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

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 enforcement activities.

Read the full post on Proskauer’s The Capital Commitment blog.

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 shares of a competitor not involved in the acquisition, in the belief (as alleged by the SEC) that the competitor’s stock price would also benefit from the news. The SEC did not allege that Panuwat had any particular information received from the company whose stock he had traded, but that he had engaged in what has been referred to as “shadow trading” of a comparable company by misappropriating information from his employer.

Read the full client alert here.

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. 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, last December.  Under SEC regulations, self-regulatory organizations such as Nasdaq must formally submit proposed rule changes to the Commission.  Nasdaq made some minor revisions to the proposed rule in February that granted smaller boards and newly listed companies some compliance leeway, but the proposal has otherwise survived scrutiny from conservatives, corporate interests, and popular newspaper editorial boards.

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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 hold companies liable for perceived diversity failures and workplace discrimination.  As we noted, a New York Times report detailing specific allegations of a former Chief Marketing Officer led to the filing of shareholder actions across the country, including in Ohio, Oregon, and Delaware. Continue Reading

June 2021 Update of the SEC’s Covered Actions for Potential Whistleblower Claims

On June 30, 2021, the SEC posted six Notices of Covered Actions, for which individuals have 90 calendar days to apply for a whistleblower award.  As discussed in our prior post, the SEC publishes Notices for cases in which the final judgment or order, by itself or together with other prior judgments or orders in the same action issued after July 21, 2010, results in monetary sanctions exceeding $1 million.

In this post, we briefly survey the six June 2021 Notices of Covered Actions.

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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 – from IPO to deSPAC transaction – may be considered part of the offering for purposes of securities law liability.  After this bombshell, it appears other regulators do not want to miss out on making their voices heard. Continue Reading

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