Corporate Defense and Disputes

Important developments in U.S. securities law, white collar criminal defense, regulatory enforcement and other emerging issues impacting financial services institutions, publicly traded companies and private investment funds

Supreme Court Holds that Persons Who Do Not “Make” Misstatements Can Nevertheless Be Liable for Other Securities-Fraud Violations

The Supreme Court held on March 27 that persons who do not “make” material misstatements or omissions, but who disseminate them to potential investors with fraudulent intent, can be held to have violated other provisions of the securities laws that do not depend on actually “making” the misstatements or omissions.  The Court’s decision in Lorenzo v. SEC (No. 17-1077) reads the anti-fraud provisions broadly and bolsters the ability of investors and governmental authorities to pursue persons who employ fraudulent schemes or practices even if those persons themselves do not “make” any material misrepresentations or omissions.

Read the full client alert here.

Second Circuit Rejects Securities Claims Based on Generic Statements About Ethics and Compliance

The Court of Appeals for the Second Circuit yesterday affirmed the dismissal of a securities class action alleging misrepresentations arising from generalized statements about an issuer’s compliance efforts and Code of Ethics. The decision in Singh v. Cigna Corporation held that such generic statements are not material because a reasonable investor could not have relied on them as representations of regulatory compliance.  Continue Reading

The Importance of Documenting Corporate Actions: Delaware Supreme Court Requires Production of Emails in Books-and-Records Request

The Delaware Supreme Court held yesterday that a corporation can be required to produce emails and other electronic documents where necessary to satisfy a shareholder’s legitimate request to inspect corporate books and records under § 220 of the Delaware General Corporation Law.  The Supreme Court also held that, under the circumstances of the case, a court could not impose jurisdictional limitations on the shareholder’s use of documents obtained through the § 220 inspection process. Continue Reading

First Appellate Decision Holds that SEC Can Bring Extraterritorial Enforcement Action Based on Conduct or Effects in United States

The Court of Appeals for the Tenth Circuit held today that the Securities and Exchange Commission may bring an enforcement action based on allegedly foreign securities transactions involving non-U.S. residents if sufficient conduct occurred in the United States. Continue Reading

Insider Trading for Dummies: Judge Rakoff Tries to Simplify the Law

A lot of ink has been spilled over the crime of insider trading, which – in the view of U.S. District Judge Jed Rakoff – “is a straightforward concept that some courts have managed to complicate.”  In his recent decision in United States v. Pinto-Thomaz (S.D.N.Y. Dec. 6, 2018), Judge Rakoff attempts to simplify insider-trading law by returning to its roots:  embezzlement, and use of stolen property. Continue Reading

Dutch Court Approves Collective Settlement of Fortis Shareholders’ Claims

The Amsterdam Court of Appeal has approved a €1.3 billion collective settlement of claims asserted on behalf of shareholders of the former Fortis (now Ageas). The July 13, 2018 decision again shows that the Dutch Act on Collective Settlement of Mass Claims (the “WCAM”) can be used to resolve transnational disputes regardless of whether those claims could be litigated adversarially on a classwide basis in the Netherlands or elsewhere. Continue Reading

Second Circuit Again Upholds Tipper/Tippee Liability from Gift of Information Without Close Relationship

The Second Circuit confirmed this week that a “meaningfully close personal relationship” is not required for insider-trading liability where a tipper discloses inside information as a gift with the intent to benefit the tippee.  The June 25, 2018 decision on panel rehearing in United States v. Martoma (No. 14-3599) retreats from the panel’s original decision and no longer effectively overrules a portion of the Second Circuit’s 2014 decision in United States v. Newman, which had refused to infer a tipper’s intent to benefit a tippee in the absence of a meaningfully close relationship and a pecuniary or similarly valuable benefit in exchange for the tip.  The new panel decision – again a 2-1 ruling – now holds that the requisite relationship described in Newman can be established by proving “either [i] that the tipper and tippee shared a relationship suggesting a quid pro quo or [ii] that the tipper gifted confidential information with the intention to benefit the tippee.”

Read the full client alert here.

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