downgrade considerations; use of derivatives in M&A; understanding valuation and risk; tax consequences of various derivatives and structured notes; and how the derivatives clearing requirements of the Dodd-Frank Act impact the derivatives market and your clients.



Outline

I. Introductions 
    A. Speakers and Topics
II. Basics of Derivatives and Structured Products 
    A. What Are Derivatives? 
    B. Why Buy and Sell Derivatives?
    C. Structured Products 
III. Common Issues When Analyzing Structured Products 
    A. What Am I Selling and Why Am I Selling It? 
    B. To Whom Am I Selling? 
    C. Disclosure and Registering With the SEC 
    D. How Am I Selling It? 
    E. Hidden Traps 
IV. The Use of Derivatives 
    A. Documenting Over-the-Counter Derivatives 
    B. ISDA Master Agreement 
    C. Confirmations and The Schedule
    D. Swaps
    E. Options and Forwards 
V. Key Considerations in Derivatives and Structured Products and Collateral 
    A. Current Method of Obtaining Collateral
    B. Uncleared Margin and Mechanisms for Swaps 
    C. End Users 
    D. Bankruptcy and Credit Downgrade Considerations 
        1. Guarantees 
        2. Collateralization, Jurisdiction, and Rehypothecation
        3. ISDA Credit Support Provisions - Part I
        4. ISDA Credit Support Provisions - Part II 
    E. Derivatives in M&A     
    F. Tax Implications in the Derivatives Space 
VI. Derivatives and Considerations Related to New Regulations 
    A. Introduction of Topic 
    B. Overview of Regulatory Environment     
    C. Working With Multiple Regulators 
    D. Exclusions From Dodd-Frank     
    E. Writing the Rules 
    F. Missed Statutory Deadlines 
    G. Title VII
    H. Mandatory Clearing
    I. Does This Increase the Cost of Transactions?    
    J. Relationships and Business Conduct Standards
    K. Understanding the Product
VII. Audience and Panel Discussions
    A. End User's Perspective on Valuation
    B. Wrap-Up
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Speakers / Authors:

Photo of Daniel N. Budofsky

Daniel N. Budofsky
Davis Polk & Wardwell LLP

Daniel N. Budofsky is a partner in Davis Polk & Wardwell’s Derivatives and Structured Products Group and Financial Institutions Group. He advises financial institutions, corporations and hedge funds on financial products in domestic and international transactions and has worked on numerous convertible, exchangeable and over-the-counter derivatives and financing transactions, including fund derivatives transactions, as well as a variety of complex structured products.

Mr. Budofsky has acted as counsel to the Securities Industry and Financial Markets Association in connection with financial and derivatives reform and the International Swaps and Derivatives Association in connection with the drafting of the 2006 Fund Derivatives and the 2010 Equity Derivatives Definitions project.

Mr. Budofsky is admitted to practice in New York. He received his J.D., Order of the Coif, in 1990 from New York University School of Law, and his B.S. in 1979 from Cornell University.

Photo of Ilene K. Froom

Ilene K. Froom
Jones Day

Ilene K. Froom is partner at Jones Day. Ms. Froom advises on, negotiates, and structures derivatives transactions and related documentation. She analyzes contractual restrictions, securities law, accounting, tax, bankruptcy, recharacterization, local law, credit, and risk allocation issues.

Prior to joining Jones Day, Ms. Froom worked at JPMorgan Chase Bank where she focused on onshore and offshore equity derivatives transactions, including hedging and monetization strategies, such as collars, collar/loans, and prepaid variable forwards; total return, swaps volatility and variance swaps, dividend swaps, correlation, and dispersion trades; access products; and customized transactions. She also has an extensive background in fixed income products, including swaps, swaptions, straddles, caps, floors, collars, range accruals, credit default swaps, CDOs, and FX options and forwards.

Ms. Froom is extremely knowledgeable about ISDA documentation and is active in ISDA derivatives. She was heavily involved in the 2002 ISDA Equity Derivatives Definitions and the 2011 ISDA Equity Derivatives Definitions. She is a former chairperson of the New York State Bar Association's Derivatives and Structured Products Committee and is currently chairperson of the Membership Committee of the NYSBA's Business Law Section. She frequently lectures on derivatives and has presented at conferences for ISDA, PLI, New York City Bar, and ACI. She also teaches classes on interest rate products and on the ISDA Master Agreement at New York University's School of Continuing and Professional Studies.

