Corporate & Securities Law Blog

Up-to-date Information on Corporate & Securities Law

This client alert is the second of a two part series concerning the Save Our Stages Act (the “SOS Act”), which became law on December 27, 2020 as Section 324 of the Economic Aid to Hard-Hit Small Business, Nonprofits, and Venues Act (the “Economic Aid Act”, comprising Title III of Division N of the Consolidated Appropriations Act, 2021).  The SOS Act establishes a new grant program (the “SOS Program”, also known as the “grant program for shuttered venue operators”) to be administered by the Small Business Administration (“SBA”) to aid certain financially distressed venue operators, event promoters or producers, and…
Among the various bills that were amalgamated in the Consolidated Appropriations Act, 2021 (the omnibus appropriations and stimulus funding bill that was signed into law on December 27, 2020) was a modified version of the Save Our Stages Act (the “SOS Act”), a bill first introduced into the Senate by Sen. John Cornyn (TX) on July 22, 2020. The SOS Act can be found in Section 324 of the Economic Aid to Hard-Hit Small Business, Nonprofits, and Venues Act, which act comprises Title III of Division N of the Consolidated Appropriations Act, 2021.  The SOS Act establishes a new grant…
Section 220 of the Delaware General Corporation Law, 8 Del. C. § 220 (“Section 220”), permits a stockholder of a Delaware corporation to inspect corporate books and records upon a showing of a proper purpose.  The Delaware courts have long urged stockholders to avail themselves of Section 220 — the “tools at hand” — to inspect relevant corporate documents before commencing plenary derivative litigation.  See, e.g., Grimes v. Donald, 673 A.2d 1207, 1216 & n.11 (Del. 1996).  Perhaps as a result of stockholders heeding this advice, recent years have seen an increase in litigation arising out of Section 220 demands, with…
On December 10, 2020, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a Fact Sheet clarifying the circumstances under which financial institutions can share information under Section 314(b) of the USA Patriot Act (“Section 314(b)”), 31 C.F.R. § 1010.540.  In a speech on the same day, FinCEN’s director, Kenneth Blanco, urged financial institutions to take advantage of the program.…
On December 1, 2020, the Commodities Futures Trading Commission (CFTC) Division of Enforcement published its annual report for Fiscal Year 2020.  According to the report, the Division filed a record number of enforcement actions in 2020 and achieved a number of firsts, despite the unprecedented challenges presented by the COVID-19 pandemic.  In addition, the report provides a number of key insights into the Division’s enforcement concerns in several key areas, including compliance, digital assets, anti-money laundering (AML), market surveillance and its whistleblower program.    …
On November 19, 2020, Peter Driscoll, director of the Office of Compliance Inspection and Examination (“OCIE”) of the Securities and Exchange Commission (“SEC”), gave a speech urging advisory firms to empower their Chief Compliance Officers (“CCOs”).  The speech, made at the SEC’s annual compliance outreach conference, accompanied OCIE’s Risk Alert, issued the same day, identifying notable deficiencies and weaknesses regarding Registered Investment Advisors (“RIAs”) CCOs and compliance departments.  Driscoll’s speech complemented the Risk Alert by outlining the fundamental requirements for CCOs:  “empowered, senior and with authority.”…
A Securities and Exchange Commission (“SEC”) plan to create a registration exemption for certain finders has generated a mixed response.  The nearly 90 comments received by the SEC by the November 12, 2020 close of the comment period reflect a clear divide along predictable lines.  Broker-dealers, issuers, and some practitioners lauded the proposal for bringing regulatory clarity to what has long been a cloudy issue while regulatory groups and investor advocates criticized the plan for allowing unregistered finders to conduct brokerage activities without sufficient investor protection mechanisms.…
On November 2, 2020, the Securities and Exchange Commission adopted amendments intended to ease the rules for certain exempt offerings. These changes include increasing the annual cap on equity crowdfunding from $1.07 million to $5 million, raising the annual cap on Reg A+ offerings from $50% million to $75 million, raising the maximum offering amount for Rule 504 of Regulation D from $5 million to $10 million, and expanding the “test-the-waters” accommodation to Regulation Crowdfunding issuers.…
