The focus of securities litigation broadened in 2011, yet the credit crisis remains a source of important cases and a driving factor in enforcement. This Ross Roundtable, co-sponsored by NYU's Vincent C. Ross Institute of Accounting Research and NERA Economic Consulting, will bring together a panel of top experts from a range of perspectives to examine in-depth recent developments in shareholder litigation and regulatory enforcement, the impact of regulatory reform, and current academic research. NERA Senior Vice President Dr. John Montgomery and Vice President Dr. James Overdahl will both participate in the discussion, and Senior Vice President Dr. Elaine Buckberg will serve as moderator, with host NYU Stern School Professor Baruch Lev, Director of the Vincent C. Ross Institute of Accounting Research. Other panelists will include George Canellos, Director of the SEC's New York Regional Office; Jonathan Streeter, Dechert LLP and former Deputy Chief of the Criminal Division at the US Attorney's Office for the Southern District of New York; Jonathan Macey, Yale Law School; Michele Rose, Latham and Watkins LLP; Mary Billings, NYU Stern School of Business; Mark Kornfeld, Baker and Hostetler LLP; and Hilary Williams, UBS Investment Bank.

January 2012 marks the 10th anniversary of the opening of NERA’s Tokyo office. To celebrate this milestone, we are pleased to host a seminar covering a broad range of our practices. NERA provides practical and realistic solutions through innovative application of microeconomic frameworks to complex litigation and regulation issues in the areas of international transfer pricing, securities and finance, antitrust and competition policy, intellectual property, energy, telecommunications, and healthcare.

With increasingly stringent laws and regulations in an increasingly globalized economy, companies are facing more involvement in litigation and disputes, and it has become critical for companies to secure fair and reasonable benefits from these challenges. NERA has supported these companies by providing quantitative and objective analyses to resolve complex legal problems.

In this seminar, our experts will explain how economic analysis can provide practical solutions to such problems by providing examples of NERA’s experience in Japan with international transfer pricing, securities and finance, antitrust, intellectual property, and international arbitration cases.

To attend this free seminar, please reply by February 21 to infotokyo@nera.com.

This annual conference, to be held in Gainesville, Florida on 15-16 February 2012, brings together key leaders in industry and academia, primarily from Florida and the Southeast, to discuss issues facing utility service providers, policymakers, and regulatory agencies. This year's conference will cover a number of timely topics, including the ongoing battles in the energy, telecommunications, and water industries and whether these battles are necessary or merely legacies from previous eras; whether public priorities are based on realistic views; and new technologies, social developments, and information that should be considered by decision-makers. NERA Vice President Edward Kee has been invited to participate in a session on the future of the nuclear energy industry.

To learn more or to register for this event, please visit the PURC website.

NERA Vice President Dr. James Overdahl, a former Chief Economist at both the US Securities and Exchange Commission and the US Commodity Futures Trading Commission, has been invited by George Washington University to discuss his personal view of the world of quantitative finance. The recent explosive growth in quantitative finance has led mathematics, physics, computer science, and engineering students of all levels to wonder whether a career or an advanced degree in quantitative finance is right for them. With the rapid increase in sophisticated quantitative and computational techniques employed in financial firms, there has been increasing demand for students with highly quantitative backgrounds to work in the financial field and an increase in advanced degree programs covering these topics. Dr. Overdahl will share his professional experiences, engage in a moderated discussion, and participate in a Q&A session with the students.

Learn more about this event via the IAFE website.

NERA Director Dr. Francesco Lo Passo will deliver a presentation on natural gas distribution at a forum to be held in Milan on 10 February 2012. The seminar will focus on the new rules and deadlines for the assignment of Italy's local public services, as well as on the reform of natural gas distribution services. Dr. Lo Passo's presentation, "Regulated Revenues and Determination of Natural Gas Distribution VIR," will examine a number of critical issues in the new regulations: the calculation of the regulated revenues of distribution, metering, and sale activities; operating expenses, depreciation, and remuneration of recognized investments for tariff setting; concession grant and remuneration of the assets of shippers and municipalities; the Regulatory Asset Base (RAB) and deduction of public contributions; ownership of assets; value of assets at the end of the concession period; and tariff equalization.

This Law Seminars International conference, to be held in Las Vegas on 2-3 February 2012, will examine how recent challenges -- including environmental requirements, aging infrastructure, volatile fuel prices, new generation and transmission projects, smart grid issues, and new technologies to deal with greenhouse gas emissions -- are affecting the current ratemaking environment for regulated gas and electric companies. On the first day of the conference, NERA Senior Consultant Kurt Strunk will deliver a presentation entitled "Marginal Cost Pricing for Rate Design: Is It Still Reasonable When There is No New Generation Needed for a Period of Time?" Mr. Strunk will present arguments and decisional trends on various approaches to assessing demand components for future generation. On the second day, Senior Vice President Dr. David Harrison will participate in a session entitled "Air Quality Regulation: What Are the Prospects for New EPA Rules? What are the Ratemaking Implications?" The session will address recently resolved and currently pending issues in rulemaking and enforcement appeals, decisional trends and the extent to which they provide guidance for utility planners and regulators, and legislative developments. Dr. Harrison will discuss the implications of these regulations for issues likely to come before Public Utility Commissions, including potential plant retirements, capital and operating cost increases, and impacts on electricity rates.

Learn more or register for this event via the LSI website.

New York -- NERA Economic Consulting, a leading global provider of economic advice and analysis in business, legal, and regulatory matters, congratulates NERA Vice President Dr. Elizabeth M. Bailey on her appointment as Executive Director of the Energy Institute at the Haas School of Business. Dr. Bailey will remain affiliated with NERA as a Special Consultant with the firm.

"Dr. Bailey has been an invaluable asset to NERA and its clients over the past 14 years," said NERA President Dr. Andrew Carron. "I join everyone at NERA in congratulating Liz on her appointment, and looking forward to continuing to work with her in her new role. The Energy Institute at Haas is fortunate to have someone with Liz's experience, talents, and intellect serving as its Executive Director."

The Energy Institute at Haas is a joint venture of the Haas School of Business and the U.C. Energy Institute that brings together research and curricular programs on energy business, policy, and technology commercialization. In the newly created Executive Director position, Dr. Bailey will work to expand the Energy Institute's curricular and research activities. She will engage in applied research on energy and environmental issues to support the business and policy communities, and develop and coordinate the curriculum for MBA and undergraduate students.

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world’s leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

NERA's clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world's largest economic consultancies. With its main office in New York City, NERA serves clients from more than 20 offices across North America, Europe, and Asia Pacific.

Toronto -- Securities class action filings in Canada reached their highest level to date in 2011 with 15 new filings, according to NERA Economic Consulting's annual report, Trends In Canadian Securities Class Actions: 2011 Update. The previous high was 12 filings in 2008.

Driving this increase in filings are so called "Bill 198" cases, which are those involving claims in respect of an issuer’s continuous disclosure obligations pursuant to PartXXIII.1 of the Ontario Securities Act (OSA) and analogous sections of the other provincial securities acts. Nine of the 15 cases filed in 2011 were Bill 198 cases, compared to the seven filed in 2010. A total of 35 Bill 198 cases have been filed since the new provisions came into force in 2005. Of these, 24 remain unresolved, 10 have settled, and one has been dismissed.

"The uptick in securities class actions filings observed since 2008 is clearly not a transient phenomenon," said NERA Senior Vice President and Trends co-author Mark Berenblut. "This trend has been driven by filings of Bill 198 cases, which account for more than two-thirds of the cases filed between 2008 and 2011."

"This upward trend seems likely to continue at least through 2012. Several factors may influence the number of filings and the size of settlements in the future, including future rulings in leave applications, certification motions, and any trial judgments, as well as the evolving landscape of US class actions involving foreign companies and investors following the US Supreme Court decision in Morrison," added NERA Vice President and Trends co-author Brad Heys.

Filings against Chinese Companies

Three of the new filings during 2011 were made against Chinese companies whose shares trade on the TSX or TSX Venture Exchange. These filings are a reflection of one of the major trends driving class action filings in the United States last year. The filings in Canada include the case against Sino-Forest—one of the highest-profile suits brought against Chinese companies on either side of the border.

Additional Securities Class Action Trends

Other key findings from the report include:

• There are 45 active Canadian securities class actions as of 31 December 2011. These cases represent a total of approximately CAN$24.5 billion in outstanding claims.
• Of the six non-Bill 198 class action filings made in 2011, one involved only prospectus claims, one is related to a takeover bid, two involved allegations related to the management of investment funds, and two involve allegations of a Ponzi scheme.
• As noted in previous annual reports, Canadian companies face the risk of class action litigation in the United States, with parallel actions in Canada. In 2011 five Canadian-domiciled companies were named as defendants in six securities class action filings in the US, up from the three cases filed in each of 2009 and 2010, but down from the eight cases filed in 2008.
• Two cases settled in 2011 for total payments by defendants of $58.6 million. This includes the actions against Norbourg Asset management ($55 million) and Redline Communications Group ($3.6 million).
• Ontario continues to be the venue for the majority of Canadian shareholder class action filings. In 2011, 12 of the 15 new cases were filed in the province.
• Five of the 15 Canadian securities class actions filed in 2011 were brought against companies in the minerals sector and four were brought against companies operating in the finance sector. Two were brought against forestry companies.
• In 2011, the average time to filing was about 10.5 months from the end of the proposed class period. However, the median time to filing cases filed was significantly lower in 2011 at just under three months, down from approximately twelve months for cases filed in 2010.

Class Action Trend Series

NERA has been analyzing trends in securities class actions for more than 15 years. In addition to this Canada Trends report, the firm produces two US Trends studies annually, and reports for the UK, Australia, Japan, and Italy.

This year-end study was authored by NERA Economic Consulting Senior Vice President Mark Berenblut and Vice President Bradley Heys.

Trends In Canadian Securities Class Actions: 2011 Update may be downloaded from: http://www.nera.com/67_7596.htm.

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For nearly half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world's leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

NERA's clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world's largest economic consultancies. With its main office in New York City, NERA serves clients from over 20 offices across North America, Europe, and Asia Pacific.

Securities class action filings in Canada reached their highest level to date in 2011, with 15 new filings, according to this newly released edition of NERA's study,  Trends In Canadian Securities Class Actions: 2011 Update. The previous high was 12 filings in 2008.

