Corporate & Securities Law Blog

Up-to-date Information on Corporate & Securities Law

Yesterday, each of Nasdaq, FINRA and NYSE released Regulatory Alerts highlighting concerns surrounding fraudulent activities in Small-Cap IPOs. Each of these alerts raises similar issues, highlights the importance of the Underwriter in the process, and stresses the obligations that Underwriters have as Gatekeepers in the IPO Process. Below is a link to each of these Alerts and some relevant excerpts from them.
Continue Reading Nasdaq, FINRA and NYSE Issue Warnings of Small-Cap IPO Fraud

On November 10, 2022, the Federal Trade Commission issued its “Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act.” The Statement replaces prior guidance on the subject that was rescinded by the FTC on July 1, 2021[1] and “supersedes all prior FTC policy statements and advisory guidance on the scope and meaning of unfair methods of competition under Section 5 of the FTC Act.”
Continue Reading FTC Policy Statement on the Scope of Unfair Methods of Competition – A Broad But Vague Warning

Over the last year, the U.S. Securities and Exchange Commission (“SEC”) has been laser-focused on the use of personal devices by employees of the large Wall Street banks to conduct company business. The SEC’s investigations have focused on whether the banks complied with the “books and records” requirement that they preserve all communications that relate to Company business. The SEC has asserted that certain “off-channel” business communications not captured in company systems run afoul of this basic record keeping requirement. Not surprisingly, during the pandemic and with the increase in remote work, the SEC has determined that violations have been widespread. 
Continue Reading SEC Shifts Focus on Employees’ Off-Channel Business Communications to Investment Advisers

The U.S. Securities and Exchange Commission (“SEC”) voted on Wednesday to adopt a new rule requiring companies listed on a national securities exchange to claw back incentive-based executive compensation that was erroneously awarded on the basis of materially misreported financial information that requires an accounting restatement.
Continue Reading SEC Adopts New Executive Compensation Clawback and Disclosure Rule

Kandace Watson, Corporate M&A Partner, Sheppard Mullin, and Michael-Bryant Hicks, a seasoned EVP, General Counsel & Corporate Secretary recently discussed mergers and acquisitions perspectives from the Boardroom and C-Suite. From the Board and Executive Management viewpoint, there are only a few key important wins.
Continue Reading Mergers & Acquisitions Insights: Perspectives from the Boardroom and C-Suite

On August 25, 2022, the Securities and Exchange Commission adopted a pay versus performance rule in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule requires a registrant to disclose, in a proxy statement or an information statement in which executive compensation disclosure is required to be included, how executive compensation actually paid by the registrant to its named executive officers is related to the financial performance of the registrant. The new rule is intended to “provide investors with important and decision-useful information for comparison purposes in one place when they evaluate a registrant’s executive compensation practices
Continue Reading SEC Releases Pay Versus Performance Disclosure Requirements For Public Companies

In ZF Micro Solutions, Inc. v. TAT Capital Partners, Ltd., 2022 WL 4090879 (Cal. App. Aug. 8, 2022), the Fourth Appellate District of the California Court of Appeal decided, as a matter of first impression, that a non-derivative breach of fiduciary duty cause of action seeking compensatory damages was legal rather than equitable, and therefore required a jury trial as a matter of law. The Court arrived at its conclusion by evaluating the right and relief requested. In so doing, the Court concluded that because the claim at hand exhibited all the characteristics of a cause of action at law,
Continue Reading California Court of Appeal Holds that a Corporation’s Direct Cause of Action for Breach of Fiduciary Duty is Legal Rather than Equitable, Requiring a Trial by Jury

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the Act), a sweeping bill with significant tax, energy and healthcare implications.[1] This alert focuses on two key corporate tax aspects of the Act:
Continue Reading Key Corporate Tax Aspects of the New Inflation Reduction Act

In In re GGP Stockholder Litigation, 2022 WL 2815820 (Del. July 19, 2022), an M&A transaction split the merger consideration into two parts: an oversized pre-closing dividend totaling over $9 billion, followed by a nominal post-closing payment of about 31 cents a share. In this case, a majority of the Delaware Supreme Court concluded that divvying up merger consideration in this manner does not defeat a dissenting stockholder’s appraisal rights. The majority held that a pre-closing dividend (at least one dependent upon the consummation of the transaction) is part and parcel of the total “merger consideration,” and therefore will
Continue Reading Delaware Supreme Court Holds Novel Pre-Closing Dividend Transaction Structure Does Not Thwart Appraisal Remedy

