Corporate & Securities Law Blog

Up-to-date Information on Corporate & Securities Law

In Securities and Exchange Commission v. Jarkesy, No. 22-859, 2024 WL 3187811 (U.S. June 27, 2024), the United Stated Supreme Court (Roberts, C.J.) held that when the Securities and Exchange Commission (“SEC”) seeks civil penalties against a defendant for securities fraud, the Seventh Amendment of the United States Constitution entitles the defendant to a trial by jury. This decision was based upon the Court’s interpretation that the SEC’s antifraud provisions replicate common law fraud, and thus actions for violations of these provisions implicate the Seventh Amendment right. The Court determined that the “public rights” exception, which allows certain matters to
Continue Reading Supreme Court Limits SEC’s Enforcement Power to Penalize Fraud

In the dynamic and ever-evolving landscape of mergers and acquisitions (“M&A”) and related corporate transactions, Delaware courts continue to play a pivotal role in shaping legal precedents and guiding corporate practices. Delaware cases over the past year have been no exception, with several landmark decisions having significant implications for M&A strategy, governance, and dispute resolution. The summary and analysis of cases below touch upon critical aspects of corporate law as it relates to future M&A transactions. As we delve into these pivotal Delaware M&A cases, we aim to shed light on the key legal principles and takeaways that corporate attorneys,
Continue Reading Delaware M&A Case Law Roundup

On March 28, 2024, the Council of the Corporation Law Section of the Delaware State Bar Association (“DSBA”) issued proposed amendments to the Delaware General Corporation Law (“DGCL”), which, if signed into law, would become effective on August 1, 2024. One of the proposed amendment stems from Crispo v. Musk, C.A. No 2022-0666-KSJM, 2023 WL 7154477 (Del. Ch. Oct. 31, 2023), in which a Twitter stockholder alleged that Elon Musk and related entities breached fiduciaries duties as a controller and violated the Twitter/Musk merger agreement (until Elon Musk decided to close the merger anyway). In this case, the
Continue Reading Lost-Premium Damages under Merger Agreement – Proposed Amendment to the DGCL in Light of Crispo vs. Musk

In Macquarie Infrastructure Corp. v. Moab Partners, No. 22-1165, 2024 WL 1588706 (U.S. Apr. 12, 2024) (“MIC”), the United States Supreme Court (Sotomayor, J.) held unanimously that “pure omissions” in a Securities and Exchange Commission (“SEC”) filing do not support liability under SEC Rule 10b-5(b). The Court ruled that the failure to make a required disclosure can give rise to a Rule 10b-5(b) claim only if the non-disclosure renders affirmative “statements made” misleading. Put differently, if a company elects to speak, it must tell the whole truth (or at least “information necessary to ensure that the [affirmative] statements made are
Continue Reading Supreme Court Holds “Pure Omissions” Are Not Actionable Under Rule 10b-5(b)

Over the last several years, the Securities and Exchange Commission (“SEC”) has been laser-focused on the use of so-called “off-channel communications” in the financial services industry. On the theory that employees’ use of personal devices and platforms (such as WhatsApp) to communicate about business violates the “books and records” requirements applicable to financial institutions, the regulator has conducted intrusive and extensive investigations. To respond to the SEC, many companies have required employees to have their personal cell phones copied and reviewed. 
Continue Reading What Private Equity Firms Need to Know About the Ongoing SEC Investigation of “Off-Channel” Communications

Beginning on January 1, 2024, the Corporate Transparency Act (the “CTA”) requires each domestic and foreign entity that qualifies as a “reporting company” to file a Beneficial Ownership Information Report (“BOIR”) with the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”), which discloses information about the reporting company, the reporting company’s beneficial owners, and the individuals who prepared and filed the formation/registration documents of the reporting company with the Secretary of State (if formed/registered on or after January 1, 2024).
Continue Reading The Corporate Transparency Act: Which Business Entities are Impacted and What is Required

In Ap-Fonden v. Activision Blizzard, Inc., C.A. No. 2022-1001-KSJM, 2024 WL 863290 (Del. Ch. Feb. 29, 2024), the Delaware Court of Chancery (McCormick, C.) declined to dismiss a claim alleging that the Board of Directors of defendant Activision Blizzard, Inc. (“Activision”) violated Section 251(b) of the Delaware General Corporation Law (the “DGCL”) by approving a draft merger agreement between Activision and Microsoft, Inc. (“Microsoft”) that was not sufficiently final. The Court held that to comply with Section 251(b), the version of a merger agreement the board must consider and approve need not be “execution ready” but must be “essentially complete.”
Continue Reading Delaware Court of Chancery Puts Practitioners on Notice Regarding Voting Formalities Around Merger Agreements

In Palkon v. Maffei, C.A. No. 2023-0449-JTL, 2024 Del. Ch. LEXIS 48 (Del. Ch. Feb. 20, 2024) (Laster, V.C.) the Delaware Court of Chancery considered whether a controlling stockholder’s approval of transactions reincorporating two Delaware corporations in Nevada is subject to entire fairness review where there was a lack of procedural protections that would give the approval of the transactions the patina of arms-length bargaining. Because the stockholders’ derivative complaint contained allegations that (if true) established that the disputed transactions adversely affected investor protections, the Court of Chancery applied the inherently-factual “entire fairness” standard of review and denied the defendants’
Continue Reading Delaware Corporations Must Employ Procedural Safeguards When Approving a Reincorporation that Could Benefit a Controlling Stockholder to Avoid Entire Fairness Standard of Review