The study's co-authors, Vice President Bradley A. Heys and Senior Vice President Mark L. Berenblut, report that driving this increase in filings are so called "Bill 198" cases, which are those involving claims in respect of an issuer's continuous disclosure obligations pursuant to PartXXIII.1 of the Ontario Securities Act (OSA) and analogous sections of the other provincial securities acts. Nine of the 15 cases filed in 2011 were Bill 198 cases, compared to the seven filed in 2010.

The study also notes that three of the new filings during 2011 were made against Chinese companies whose shares trade on the TSX or TSX Venture Exchange. These filings are a reflection of one of the major trends driving class action filings in the United States last year. The filings in Canada include the case against Sino-Forest -- one of the highest-profile suits brought against Chinese companies on either side of the border. There are 45 active Canadian securities class actions as of 31 December 2011. These cases represent a total of approximately CAN$24.5 billion in outstanding claims.

NERA has been analyzing trends in securities class actions for more than 15 years. In addition to this Canada Trends report, the firm produces two US Trends studies annually, and reports for the UK, Australia, Japan, and Italy.

If casual observation is an accurate indicator, consumers make their mobile purchasing decisions based solely on the type of mobile phone that mobile service providers are offering as part of a bundle of services. This raises the question of whether other service bundle components matter to consumers. In light of increased competition and saturation in the US mobile sector, gaining a deeper understanding of consumer choice is critical not only for the development of effective market strategies but also for policymaking and antitrust investigations. Surprisingly, although there is a large literature addressing various aspects of mobile demand, no prior study has examined this topic from a mobile service bundle perspective. This study, by NERA Vice President Dr. Christian Dippon, uses a stated-preference survey to fill this gap in the literature. It offers direct insights into the demand determinants for mobile service bundles and how subscribers trade off the various bundle components. The design for the conjoint analyses incorporates efficient survey design, which promises most accurate parameter estimates. It is the first application of efficient survey design theory to telecommunication services. It is also one of the first practical applications of this innovative concept.

The fitted model reveals several interesting competitive and public policy findings. In terms of competition, the fitted model explores several competitive strategies, simulating market share gains and losses from changes in attribute levels and calculating demand elasticities for specific bundle components. This analysis reveals that only certain pricing strategies are effective. It also demonstrates that a combinatorial strategy might be most effective. Specifically, decreasing mobile phone prices, increasing term lengths, and increasing the monthly recurring charge increases subscriber revenue in addition to gaining market share. In terms of public policy, the study finds that regulators must examine market behavior and alleged market failures in terms of service bundles. Considering individual bundle attributes on a standalone basis, which is currently the common practice, yields incorrect results. Finally, the fitted model highlights the importance of making additional radio spectrum available to mobile service providers.

As the number of Canadian securities cases continues to grow, issues regarding the materiality of alleged misrepresentations are likely to arise more frequently. Reporting issuers who make misrepresentations to the market may face liability under Canadian securities laws if those misrepresentations are found to be material. Where a misrepresentation can be shown to be immaterial, there is no liability. While in some cases, whether an alleged misrepresentation was material or not may appear to be obvious on its face, in other cases materiality may not always be so obvious. In this article from The Canadian Class Action Review, NERA Vice President Bradley A. Heys describes some of the ways in which economic experts assist counsel, their clients, and the trier of fact by using the tools of finance and valuation theory combined with econometric analysis to provide a relevant and helpful framework for addressing questions of materiality.

New York -- The Securities and Exchange Commission (SEC) reached a total of 682 settlements in fiscal year 2011 (FY11), almost unchanged from 680 settlements in fiscal year 2010, according to NERA Economic Consulting’s biannual report SEC Settlement Trends: 2H11, released today.

Settlement Allegation Trends

While the total number of FY11 settlements remained relatively constant over the previous fiscal year, there has been a substantial shift in the composition of allegations. Since FY09, Trends authors have observed an increase in settlements with financial services firms for misrepresentations to customers or misappropriation of funds, and an offsetting decrease in settlements relating to public company misstatements.

The three-year rise in the percentage of SEC settlements involving misrepresentations or misappropriation by financial services firms suggests a shift in the SEC’s enforcement focus since the financial crisis began and the Madoff fraud was revealed. These types of settlements accounted for 41.6% of all SEC settlements in FY11, as compared to the FY03-08 average of 23.7%. Illegal offering and market manipulation cases were the second most common in FY11, representing 27.3% of settlements, the highest level since 2005. Public company misstatement settlements continued to decline for a fourth consecutive year, to 10.4% of total settlements, the lowest level since Sarbanes-Oxley ("SOX") was passed.

Relative to the previous fiscal year, the SEC reached 24% more settlements with companies in FY11 and 7% fewer settlements with individuals. This shift in FY11 does not appear indicative of a multi-year trend, as Trends authors have observed similar fluctuations in company and individual settlements in previous years.

Trends in Settlement Values

Median settlement values with companies nearly doubled from $800,000 in FY10 to $1.47 million in FY11, near the post-SOX high of $1.5 million in FY06. Median settlement values for individuals were $175,000 in FY11, a 35% increase from the previous post-SOX high of $130,000 in FY08. Although high-value settlements with companies declined––an exception to the overall trend of increasing settlement values––high-value settlements with individuals reached post-SOX highs, when measured at the 75th and 90th percentiles. This result is consistent with recent statements by SEC officials emphasizing individual accountability for actions taken by individuals responsible for corporate decisions.

"The data from 2011 show the impact of settlements for conduct occurring during the financial crisis," said NERA Vice President and Trends co-author Dr. James A. Overdahl. "Given recent statements made by senior SEC officials emphasizing individual accountability, we may see more individual settlements arising from these cases. In addition, the recent court decision failing to approve the SEC's proposed settlement with Citigroup Global Markets and the broader implementation of Dodd-Frank in the year ahead may have far-reaching, but at this point unpredictable, implications for settlement trends in the months and years ahead."

Ten Largest FY 2011 Settlements

 

Settling Defendant	Total
Milowe Allen Brost & Gary Allen Sorenson	$310 million
J.P. Morgan Securities LLC	$154 million
U.S. Pension Trust Corp. & U.S. College Trust Corp.	$113 million
Morgan Asset Management & Morgan Keegan & Co. Inc.	$100 million
Jacob “Kobi” Alexander, co-founder, Comverse Tech.	$54 million
J.P. Morgan Securities LLC	$51 million
Johnson & Johnson	$49 million
UBS Financial Services Inc.	$47 million
Alcatel-Lucent, S.A.	$45 million
Joseph P. Nacchio, former CEO, Qwest Communications International, Inc.	$45 million

SEC Settlement Trends Report Series
 
NERA has developed a proprietary database of settlements and judgments in SEC enforcement actions since SOX by reviewing every litigation release and administrative proceeding document published since 21 July 2002. You can download the latest report, SEC Settlement Trends: 2H11, and find historical SEC settlements data and previous SEC settlements trends reports at www.SecuritiesLitigationTrends.com.
 
This report is authored by NERA Senior Consultant Dr. Max Gulker, Senior Vice President Dr. Elaine Buckberg, and Vice President Dr. James A. Overdahl.

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world’s leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

NERA's clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world's largest economic consultancies. With its main office in New York City, NERA serves clients from more than 20 offices across North America, Europe, and Asia Pacific.

The latest report from NERA's ongoing analysis of trends in Securities and Exchange Commission (SEC) enforcement action settlements finds that the SEC reached a total of 682 settlements in fiscal year 2011 (FY11), almost unchanged from 680 settlements in fiscal year 2010. However, while the total number of FY11 settlements remained relatively constant, there has been a substantial shift in the composition of allegations. Since FY09, Trends authors have observed an increase in settlements with financial services firms for misrepresentations to customers or misappropriation of funds, and an offsetting decrease in settlements relating to public company misstatements.

The authors -- Senior Consultant Dr. Max Gulker, Senior Vice President Dr. Elaine Buckberg, and Vice President Dr. James A. Overdahl -- note that the three-year rise in the percentage of SEC settlements involving misrepresentations or misappropriation by financial services firms suggests a shift in the SEC's enforcement focus since the financial crisis began and the Madoff fraud was revealed. These types of settlements accounted for 41.6% of all SEC settlements in FY11, as compared to the FY03-08 average of 23.7%. Illegal offering and market manipulation cases were the second most common in FY11, representing 27.3% of settlements, the highest level since 2005. Public company misstatement settlements continued to decline for a fourth consecutive year, to 10.4% of total settlements, the lowest level since Sarbanes-Oxley was passed.

The report's findings are informed by NERA's proprietary database of settlements in SEC enforcement actions, which is based on litigation releases and administrative proceeding documents. SEC Settlement Trends: 2H11, historical SEC settlements data, and previous SEC settlement trends reports can be viewed on NERA Economic Consulting's Securities Litigation Trends website at www.securitieslitigationtrends.com.

New York -- NERA Economic Consulting welcomes Dr. Fabrizio Hernández on his return to the firm after serving as Secretary of State for Energy since January 2011 within Spain's Ministry of Industry, Tourism, and Trade.
 
Dr. Hernández originally joined NERA in 1997, where he held the position of Associate Director at the time of his Ministry appointment. He now rejoins the firm in the same position.
 
Working from NERA's Madrid, London, and Brussels offices, Dr. Hernández will be applying his expertise on behalf of clients primarily across Europe and Latin America, focusing on international arbitration, commercial damages, valuation, infrastructure planning and development, and economic regulation.
 
"We are pleased that Fabrizio has returned to NERA," said NERA Economic Consulting President Dr. Andrew Carron. "His economic expertise and broad experience in numerous sectors of the economy have always brought real value to our clients."

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world’s leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

NERA's clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world's largest economic consultancies. With its main office in New York City, NERA serves clients from more than 20 offices across North America, Europe, and Asia Pacific.

New York -- NERA Economic Consulting, a leading global provider of economic advice and analysis in business, legal, and regulatory matters, has appointed Senior Vice President Dr. Marcia Kramer Mayer as the new Chair of its Global Securities and Finance Practice. Dr. Robert Mackay, who preceded Dr. Mayer as Practice Chair, will remain with the firm as Senior Vice President.

"On behalf of all of us at NERA, I would like to thank Robert for his exceptional leadership of the Practice over the last two years," said NERA President Dr. Andrew Carron. "In a time of great change in the securities and finance industry, he has successfully moved the Practice into new geographies and added new capabilities of great value to our clients. With her intellect, vision, and long track record of success as an economist and consultant, I’m confident that Marcia will continue to move the Practice forward as a recognized leader in its field."

