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

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Jonathan Richman

Partner

Jonathan Richman represents a variety of companies in securities class actions, shareholder derivative actions, internal investigations, SEC investigations, corporate governance, insider trading, D&O insurance and related matters. Many of those matters involve international elements, including representations of non-U.S. issuers in U.S. litigation and in landmark non-U.S. collective settlements under Dutch law in the Netherlands. Jonathan’s clients have included Hewlett Packard, Royal Dutch/Shell, Zurich Insurance Group, Halliburton, and Waste Management.

Jonathan writes extensively on topics ranging from securities and insider-trading law, corporate governance and fiduciary issues to non-U.S. law on collective actions. His articles have been published in major legal publications.

Jonathan is the immediate past co-head of the Firm’s Securities Litigation Group and is currently co-head of the Firm’s Asset Management Group. Before joining Proskauer, Jonathan was a partner at Dewey & LeBoeuf LLP, where he was co-head of the Securities, M&A and Corporate Governance Litigation Practice Group.

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SEC Enforcement Director and SDNY/EDNY Officials Address Enforcement Priorities

SEC Division of Enforcement Director Gurbir Grewal and several high-ranking officials from the U.S. Attorney’s Offices for the Southern and Eastern Districts of New York and the FBI spoke on November 29, 2022 at a conference sponsored by Sandpiper Partners LLC concerning hot topics in SEC and DOJ enforcement.  The panelists all made clear that … Continue Reading

New Study Finds Trickle-Down Effect from Board Diversity

A new study has found that diversity on corporate boards of directors leads to statistically significant increases in the representation of under-represented groups at the manager and staff level.  The study – “Do Diverse Directors Influence DEI Outcomes?” by Wei Cai (Columbia Graduate School of Business), Aiyesha Dey (Harvard Business School), Jillian Grennan (Santa Clara … Continue Reading

Father Sometimes Knows Best: District Court Blasts SEC’s “No Admit, No Deny” Provisions

In a scathing opinion, Southern District of New York Judge Ronnie Abrams recently blasted the SEC’s standard demand that defendants settling with the Commission agree never to deny the allegations against them.  Judge Abrams’ decision in SEC v. Moraes reluctantly approved a consent decree containing the usual “no admit, no deny” provision in light of … Continue Reading

Court Preliminarily Enjoins Florida’s “Stop Woke Act”

In a new skirmish in the volatile ESG and culture wars, a Florida federal court preliminarily enjoined enforcement of portions of Florida’s “anti-woke” law, which prohibits employers from requiring employees to attend training sessions or other activities that “espouse” or “promote” eight “concepts” relating to race, color, sex, or national origin.  U.S. District Judge Mark … Continue Reading

Blockchain Meets Morrison: Court Rejects Blockchain Class Settlement Because of Concerns About Adequacy of Representation

The U.S. District Court for the Southern District of New York recently rejected a proposed settlement of a securities class action involving purchasers of digital tokens due to concerns about whether the lead plaintiff had adequately represented the class for settlement purposes.  Judge Lewis A. Kaplan held in Williams v. Block.one that the federal securities laws … Continue Reading

Delaware Supreme Court Allows Use of “Reliable” Hearsay to Support Books-and-Records Demand

The Delaware Supreme Court held yesterday that a stockholder seeking to inspect corporate books and records may use “reliable” hearsay to establish the propriety of the purpose of the inspection demand. The decision in NVIDIA Corp. v. City of Westland Police and Fire Retirement System (July 19, 2022) does not appear to break new ground on … Continue Reading

Divided Delaware Supreme Court Decision Highlights Issues About Director Independence in Derivative Actions

The Delaware Supreme Court recently affirmed a Court of Chancery ruling granting a Special Litigation Committee’s motion to terminate a shareholder derivative action that had survived a motion to dismiss. The split decision in El Pollo Loco (June 28, 2022) highlights whether a director can be considered independent – especially as a member of a Special … Continue Reading

Second Circuit Reverses Dismissal of Securities Claim Alleging Failure to Disclose SEC Investigation

The Court of Appeals for the Second Circuit yesterday reversed the dismissal of a securities class action alleging fraud based on the defendants’ failure to disclose an SEC investigation into the company’s disclosed financial-control weaknesses.  The May 24, 2022 ruling in Noto v. 22nd Century Group, Inc. (No. 21-0347) is fact-specific, requiring disclosure of the investigation because … Continue Reading

Ninth Circuit Upholds Delaware-Forum Bylaw That Precludes Assertion of Federal Proxy Claim

