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

Major SPAC News, Rules May Be Coming This Week

On Thursday, March 24th, the Securities and Exchange Commission announced an agenda for a March 30th open meeting for the Divisions on Corporate Finance and Investment Management.  The meeting has only one agenda item: SPACs, shell companies, and projections.

In December 2021, SEC Chair Gary Gensler compared SPACs to traditional IPOs, and noted that there may be different levels of disclosure provided to various parties involved in SPAC transactions.  He further made reference to future regulatory action on SPACs.

This March gathering may well be what Chair Gensler promised, as the Commission will consider at this meeting “whether to propose amendments regarding special purpose acquisition companies, shell companies, the use of projections in Commission filings and a rule addressing the status of special purpose acquisition companies under the Investment Company Act of 1940.”

We will be monitoring this meeting and other SEC actions regarding SPACs.  Stay tuned here for more updates.

SEC Proposes Broad New Climate Change Disclosure Requirements

Last week, the U.S. Securities and Exchange Commission proposed a set of sweeping new rules requiring public companies to disclose climate-related risks in their registration statements and periodic reports.  Under the proposed rules, public companies would have to disclose the actual and potential impacts of climate change on their business, management and governance processes to address those impacts, and their direct and indirect greenhouse gas emission levels.  According to the SEC Chair Gary Gensler, the proposed rules, which were approved by a 3-1 margin, were driven by investor demand and concern that climate change poses significant financial risks to companies.  While many companies already gather and report climate-related information, the proposed rules seek to standardize this information so that companies can effectively and efficiently make these disclosures and investors have consistent and comparable information to make informed investment decisions.  Should they be enacted, they will have an outsized impact on the preparation of corporate disclosures, and could serve as the basis for future enforcement actions and, potentially, private litigation for alleged failure to comply.

Read the full client alert here.

Cisco Diversity Suit Dismissed

Another shareholder derivative suit claiming diversity shortcomings within the company was dismissed last week: A judge in the Northern District of California dismissed allegations that Cisco Systems Inc. falsely and improperly represented itself as an industry leader in diversity.

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Pay Versus Performance Takes Center Stage

In an era where TikTok stars outearn scores of CEOs of top earning publicly traded companies, executive compensation is no less important to the investing public or to companies striving to attract and retain top talent. Indeed, just this year the CEO of Starbucks received a 39% pay increase. Such soaring executive compensation has not escaped the notice of the SEC. Continue Reading

Securities Litigation: An Emerging Strategy to Hold Companies Accountable for Privacy Protections

A California federal judge rejected Zoom Video Communications, Inc.’s motion to dismiss securities fraud claims against it, and its CEO and CFO, for misrepresenting Zoom’s privacy protections. Although there have been a number of cases challenging inadequate privacy protections on consumer protection grounds in recent years, this decision shifts the spotlight to an additional front on which the battles for privacy protection may be fought:  the securities-litigation realm. Continue Reading

SEC Says Remedy Stops Penalty: HeadSpin Avoids Fine in SEC Fraud Action

On January 28, 2022, the Securities and Exchange Commission filed a complaint in the U.S. District Court for the Northern District of California against HeadSpin, Inc., a Silicon Valley start-up. In the complaint, the SEC alleged that HeadSpin, though its then-CEO Manish Lachwani, engaged in a fraudulent scheme “to propel its valuation to over $1 billion by falsely inflating the company’s key financial metrics and doctoring its internal sales records.” Continue Reading

Key Takeaways from Recent Court Rulings on Corporate Board Oversight

Corporate boards are subject to a duty of oversight, as part of their duty of loyalty to their company. As outlined by Delaware’s famously stringent Caremark standard, pleading a violation of that duty is often difficult. However, the Delaware Court of Chancery has issued several recent opinions addressing duty of oversight claims where they held the plaintiffs successfully met the Caremark standard. These decisions serve as important reminders for corporate boards to thoughtfully carry out their oversight duties, in order to ensure that their internal controls, reporting systems, and other oversight-related practices are sufficiently comprehensive.

Read the full post on Proskauer’s Minding Your Business blog.


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