Dr. Mayer has been affiliated with NERA for 20 years, working on a wide variety of securities and finance projects, with special expertise in cases involving credit crisis allegations, accounting restatements, public offerings, stock acquisitions, FDA issues, market manipulation, insider trading, Ponzi schemes, and transactions-level data. She has applied her expertise in legal and regulatory cases, and as an advisor to companies and regulatory bodies. Before joining NERA, Dr. Mayer was Vice President of Research at the American Stock Exchange.

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world’s leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

NERA's clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world's largest economic consultancies. With its main office in New York City, NERA serves clients from more than 20 offices across North America, Europe, and Asia Pacific.

NERA Special Consultant Dr. William E. Taylor and MIT Department of Economics Professor Dr. Jerry Hausman presented a paper on telecommunications deregulation at the American Economic Association's annual meeting, held in Chicago on 6-8 January 2012. The paper was presented during a session entitled "In Remembrance of Alfred E. Kahn: Fred Kahn's Impact on Deregulation and Regulatory Reform." The late Dr. Kahn was a Cornell University Professor, a former advisor to President Carter, the "father of airline deregulation," and a longtime Special Consultant to NERA. This paper discusses how the telecommunations industry was greatly influenced by Dr. Kahn's many publications, his colleagues, students, and admirers, and his numerous testimonies, reports, and affidavits. The paper will appear in the May American Economic Review Papers and Proceedings.

Pursuing and Defending Investors, Issuers, Underwriters and Other Stakeholders in MBS Claims

NERA Senior Vice President Dr. Faten Sabry presented as part of this live 90-minute CLE webinar on recent trends involving residential and commercial mortgage-backed securities suits and the complexities involved in representing the various stakeholders. Dr. Sabry discussed recent trends in MBS litigation, and also provided an economic perspective of the RMBS litigation. Other presenters included Murphy & McGonigle Partner James K. Goldfarb and Christopher Lometti, Of Counsel with Cohen Milstein Sellers & Toll.
 
Specific questions addressed by the presenters include:

• What are the bases for suits regarding mortgage-backed securities?
• What challenges do plaintiffs' counsel face in pursuing MBS claims?
• How will the FHFA's suits impact the future of MBS litigation?
• What are the most recent developments in settlement of MBS suits?
• How will the recent New York court rulings on class certification impact class litigation of MBS claims?

The presentations were followed by an interactive Q&A. Learn more here.

The admission by Japan's Olympus Corporation of a JPY 135 billion (US$1.8 billion) accounting scandal -- and the dramatic drop in the company's share price since news of the irregularities became public -- leave little doubt that litigation will result. In this article from Law360, NERA Vice Presidents Paul Hinton and Makoto Ikeya examine the history of the Olympus case and discuss how court decisions in other recent scandals will affect the potential for litigation in both Japan and the US. While Olympus' largest potential claimants in shareholder litigation include US- and UK-based institutions, the US Supreme Court's 2010 ruling in Morrison v. National Australia Bank Ltd. closed the door to international investors seeking recovery through the US courts for fraud-related losses unless the transactions were executed in the US. However, the authors note, though the door is closed to litigation for most Olympus shareholders in the US, the statutory protections provided by Japan's 2006 Financial Instruments and Exchange Act (FIEA) and the rulings in recent cases have opened the door to such litigation in Japan. Mr. Hinton and Mr. Ikeya point out that the shareholder suits against Livedoor Co. Ltd., whose accounting fraud remains the largest yet to be litigated under FIEA, provide some basis for assessing the prospects for shareholder litigation against Olympus in Japan. Similarities in the nature of the alleged frauds perpetrated by the two companies make the Livedoor experience particularly instructive, and suggest that at least some Olympus shareholders could recover much of their losses through litigation.

New York -- NERA Economic Consulting, a leading global provider of economic advice and analysis in business, legal, and regulatory matters, congratulates Fernando Jiménez on his appointment to Spain's Ministry for the Economy and Competitiveness as Secretary of State for the Economy and Business Support. Prior to his appointment, he was a NERA Associate Director and head of the firm’s Competition Policy Group in Madrid. Mr. Jiménez joined NERA in 2004, and has provided advice in numerous merger investigations and antitrust cases.

"We are pleased that the Spanish government has selected Mr. Jiménez to fill such an important position," said NERA President Dr. Andrew Carron. "The appointment reflects both Mr. Jiménez's outstanding capabilities and the high caliber of competition economics here at NERA."

In his role as Secretary of State for the Economy and Business Support, Mr. Jiménez will be broadly responsible for developing and executing the government’s economic policy and reforms to improve the competitiveness of the economy through liberalization and support for entrepreneurship.

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world’s leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

NERA's clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world's largest economic consultancies. With its main office in New York City, NERA serves clients from more than 20 offices across North America, Europe, and Asia Pacific.

Since 2007, the losses and write-downs resulting from the credit crisis have reached over $2 trillion worldwide. As the losses have mounted, securities litigation has followed and over 450 related securities cases, both class actions and others, have been filed. Of particular interest to the litigation are a set of credit default swaps (CDS), or credit derivatives, known as the ABX indices (ABX). Plaintiffs have cited the ABX indices in a variety of credit crisis cases, where they allege that the ABX indices should have been used as market indicators to mark subprime-related securities -- including mortgage-backed securities and collateralized debt obligations -- to foresee additional losses on subprime investments, and to revise loan loss reserves. In addition, the ABX indices have been cited in various court decisions.
 
In this NERA paper, Special Consultant Dr. Ethan Cohen-Cole and Senior Vice President Dr. Faten Sabry examine the ABX indices, explain their economic functions, and explore how these indices are currently used in related litigation. Dr. Cohen-Cole and Dr. Sabry begin with a brief introduction about the non-agency mortgage market, the CDS market, and how CDS became a mechanism through which to participate in the non-agency mortgage market. The authors then focus on a specific type of CDS, the ABX indices, and how they are administered, priced, and traded. Then, the authors discuss the allegations and decisions involving the ABX. Finally, they assess the current academic literature that analyzes the role of the ABX derivatives in the liquidity and valuation of securities that are backed by subprime mortgages.
 
This is the ninth installment of the NERA Insights series of articles dedicated to the analysis of the credit crisis. The others are available on the right-hand side of this page.

With global demand for energy poised to increase by more than half in the next three decades, the supply of safe, reliable, and reasonably priced gas and oil will continue to be of fundamental importance to modern economies. Central to this supply are the pipelines that transport this energy. And while the fundamental economics of the major pipeline networks are the same, the differences in their ownership, commercial development, and operation can provide insight into the workings of market institutions in various nations.

Drawing on a century of the world's experience with gas and oil pipelines, this book from the University of Chicago Press illustrates the importance of economics in explaining the evolution of pipeline politics in various countries. Author Dr. Jeff D. Makholm, NERA Senior Vice President, demonstrates that institutional differences influence ownership and regulation, while rents and consumer pricing depend on the size and diversity of existing markets, the depth of regulatory institutions, and the historical structure of the pipeline businesses themselves. The history of pipelines is also rife with social conflict, and Dr. Makholm explains how and when institutions in a variety of countries have controlled pipeline behavior -- either through economic regulation or government ownership -- in the public interest.

The Political Economy of Pipelines: A Century of Comparative Institutional Development is available for purchase on the University of Chicago Press website.

"More than a story of pipeline markets and regulation, this book also offers a rich study of how asset specificity, non-deployable capital, and high up-front capital costs affect market development, regulation, pricing, and entry. Makholm takes what would otherwise be a pretty unexceptional industry—pipeline transport—and makes it of interest to a broader audience, especially those concerned with the new institutional economics." -- Gary D. Libecap, University of California, Santa Barbara

"This book comes at the right moment. It blends insights into the technology, economics, and institutional development of an industry that has long been ignored in the US and elsewhere. With the ongoing transformation of the energy sector, The Political Economy of Pipelines is a must-read for anyone interested in the natural gas and other pipeline industries as well as those interested in the evolution of economic and institutional thought." -- Christian von Hirschhausen, Berlin University of Technology

"Both invaluable and disheartening, The Political Economy of Pipelines helps readers to understand why the European gas market does not work—not because reforms have not gone far enough, but because they are fundamentally flawed. In place of the current patchwork of nationally regulated pipeline monopolies, Europe must put in place institutions allowing the emergence and evolution of a competitive market for gas transportation capacity rights that ignores national borders. As Jeff D. Makholm’s institutional economic analysis confirms, such a shift is almost as unlikely as it is needed." -- Pierre Noël, University of Cambridge

When preparing its Regulatory Impact Analyses (RIAs) for regulations under the Clean Air Act (CAA) that are not intended to control ambient fine particulate matter (PM2.5), the US Environmental Protection Agency (EPA) often predicts reductions of ambient PM2.5 that may occur coincidentally, and attributes so-called "PM2.5 co-benefits" to those coincidental reductions. In this report, prepared for the Utility Air Regulatory Group, NERA Senior Vice President Dr. Anne E. Smith reviews and evaluates EPA's practice of including PM2.5 co-benefits in its RIAs for non-PM rules. Based on review of the available cost and benefit information for 57 individual CAA-related regulations released since EPA promulgated its first PM2.5 national ambient air quality standard (NAAQS), the report finds that EPA has been relying on PM2.5 co-benefits estimates to create an apparent benefit-cost justification for almost all of its non-PM CAA rules. The report then evaluates that practice from multiple perspectives: theoretical, practical, scientific, and analytical.

Dr. Smith concludes that co-benefits from separately-regulated pollutants, such as PM2.5, should not be reported as part of the total benefits estimates in an RIA, nor should they be included in public announcements of the benefits of a new regulation. She argues that EPA's use of PM2.5 co-benefits in RIAs is inconsistent with the theoretical underpinnings of benefit-cost analysis, and that the use of these co-benefits subverts the practical purpose of RIAs as informational devices for improving policy-making. Dr. Smith suggests that EPA reform the manner in which it defines its baselines of emissions for each RIA, and provide more temporal information on benefits and costs to eliminate problems of double-counting. She also concludes that EPA should reform its current methods of calculating benefits from reductions in ambient PM2.5 even in its PM-related rules, because she finds that, as EPA's reliance on co-benefits has increased, EPA has shifted to less credible methods of estimating PM2.5 benefits.

