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

Subscribe to Securities Law RSS Feed

Shareholders Cannot Sue Corporate Officers for Forward-Looking Projections that Don’t Pan Out, Ninth Circuit Affirms

It is illegal under the Securities Exchange Act to make false or misleading statements to the investing public about material facts.  At the same time, corporations and their officers must be able to make statements about the company’s future plans, projections, and aspirations without fear of opening themselves up to claims of securities law liability … Continue Reading

Delaware Supreme Court Provides Further Guidance on Books and Records Requests in AmerisourceBergen

This past year, we highlighted a Delaware Chancery case adopting an expansive view in favor of parties seeking information from companies under Section 220 of the Delaware General Corporation Law.  The Delaware Supreme Court recently affirmed the Chancery Court’s ruling, providing additional appellate guidance on Section 220 and endorsing limits the Chancery Court set on … Continue Reading

ESG on the Books: NASDAQ Proposed Rules Require Board Diversity

In December, the NASDAQ proposed new listing rules that—if implemented—would require companies to (i) disclose information about the diversity of their directors on an annual basis and (ii) have at least two diverse directors, or else provide an explanation why they do not. By “diverse directors,” the rules contemplate “one [director] who self-identifies as female … Continue Reading

COVID-19 Misrepresentations: Blood Is Thicker Than Water

Thanks to HBO’s documentary, “The Inventor: Out for Blood in Silicon Valley,” and a barrage of media coverage about Elizabeth Holmes and her defunct company, Theranos, it is unmistakable that big misrepresentations can lie in public statements regarding miniscule quantities of blood. This lesson proved true again last month, when the CEO of Decision Diagnostics, … 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

Pinning Down Corporate Leadership

An interesting shareholder derivative suit was filed on November 30, 2020 in the Northern District of California against Pinterest, Inc. Pinterest, a visual discovery engine popular for collecting ideas for weddings and aggregating recipes, went public in April 2019. The complaint alleges that Pinterest executives “breached their fiduciary duties to the [c]ompany by perpetrating or … Continue Reading

SolarWinds Government Data Breach Leads to Securities Action

The massive data breach of the United States Commerce and Treasury Departments that has roiled the federal government has resulted in federal securities litigation. On January 4, 2021, Plaintiff-Shareholder Timothy Bremer filed a class action complaint against SolarWinds and SolarWinds’ corporate executives in the United States District Court for the Western District of Texas. SolarWinds … 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

SEC Adopts Final Rule on “Test-the-Waters” Communications

On September 25, 2019, the Securities and Exchange Commission (the “SEC”) adopted Rule 163B under the Securities Act of 1933, as amended (the “Securities Act” ), which permits all issuers, including business development companies (“BDCs”) and registered investment companies (collectively, “Funds”), to gauge market interest in contemplated registered securities offerings by engaging in oral or … Continue Reading

Delaware Supreme Court Rejects Presumption of Confidentiality for Books-and-Records Productions

The Delaware Supreme Court yesterday rejected a presumption of confidentiality for documents produced pursuant to books-and-records inspection requests under § 220 of the Delaware General Corporation Law.  The decision in Tiger v. Boast Apparel, Inc. (Del. Aug. 7, 2019) holds that courts can impose confidentiality restrictions in appropriate cases, but that some justification of confidentiality is necessary – … Continue Reading

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. … Continue Reading

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 … 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 … Continue Reading

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 … 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 … 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

Dutch Court Approves Collective Settlement of Fortis Shareholders’ Claims

The Amsterdam Court of Appeal has approved a €1.3 billion collective settlement of claims asserted on behalf of shareholders of the former Fortis (now Ageas). The July 13, 2018 decision again shows that the Dutch Act on Collective Settlement of Mass Claims (the “WCAM”) can be used to resolve transnational disputes regardless of whether those claims could … Continue Reading

SEC Enforcement Co-Director Gives Guidance for Wells Process, Part 2

On June 4, we posted a summary of SEC Enforcement Co-Director Steven Peikin observations during his recent keynote address at the New York City Bar Association’s 7th Annual White Collar Crime Institute.  Co-Director Peikin imparted a few suggested “do’s and don’ts” for effective communication with the SEC during the Wells process.  Although Co-Director Peikin’s suggestions should serve as … Continue Reading

Supreme Court Rules That Federal Courts Are Not Bound to Give Conclusive Effect to Foreign Governments’ Statements About Their Laws

The Supreme Court ruled today that, when a foreign government presents a formal submission to a federal court about the content of the government’s own laws, the court should accord “respectful consideration” to the government’s statements, but is not bound to grant them “conclusive effect.”  The decision in Animal Science Products, Inc. v. Hebei Welcome … Continue Reading
LexBlog

This website uses third party cookies, over which we have no control. To deactivate the use of third party advertising cookies, you should alter the settings in your browser.

OK