Posts Tagged ‘State law’

NASAA and the SEC: Presenting a United Front to Protect Investors

Posted by Luis A. Aguilar, Commissioner, U.S. Securities and Exchange Commission, on Sunday April 20, 2014 at 9:00 am
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Editor’s Note: Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s remarks at the North American Securities Administrators Association’s Annual NASAA/SEC 19(d) Conference; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

I have been NASAA’s liaison since I was asked by NASAA to take on that role early in my tenure at the SEC, and it is truly a pleasure to continue our dialogue with my fifth appearance here at the 19(d) conference. This conference, as required by Section 19(d) of the Securities Act, is held jointly by the North American Securities Administrators Association (“NASAA”) and the U.S. Securities and Exchange Commission (“SEC” or “Commission”).

The annual “19(d) conference” is a great opportunity for representatives of the Commission and NASAA to share ideas and best practices on how best to carry out our shared mission of protecting investors. Cooperation between state and federal regulators is critical to investor protection and to maintaining the integrity of our financial markets, and that has never been more true than it is today.

…continue reading: NASAA and the SEC: Presenting a United Front to Protect Investors

Supreme Court Allows State-Law Securities Class Actions to Proceed

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday March 18, 2014 at 9:29 am
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Editor’s Note: The following post comes to us from Jonathan C. Dickey, partner and Co-Chair of the National Securities Litigation Practice Group at Gibson, Dunn & Crutcher LLP, and is based on a Gibson Dunn publication.

On February 26, 2014, the Supreme Court decided Chadbourne & Parke LLP v. Troice, 571 U.S. ___ (2014), ruling by a 7-2 vote that the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) does not bar state-law securities class actions in which the plaintiffs allege that they purchased uncovered securities that the defendants misrepresented were backed by covered securities. The decision is the first in which the Court has held that a state-law suit pertaining to securities fraud is not precluded by SLUSA, suggesting that there are limits to the broad interpretation of SLUSA’s preclusion provision that the Court has recognized in previous cases. While Chadbourne leaves many questions unanswered concerning the precise contours of SLUSA preclusion, and could encourage plaintiffs to pursue securities-fraud claims under state-law theories, the unusual facts in Chadbourne could limit the reach of the holding and provide defendants with avenues for distinguishing more typical state-law claims in other cases.

…continue reading: Supreme Court Allows State-Law Securities Class Actions to Proceed

Corporate “Free Exercise” and Fiduciary Duties of Directors

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday March 4, 2014 at 9:15 am
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Editor’s Note: The following post comes to us from Mark A. Underberg, retired partner of Paul, Weiss, Rifkind, Wharton & Garrison LLP, and an Adjunct Professor of Law at Cornell Law School and the Benjamin N. Cardozo School of Law.

This Spring, the Supreme Court will decide whether a for-profit corporation can refuse to provide insurance coverage for birth control and other reproductive health services mandated by the Affordable Healthcare Act (or “Obamacare”) when doing so would conflict with “the corporation’s” religious beliefs. Although the main legal issue in Sibelius v. Hobby Lobby Stores, Inc., et al. and Conestoga Wood Specialties Corp., et al. v. Sibelius concerns the extent to which the guarantee of free exercise of religion under the Constitution and the Religious Freedom Restoration Act may be asserted by for-profit corporations, the Court’s decision may also have important—and unsettling—implications for state corporate laws that define the fiduciary duties of boards of directors.

…continue reading: Corporate “Free Exercise” and Fiduciary Duties of Directors

Delaware’s Choice

Posted by Guhan Subramanian, Harvard Law School, on Monday February 10, 2014 at 9:17 am
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Editor’s Note: Guhan Subramanian is the Joseph Flom Professor of Law and Business at the Harvard Law School and the H. Douglas Weaver Professor of Business Law at Harvard Business School. The following post is based on Professor Subramanian’s lecture delivered at the 29th Annual Francis G. Pileggi Distinguished Lecture in Law in Wilmington, Delaware. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

In November 2013 I delivered the 29th Annual Francis G. Pileggi Distinguished Lecture in Law in Wilmington, Delaware. My lecture, entitled “Delaware’s Choice,” presented four uncontested facts from my prior research: (1) in the 1980s, federal courts established the principle that Section 203 must give bidders a “meaningful opportunity for success” in order to withstand scrutiny under the Supremacy Clause of the U.S. Constitution; (2) federal courts upheld Section 203 at the time, based on empirical evidence from 1985-1988 purporting to show that Section 203 did in fact give bidders a meaningful opportunity for success; (3) between 1990 and 2010, not a single bidder was able to achieve the 85% threshold required by Section 203, thereby calling into question whether Section 203 has in fact given bidders a meaningful opportunity for success; and (4) perhaps most damning, the original evidence that the courts relied upon to conclude that Section 203 gave bidders a meaningful opportunity for success was seriously flawed—so flawed, in fact, that even this original evidence supports the opposite conclusion: that Section 203 did not give bidders a meaningful opportunity for success.