In this Financial Regulation Bloomberg Brief, NERA Vice President Dr. James Overdahl participates in a Q&A on the US Commodity Futures Trading Commission's (CFTC) attempt to define high-frequency trading (HFT). Dr. Overdahl, a former Chief Economist at both the CFTC and the US Securities and Exchange Commission, describes the background on the controversy surrounding HFT and discusses the proposed regulatory definition of HFT offered by a CFTC commissioner. Dr. Overdahl discusses an alternative definition suggested by the Futures Industry Association's Principal Traders Group, which Dr. Overdahl advises. Dr. Overdahl argues that the CFTC's regulatory concerns would be best served by adopting a new term of "direct automated trading system (ATS) participant." The term captures any futures market participant who is directly connected to an exchange using an automated trading system. Dr. Overdahl notes that this approach would avoid having to make arbitrary distinctions on how many trades meet the definition of "high frequency." The immediate benefit to the CFTC is that, by defining market participants in this manner, the CFTC can readily use data that are already collected by the exchanges.

In this paper, submitted to the Securities and Exchange Commission (SEC) as part of a public comment process, NERA Senior Vice President Dr. Elaine Buckberg and Senior Consultant Dr. Max Gulker conduct an empirical inquiry into the effect of the Supreme Court's decision in Morrison v. National Australia Bank. In June 2010, the Supreme Court ruled in Morrison that only trades on US markets are covered under the Securities Exchange Act of 1934, significantly limiting the extraterritorial scope of Section 10(b) of the Act. In the wake of the Morrison decision, Section 929Y of the Dodd-Frank Wall Street Reform and Consumer Protection Act directs the SEC to inform Congress about the merits of creating a new extraterritorial right of action. The SEC is soliciting public comment on the matter, and thereafter will conduct a study to determine the extent to which private rights of action under the antifraud provisions of the Exchange Act should be extended to cover transnational securities fraud.
 
In "Cross-Border Shareholder Class Actions Before and After Morrison," Dr. Buckberg and Dr. Gulker conduct an empirical inquiry into the effect of the Morrison decision. The authors provide input into the debate by using data on 329 shareholder class actions filed against foreign-domiciled companies and discussing the effects of such a right on the competitiveness of US capital markets. They conclude that, following Morrison, foreign companies’ expected litigation costs should fall, because investors who purchased their shares on overseas exchanges will be excluded from classes. By reducing expected litigation costs, Morrison eases a deterrent to US listing by foreign issuers and thereby makes the US a more competitive venue for cross-listings, as well as for the volume in cross-listed stocks.

The pace of filings of class actions under federal securities and commodity laws held relatively steady in 2011 as compared to the previous three years, according to this edition of NERA's semi-annual study. Co-authored by Senior Consultants Dr. Jordan Milev, Robert Patton, and Svetlana Starykh and Senior Vice President Dr. John Montgomery, the study draws from more than 15 years of NERA research on case filings and settlements in securities class actions, and includes data on filings and dismissals through 30 November 2011, and settlements through 31 December 2011. The authors project there will be 232 shareholder class action filings in 2011, broadly in line with levels observed in 2010 (241), in 2009 (218), and in 2008 (245). Suits objecting to a merger or an acquisition have accounted for 29 percent of filings so far in 2011, and filings against Chinese companies have accounted for approximately 18 percent.

The authors find that, while shareholder filings continue to be filed at a relatively steady level as compared to the past three years, there has been a substantial shift in the composition of suits filed. A surge in cases involving Chinese companies listed in the US and in M&A objection suits, along with a waning of credit-crisis cases, has been driving this trend. Filings against foreign-domiciled issuers reached 64 in 2011, more than double the annual count observed in recent years. This surge in suits is largely attributed to the surge in filings against Chinese companies. So far in 2011, there have been a total of 29 filings against Chinese-domiciled firms. However, this number understates the number of Chinese firms targeted, as not all companies based in China are legally domiciled there. When including Chinese companies that are either domiciled in China or have their principal executive offices in the country, there have been 39 suits against Chinese companies in 2011.

Meanwhile, average settlement values of securities class actions fell to $31 million, well below the 2010 average of $108 million. However, the annual average settlement figure can be significantly affected by large settlement outliers. Excluding settlements in excess of $1 billion, as well as 309 small settlements related to IPO laddering cases that were approved in October 2009, there was still a substantial decline in average settlements from 2010 to 2011 -- from $40 million in 2010 to $31 million in 2011.

New York -- The pace of filings of class actions under federal securities and commodity laws held relatively steady in 2011 as compared to the previous three years, according to NERA Economic Consulting's semi-annual report, Recent Trends in Securities Class Action Litigation: 2011 Year-End Review, released today. While shareholder filings continue to be filed at a relatively steady level as compared to the past three years, there has been a substantial shift in the composition of suits filed. A surge in cases involving Chinese companies listed in the US and in M&A objection suits, along with a waning of credit-crisis cases, has been driving this trend.

NERA Trends authors project there will be 232 shareholder class action filings in 2011, broadly in line with levels observed in 2010 (241), in 2009 (218), and 2008 (245). Suits objecting to a merger or an acquisition have accounted for 29 percent of filings so far in 2011, and filings against Chinese companies have accounted for approximately 18 percent.

Filings against Foreign-Domiciled Firms

Filings against foreign-domiciled issuers reached 64 in 2011, more than double the annual count observed in recent years. This surge in suits is largely attributed to the surge in filings against Chinese companies. So far in 2011, there have been a total of 29 filings against Chinese-domiciled firms. However, this number understates the number of Chinese firms targeted, as not all companies based in China are legally domiciled there. When the Trends authors included Chinese companies that are either domiciled in China or have their principal executive offices in the country, there have been 39 suits against Chinese companies in 2011.

Settlements

Average settlement values of securities class actions fell to $31 million in 2011, well below the 2010 average of $108 million. However, the annual average settlement figure can be significantly impacted by large settlement outliers. Excluding settlements in excess of $1 billion, as well as 309 small settlements related to IPO laddering cases that were approved in October 2009, there is still a substantial decline in average settlements from 2010 to 2011—from $40 million in 2010 to $31 in 2011. An alternative metric Trends authors use is median settlements. In 2010, the median settlement reached an all-time high of $11 million, but in 2011, this figure fell to $8.7 million—below the previous two years but still the third highest on record.

Additional Settlement Trends

• The number of settlements in 2011 also declined as compared to previous years.
• 54% of cases that settled or have a scheduled court approval date in 2011 did so for less than $10 million, well up from the 41% observed in 2010.
• Only 6% of 2011 settlements were for more than $100 million, down from 8% in the previous year.
• Aggregate amount paid out in settlements ($2.6 billion) is at its lowest level since 2004.

"The year 2011 may be remembered as the year that saw the explosion of Chinese company-related lawsuits, the continued dominance of M&A cases alleging breach of fiduciary duty, and the sunset of credit crisis-related litigation," said NERA Senior Vice President and report co-author Dr. John Montgomery. "Looking ahead, it will be interesting to see how the level of filings may change or whether new categories of litigation will predominate."

"The number of settlements has declined, with the median settlement in 2011 falling below last year's high on $11 million, but still the third-highest on record," said NERA Senior Consultant Robert Patton. "Settlement amounts also reflect the stage of litigation," added NERA Senior Consultant Jordan Milev. "Settling after a motion for summary judgment is denied could drive up the settlement amount by an estimated 62%, on average."

Additional Shareholder Class Action Trends

• Filings by sector: Securities class actions against financial sector companies accounted for roughly 16% of cases in 2011, as contrasted with nearly half in 2008 and 2009. Filings against companies in the electronic technology and technology services sector accounted for the largest percentage in the year, with 21% of filings. Health technology and services companies accounted for 15% of filings.
• Filings of credit crisis-related class actions largely subsided in 2011, with 11 cases filed. Such litigation is approximately a third of its level last year, when it had already declined by about two-thirds from its 2008 peak.
• Aggregate plaintiffs' attorney fees, at $594 million, fell in 2011 to their lowest level since 2004. This decline is largely attributed to the combination of the lower average and median settlement size, and fewer settlements occurring in 2011.
• Cases were filed considerably more quickly in 2011 -- the average time to file in 2011 was 109 days, as compared to 175 days last year.

NERA Securities Class Action Trends Report Series

NERA has been analyzing trends in securities class actions for more than 15 years. Two reports are published per year: a mid-year study and an annual review at year's end. This year-end study was authored by NERA Senior Vice President Dr. John Montgomery and Senior Consultants Dr. Jordan Milev, Robert Patton, and Svetlana Starykh and includes data on filings and dismissals through 30 November 2011, and settlements through 31 December 2011.

For more details, and to read the full report, visit: www.nera.com/recenttrends.

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world’s leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

NERA's clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world's largest economic consultancies. With its main office in New York City, NERA serves clients from more than 20 offices across North America, Europe, and Asia Pacific.

In this NERA paper, Vice President Bradley A. Heys examines the Ontario Securities Commission's (OSC) recently released decision in In Re Coventree Inc., in which the OSC found that Coventree and two of its directors (the “Respondents”) failed to disclose material changes to Coventree's business as required under the Ontario Securities Act. Whether or not it reached the correct result, the OSC Panel's reasons raise significant questions about the type of evidence required to demonstrate that a change in a company's business is material. Mr. Heys argues that, while no expert evidence was introduced by either the OSC Staff or by the Respondents on the materiality of the changes in question, the Panel drew at least some key inferences that would have been better supported by expert evidence. Although the OSC Panel is recognized as a specialized tribunal with expertise in matters relating to the Ontario Securities Act, the Panel's conclusions on materiality appear to be largely subjective and therefore provide little guidance for future litigants about the types of evidence that should be led in order to establish or disprove allegations of material changes. Mr. Heys describes the assistance that expert economic evidence and analysis could have provided and that, arguably, should have been required to support a finding of materiality.

In this Law360 article, NERA Special Consultant Dr. Elizabeth M. Bailey, Senior Vice President Dr. Gregory K. Leonard, and Senior Consultant Dr. Mario A. Lopez examine the apportionment movement, which has found support as a proposed solution not only to excessive damages awards in situations in which the patented technology is one of many technologies and assets that are incorporated into a product, but also to the related problem of royalty stacking. Under apportionment, the portion of the overall value of the product that is "attributable" to the patented technology is identified. Then, reasonable royalty damages are calculated with reference to this apportioned value of the patented technology rather than the overall value of the product. The authors point out that, while the problems that have motivated the apportionment movement are real and serious, apportionment raises a number of practical problems. In addition, apportionment makes sense as a solution only under the assumption that an economically invalid approach to calculating damages is being taken in the first place. The authors argue that a more sensible solution to excessive damages awards is to require litigants to take an economically valid approach to damages so that apportionment is not necessary.

