How the SEC Can Be a Better Lifeguard: Commissioner Peirce’s Insightful Comments on Regulators’ Role in a Sea of FinTech Innovation

Alter_Daniel_web2_8784879218361Guest Commentary

By Daniel S. Alter, a Shareholder in the New York office of Murphy & McGonigle P.C. and a former general counsel for the New York State Department of Financial Services.

Earlier this month, Securities and Exchange Commission (SEC) Commissioner Hester M. Peirce addressed a FinTech conference hosted by the Medici Project, which is a serious effort to build a blockchain-based securities exchange.  In her remarks, Peirce discussed two constructive approaches that financial regulators have taken worldwide in response to the tidal shift in technology that supports financial products and services.  The commissioner’s message to conference attendees should encourage all those in both the legal and entrepreneurial communities who, to date, have felt only the punitive response of SEC enforcement actions involving initial coin offerings, or ICOs.  And yet, Peirce’s comments stopped just short of advocating for the sort of regulatory approach that would likely be most effective in grappling with fast-paced FinTech developments. Continue reading “How the SEC Can Be a Better Lifeguard: Commissioner Peirce’s Insightful Comments on Regulators’ Role in a Sea of FinTech Innovation”

“China Agritech” SCOTUS Case Will Turn on Justices’ Opinions of Class Actions

supreme courtDuring oral arguments this coming Monday in China Agritech, