This week, our corporate colleagues published a handy guide to the SEC’s new proposed rules on SPACs. Of particular note to securities watchers should be potential increases in litigation stemming from changes to the definition of “blank check company” for the Private Securities Litigation Reform Act of 1995 (the “PSLRA”).
SEC Division of Examinations Announces 2022 Examination Priorities
The Securities and Exchange Commission’s Division of Examinations recently announced its examination priorities for fiscal year 2022: Private Funds; Environmental, Social, and Governance (“ESG”) Investing; Standards of Conduct; Information Security and Operational Resiliency; and Emerging Technologies and Crypto-Assets. The Division seeks to provide investors and registrants with transparency into these
Major SPAC News, Rules May Be Coming This Week
On Thursday, March 24th, the Securities and Exchange Commission announced an agenda for a March 30th open meeting for the Divisions on Corporate Finance and Investment Management. The meeting has only one agenda item: SPACs, shell companies, and projections.
In December 2021, SEC Chair Gary Gensler compared SPACs to traditional
SEC Proposes Broad New Climate Change Disclosure Requirements
Last week, the U.S. Securities and Exchange Commission proposed a set of sweeping new rules requiring public companies to disclose climate-related risks in their registration statements and periodic reports. Under the proposed rules, public companies would have to disclose the actual and potential impacts of climate change on their business,
Pay Versus Performance Takes Center Stage
In an era where TikTok stars outearn scores of CEOs of top earning publicly traded companies, executive compensation is no less important to the investing public or to companies striving to attract and retain top talent. Indeed, just this year the CEO of Starbucks received a 39% pay increase. Such soaring executive compensation has not escaped the notice of the SEC.
SEC Defeats Motion to Dismiss Insider-Trading Complaint Alleging Novel “Shadow Trading” Theory
The SEC prevailed on a motion to dismiss a closely watched lawsuit alleging that the defendant had engaged in insider trading based on news about a not-yet-public corporate acquisition when he purchased securities of a company not involved in that deal. The January 14, 2022 decision in SEC v. Panuwat (N.D. Cal.) marks the first time a court has considered the theory of “shadow trading,” which involves trading the securities of a public company that is not the direct subject of the material, nonpublic information (“MNPI”) at issue.
The Panuwat decision does not appear to break new ground under the misappropriation theory of insider trading in light of the particular facts alleged. But the “shadow trading” theory warrants attention because, on other sets of allegations, it can have wide-ranging ramifications for traders.
Supreme Court to Decide Whether Discovery Stays Apply to State-Court Securities Lawsuits This Fall
One of the most significant differences between bringing a securities lawsuit in state versus federal court is the application of the mandatory discovery stay set forth in the Private Securities Litigation Reform Act (the “PSLRA”). Following the enactment of the PSLRA in 1995, federal courts must stay discovery in securities-law cases until after a complaint has survived a pleadings challenge, i.e., a motion to dismiss. State courts have been divided on whether such a stay is mandatory in securities-law cases brought before them as well. Now, a software company facing a challenge under the Securities Act of 1933 in California state court has been granted leave to argue before the United States Supreme Court that the PSLRA’s discovery stay equally applies in state courts.
SPACs Explained, in Five Minutes or Less
In the financial world, 2020 was the year of the SPAC. During the past few years, many Silicon Valley start-ups were chomping at the bit to get listed and cash out via initial public offering (IPO). And in 2020, over half of the companies that went public did so using a SPAC. Exchanges are also getting in on the fun, with at least three SPAC ETFs hitting the stock exchange in the past few months.