On 8-9 December 2011, NERA joined with the Electricity Policy Research Group at Cambridge University to present a research seminar on European Gas and Electricity Policies. At the pre-seminar dinner, Senior Vice President Dr. Jeff D. Makholm delivered the keynote speech, "The Trouble With Europe: Infrastructure, Institutions & Investment," in which he presented an economic critique of the European model for gas markets. In the seminar itself, Director Graham Shuttleworth delivered a presentation entitled "Intermittency and Generation Investment" in the session on renewables and the electricity market. Mr. Shuttleworth explained the economics of intermittent wind farms and the implications for electricity market design.  Associate Director Daniel Radov also spoke about the UK's plans to implement a carbon price floor within the electricity sector, in a session entitled "EU v. Member States: Issues in Policy-Making." Other speakers included David Newbery of Cambridge University and representatives of major energy companies.

The Association of the Bar of the City of New York hosted a securities CLE program on 6 December 2011. At this program, an expert faculty of highly experienced and well-known securities litigators discussed recent court decisions that have dramatically altered the securities litigation landscape, as well as the impact of new enforcement and regulatory initiatives. NERA Senior Vice President Dr. Marcia Kramer Mayer participated in a session entitled "Securities Class Actions: Trends, Developments, and Hot-Button Issues," where she focused on merger objection litigation. The topics Dr. Mayer addressed included: how merger objection cases differ from standard securities class actions; recent trends in the number of litigated deals in both state and Federal courts; the distribution of litigated deals from announcement to first filing; the factors associated with whether a deal gets litigated; patterns and trends in the size and composition of settlements; and the top 10 settlements.

Other program topics discussed included: Corporate internal investigations; settlement trends, mediation and D&O coverage issues; corporate governance litigation; SEC and PCAOB investigations and enforcement proceedings; and DOJ investigations and prosecutions.

Learn more via the New York City Bar website.

California dramatically adjusted its Renewable Portfolio Standard in April 2011, with the goal of increasing the percentage of renewable energy in the state's electricity mix to 33 percent of retail sales by 2020. With this in mind, industry experts convened at this Infocast summit in San Diego on 5-6 December to discuss approaches and challenges to renewables development in the West. On the first day of the summit, NERA Vice President James Heidell participated in a panel session examining current development opportunities in the solar, wind, geothermal, and biomass renewables sectors.

To learn more, please visit the Renewables West Summit website.

The economic and reputational impact of a securities class action can be devastating for a company. This seminar and teleconference, hosted by Heenan Blaikie LLP on 30 November 2011, focused on how economic experts, communications professionals, and litigation counsel can work to advise and defend issuers to manage and mitigate these costs. NERA Senior Vice President Mark Berenblut participated in a discussion on a number of timely topics, including current trends in securities litigation; economic issues in the analysis of materiality, causation, and damages; and recent Canadian legal developments, including certification of global classes.

India's new competition law regime has played a crucial role in creating an environment conducive for investment and good corporate governance. This international conference, held in New Delhi on 25-26 November 2011, examined the impact and status of the India competition law regime on a globalized India, and the role of competition law and policy in promoting economic growth and prosperity. NERA Associate Director David Matthew participated in a session on "The Role of Economics in Competition Law," in which he discussed the importance of rigorous economic analysis in merger, dominance, and cartel cases.

Learn more about this event via the International Academy of Law website.

NERA's Global Transfer Pricing Practice and Dechert LLP's London Tax Practice jointly presented a seminar in London on 24 November 2011. The financial turmoil and changes in the taxation and regulatory environment have significantly increased the tax and compliance burden for investment management companies. In addition, the international nature of the industry combined with stress on public finances have led to increased scrutiny from tax authorities, particularly with respect to intra-group transactions concerning non-UK companies. In this regard, the potential risks and rewards of international structuring and transfer pricing have never been higher. During this seminar, Dechert lawyers and NERA economists discussed tax and transfer pricing implications of cross border arrangements for investment managers. Speakers included Associate Director Dr. Emmanuel Llinares and Senior Consultant Amanda Pletz of NERA, and Partners David Gubbay and Mark Stapleton of Dechert. The speakers provided an overview of main tax and legal considerations as well as an overview of popular structures. They also discussed the main considerations in intra-group pricing for investment managers and presented a case study.

Cleary Gottlieb held its 10th annual seminar at Harvard Law School on 21 November 2011. This year's program examined the latest developments in EU and US antitrust law. NERA Vice President Dr. Elizabeth M. Bailey delivered a presentation entitled "The Big Swap: Financial Derivatives Agreements and Alleged Anticompetitive Conduct in U.S. v. KeySpan."

Learn more via the Cleary Gottlieb website.

Georgetown Law held its annual Advanced eDiscovery Institute, Making the Case: Developing Legally Defensible eDiscovery Best Practices, in Arlington, Virginia on 17-18 November 2011. NERA Senior Vice President Dr. David Tabak was invited to participate in a panel discussion entitled "Statistics and Sampling for Lawyers: How to Apply a Well-Accepted Methodology in the World of eDiscovery." The panel, which was moderated by the Hon. James C. Francis, focused on how to analyze large volumes of electronic evidence in litigation through the use of statistical methods. Statistics provide a principled framework for proving that certain information gleaned from a sample can be extended, with reliability and validity, to the whole population, and also provide well-accepted measures of quality control and reasonableness. Dr. Tabak and his co-panelists provided an overview of basic statistical reasoning that can be applied in the eDiscovery context to help tackle voluminous and complex sets of data in a streamlined and cost-effective manner.

Learn more about this event the Advanced eDiscovery Institute website.

New York -- NERA Economic Consulting, a leading global provider of economic advice and analysis in business, legal, and regulatory matters, announced today that Dr. Jerry Arnold has affiliated with the firm as a Special Consultant in its Global Securities and Finance Practice.

Dr. Arnold, a professor of accounting at the University of Southern California, is a leading expert on accounting issues, particularly those related to compliance with US Securities and Exchange Commission (SEC) rules. He has served many times as an expert witness in commercial litigation focusing on SEC and accounting issues, as well as matters involving valuation and assessment of damages. He has also been retained by the SEC and the US Department of Justice as an expert on accounting and disclosure issues, and has advised several companies on SEC compliance issues.

"We are pleased that Dr. Arnold has decided to affiliate with NERA," said Dr. Robert Mackay, NERA Senior Vice President and Securities and Finance Practice chair. "As SEC and accounting rules have become more complex, compliance and related litigation have become increasingly important issues. Dr. Arnold's expertise and experience in these areas represent an invaluable asset to NERA and our clients."

In addition to serving on the faculty at the University of Southern California, Dr. Arnold has taught at the University of Pennsylvania's Wharton School, the University of California, Los Angeles, the University of Michigan, and the University of Missouri. He was also the founding director of the SEC and Financial Reporting Institute, which promotes interaction among policymakers, their constituencies, and researchers in academia.

Dr. Arnold has published extensively in business and academic journals and monographs, and has spoken widely at conferences and before government bodies.

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world’s leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

NERA's clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world's largest economic consultancies. With its main office in New York City, NERA serves clients from more than 20 offices across North America, Europe, and Asia Pacific.

The UK Committee on Climate Change (CCC) recently launched its analysis of UK shipping emissions. On 17 November 2011, Neil Golborne, Team Leader for Transport and Agriculture in the Secretariat for the CCC, visited NERA's London office to present the analysis to members of the British Institute of Energy Economics (BIEE). International aviation and shipping emissions are not currently included in the UK's target for emission reduction in the Climate Change Act, which leaves a part of UK emissions not fully accounted for. However, the Climate Change Act also requires that the exclusion from UK carbon budgets be revisited by the end of 2012. The CCC will provide its advice on the issue next spring, and in developing that advice, the CCC has been looking at the possible future path for shipping emissions. In this seminar, Mr. Golborne presented estimates of the UK's share of current international shipping emissions; the options for emissions abatement; projections to 2050, under various assumptions for demand growth and emissions abatement; and options for inclusion in the UK's emission abatement target and carbon budgets.

Learn more about this event via the BIEE website.

The ABA Section of Antitrust Law hosted its annual Fall Forum in Washington, DC on 17 November 2011 to discuss the latest cutting-edge issues in competition and consumer protection enforcement. NERA Senior Vice President Dr. Lawrence Wu participated in a panel session entitled "Health Care: Accountable Care Organizations" along with The Honorable J. Thomas Rosch, Commissioner at the Federal Trade Commission (FTC); Fiona M. Scott-Morton, Deputy Assistant Attorney General at the US Department of Justice (DOJ), Antitrust Division; and Joshua D. Wright, Professor of Law at George Mason University. The panel, moderated by Seth C. Silber of Wilson Sonsini Goodrich & Rosati PC, discussed the recently enacted US health care reform, which seeks to improve access to health care while making the system more efficient. A key component of those reforms is the authorization of accountable care organizations (ACOs) that are intended to enable progress on both fronts. At the same time, ACOs present significant antitrust issues. The panel examined how the DOJ and FTC are approaching ACOs as well as other competition issues in the US health care system.
 
To learn more, please visit the ABA Section of Antitrust Law website.

The Northeast Chapter of the Association of Corporate Counsel (ACC) hosted a program in Needham, Massachusetts on 16 November 2011 that featured a series of panels and keynote addresses on the topic of risk management and assessment. NERA Vice President Dr. Thomas Porter participated in a session entitled "Gap Analysis and Prioritization of Enterprise Risk." The session was moderated by Megan Gates of law firm Mintz Levin, which is sponsoring the event.

Learn more about this event on the ACC website.

This Global Competition Review (GCR) conference, held in association with NERA in Brussels on 15-16 November 2011, addressed significant developments in the field of competition law and policy over the past year. GCR brought together leading figures in the field from across Europe, including representatives from the European Commission, in-house counsel, lawyers in private practice, and consulting economists. NERA Director Dr. Mark Williams, who leads NERA's European competition policy group in Brussels and London, co-chaired the event along with Gerwin Van Gerven of Linklaters LLP. The program covered a number of timely topics, including: the main competition law developments in cartel enforcement, merger control, and abuse of dominance; the role of the hearing officer; the latest trends in referral decisions between the European Commission and the national competition authorities in merger cases; and competition in the financial and high-tech markets.
 
Learn more about this conference via the GCR website.

