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

Another Diversity Suit Stifled

Last week, yet another federal court dismissed a shareholder derivative suit that claimed a company had failed to diversify its corporate leadership team.  Shareholders had alleged that Opko Health Inc., a Miami-based medical company, failed to nominate or appoint minorities to the board and executive management team despite public statements celebrating the company’s diverse staff.

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SEC Investor Advisory Committee Considers Recommendations to Tighten Rules for Insiders’ Trading Plans

The Securities and Exchange Commission’s Investor Advisory Committee (the “IAC”) is considering recommendations from its Owner Subcommittee urging the Commission to tighten the affirmative defense and disclosure requirements for SEC Rule 10b5-1 trading plans.  These recommendations follow recent statements by SEC Chair Gary Gensler signaling the agency’s intention to review and toughen rules governing those plans.

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July 2021 Update of the SEC’s Covered Actions for Potential Whistleblower Claims

On July 30, 2021, the SEC posted 14 Notices of Covered Actions, after which individuals have 90 calendar days to apply for a whistleblower award.  As discussed in our prior post, the SEC publishes these Notices for cases in which the final judgment or order, either by itself or together with other prior judgments or orders in the same action issued after July 21, 2010, results in monetary sanctions exceeding $1 million.

In this post, we briefly survey the 14 Notices of Covered Actions from July 2021.  (See our previous post on the SEC’s Notices of Covered Actions from June 2021.)  Several of the alleged misconducts in the 14 Covered Actions also resulted in parallel criminal actions. Continue Reading

Ex-Nikola Chairman Indicted for Securities Fraud

In April 2021, the SEC released several public statements that may have begun to cool a superheated SPAC market. FINRA soon followed suit, announcing in July 2021 a regulatory sweep aimed at SPACs.  Now, for the first time, a criminal case has been filed in connection with a company that came to market as part of the 2020 SPAC explosion. Continue Reading

Second Circuit Holds that Accurately Reported Financial Statements Are Not Actionable and that Materiality Has a Half-Life

The U.S. Court of Appeals for the Second Circuit held earlier this week that a company’s accurately reported financial statements are not misleading simply because they do not disclose that alleged misconduct might have contributed to the company’s financial results. The court also ruled that alleged misstatements made three to four years before the plaintiffs purchased the issuer’s securities were not material as a matter of law where an “outpouring of information” about the alleged misconduct followed those purported misstatements and preceded the plaintiffs’ securities purchases.

The decision in Plumber & Steamfitters Local 773 Pension Fund v. Danske Bank A/S (2d Cir. Aug. 25, 2021) squarely aligns the Second Circuit with other courts that have held that accurately reported financial results are not actionable even if undisclosed alleged misconduct purportedly contributed to the financial performance. The decision also highlights the need to consider whether a particular shareholder can be an optimal class representative where the complaint alleges a long class period. Continue Reading

U.S. Federal Regulators Turn Up the Heat on Cryptocurrency Trading Platforms

With new types of digital assets and related business on the rise, federal authorities have been busy investigating.  Recently, the SEC, FinCEN and the CFTC have imposed some notable settlements involving cryptocurrency trading platforms for allegedly operating without appropriate approvals from financial regulatory authorities.  This may be the start of the next wave of government enforcement activities.

Read the full post on Proskauer’s The Capital Commitment blog.

MNPI Update: SEC Pursues “Shadow Trading” Insider Trading Case

The SEC recently charged a former employee of a biopharmaceutical company with insider trading in advance of an acquisition but with a unique twist: Trading the securities of a company unrelated to the merger. The employee, Matthew Panuwat, did not trade his own company’s or the acquiring company’s securities, but instead purchased stock options for shares of a competitor not involved in the acquisition, in the belief (as alleged by the SEC) that the competitor’s stock price would also benefit from the news. The SEC did not allege that Panuwat had any particular information received from the company whose stock he had traded, but that he had engaged in what has been referred to as “shadow trading” of a comparable company by misappropriating information from his employer.

Read the full client alert here.

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