Ms. Froom is admitted to practice in New York. She received her J.D. in 1993 from New York University, and her B.A., magna cum laude, in 1986 from Brandeis University.

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Jason M. Hoberman
Société Générale

Jason M. Hoberman is the Deputy Head of Legal for Structured Products and Cross-Asset Solutions in Société Générale’s New York office and chairs the firm’s Global Markets Legal Practice Group. Mr. Hoberman has over 10 years’ experience advising on complex financial transactions and his areas of expertise include derivatives and structured products, hedge funds and hedge fund-linked investments and reinsurance. He regularly advises on matters related to securities law, ’40 Act/Adviser’s Act, broker/dealer regulation, ERISA/pension plan law, insurance law and bank regulation.

Mr. Hoberman specializes in complicated and novel structures, and has a great deal of experience in various investment company structures, securities issuance vehicles, proprietary indices and other strategy-based investments, insurance/reinsurance transactions, securitization structures, collateral structures, among others. He also advises on the Dodd-Frank Act, with a particular focus on the Volcker Rule and the rules governing investment advisers.

Mr. Hoberman is a member of the New York State Bar Association’s Committee on Derivatives and Structured Products, and has served on several ISDA, SIFMA and IIB working groups. He has spoken at several industry conferences on derivatives, structured products and investment companies and his article, “A Simple Roadmap for a Complicated Transaction,” was recently published in Business Law Today. Prior to joining Société Générale, Mr. Hoberman was an associate at the law firm of Sullivan & Cromwell LLP, focusing on securities transactions and other transactions involving financial institutions including mergers and acquisitions.

Mr. Hoberman holds a J.D. from Columbia University School of Law and a B.A, magna cum laude, from Emory University.

Photo of N. Adele Hogan

N. Adele Hogan
Sheppard Mullin Richter & Hampton LLP

Adele Hogan is a member of the Corporate practice group in Sheppard Mullin Richter & Hampton's New York office.In the securities area, Ms. Hogan has worked for underwriters and issuers in a wide array of industries on offerings of diverse types of securities, medium-term note programs, 144A offerings, debt tenders, and consent solicitations. She regularly advises on SEC reporting, disclosure and corporate governance issues. 

Her work in the restructuring area involves diverse industries, including airlines, automotive, energy and utilities, financial institutions, gaming, hotels and leisure, real estate, and retail. In the M&A area, she has led public company tender offers, acquisitions and divestitures, going-private transactions, spin-offs and private equity deals. Throughout her career, Ms. Hogan has worked on more than 200 deals totaling over $250 billion. 

Ms. Hogan is admitted to practice in New York and before the U.S. Supreme Court. She earned her J.D. from Cornell University in 1985, and a B.A, also from Cornell University, in 1982.

Photo of Kenneth L. Josselyn

Keenneth L. Josselyn
Goldman Sachs

Kenneth L. Josselyn is a Managing Director and General Counsel - Finance and Corporate for Goldman, Sachs & Co. He practiced with Sullivan & Cromwell in New York City and London prior to joining Goldman Sachs. At Goldman Sachs, Mr. Josselyn served as General Counsel of the Investment Banking Division. Mr. Josselyn is a former member of the Corporate Financing Committee of FINRA, past Chairman of the Capital Markets Committee of the Securities Industry Association and a member of the Retail Structured Products Committee of SIFMA.

Mr. Josselyn graduated from Harvard College and Harvard Law School.

Photo of Gary E. Kalbaugh

Gary E. Kalbaugh

Gary E. Kalbaugh is Director and Assistant General Counsel at ING Financial Holdings Corp. Mr. Kalbaugh is also a Special Professor of Law at the Maurice A. Deane School of Law at Hofstra University, teaching banking law and derivatives law.

Previously, he was an Executive Director, Counsel and Chief US Data Protection Officer at WestLB AG, chairing the Dodd- Frank and Underwriting Task Forces. He has served on the New York City Bar Association’s Committee on the Regulation of Futures and chaired the Over-the-Counter Derivatives and CLE Sub-Committees. He is currently a member of the New York City Bar Association’s Banking Law Committee. Additionally, Mr. Kalbaugh is a member of the New York State Bar Association’s Derivatives and Structured Products Law Committee and a Board member of the Center for Transnational Legal Studies, the organization responsible for publishing the treatise “Regulation of Foreign Banks.” He is a frequent speaker and commentator on derivatives and banking law topics, chairing the New York City Bar Association’s 2012 Futures and Derivatives conference.