On 15 November 2011, NERA Director Graham Shuttleworth spoke at an energy seminar in Bilbao, Spain that was organized by the Club Español de la Energia. Mr. Shuttleworth discussed the various "roadmaps" that have attempted to set out a path toward meeting EU targets for reducing CO2 emissions by 80% or more by 2050. The theme of his presentation was the need to move on from "Forecasts, Planning, and Targets" to "Incentives, Markets, and -- above all -- Economic Efficiency."  Mr. Shuttleworth queried whether the EU's targets were really credible, given their implications for the cost of doing business in Europe, and the little regard for economic efficiency shown in some of today's policy discussions.

Download Mr. Shuttleworth's presentation.

Employment and labor experts convened at this Practising Law Institute conference in San Francisco on 9 November 2011 to examine recent case law and regulatory developments in California. NERA Senior Vice President Dr. Jon Wainwright participated in a panel discussion entitled "Conducting Employment Audits Thoroughly and Ethically." The panel -- which also included Andrew Livingston, Partner at Orrick, Herrington & Sutcliffe LLP, and Louisa Holzschuher, Senior Director of Employment Law and Associate General Counsel, Juniper Networks, Inc. -- explored ethical considerations when conducting employment audits.

Learn more about this event on the PLI website.

On 8 November 2011, the National Chamber Foundation (NCF) and GFI Group hosted the third event of a series of quarterly economic briefings led by Dr. Martin Regalia, Chief Economist and Senior Vice President for the US Chamber of Commerce. Dr. Regalia delivered a keynote address based on GDP data released by the US Department of Commerce from the previous quarter, before leading a panel of economists representing crucial sectors of the economy. NERA Vice President Dr. Sharon Brown-Hruska, a former Commissioner and Acting Chairman of the US Commodity Futures Trading Commission, was invited to join the panel. Dr. Brown-Hruska discussed the efforts of the Federal government to stimulate economic recovery through monetary policy, and the prospects for the financial services industry given the weight of sweeping financial reform.

The Federal Reserve Bank of Chicago hosted its 17th annual capital markets conference on 7-9 November 2011. The conference is organized each year as part of the training program for regulatory and supervisory senior staff within the Federal Reserve System, the Office of the Comptroller of the Currency, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC). NERA Vice President Dr. James Overdahl, former Chief Economist at both the SEC and the CFTC, moderated a panel discussion entitled "Trading in 21st Century."

The Global Airport Development (GAD) conference, now in its 18th year, brings together over 300 market leaders and representatives from all sectors of the airport management and development communities. This year's event was held in Barcelona on 7-10 November 2011. On 9 November, NERA Director Dr. Francesco Lo Passo delivered a presentation entitled "The Landscape of Italian Airports."

To learn more about GAD 2011, please visit the conference website.

Industry experts convened at this Law Seminars International conference in San Francisco on 3-4 November 2011 to examine the interface between the need for flexible generating resources to fill in for variability in California's energy supply, and the challenge these resources face in terms of fuel supply and economic viability. Mike King, Senior Vice President and Chair of NERA's Global Energy, Environment, and Network Industries Practice, delivered a presentation entitled "Natural Gas in the Energy Mix: Is It a Bridge to Renewables?" Mr. King provided an overview of California's supply and demand outlook for natural gas. His presentation covered the Rocky Mountain reserves, Alaskan and Canadian exports, foreign demand, pricing trends, the economics of gas peaking plants to balance intermittent renewables, and the likely impact of fracking concerns.
 
To learn more about this event, please visit the LSI website.

The ABA Section of Labor and Employment Law is holding its annual conference on labor and employment law in Seattle on 2-5 November 2011. On Friday, 4 November, NERA Senior Vice President Dr. Elizabeth Becker will participate in a session entitled "Working With Experts in Wage and Hour Litigation." The panel will explore the use of statisticians, labor economists, industry experts, industrial psychologists, sociologists, and an array of others with specific expertise that may be relevant to class certification and decertification, summary judgment, mediation, and trial. The panel will also focus on the preparation and use of data summaries, graphs, and the latest software tools available for digesting and presenting information to the fact finder. In addition, the panel will discuss the impact of the recently amended Federal Rules of Civil Procedure on expert witness discovery.

Experts from NERA's Global Transfer Pricing Practice have published a series of articles on location specific advantages in BNA's Transfer Pricing International Journal.

The first article, "Location Specific Advantages -- Principles," by Principal Sébastien Gonnet, Special Consultant Pim Fris, and Economic Analyst Tommaso Coriano, provides an analytical framework and economic tools for identifying, quantifying, and apportioning super-profits arising from location advantages.

The second article, "Location Specific Advantages -- Case Studies," by Principal Sébastien Gonnet, Vice President Makoto Ikeya, and Senior Consultant Dr. Vladimir Starkov, applies the framework estabalished in the first article in the context of manufacturing, services, and distribution.

The third article, "Location Specific Advantages -- China," by Principal Sébastien Gonnet, assesses what economic methods can be used to properly quantify and apportion the location specific advantages between a Chinese subsidiary and its foreign parent and/or the other parts of the group to which it belongs.

In the latest issue of The Electricity Journal, experts from NERA's Energy, Environment, and Network Industries Practice -- Vice President Jonathan Falk and Special Consultant Dr. Michael Rosenzweig -- engage in a debate with economist Robert Borlick over the issue of electric demand-side response. The debate began in response to Mr. Falk's article in a previous Electricity Journal issue, "Paying for Demand-Side Response at the Wholesale Level." In that article, Mr. Falk assessed the Federal Energy Regulatory Commission's (FERC's) controversial Notice of Proposed Rulemaking on the "just and reasonable" payment in FERC-regulated wholesale markets to consumers who offer to cut back their power purchases to reduce demand on costly electric generating capacity. On one side are those who want to pay the marginal costs saved, while on the other side are those who advocate paying less -- sometimes much less. Mr. Falk critically assessed the arguments for paying less and found the arguments to be both short on substance and highly impractical. This view prompted a rebuttal from Mr. Borlick, who argued that the FERC's Order prescribes an inefficient pricing rule that overcompensates demand response, thereby reducing market efficiency and unfairly burdening small electricity consumers. Mr. Falk and Dr. Rosenzweig then countered by demonstrating how Mr. Borlick's latest salvo offered nothing substantively new. They showed that Mr. Borlick simply restated, in different guises, previous arguments that were rebutted either in the late Professor Alfred Kahn's testimony in the proposed rulemaking or in Mr. Falk's earlier piece.

The full debate, including Mr. Falk's original article, Mr. Borlick's response, Mr. Falk and Dr. Rosenzweig's rebuttal, Mr. Borlick's counter-rebuttal, and Mr. Falk's conclusion on the subject, can be accessed on The Electricity Journal website.

One of the more difficult challenges faced by exchanges is balancing the needs and interests of different segments of the market. One example is the introduction of implied matching functionality, a mechanism that allows exchanges to replicate certain market-making functions within their own matching engines. Some market participants have welcomed this innovation, while others have questioned its value in liquid markets. In this article from Futures Industry, NERA Vice President Dr. James Overdahl examines the impact of implied matching functionality on two specific futures contracts. Dr. Overdahl, whose research was sponsored by the FIA Principal Traders Group, analyzes the impact using five measures of market quality and finds that, in these two instances, market quality improved when the exchanges turned off their implied matching functionality. The study also finds that futures volume, an important measure of market health, increased during these periods, even after controlling for other potential explanatory variables. Finally, an examination of the order books for calendar spreads fails to yield a meaningful result as to whether market quality improved or declined when matching functionality was turned off.

According to data from the US Securities and Exchange Commission, Chinese companies now represent the majority of securities class action lawsuits filed against foreign-domiciled companies. In fact, NERA's most recent report on trends in US securities class actions found that, in the first half of 2011, 27 suits were filed against companies domiciled in China, representing 60% of all suits filed against foreign-domiciled companies. More recent data indicate that, by the end of September, there were 31 filings in US Federal Court against Chinese companies. This trend is particularly worrying for the Chinese companies involved, as such class actions are unfamiliar but a business reality when dealing with the US. With this in mind, NERA sister company Marsh hosted a seminar in Beijing on 1 November 2011 that examined the lifecycle of a securities class action lawsuit. Senior Vice President Dr. Alan Cox, a member of NERA's Global Securities and Finance Practice, participated in a series of presentations on this topic, focusing specifically on the settlement phase of class action lawsuits. 
 
To learn more about this seminar, please visit the Marsh website.

The American Nuclear Society (ANS) hosted a meeting in Washington, DC on 30 October - 3 November 2011 to discuss the new wave of small modular reactors (SMR), as well as related technical issues, licensing approaches, university and national lab involvement, and plans for commercial realization. On 1 November, NERA Vice President Edward Kee delivered a presentation on the market for small reactors, public expectations, research and technology developments, and the role of government.

The Wall Street Tax Educational Corporation, in cooperation with NERA and the Wall Street Tax Association, held a transfer pricing training program in New York City on 27 October 2011. Several experts from NERA -- Senior Vice Presidents Dr. Elaine Buckberg and Dr. Harlow Higinbotham, Vice President Dr. Stuart Harshbarger, Special Consultant Dr. Alexander Voegele, and Consultants Vivek Pai and Wolf Witt -- presented. The training program covered intercompany interest rates; intercompany credit guarantees; the Advance Pricing Agreement process; outsourcing profits; and valuing financial service company trademarks.

NERA is pleased to have co-sponsored the State Bar of California Antitrust and Unfair Competition Law Section's 21st annual Golden State Institute. As part of the program, which was held in San Francisco on 27 October 2011, NERA Senior Vice President Dr. Lawrence Wu participated in a panel session entitled "The Law of Pricing, Including Resale Price Maintenance in California After Leegin." The panelists discussed a number of pricing practices that are often in the antitrust spotlight, such as bundled pricing, below-cost pricing, and price discrimination. They also discussed resale price maintenance in light of the US Supreme Court's recent decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc.

To learn more, please visit the State Bar of California website.

The US Chamber Institute for Legal Reform held its 12th annual summit in Washington, DC on 26 October 2011. NERA Vice President Paul Hinton was invited to participate in a panel session entitled "The Liability Climate in the States: Costs, Reforms and the Potential Impact on Jobs." The panel was introduced and moderated by The Honorable John M. Engler, President, Business Roundtable, and also included The Honorable Robert F. McDonnell, Governor, Commonwealth of Virginia, and Richard J. Trabulsi, Jr, President, Texans for Lawsuit Reform. The panelists examined the current legal climate in the US, reforms, and the impact on employment and business activity.

