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

SEC Announces Important Changes to Disqualification Waivers

On July 3, 2019, SEC Chairman Jay Clayton issued a “Statement Regarding Offers of Settlement” (the “Statement”), announcing important changes to how the SEC will consider future requests for waivers from disqualifications in settlements. The Statement may have been in response to the Bad Actor Disqualification Act of 2019 recently proposed by Representative Maxine Waters. Regardless of the impetus, the Statement should provide settling parties with greater certainty regarding the waiver process. Importantly, the new policy effectively allows a settling party to condition its offer of settlement on whether the SEC grants a requested waiver.

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

Supreme Court Hearing Raises Questions About Private Rights of Action Under § 14 of Securities Exchange

One of the more intriguing rulings of this Supreme Court Term is the Court’s one-sentence order yesterday dismissing as improvidently granted the writ of certiorari issued in Emulex Corp. v. Varjabedian (No. 18-459).  The Court had taken the case to review a Circuit split on the liability standard under § 14(e) of the Securities Exchange Act, which regulates tender offers.  Along the way, however, the petitioner argued that a private right of action does not exist at all under § 14(e) – an issue that had not been raised in the lower courts.  That issue occupied a large portion of the oral argument held on April 15, 2019, with the parties and the Justices exploring whether the Court should entertain the previously unraised issue and, if so, what the outcome should be. Continue Reading

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

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