In Murray v. UBS Securities, LLC, 601 U. S. ____, 2024 WL 478566 (2024), the United States Supreme Court (Sotomayor, J.) held that whistleblowers do not need to prove their employer acted with “retaliatory intent” to be protected under the Sarbanes-Oxley Act. Instead, all whistleblower plaintiffs need to prove is that their protected activity was a “contributing factor” in the employer’s unfavorable personnel action. The decision establishes a lower burden of proof for whistleblowers alleging retaliation and, conversely, reaffirms a greater burden on employers who must demonstrate the absence of retaliation under the heightened “clear and convincing” evidentiary standard in order
Continue Reading United States Supreme Court Endorses Low Burden of Proof for Whistleblowers

In Cantor Fitzgerald, L.P. v. Ainslie, No. 162, 2023, 2024 WL 315193 (Del. Jan. 29, 2024), the Delaware Supreme Court held enforceable a “forfeiture for competition” provision in a limited partnership agreement, upholding “the freedom of contract” and enforcing “as a matter of fundamental public policy the voluntary agreements of sophisticated parties.” Given Delaware’s recent shift from its typically non-compete friendly stance, the Delaware Supreme Court’s ruling is beneficial for employers.
Continue Reading Delaware Supreme Court Enforces Forfeiture for Competition Provision in Partnership Agreement

The United States Department of the Treasury has announced that it is working to address what it perceives as money laundering risks associated with investment advisers. Specifically, the agency asserts that absent consistent and comprehensive anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”) obligations, corrupt officials and other illicit actors may invest ill-gotten gains in the U.S. financial system through hedge funds and private equity firms. Treasury indicated its intention to issue a proposal in the first quarter of 2024 that would apply Bank Secrecy Act (“BSA”) AML/CFT requirements, including suspicious activity report obligations, to certain investment advisers.
Continue Reading Treasury Announces Renewed Push for Investment Adviser AML Rules

In Segway Inc. v. Hong Cai, 2023 Del. Ch. LEXIS 643 (Del. Ch. Dec. 14, 2023), the Delaware Court of Chancery (Will, V.C.) dismissed a claim for breach of fiduciary duty brought by Segway Inc. (the “Company”) against its former President and Vice President of Finance (the “Officer”). The Company framed its claim as a claim for breach of the duty of oversight, commonly known as a Caremark claim (from the landmark case In re Caremark Int’l Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996)). 
Continue Reading The Delaware Court of Chancery Confirms that Duty of Oversight Claims Against Corporate Officers Are Subject to the Same High Pleading Standards Applicable to Duty of Oversight Claims Against Corporate Directors

In Briskin v. Shopify, Inc., No. 22-15815, 2023 WL 8225346 (9th Cir. Nov. 28, 2023), the United States Court of Appeals for the Ninth Circuit held that the Canada-based company Shopify, Inc. (“Shopify”), which provides a web-based payment processing platform to online merchants across the United States (and the world), is not subject to specific personal jurisdiction in California courts under California data privacy laws based solely upon Shopify’s collection, retention and use of customer data from California residents. In making this ruling, the Ninth Circuit became the first Circuit in the nation to address this type of personal jurisdiction
Continue Reading In a Case of First Impression, Ninth Circuit Addresses Personal Jurisdiction Issues Involving Non-Resident Corporation Providing a Web-Based Payment Processing Platform

In Roth v. Foris Ventures, LLC, Nos. 22-16632, 22-16633, 2023 U.S. App. LEXIS 30081 (9th Cir. Nov. 13, 2023), the United States Court of Appeals for the Ninth Circuit partially reversed the dismissal of a shareholder derivative suit seeking to recover disgorgement of short-swing profits under Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p(b). The three-judge panel held that the district court erred in holding that the company’s board was required to approve the stock sale transactions for the specific purpose of exempting it from Section 16(b) liability pursuant to Securities and Exchange Commission (“SEC”)
Continue Reading Ninth Circuit Provides Guidance on SEC Rule 16b-3 Short-Swing Profit Liability Exemption

Hospital mergers have been an increasing trend in the healthcare markets over the past decade, with many proponents of these mergers believing that the overall consolidation of hospital services provides better outcomes for patients at large, and opponents arguing that these mergers only result in increased costs to patients. Over the last couple of years, there has been a slight decrease in the number of hospital mergers, in part due to the whirlwind of changes in society and the economy (i.e., the public health epidemic, increased interest rates and an unstable M&A market), but in large part as a result of
Continue Reading Hospital Mergers: The Value and Pitfalls

On September 27, 2023, the Securities and Exchange Commission (the “SEC”) announced charges against six officers, directors, and major shareholders of public companies (“insiders”) for failing to timely report and file disclosures related to (i) their holdings in public company stock and (ii) transactions they undertook involving public company stock. Five public companies were also charged in connection with timely reporting failures by their insiders. Without admitting or denying the charges, the six insiders and five public companies agreed to cease and desist from violating the charged provisions and agreed to pay civil penalties ranging from $66,000 to $200,000.
Continue Reading SEC Announces Charges Against Insiders for Reporting Failures and Adopts Amendments to Schedule 13D and 13G Report Filing Timelines