NERA Vice President Dr. Sharon Brown-Hruska participated in a webinar on 25 October 2011 that was hosted by the Global Association of Risk Professionals (GARP). The webinar examined the ramifications of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is set to overhaul the derivatives trading infrastructure in the US, creating new incentives to execute trades on transparent platforms and settle transactions through centralized clearing. The ultimate results of the regulations may be difficult to assess, but the impact will reach beyond the financial sector, and trading in the commodities and energy industries will feel the effects. In this webinar, the third in GARP's series on the ramifications of the Dodd-Frank Act on capital markets, Dr. Brown-Hruska shared her insights on the potential pitfalls of the new rules.

Learn more via the GARP website.

The Nodal Trader, a Platts publication on power trading, hosted a conference in New York City on 25-26 October 2011 that focused on nodal/forward power trading. market design and requirements, and updates on new market entry. NERA Vice President Dr. Sharon Brown-Hruska, a former Commissioner and Acting Chairman of the US Commodity Futures Trading Commission, participated in a session entitled "Impact of Dodd-Frank Act/Financial Reform Legislation on Power Trading." The session addressed how the Act could impact the power markets, the potential impact of the final rules, how Financial Trading Rights in wholesale power markets could be treated under developing rules, and the market reactions to the US Federal Energy Regulatory Commission's Credit Reform Order. 
 
To learn more, please visit the Nodal Trader website.

Nuclear constructions leaders and industry experts convened at a summit organized by Nuclear Energy Insider in Charlotte, North Carolina on 25-27 October 2011. NERA Vice President Edward Kee chaired a panel entitled "New Nuclear Build Strategy: Where Do we Go From Here?" The panel examined the status of new nuclear build and project cost estimates, as well as the economic outlook for new nuclear in North America and abroad.

In this report for Enel, a NERA team led by Senior Vice President and Environment Group Head Dr. David Harrison considers the incentives of key actors to develop or participate in a sectoral crediting mechanism (SCM) for greenhouse gas emission reductions. Sectoral approaches have become prominent in international discussions of new market mechanisms to reduce greenhouse gas emissions in developing countries and set the stage for broader international agreements. The SCM is a particular form of sectoral approach in which a developing country and a developed country agree upon a crediting baseline level of emissions intensity for a sector that is below the business-as-usual level. The developing country would receive valuable credits for reductions below this crediting baseline -- based upon its actual emissions intensity and output level -- but would incur no liability if the emissions intensity of the sector remained above the crediting baseline level.

The objective of this report is to evaluate incentives under an SCM, recognizing that, to have any chance of success, the mechanism needs to be attractive to three key groups: (1) host governments, such as China and India; (2) buyer countries, such as those participating in the European Union Emissions Trading Scheme (EU ETS); and (3) private parties, including local parties and international investors. The authors examine alternative frameworks that could be developed to provide viable programs.

Dr. Harrison delivered a presentation summarizing this report at a workshop and conference on New Market Mechanisms organized by the International Emissions Trading Association and Enel in Brussels on 13-14 October 2011.

McGivney & Kluger, P.C., hosted a seminar in New York City on 21 October 2011 that focused on the latest developments in product liability and environmental law. NERA Senior Consultant Dr. Stephanie Plancich delivered a presentation entitled "Trends in Mass Tort Litigation, Through 2011 and Beyond." Dr. Plancich discussed historical trends in asbestos filings and settlements; lead paint, pharmaceuticals, and toxic torts; forecasting models; and predicting the next wave of mass tort litigation.

NERA Senior Vice President Dr. Lawrence Wu joined a panel of experts on 20 October 2011 for a CLE webinar hosted by the American Bar Association's Section of Antitrust Law. The webinar examined the practical considerations involved in a jury trial with respect to vertical restraints, including the type of evidence that plaintiffs and defendants should seek to advance, witness considerations, damages considerations, and what appropriate economic evidence may be provided. The program focused on the recent antitrust case Stand-Up MRI of the Bronx PC et. al v. CareCore National LLC et. al.

Learn more about this webinar and teleconference via the ABA website.

NERA Associate Director David Matthew was invited by the American Chamber of Commerce in Romania and the Romanian Competition Council to speak at a workshop hosted in Bucharest on 20 October 2011. The competition law workshop featured two sessions: "Resale Price Maintenance" and "Exclusive Arrangements." In the latter session, Mr. Matthew delivered a presentation entitled "Bundling, Discounts, and Related Practices: Pro-competitive, Anti-competitive, and Neutral Economic Effects."

Learn more about this event via the AmCham Romania website.

NERA sponsored this global transfer pricing event, which took place in Hong Kong on 19-21 October 2011. Three experts from NERA's Global Transfer Pricing Group -- Senior Vice President Nobuo Mori, Principal Sébastien Gonnet, and Special Consultant Pim Fris -- participated. On 19 October, Mr. Gonnet and Mr. Fris led a workshop called "The Role of Economic Analysis in China -- Intellectual Property and Corporate Charges." The workshop demonstrated how to structure, quantify, and defend intellectual property (IP) and corporate charges involving Chinese entities, with a particular emphasis on economic analysis and defense. The following day, Mr. Mori participated in a panel discussion entitled "The Future of Intangibles & Comparison between Jurisdictions." The panel discussed a range of issues, including the treatment of legally protected IP vs. "soft" intangibles, how IP is considered in business restructurings, IP valuation methodologies in a transfer pricing context, high value services with embedded IP, and recent global regulatory and legal developments.

To learn more about this event, please visit the IBC website.

A summary report of The Americas Spectrum Management Conference 2011 can be downloaded here. Prepared by NERA Economic Consulting and Aetha Consulting, the report summarizes the main discussions held during the conference, including an overview of each of the main presentations. The authors begin by highlighting some of the major themes that emerged across the conference, then follow with a summary of the event in chronological order.

The inaugural Americas Spectrum Management Conference took place in Washington, DC on 19-20 October 2011. NERA played a key role in setting up the event and participated as Knowledge Partner to the conference organizers, Forum Global.
 
The conference featured high-profile speakers from the FCC, Industry Canada, COFETEL, ITU, and other regulators from across the Americas and beyond, as well as senior representatives from the communications industry and manufacturers.  NERA Senior Vice President Dr. Chantale LaCasse opened the conference and introduced the keynote presentations, and also chaired a debate on use of the valuable 700 MHz band for mobile broadband across the Americas. In addition, Vice President Richard Marsden chaired the sessions on spectrum auctions, including a discussion of the use of new tools in spectrum auction design, such as package bidding and generic lots, and a lively debate on the FCC's plans to use incentive auctions to redistribute spectrum from broadcasting to mobile broadband. As part of the auction design session, Senior Consultant Dr. Maria Maher presented an overview of recent auctions worldwide, including case studies of recent auctions for 800MHz, 2.5 GHz (2.6 GHz), and other mobile bands in Denmark, Italy, and Sweden. 

The numbers of cases involving mass claims, including accidents in nuclear power plants, harmful effects of medication, and product liability, are increasing in Japan, which has resulted in greater scrutiny of damages claims and insurance policies. Japan's experience in this area is relatively limited, but many litigation cases involving mass claims for damages have been tried in US courts. At this seminar, hosted by the Non-Life Insurance Institute of Japan in Tokyo on 18 October 2011, NERA Vice President Makoto Ikeya discussed NERA's extensive experience with such cases in the US, and introduced a fundamental valuation methodology of calculating damages in mass health and product liability cases.

NERA Senior Vice President and Environment Group Head Dr. David Harrison participated in a workshop and conference on New Market Mechanisms organized by the International Emissions Trading Association and Enel in Brussels on 13-14 October 2011. The two-day workshop brought together almost 100 experts from the private and public sectors to discuss market-based mechanisms that would attract private sector investments into solutions to prevent global climate change. The development of such mechanisms is critical to reducing the cost of meeting global objectives to reduce greenhouse gas emissions. During last year's climate negotiations in Cancun, Mexico, parties and observers to the United Nations Framework Convention on Climate Change were asked to submit ideas on new market mechanisms.

Day One's purposes were to explore the lessons learned from existing market tools (e.g., the Clean Development Mechanism) and to develop new concepts to attract the private sector in finding cost-efficient and large-scale emission reductions. Dr. Harrison delivered a presentation on "Incentives for International Sectoral Crediting Mechanisms" that summarized a report that NERA prepared on behalf of Enel. He noted that, to be viable, such mechanisms have to appeal to three key groups: (1) host governments, such as China and India; (2) buyer countries, such as those participating in the European Union Emissions Trading Scheme (EU ETS); and (3) private parties, including local parties and international investors. Dr. Harrison summarized an evaluation of alternative frameworks that could be developed to provide viable programs.

Day Two was dedicated to discussions among private sector representatives and key public decision makers -- including representatives from the European Commission, Mexico, Japan, and China -- with a view to having an exchange on the feasibility of the proposed market measures and of getting them a prominent place in the agenda for the next round of international negotiations at the end of this year. Dr. Harrison presented the summary of the key messages -- which was a compilation of conclusions discussed on Day One -- that the private sector would like the public sector to address when developing new market mechanisms.

Dr. Harrison is Head of NERA's Environment Group, which specializes in the economic analysis of regulatory, legislative, public policy, and litigation matters related to environmental considerations. Dr. Harrison has extensive experience evaluating market mechanisms to deal with climate change, including serving as a consultant to the European Commission and the UK Government in the development of the EU ETS as well as to numerous trade associations and private companies with regard to climate policy and other matters. He and his colleagues have developed the Carbon Financial Impacts Model, which NERA has used to evaluate the impacts of potential climate change policies in numerous sectors, including electricity, oil and gas, refining, cement, chemical, iron and steel, and others. Before joining NERA, Dr. Harrison was an Associate Professor at Harvard's Kennedy School and on the senior staff of the President's Council of Economic Advisors. He holds a PhD in economics from Harvard University.  The other authors of the NERA report prepared for Enel include Dr. Francesco Lo Passo, Daniel Radov, Dr. Albert Nichols, Andrew Foss, and Per Klevnas.

View NERA's report, Evaluation of Incentives for International Sectoral Crediting Mechanisms.

View Dr. Harrison's presentation, Incentives for International Sectoral Crediting Mechanisms.

China's State Administration of Taxation (SAT) and the Organisation for Economic Co-operation and Development (OECD) hosted a transfer pricing seminar in Beijing on 13-14 October 2011. On the first day of the seminar, NERA Senior Vice President Nobuo Mori and Special Consultant Pim Fris delivered a presentation on location specific advantages (LSAs). Through the use of case studies, their presentation examined the practical application of LSAs in various real-world situations, and provided insight on the quantification and apportionment of LSAs.