On October 2, 2020, the U.S. Small Business Administration (SBA) released a Procedural Notice providing guidance addressed to Paycheck Protection Program (PPP) lenders and SBA employees as to the circumstances under which prior SBA approval is required before a borrower of a PPP loan undergoes a change of ownership.[1]  In particular, the October 2, 2020 Procedural Notice includes instructions to PPP lenders on how they may address equity or asset M&A transactions, ownership restructurings, or transfers of ownership interests involving their PPP borrowers.  Importantly, the October 2, 2020 Procedural Notice does not clearly address the circumstance of a…
On September 17, 2020, Stephanie Avakian, Director of the SEC’s Division of Enforcement, spoke at the Institute for Law and Economics, University of Pennsylvania Carey Law School Virtual Program.  Ms. Avakian used her time to highlight the Division’s enforcement priorities, operations, and challenges in the years since Jay Clayton became the director of the SEC in May 2017.…
On September 10, 2020, the Commodities Futures Trading Commission (CFTC) issued the latest in a series of circulars regarding corporate compliance released this summer by government agencies. In June, the Criminal Division of the Department of Justice (DOJ) issued updated guidance regarding its evaluation of corporate compliance programs (see our prior blog here). In July, DOJ and the Securities and Exchange Commission (SEC) jointly issued an updated Resource Guide to the U.S. Foreign Corrupt Practices Act, which includes a 12-part section covering the “hallmarks” of effective corporate compliance programs. The instant CFTC guidance is the first issued by…
In In re WeWork Litigation, 2020 Del. Ch. LEXIS 270 (Del. Ch. Aug. 21, 2020) (Bouchard, C.), the Delaware Court of Chancery considered an issue of first impression:  Does the management of a Delaware corporation have the unilateral authority to preclude a director from obtaining the corporation’s privileged information?  The Court held it cannot.  The directors of Delaware corporations are entitled to share in legal advice the corporation receives and, subject to limited exceptions not at issue in WeWork, cannot be prevented from accessing the corporation’s privileged information.…
In Heinze v. Tesco Corp., No. 19-20298, 2020 WL 4814094 (5th Cir. Aug. 19, 2020), the United States Court of Appeals for the Fifth Circuit affirmed the dismissal of a putative class action suit under Section 14(a) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78(b) alleging that defendant Tesco Corporation (“Tesco”), former members of Tesco’s board of directors and Nabors Industries, Ltd. (“Nabors”) omitted material information from a proxy statement issued in connection with Nabors’ acquisition of Tesco in 2017.  Applying the heightened pleading standard of the Private Securities Litigation Reform Act of 1995 (“PSLRA”),…
For the first time outside of the originating case itself, a federal appeals court was called upon to apply the principles governing disgorgement in SEC enforcement actions established by the United States Supreme Court’s high-profile decision in Liu v. Securities & Exchange Comm’n, No. 18-1501, 2020 WL 3405845 (U.S. June 22, 2020) (blog article here).  In Securities & Exchange Comm’n v. Yang, No. 19-55289, 2020 WL 4530630 (9th Cir. Aug. 6, 2020), the United States Court of Appeals for the Ninth Circuit reviewed a district court order, issued some eighteen months before the Supreme Court spoke…
In Juul Labs, Inc. v. Grove, 2020 Del. Ch. LEXIS 264 (Del. Ch. Aug. 13, 2020) (Laster, V.C.), the Delaware Court of Chancery held that the “internal affairs doctrine” bars a stockholder of a Delaware corporation headquartered in a foreign jurisdiction from seeking to inspect corporate books and records pursuant to the statutory law of that foreign jurisdiction.  The stockholder is limited instead to the inspection rights and remedies under Section 220 of the Delaware General Corporation Law, 8 Del. C. § 220.  This decision has the potential to provide greater certainty to Delaware corporations headquartered in other states…