…continue reading: Delaware’s Choice

Regulation A+ Offerings—A New Era at the SEC

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday January 15, 2014 at 9:02 am
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Editor’s Note: The following post comes to us from Samuel S. Guzik, founder and principal of Guzik & Associates.

December 18, 2013 may well mark an historic turning point in the ability of small business to effectively access capital in the private and public markets under the federal securities regulatory framework. On that day the Commissioners of the U.S. Securities and Exchange Commission met in open session and unanimously authorized the issuance of proposed rules [1] intended to implement Title IV of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”)—a provision widely labeled as “Regulation A+”—and whose implementation is dependent upon SEC rulemaking. Title IV, entitled “Small Company Capital Formation”, was intended by Congress to expand the use of Regulation A—a little used exemption from a full blown SEC registration of securities which has been around for more than 20 years—by increasing the dollar ceiling from $5 million to $50 million. Both the scope and breadth of the SEC’s proposed rules, and the areas in which the SEC expressly seeks public comment, appear to represent an opening salvo by the SEC in what is certain to be a fierce, long overdue battle between the Commission and state regulators, the SEC determined to reduce the burden of state regulation on capital formation—a burden falling disproportionately on small business—and state regulators seeking to preserve their autonomy to review securities offerings at the state level.

…continue reading: Regulation A+ Offerings—A New Era at the SEC

SEC Proposes Rules to Update Regulation A

Posted by Toby S. Myerson, Paul, Weiss, Rifkind, Wharton & Garrison LLP, on Wednesday January 8, 2014 at 9:11 am
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Editor’s Note: Toby Myerson is a partner in the Corporate Department at Paul, Weiss, Rifkind, Wharton & Garrison LLP and co-head of the firm’s Global Mergers and Acquisitions Group. The following post is based on a Paul Weiss memorandum.

On December 18, 2013, the Securities and Exchange Commission (“SEC”) voted to propose amendments to its public offering rules to exempt an additional category of small capital raising efforts as mandated by Title IV of the Jumpstart Our Business Startups Act (the “JOBS Act”). The SEC has proposed to amend Regulation A to exempt offerings of up to $50 million within a 12-month period, and in so doing has created two tiers of offerings under Regulation A: Tier 1, for offerings of up to $5 million in any twelve-month period, and Tier 2, for offerings of up to $50 million in any twelve-month period. Rules regarding eligibility, disclosure and other matters would apply equally to Tier 1 and Tier 2 offerings and are in many respects a modernization of the existing provisions of Regulation A. Tier 2 offerings would, however, be subject to significant additional requirements, such as the provision of audited financial statements, ongoing reporting obligations and certain limitations on sales.

…continue reading: SEC Proposes Rules to Update Regulation A

2013 Amendments to the DGCL and DLLCA

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday August 6, 2013 at 8:51 am
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Editor’s Note: The following post comes to us from Ariel J. Deckelbaum, partner and deputy chair of the Corporate Department at Paul, Weiss, Rifkind, Wharton & Garrison LLP, and is based on a Paul Weiss client memorandum. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

The Delaware General Assembly has adopted, and Delaware’s governor has signed into law, several important amendments to the State’s General Corporation Law (the “DGCL”) and Limited Liability Company Act (the “DLLCA”). Of particular interest to corporate and M&A practitioners are the following provisions:

  • New DGCL Section 251(h), which eliminates the need for stockholder approval of second-step mergers following tender offers if certain conditions are met, thus eliminating the need for workarounds such as top-up options and dual-track structures;
  • New DGCL Sections 204 and 205, which delineate a procedure to ratify defective corporate actions and to vest the Court of Chancery with jurisdiction over disputes regarding such actions;
  • New DGCL Sections 361 through 368 (Subchapter XV), which permit the creation of public benefit corporations (i.e., for-profit corporations formed for the benefit of constituencies other than stockholders, such as categories of persons, entities, communities or interests); and
  • Amended DLLCA Section 18-1104, which amendments confirm the default rule that fiduciary duties exist in the case of Delaware limited liability companies unless otherwise provided in the LLC agreement.