The presentation can be downloaded here. To learn more about NERA's transfer pricing practice in China, please contact NERA Principal Sébastien Gonnet in our Beijing office.

New York -- NERA Economic Consulting Senior Consultants Dr. Max Gulker and Dr. Alex Grecu, and Senior Analyst David Bubb analyzed the benefits and costs to New York State and its residents of implementing a proposed executive order mandating that state government agencies provide translation and interpretation services to state residents with limited English proficiency (LEP). NERA was retained by New York Lawyers for the Public Interest on a pro bono basis.

After a review of independent data, academic literature, government documents, and related executive orders from multiple jurisdictions, Dr. Gulker, Dr. Grecu, and Mr. Bubb found that "implementation of the proposed executive order will yield benefits to both New York State’s LEP residents and its government agencies. LEP residents will experience improvements in access to and quality of services provided by state agencies. State agencies will experience increased efficiency and, potentially, reduced costs, associated with their interactions with LEP individuals."

Dr. Gulker, Dr. Grecu, and Mr. Bubb estimated that the incremental cost of providing language-access services by the State represents a small fraction of the affected agencies’ budgets—0.05% of agencies’ total budgets.

On 6 October 2011, Governor Andrew M. Cuomo signed an Executive Order requiring New York state agencies that offer public services to offer free interpretation and translation services to members of the public for vital government forms and instructions.

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world's leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

NERA's clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world's largest economic consultancies. With its main office in New York City, NERA serves clients from more than 20 offices across North America, Europe, and Asia Pacific.

The Global Association of Risk Professionals (GARP) hosted a forum in New York City on 11 October 2011 to examine the evolving requirements and provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The program covered derivatives trading, proprietary trading (Volcker Rule), structured products, regulatory oversight, and investor protections, as well as the anticipated impact of new regulation and the interrelationship between the Act with the broader spectrum of risk regulations. NERA Senior Vice President Dr. Elaine Buckberg was invited to share her insights on living wills and the resolution of failed cross-border banks, including the new FDIC rule on resolution plans and the Vickers Commission report.

To learn more about this event, please visit the GARP website.

Courts have long grappled with the proper approach to post-verdict royalties when a permanent injunction is denied, recognizing that the analysis of ongoing royalties is not necessarily identical to that of reasonable royalties for damages calculations. The structure of an ongoing royalty -- whether lump sum, a dollar amount per unit, or a percentage of revenues -- can differ from the structure of the reasonable royalty for past infringement. In this article from Law360, NERA Senior Consultant Dr. Svetla Tzenova explains how an analysis of the proper structure of post-verdict royalties, as well as the appropriate rate or amount, depends on an understanding of how the parties' circumstances, expectations of the future, and assessments of risks may have changed between the time of the hypothetical negotiation for a reasonable royalty for past infringement and the time of trial. Dr. Tzenova then describes how to develop a framework for analyzing ongoing royalties that compensates the patent-holder fairly regardless of the level of market success attained by the patent-in-suit.

The Futures Industry Association held its 27th annual conference in Chicago on 10-12 October 2011. On the last day of the program, NERA Vice President Dr. James Overdahl chaired a session entitled "Impact of High-Frequency Trading on Markets." As high-frequency trading (HFT) continues to influence exchange-traded markets around the globe, a growing body of empirical studies has emerged documenting the impact of HFT on markets. This panel examined the impact of HFT on market quality metrics, and addressed issues such as whether HFT creates an unlevel playing field, disadvantages other market participants, or contributes to market instability.

Experts from NERA's Global Transfer Pricing Practice hosted a breakfast seminar in the firm's Madrid office on 6 October 2011 to address some relevant topics in the current transfer pricing arena and business environment.

First, Special Consultant Pim Fris presented "Signals from the Transfer Pricing practice worldwide -- What's the message?" Mr. Fris provided an overview of transfer issues from around the world, including intangibles (OECD), cost-sharing views (US), implicit support (Canada), bargaining positions (UK), location-specific advantages (BRICS), and the UN guidelines.

Next, Associate Director Jean-Sébastien Lénik highlighted, using a case study, the central role that transfer pricing plays in a company's valuation exercises. Because the current business environment is highly dynamic and unpredictable, the alignment of a company's transfer pricing system with its operational and risks footprint is therefore a complex challenge. Mr. Lénik discussed how transfer pricing interacts with strategic assets and business valuation, performance measurement, and supply chain management.

Finally, Senior Consultant Victoria Alonso presented "Thin Capitalization and Profit Participation Loans: Transfer Pricing Economic Analysis and Legal Regulations." The introduction of profit participation loans into Spanish Law and the thin capitalization regulation based on a safe harbor policy has brought about many complex transfer pricing issues. Ms. Alonso discussed how the economic analysis performed to determine the arm's length leverage ratio and interest rate for a profit participation loan should take into account the legislative framework regulating the capital structure and financial transactions. On the other hand, if the rules are merely applied without considering the underlying economic rationale, this could lead to conclusions lacking economic meaning.

Over the past year, Canada has seen a significant increase in enforcement across all areas of competition law, including misleading advertising, mergers, abuse of dominance, and pricing practices. Important developments have also arisen in competition class actions, criminal investigations, and foreign investment review, and the Competition Bureau has proposed to revise its own substantive guidelines for evaluating the competitive effects of mergers. To examine these developments, the Canadian Bar Association held its annual competition law conference in Gatineau, Québec on 5-7 October 2011. NERA sponsored the opening cocktail reception held on Wednesday evening, 5 October. The following day, NERA Vice President Dr. Graeme Hunter served as a panelist for a session entitled "The Great Cartel Experiment." This interactive session explored when empirical tools can be used to detect cartel behavior and some of the conditions that make such agreements effective.

On 4 October 2011, NERA Senior Vice President Dr. Anne E. Smith delivered testimony at a hearing on "Quality Science for Quality Air" before the US House of Representatives Committee on Science, Space, and Technology's Subcommittee on Energy and the Environment. Dr. Smith was asked to share her perspective on the economic underpinnings of the Environmental Protection Agency's (EPA) policy analyses for setting air quality standards. Dr. Smith's testimony focused primarily on her analyses and research on the costs and benefits in EPA's Regulatory Impact Analyses (RIAs). Dr. Smith argued that, in order to create the appearance of large health benefits from air regulations for pollutants other than fine particulate matter (PM2.5), EPA is relying to an extreme degree on calculations of "co-benefits" from small reductions in PM2.5 concentrations that are already at levels EPA deems safe -- reductions that EPA predicts will occur as a coincidental result of having to comply with the regulations on non-PM pollutants. Dr. Smith also argued that EPA's unwillingness to set a PM2.5 air quality standard low enough to directly mitigate those purported risks suggests EPA recognized that its estimates of "co-benefits" are not reflective of true public health risks. This practice in EPA's RIAs is dubious scientifically, but also leads to overly costly and complex ways of providing for national air quality needs.

NERA hosted a seminar in London on 4 October 2011 that examined the latest developments in financial litigation, disputes, and enforcement. The program consisted of an opening session followed by two concurrent breakout sessions.

In the opening session, "Financial Regulation and Enforcement: A Global Perspective," NERA Vice President Paul Hinton and Senior Consultant Rob Patton began by discussing recent trends in regulatory enforcement in UK financial markets. Patrick Meaney, Manager of the Wholesale Department in the UK Financial Services Authority's Enforcement Division, then presented on market integrity and global enforcement. NERA Vice President Dr. Sharon Brown-Hruska followed with an examination of the impact of Dodd-Frank Wall Street Reform on global markets and intermediaries. The session concluded with a discussion of "EU Regulation in a G20 World" by Richard Metcalfe, Head of Global Policy, Senior Regulatory Adviser, and Deputy Regional Director, EMEA of the International Swaps and Derivatives Association. The session was moderated by NERA President Dr. Andrew Carron.
 
Dr. Carron also moderated the first breakout session, "Complex Financial Products: Mis-selling, Mis-marking, and Valuation." In this session, Dr. Chudozie Okongwu, Senior Vice President and Head of NERA's European Finance, Litigation, and Dispute Resolution Group, began with an examination of complex financial products and the risks involved for investors. NERA Senior Vice President Dr. Faten Sabry then discussed the economics of CDO litigation. The session concluded with a presentation on litigating complex financial products by Michael Barnett, Partner on the Finance Litigation Team at Addleshaw Goddard LLP.

The second breakout session, "Alternative Economic Approaches in Commercial Disputes: Applications to Lost Profits and Competing Claims for Assets," began with a presentation by NERA Senior Vice President Dr. Vinita Juneja on how a financial economist approaches breach of contract and lost profits claims in commercial disputes. George Burn, Partner and Head of International Arbitration at Salans, followed with an examination of event studies as an alternative method for valuing a claim in international arbitration cases. Next, NERA Senior Vice President Dr. Elaine Buckberg discussed economic analysis in workouts of failed banks. Charles Kaplan, Partner and Head of International Dispute Resolution at Herbert Smith LLP, closed the session with a presentation on two aspects of the time value of money in international arbitration matters: discounted cash flows and interest. The session was moderated by NERA Director Graham Shuttleworth, head of the London office.

Please contact Angela McLean at angela.mclean@nera.com for further information.

The Osgoode Hall Law School at York University and the International Property Tax Institute (IPTI) offered a two-part, four-day certificate program entitled "Expert Evidence in Property Valuation Disputes," which began on 3 October 2011. The program focused on how to give effective oral and written expert testimony in tribunal and court proceedings. NERA Senior Vice President Mark Berenblut and Vice President Bradley A. Heys were invited to share their insights during the first part of the program, "The Effective Expert Witness," which took place on 3-4 October. The faculty explained a number of key issues, including, among others: what to expect in cross-examination; addressing alternate assumptions and methodologies; dealing with conflicting expert opinions; what to expect at pre-hearing meetings between experts; the rising practice of concurrent evidence or "hot-tubbing;" key components of a strong, persuasive report; and how to address alternate methods and assumptions. The second part of the program, "The Valuator as Expert Witness," was held on 31 October - 1 November.

To learn more about the Osgoode-IPTI Certificate Program, please visit the IPTI website.

This conference, being held on Amelia Island, Florida on 3-4 October 2011, will explore the latest trends and developments in lead litigation. NERA is pleased to be sponsoring the event. In addition, NERA Vice President Dr. Ronald Miller will participate in a session entitled "Presenting Economic Loss." Dr. Miller will address the possible roles of an economist in lead litigation, focusing on the valuation of economic damages as well as potential causation arguments.

For more information, please visit the Lead Litigation Conference website.