A federal district court in Missouri recently denied a motion to dismiss the Securities Industry and Financial Markets Association’s (“SIFMA’s”) challenge to Missouri Securities Division rules that require financial firms and professionals to obtain clients’ signatures on state-prescribed documents before providing advice that “incorporates a social or nonfinancial objective.” The decision – Securities Industry and Financial Markets Association v. Ashcroft – upholds a noteworthy response from the securities industry to the anti-ESG backlash that has emerged in the past few years and has politicized investment decisionmaking.
The Delaware Court of Chancery recently held that claims for breach of the fiduciary duty of oversight are not easier to plead against corporate officers than against corporate directors. The decision in Segway Inc. v. Cai emphasizes the high burden for pleading oversight claims against officers as well as directors, and it repeats the admonition that the oversight doctrine “is not a tool to hold fiduciaries liable for everyday business problems.”
On November 29, the U.S. Treasury Department’s Financial Crimes Enforcement Network issued a final rule aimed to ease compliance with certain aspects of the regulations promulgated under the Corporate Transparency Act. The final rule extends the deadline from 30 days to 90 days for entities created or registered during 2024…
The SEC defeated a motion for summary judgment brought by a defendant whom the SEC accused of engaging 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 November 20, 2023 decision in SEC v. Panuwat (N.D. Cal.) keeps alive the SEC’s 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 it can potentially have wide-ranging ramifications for traders by broadening the scope of the types of nonpublic information that might be deemed material.
Since 2015, the SEC has brought nearly two dozen enforcement actions for violations of the whistleblower protection rules under Rule 21F-17(a) against employers for actions taken to impede reporting to the SEC. The bulk of these actions have focused on language in employee-facing agreements that allegedly discouraged such reporting. The…
A federal District Court in Washington recently dismissed a shareholder derivative action by a conservative advocacy group challenging Starbucks’ initiatives relating to diversity, equity, and inclusion (“DEI”). The decision in National Center for Public Policy Research v. Schultz held that the plaintiff did not fairly and adequately represent the interests of Starbucks and its shareholders in launching the challenge and had not pled particularized facts showing that Starbucks’ Board of Directors had wrongfully refused the plaintiff’s demand to dismantle the company’s DEI initiatives.
In an era of politicization of DEI and other ESG-related concerns, the ruling sends a signal that at least some courts will refuse to become “political attachés” in the culture wars and will not involve themselves with partisan attacks on “reasonable and legal decisions made by the board of directors of public corporations.” Decisions of this type should provide some comfort to corporations and boards as they consider how to address those complicated social and workplace issues.
The U.S. Court of Appeals for the Second Circuit held that a statement of opinion that reflects some subjective judgment can nevertheless be actionable under the securities laws if it misleads investors into thinking that the issuer had historical or factual support for the judgment made. But the court also held that corporate officers’ certifications of financial statements are nonactionable opinions in the absence of allegations that the officers either did not believe their certifications or knew that the financial statements were false or misleading.