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

Category Archives: Securities Law

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Qualcomm Escapes Diversity Suit

Another diversity-based derivative suit was dismissed this week by a federal district court, joining a list of decisions that have rejected similar shareholder allegations. This most recent decision, from the District of Delaware, dismissed claims alleging Qualcomm Inc. had allowed unlawful and discriminatory practices to exist within its executive ranks.  Though the complaint was initially … Continue Reading

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.… 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

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 … Continue Reading

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 … Continue Reading

SEC Greenlights Board Diversity Requirements

After much debate, the SEC on Friday approved a Nasdaq proposal that will require listed companies to adopt several diversity-related measures.  Nasdaq first made this proposal, which requires listed companies to publicly disclose diversity information about their board members and either hire “diverse” members to their boards or explain why they do not in writing, … Continue Reading

L Brands Settles Derivative Suits

On July 30, 2021, L Brands, the parent company behind Victoria’s Secret and Bath & Body Works, settled a rash of derivatives actions which had alleged “toxic” workplace conditions and “a culture of misogyny” at the company.  We previously detailed the allegations in this space as part of our ongoing review of shareholder attempts to … Continue Reading

FINRA Lives Up To Its Name, Announces Regulatory Inquiries into SPACs

While 2021 has been exceptionally lucrative for SPAC sponsors – even more so than 2020’s “Year of the SPAC” – U.S. regulators appear emphatic that 2021 be the year of SPAC supervision.  In April, the SEC released guidance on SPACs and related risks, highlighted by its novel argument that the entire lifespan of the SPAC … Continue Reading

SEC’s Coinschedule Settlement Offers Mere “Clue-By-Enforcement” Into Whether Cryptocurrencies are Securities

On July 14, 2021 the SEC issued a consented-to Cease and Desist Order against U.K.-based cryptocurrency review website owner Blotics Ltd. (formerly doing business as Coinschedule Ltd.) for violating Section 17(a) of the Securities Act. According to two SEC Commissioners, the decision should have but didn’t clarify the Commission’s position as to whether and when … Continue Reading

District Court Takes Judicial Notice of SEC Order in Denying Motion to Dismiss Shareholder Claims

In our previous post, Under Armour Inc. Pulls Sales Forward, SEC and Stockholders Push Back, we discussed Under Armour Inc.’s recent settlement with the SEC, under which Under Armour agreed to pay $9 million for alleged violations of federal securities laws. While that settlement marked the end of a two year investigation into Under Armour’s … Continue Reading

SEC Chair Gensler Testifies on “Unprecedented Surge” in SPACs

SPACs remain on everyone’s mind, especially the country’s chief regulator.  On May 26, 2021, SEC Chair Gary Gensler testified before the U.S. House Subcommittee on Financial Services and General Government on “key capital market trends” that will impact SEC resources in the coming years. And the very first topic he raised – Initial Public Offerings … Continue Reading

Review of the SEC Whistleblower Program: At the Crossroads of Securities Law and Whistleblower Protection

Fiscal year 2020 marked the ten-year anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act establishing the Securities and Exchange Commission’s whistleblower program. Since its inception through the end of FY2020, the SEC has awarded approximately $562 million to 106 individuals. Even a decade after it was created, the whistleblower program continues to … Continue Reading

ESG Status Quo Persists For Now, Gensler Signals Rulemaking Forthcoming

The SEC’s Climate and ESG Task Force has been criticized by Republican commissioners who believe enforcement in the area would be premature. But Kelly L. Gibson, acting deputy director of the enforcement and head of the agency-wide ESG Task Force, stated that the task force is necessary to recognize evolving investor priorities and that it will … Continue Reading

Under Armour Inc. Pulls Sales Forward, SEC and Stockholders Push Back

As the culmination of an SEC investigation into Under Armour Inc.’s “pull forward” practice leads to charges, Under Armour agrees to cease and desist and settles for $9 million. Following an investigation dating back to 2015, the SEC claimed Under Armour misled investors by not disclosing the reason for its growth in revenue and what … Continue Reading

Underperforming SPAC Still Subject to Federal Claims in Securities Class Action

If 2020 was the “Year of the SPAC,” 2021 may be turning into the year of the SPAC class action. We have already followed numerous cases where recently formed SPACs have been challenged in federal court for alleged violations of federal securities laws. Although those cases are still pending, a district court recently delivered a … Continue Reading

DOJ Tax Division Shows Continued Interest in Cryptocurrency

On May 5, 2021, another federal district court, this time for the Northern District of California, permitted the IRS to proceed with a John Doe summons very similar to the one served on Circle last month (the subject of a recent post).  This time, the Summons seeks information on customers of a San Francisco-headquartered digital … Continue Reading

Another Diversity Suit Tossed on Forum Selection Grounds

This week, another shareholder derivative suit was dismissed based on a forum selection clause contained in the company’s bylaws. In November 2020, a shareholder filed a derivative action alleging that directors and officers of The Gap, Inc., an apparel company, had failed to create meaningful diversity on the Board of Directors on within the company’s … Continue Reading

SEC Speaks Out on SPACs, Highlights Legal Liability and Reporting Risks

SPACs seem to be having their moment in the financial world, especially in 2021.  In less than three months, U.S.-based SPACs have raised more money – almost $88 billion – than all SPACs combined in 2020 (which held the previous high for SPAC investment by some margin).  They have even reached a level of societal … Continue Reading

Polarizing Panel Suggests No Easy Road to Final ESG Regulatory Scheme

While the SEC staff tends to be of the broad view that ESG warrants serious consideration, there are a breadth of different opinions regarding what ultimate disclosure requirements should look like.  This discord came to a head during a virtual SEC panel last Friday. The panelists included both SEC staff and industry leaders.  One-by-one, the … Continue Reading
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