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The SEC suffered a significant loss last week in its ongoing legal battle with Ripple over the XRP digital token. While the District Court held that Ripple’s initial sales of XRP to institutional investors constituted the sale of unregistered securities, it was a Pyrrhic victory as the court held that all other ways in which Ripple sold or distributed XRP did not involve the sale of unregistered securities. In particular, the court held that Ripple’s program to sell XRP to public buyers on digital asset exchanges, as well as its distribution of XRP as compensation to employees and third parties, did not constitute the offer or sale of securities. The court also rejected the SEC’s arguments that Ripple used the institutional buyers as underwriters to sell XRP to the public. The opinion, if followed by other courts in pending litigation with the SEC, could have a far-reaching impact on the cryptocurrency markets, especially with respect to secondary market crypto trades on digital asset exchanges.               

A judge in the United States District Court for the Central District of California has allowed a lawsuit against actress Jessica Alba’s child and personal care company Honest to move forward. The case is the latest in a series of investor-led actions against companies that shareholders claim have used COVID-19 and associated disruptions to mislead the public about the financial health of their businesses.

SEC Chair Gary Gensler made news again last week with a series of statements regarding SPACs, noting their similarities with traditional IPOs and hinting at future regulatory action aimed at these investment vehicles.

In a December 9, 2021 speech before the Healthy Markets Association Conference, Chair Gensler addressed SPACs and how the SEC staff believes they can interact with three key SEC objectives:  eliminating information asymmetries, protecting against misleading information and fraud, and mitigating conflicts of interest.

On July 30, 2021, the SEC posted 14 Notices of Covered Actions, after which individuals have 90 calendar days to apply for a whistleblower award.  As discussed in our prior post, the SEC publishes these Notices for cases in which the final judgment or order, either 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 14 Notices of Covered Actions from July 2021.  (See our previous post on the SEC’s Notices of Covered Actions from June 2021.)  Several of the alleged misconducts in the 14 Covered Actions also resulted in parallel criminal actions.

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.

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 “pull forward” practices, it also was the basis on which a U.S. District Court permitted similar (but not identical) shareholder claims against Under Armour to proceed.

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 to operate. And new SEC Chairman Gary Gensler has echoed her sentiments, telling Congress that investors “measured in the trillions of dollars” seek to better understand climate risk issues.