The Court of Appeals for the Ninth Circuit affirmed the dismissal of a shareholder derivative action in light of an exclusive-forum bylaw requiring assertion of derivative claims in the Delaware Court of Chancery, even though the case included a federal claim that was subject to exclusive federal jurisdiction and could not have been litigated in … Continue Reading

Court Invalidates California Board-Diversity Statute

A California court invalidated a state law requiring that boards of directors of public companies based in California include members from under-represented groups, including persons of several races and ethnic groups and those who identify as gay, lesbian, bisexual, or transgender.  The April 1, 2022 decision in Crest v. Padilla, No. 20ST-CV-37513, by Judge Terry Green of … Continue Reading

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 … Continue Reading

California Federal Court Holds U.S. Securities Laws Inapplicable to Unsponsored, Unlisted ADR Transaction Preceded by Purchase of Common Stock Outside the U.S.

The U.S. District Court for the Central District of California held on January 7, 2022 that the federal securities laws do not apply to U.S. transactions in unlisted, unsponsored American Depositary Receipts (“ADRs”) for a foreign issuer’s shares where the ADR purchases depended on prior purchases of the underlying common stock on a foreign exchange.  … Continue Reading

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.… 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 … Continue Reading

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 … Continue Reading

First Circuit Adopts Prevailing Standard for Applicability of Federal Securities Laws to Foreign Investors, But Rejects Second Circuit’s Narrower Test

The U.S. Court of Appeals for the First Circuit held yesterday that the U.S. securities laws apply to foreign brokers’ solicitations of securities purchases by foreign investors if the purchasers or sellers incurred irrevocable liability within the United States to pay for or deliver the securities. The decision in SEC v. Morrone follows the “irrevocable … Continue Reading

Second Circuit Upholds Insider Trading Conviction, Finding Sufficient Confidentiality Duty and Personal Benefit

The Second Circuit yesterday affirmed the insider trading conviction of the principal of a potential acquiror who, in breach of a nondisclosure agreement with a potential target company, had provided a tippee with nonpublic information about an impending acquisition of the target. The decision in United States v. Chow held that: The nondisclosure agreement (“NDA”) between … Continue Reading

Second Circuit Reaffirms that Federal Securities Laws Do Not Apply to Predominantly Foreign Transactions

The U.S. Court of Appeals for the Second Circuit reaffirmed yesterday that the federal securities laws do not apply to “predominantly foreign” securities transactions even if those transactions might have taken place in the United States.  The ruling in Cavello Bay Reinsurance Ltd. v. Shubin Stein (No. 20-1371) reinforces the Second Circuit’s prior decisions concerning the … Continue Reading

Second Circuit Upholds Insider-Trading Conviction and Clarifies Scope of Requisite Fiduciary Relationship

The Second Circuit yesterday affirmed the insider-trading conviction of a doctor who, in breach of a confidentiality agreement, had traded on nonpublic information about a drug trial in which he had been participating.  The decision in United States v. Kosinski (2d Cir. Sept. 22, 2020) held that: A person can be convicted of insider trading under both … Continue Reading

Corporate Scienter Requires Link Between Employees with Knowledge and the Alleged Misstatements

The Court of Appeals for the Second Circuit held yesterday that a securities-fraud plaintiff cannot establish corporate scienter without pleading facts showing that employees who allegedly knew of underlying corporate misconduct had some connection to the corporation’s purportedly false or misleading public statements. The decision in Jackson v. Abernathy should prevent securities plaintiffs from establishing “collective” … Continue Reading

Delaware Supreme Court Rules That Corporate Charters Can Require Litigation of Federal Securities Act Claims in Federal Court

The Delaware Supreme Court ruled today that Delaware corporations can adopt charter provisions requiring that actions under the federal Securities Act of 1933 be filed in a federal court. The decision in Salzberg v. Sciabacucchi gives Delaware corporations a way to avoid state-court or multi-forum litigation of Securities Act claims by channeling all such cases into … Continue Reading

California Federal Court Holds that U.S. Securities Laws Apply to Unsponsored, Unlisted ADRs

The U.S. District Court for the Central District of California held on January 28, 2020 that the federal securities laws apply to U.S. transactions in unlisted, unsponsored American Depositary Receipts (“ADRs”) for a foreign issuer’s shares. The decision in Stoyas v. Toshiba Corporation also held that principles of international comity and forum non conveniens do … Continue Reading

Second Circuit Holds that a “Personal Benefit” Is Not Required for Insider Trading Under Criminal Securities Statute

The Second Circuit held earlier this week that the criminal statute proscribing securities fraud permits convictions for insider trading without proof that the provider of material, nonpublic information received a personal benefit in exchange for that information, even though proof of a personal benefit would be required under the general securities-law statute prohibiting insider trading. … Continue Reading
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