1. The Legal Angle: Are You Following These Stories?

    For your weekend reading, a look five legal stories we’re following. We think you should do the same:

    Neither standard nor poor… Dept of Justice sues S&P for fraud

    “Last week, the Department of Justice (DOJ) filed a civil suit in the Central District of California against Standard & Poor’s Financial Services (S&P) and its parent company McGraw-Hill. The suit alleges that S&P engaged in a scheme to defraud investors in Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDOs). As noted in the DOJ’s press release, the lawsuit alleged that investors, many of them financially insured institutions, lost billions of dollars on CDOs for which S&P issued inflated ratings that misrepresented the securities’ true risk.” (Bilzin Sumberg

    President Obama outlines his national cybersecurity program

    “The long-awaited cybersecurity executive order (EO), which will ultimately establish national cybersecurity standards for critical infrastructure, was issued by President Obama on February 12, 2013… This EO and accompanying policy directive are intended to launch a multi-year standards-setting, regulatory and legislative process that will result in new cybersecurity standards, regulations, information-sharing channels, and changes in liability for critical infrastructure and government contractors… The EO has the potential to touch upon every sector of the U.S. economy. For the vast majority of U.S. critical infrastructure that is owned or operated by the private sector, the EO could have a profound effect.” (Holland & Knight

    Feds seek to clear out bad seeds in the debt collection industry

    “The Federal Trade Commission’s continuing focus on the debt collection and debt relief industries was clearly demonstrated by several recently announced lawsuits and settlements… The debt collection industry also is facing increased scrutiny from the Consumer Financial Protection Bureau. On January 2, 2013, the CFPB’s final rule defining larger participants of a market for consumer debt collection became effective.” (Ballard Spahr

    New math in the works for student loan debt 

    “The Consumer Financial Protection Bureau reported in 2012 that U.S. borrowers are burdened by more than $1 trillion in student debt, including over $150 billion of private student loans. According to TransUnion, a credit bureau, the average student debt each borrower carries rose 30% in the past 5 years and more than half of student loan accounts are in deferral status. During the same 5 year time span, FICO Labs, a unit of Fair Isaac Corp., which publishes consumer credit scores, found that delinquencies increased by 22%. In an attempt to defuse the next potential ‘debt bomb,’ Sens. Dick Durbin (D-Ill.), Sheldon Whitehouse (D-R.I.) and Jack Reed (D-Ill.) co-sponsored the Fairness for Struggling Students Act in the Senate, and Congressmen Steve Cohen (D-Tenn.) and Danny Davis (D-Ill) introduced the Private Student Loan Bankruptcy Fairness Act in the House.” (Dechert LLP

    California sends confusing signal to startups in the state

    “In Cutler v. Franchise Tax Board … a California Court of Appeal held that the California property and payroll requirements of California’s Qualified Small Business Stock provisions were invalid. These provisions provided a tax deferral or partial exclusion to investors if the companies they invested in had substantially all (80 percent) of their assets and employee costs in California. The court struck down this requirement because it violated the Commerce Clause of the U.S. Constitution. In response to the court’s decision, the Franchise Tax Board (FTB) staff erroneously declared … that it would retroactively tax investors who previously benefited from the Qualified Small Business Stock deferral provisions.

    California is the world leader in startup businesses, but losing this tax incentive would drive more businesses out of the state. Now, rather than expanding this benefit to keep California competitive, investors are receiving notices from the FTB stating that they owe additional taxes, plus interest going back to 2008.” (Reed Smith


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