A recent decision by the U.S. Court of Appeals for the Second Circuit has implications for whistleblowers under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act” or “The Act”). In Hong v. SEC, No. 21-529 (2d Cir. July 21, 2022), the Court held that a person who provides the Securities and Exchange Commission (“SEC”) with information about potential securities laws violations is entitled to receive a whistleblower award under Section 21F of the Securities Exchange Act (15 U.S.C. § 78u-6)if the SEC itself brings a qualifying action, but not when the SEC shares the whistleblower’s information
Continue Reading Second Circuit Limits Scope of SEC Whistleblower Incentives

In SEC v. Rio Tinto PLC, No. 21-2042, 2022 U.S. App. LEXIS 19577 (2d Cir. July 15, 2022) (Jacobs, J.), the United States Court of Appeals for the Second Circuit declined to impose “scheme liability” under subsections (a) and (c) of the Securities & Exchange Commission Rule 10b-5 (17 C.F.R. § 240.10b-5) where the challenged conduct amounted solely to the making of a material misstatement or omission. The Rio Tinto decision is noteworthy because it limits the U.S. Supreme Court’s decision in Lorenzo v. SEC, 139 S. Ct. 1094 (2019) (blog article here), which potentially expanded “scheme liability”
Continue Reading Second Circuit Declines to Allow SEC Rule 10b-5 Claim for “Scheme Liability” to Proceed Where the Alleged Misconduct Amounted Only to the Making of Material Misstatements or Omissions 

Federal agencies aggressively pursued enforcement actions in June. At the same time, state and federal regulators continued to recognize the importance of blockchain industry regulation by putting forth significant policy proposals, including proposals that impact cryptocurrency miners, 401k plans, and more.
Continue Reading June 2022 Crypto Enforcement Actions and Regulatory Guidance Roundup

The Department of Justice recently filed a complaint to prevent Booz Allen Hamilton’s $440 million acquisition of “agile and innovative” competitor EverWatch, Inc.[1] Among the notable aspects of the complaint is its definition of the relevant market as a single NSA contract and its assertion that the merger agreement itself constituted a violation of Section 1 of the Sherman Act.
Continue Reading DOJ Sues to Block Merger Between Booz Allen Hamilton and EverWatch Based on Antitrust Concerns Relating to Single-Contract Market

In Fowler v. Golden Pacific Bancorp, Inc., 2022 Cal. App. LEXIS 548 (Cal. App. June 23, 2022), the California Court of Appeal, Third Appellate District (Krause, J.), reinforced the near absolute right of directors of a California corporation to inspect their company’s books and records pursuant to Section 1602 of the California Corporations Code. The Court clarified that these rights hold even when the director has a conflict of interest or is involved in litigation with the corporation. Generally, directors may be denied access to books and records only in the most extreme cases, such as when evidence shows the director
Continue Reading California Court of Appeal Reaffirms Broad Inspection Rights Accorded to Directors Under Section 1602 of the California Corporations Code

Since President Biden’s July 2021 direction to the Federal Trade Commission (“FTC”) to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility,” the FTC has ratcheted up its scrutiny of and investigations into non-compete agreements and other restrictive covenants. Now, the FTC has expanded beyond post-employment restrictive covenants to tackle “sale of business” non-competes. Most recently, the FTC voted in favor of a deal-changing proposed order against ARKO Corp. related to its 2021 acquisition of sixty fuel outlets from Corrigan Oil Company.
Continue Reading Buyer (and Seller) Beware: The FTC Is Coming for Your M&A Non-Competes

Technology solutions for the transfer, storage and management of electronic files and other digital content is vitally important for organizations to meet compliance obligations, ensure adequate data security and to administer company data generally.  Companies that provide solutions in this space – including in managed file transfer (MFT), file transfer protocol (FTP), cloud content storage and management and file sync-share, among others – are therefore very attractive targets for buyers in the “software-as-a-service” space.  Given that these businesses are charged with safeguarding their client’s precious data, however, there are unique issues in doing deals involving these types of businesses, which
Continue Reading Buying and Selling a File Management, Storage and Transfer Business