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Practice/Industry Group Overview
Sullivan & Cromwell's clients include a broad range of the largest U.S. broker-dealers, as well as major non-U.S. broker-dealers and their U.S. subsidiaries. We also serve small and mid-sized firms, and affiliates of insurance, commercial banking and other financial services companies. The Broker-Dealer Regulation Group that serves these clients includes over 10 lawyers, most of them partners, all based in our New York office. These lawyers work closely with colleagues in the Firm's other related practice groups.
S&C gives its broker-dealer clients advice on all regulatory, compliance and securities law matters relating to broker-dealers, including trading, derivatives, research, margin, net capital, clearance and settlement, customer protection, supervisory and reporting requirements under U.S. federal and state securities laws and the regulations of the SEC, FINRA (formerly NASD and NYSE) and major securities exchanges.
The Group advises clients regularly on the applicability of broker-dealer registration requirements, particularly with regard to foreign entities that wish to participate in the U.S. markets, and to unregistered affiliates of registered broker-dealers that wish to engage in securities-related activities. In addition, S&C advises a large number of broker-dealers that are affiliated with bank holding companies on the U.S. banking law requirements that apply to their securities activities.
The Group also monitors developments in regulatory and compliance matters including SEC and FINRA rule proposals.
The Firm regularly represents broker-dealer clients in litigation, arbitration and regulatory enforcement proceedings. For example, the Firm's litigators have represented Goldman Sachs and acted as liaison counsel to 55 underwriter investment banks in the IPO Securities Litigation, one of the largest and most complex securities class actions ever. The Firm also advises broker-dealer clients in connection with regulatory inquiries and internal compliance reviews.
S&C is also able to provide its broker-dealer clients with a full range of corporate, securities, M&A, tax and other advice in connection with their investment banking activities, such as securities underwriting, syndicate trading, restricted stock transactions, block trades and M&A advisory work.
Broker-Dealer Capital Markets
S&C has advised on many of the highest-profile securities transactions within the broker-dealer industry. Notable recent matters include representing:
- Lehman Brothers Holdings/Lehman Brothers Holdings E-Capital Trust I (U.S.) as issuer of US$ 300 million Rule 144A/Reg S Floating Rate Enhanced Capital Advantaged Preferred Securities (E-CAPS) (this first-of-its-kind transaction kicked off the market for a new breed of tax deductible debt-equity hybrids and was named "FIG Innovation of the Year" in 2005 by Euromoney);
- Partners Group Holdings (Switzerland) in its US$ 424 million IPO (2006);
- Thomas Weisel Partners Group (U.S.) in its US$ 103.5 million IPO (2006);
- MF Global (Bermuda ) in its US$ 2.9 billion IPO (2007);
- the underwriters in the US$ 227.7 million IPO of optionsXpress Holdings, Inc. (U.S.) (2005); and
- the underwriters in the US$ 100.6 million IPO of Greenhill & Co., Inc. (U.S.) (2004).
The Firm also regularly represents broker-dealers in a wide variety of securities offerings, including SEC-registered, Rule 144A/Reg S, Reg D and other private offerings, in the United States, Europe and Asia.
Broker-Dealer Mergers and Acquisitions
In the M&A area, S&C frequently advises clients in the acquisition or sale of broker-dealers. In this context, our work includes assisting clients with the regulatory approval process and the conduct of a regulatory "due diligence" review. We have also provided extensive advice to broker-dealers seeking to develop and conduct business over the Internet, with particular emphasis on e-offerings, online trading operations and ECNs.
Recent highlights of our broker-dealer M&A practice include advising:
- Archipelago Holdings in its US$ 10.5 billion merger with the New York Stock Exchange (NYSE) - the largest-ever merger among securities exchanges (2006);
- The Bank of New York (U.S.) in its US$ 2 billion acquisition of the Pershing unit of Credit Suisse First Boston (CSFB) (Switzerland) by The Bank of New York (2003);
- Citadel Investment Group (U.S.) in its acquisition,through its wholly owned subsidiary Citadel Derivatives Group, of a 25% stake in Direct Edge Holding (U.S.) (pending);
- Fox-Pitt, Kelton (U.K.) in its acquisition of Cochran Caronia Waller Securities (U.S.) (2007);
- Goldman Sachs Group (U.S.) in its joint venture with Beijing Gao Hua Securities (China), establishing Goldman Sachs Gao Hua Securities (2004);
- KeyCorp (U.S.) in its US$ 280 million sale of the private client business of McDonald Investments (U.S.) to UBS Financial Services Inc. (U.S.), a unit of UBS AG (Switzerland) (2007);
- the financial advisor to NYSE in NYSE's US$ 10.2 billion acquisition of Euronext (Netherlands) - creating the world's first transatlantic exchange (2007);
- Piper Jaffray Companies in the US$ 815 million sale of its Private Client Branch Network (U.S.) to UBS (Switzerland) (2006);
- RBC Capital Markets (Canada) in its acquisition of the broker-dealer business and certain other assets of Carlin Financial Group (U.S.) for an undisclosed amount (2007); and
- Sumitomo Mitsui Financial Group (Japan) in its US$ 1.6 billion acquisition of SMBC Friend Securities (Japan) (2006).
Electronic Exchanges
The Internet and the development of electronic commerce are rapidly reshaping the electronic marketplace. Sullivan & Cromwell has been involved in some of the most cutting edge issues on this new frontier.
Recent highlights include representation of:
Archipelago Holdings, Inc.
- in its US$ 10.5 billion merger with the New York Stock Exchange (NYSE) - the largest-ever merger among securities exchanges (2006);
- in its acquisition of PCX Holdings Inc. (2006);
- in its US$ 145.6 million common stock offering and IPO and the related conversion of Archipelago's predecessor company from a limited liability company to a corporation (2004); and
- in its merger of equals with REDIBook ECN (2002).
Cantor Exchange
- Cantor Fitzgerald in connection with the establishment and registration of Cantor Exchange, the only exclusively electronic futures exchange in the United States. S&C also represented Cantor Exchange and eSpeed in connection with the first block trading program implemented by a U.S. futures exchange.
Chicago Board Options Exchange
- in developing a futures exchange and in a joint venture with the Chicago Mercantile Exchange and the Chicago Board of Trade in establishing a joint exchange for the trading of single stock futures.
Chicago Climate Exchange
- in its agreement with the International Petroleum Exchange (IPE) to trade European emissions credits on IPE's electronic platform in London.
Enron Online
- UBS AG in its acquisition of the electricity and gas online trading division of Enron (2002).
Intercontinental Exchange, LLC (ICE)
- in its US$ 1.7 billion acquisition of the New York Board of Trade (NYBOT) (2007); and
- in its merger with International Petroleum Exchange PLC (IPE) (2001).
Nasdaq Stock Market, Inc. (NASDAQ)
- the financial advisor to NASDAQ in its US$ 1.88 billion acquisition of Instinet Group Incorporated, L.P. (2005).
NYSE Group Inc.
- the financial advisor to NYSE in NYSE's US$ 10.2 billion acquisition of Euronext (Netherlands) - creating the world's first transatlantic exchange (2007).
TheMuniCenter
- a consortium consisting of Salomon Smith Barney, Morgan Stanley
and Merrill Lynch in connection with the formation of TheMuniCenter, a web-based exchange that will let institutional investors purchase and sell municipal securities online.
Practice Contacts
David B. Harms
New York
P +1-212-558-4000
F +1-212-558-3588
harmsd@sullcrom.com
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