…continue reading: 2013 Amendments to the DGCL and DLLCA

2013 Mid-Year Securities Litigation Update

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday August 4, 2013 at 10:21 am
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Editor’s Note: The following post comes to us from Jonathan C. Dickey, partner and Co-Chair of the National Securities Litigation Practice Group at Gibson, Dunn & Crutcher LLP, and is based on a Gibson Dunn publication.

Filing and Settlement Trends

Filing and settlement trends continue to reflect “business as usual” for the plaintiffs’ bar—hundreds of suits and significant settlement values can be expected for the rest of 2013, based on results from the early half of the year. According to a recent study by NERA Economic Consulting, the annualized rate of new class action filings based on results in the first half of 2013 is expected to be slightly up from the prior six-year averages. Through June 2013, new securities class action filings were annualizing at 222 cases for the full year, representing an uptick from the six-year average of 219 suits. On the other hand, median settlement amounts were somewhat lower that the six-year average: $8.8 million in the first quarter of 2013, versus the six-year average of $9.3 million, but higher than four out of those six years. The average settlement value in the first quarter of 2013 was more than double the six-year average: $78 million, versus the six-year average of $35 million. Finally, median settlement amounts as a percentage of investor losses in the first half of 2013 were 2.0%, up from 1.8% for the full year 2012, but slightly lower than the six-year average of 2.

Class Action Filings

Overall filing rates are reflected in Figure 1 below (all charts courtesy of NERA Economic Consulting). NERA reports an average of 219 new cases filed in the period 2007 to 2012. Annualized filings in the first half 2013 are projected to be higher than the prior six-year average, at 222 cases. Notably, these figures do not include the many such class suits filed in state courts, including the Delaware Court of Chancery.

…continue reading: 2013 Mid-Year Securities Litigation Update

Good Faith: The New Frontier of Agreements to Negotiate

Posted by Douglas Warner, Weil, Gotshal & Manges LLP, on Wednesday July 3, 2013 at 9:25 am
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Editor’s Note: Douglas P. Warner is a partner and head of US Private Equity and Hedge Fund practices at Weil, Gotshal & Manges LLP. This post is based on a Weil Gotshal alert by Benton B. Bodamer, and is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Negotiating a term sheet, LOI, or other preliminary document can sometimes feel a bit like the Wild West: local laws and unintended consequences can vary from town to town. Even a concept as seemingly straightforward as agreeing to negotiate in good faith can yield extremely different results depending on jurisdiction. The Delaware Supreme Court’s recent decision in SIGA Technologies, Inc. v. PharmAthene, Inc. is a warning shot to investors and deal makers that, unlike most other states in the US, Delaware will award expectation (i.e., “benefit-of-the-bargain”) damages for the breach of an agreement to negotiate. What this means in practical terms is that, in certain circumstances, failure to fully negotiate a deal based on a non-binding but detailed term sheet could result in full damages as if the parties had actually signed up a deal.

…continue reading: Good Faith: The New Frontier of Agreements to Negotiate

Can Attorneys Be Award-Seeking SEC Whistleblowers?

Editor’s Note: Lawrence A. West is a partner focusing on securities-related enforcement maters at Latham & Watkins LLP. This post is based on a Latham & Watkins primer by Mr. West, Abigail E. Raish and Eric R. Swibel; the full publication, including endnotes and chart of Relevant Rules of the Fifty States and the District of Columbia, is available here.

This is a primer on attorneys as award-seeking SEC whistleblowers. It digests the relevant law and explains how it applies in real situations. That law includes the SEC attorney conduct and whistleblower award rules and each state’s ethics rules applicable to attorney disclosure. Fully assessing a particular situation will often require referring to the relevant rules for each state that might come into play for a particular lawyer in a particular situation. We therefore include information about choice of law and a chart summarizing the relevant rules in each of 51 US jurisdictions.

Our hope is that with this primer close at hand, attorneys and companies will not only be equipped to spot issues and apply the law, but will also understand how limited the circumstances are that will allow a lawyer to disclose confidential information to the SEC without client consent and seek a monetary award. This is true even though the SEC has expanded the circumstances allowing disclosure beyond those recognized in many states.

We will end with steps companies can take to deal with risks related to attorneys who are actual or would-be whistleblowers.

…continue reading: Can Attorneys Be Award-Seeking SEC Whistleblowers?

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