Mr. Kalbaugh is admitted to practice in New York. He is a 1998 graduate of the National University of Ireland, University College Cork Bachelor of Civil Laws, cum laude, and he received his Master of Laws at the University of Pennsylvania in 1999.

Photo of Brian S. Korn

Brian S. Korn
Pepper Hamilton LLP

Brian S. Korn is of counsel in the Corporate and Securities Practice Group of Pepper Hamilton LLP, resident in the New York, Los Angeles and Orange County offices. Mr. Korn represents issuers and underwriters in investment banking and capital markets transactions, including transactions involving equity, debt, hybrid/convertible and preferred securities, derivatives and foreign exchange. He has executed several IPOs and other equity value monetization transactions, such as spin-offs, split-offs and carve-out transactions.

He also has extensive experience in sponsor leveraged buy-outs and bank/bond acquisition financing. He has executed and/or advised on transactions valued in the hundreds of billions of dollars. Mr. Korn has particular experience executing transactions, including cross-border financings and joint listings, in the following industries: consumer/retail, financials/asset management, health care/ pharmaceutical, industrial, metals/mining/steel, power, real estate/REITs and technology/Internet/e-commerce. He advises investment banks on equity execution issues, including roadshow and pricing mechanics, FINRA allocation and bookbuilding regulations, Regulation M restrictions, and aftermarket stabilization and syndicate short covering. He also advises corporate clients on SEC annual, quarterly and current reporting, and advises shareholders, corporate insiders and hedge funds on Sections 13 and 16 ownership filings, Rule 144 sales, 10b5-1 managed liquidation plans and 10b-18 corporate repurchases.

Mr. Korn also has extensive experience dealing with securities and broker-dealer regulators, including the SEC, FINRA and the SROs, and has held leadership positions advocating and implementing financial reform measures, including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the JOBS Act of 2012.

Mr. Korn is admitted to practice in New York and California. He is a graduate of Northwestern University School of Law where he received his J.D. in 1997, and was note and comment editor of the Northwestern Journal of International Law & Business. During law school, he completed an externship with the Honorable Stephen Reinhardt of the U.S. Court of Appeals for the Ninth Circuit. He graduated with honors and distinction in general scholarship from the University of California, Berkeley with his B.A. in 1993.

Photo of Anna T. Pinedo

Anna T. Pinedo
Morrison & Foerster LLP

Anna T. Pinedo has concentrated her practice Morrison & Foerster LLP on securities and derivatives. She represents issuers, investment banks/financial intermediaries, and investors in financing transactions, including public offerings and private placements of equity and debt securities, as well as structured notes and other structured products. In the derivatives area, Ms. Pinedo counsels a number of major financial institutions acting as dealers and participants in the commodities and derivatives markets.

Ms. Pinedo advises on structuring issues, as well as on regulatory issues, monetization, and hedging techniques. Her work focuses on foreign exchanges, equity and credit derivatives products, and structured derivatives transactions. Ms. Pinedo has experience with a wide range of transactions and structures, including collars, swaps, forward and accelerated repurchases, forward sales, hybrid preferred stock, equity- and creditlinked notes, and off-balance sheet structures. Ms. Pinedo also has advised derivatives dealers regarding their Internet sites and other Internet and electronic signature/delivery issues.

Ms. Pinedo is a member of the American Bar Association's Committee on the Federal Regulation of Securities, a member of the subcommittee on Disclosure and Continuous Reporting, a member of the subcommittee on Securities Registration, and a member of the task force on the future of securities regulation. She has participated in the drafting committee for the ABA's comment letters on such topics as securities offering reforms, revisions to accelerated filing, and smaller public company proposals. Ms. Pinedo also is a member of the ABA Committee on Regulation of Futures and Derivatives Instruments, and a member of the George Washington University Center for Law, Economics & Finance Advisory Board.

Ms. Pinedo is admitted to practice in New York. She received her J.D. in 1993 from University of Chicago Law School, and her B.S.F.S. in 1990 from Georgetown University.

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Details

Course Code : 773101
Release Date : 5/20/2013 12:00:00 AM
Recorded Date : 1/23/2013
Length : 2hr 39min
Format Type : Video

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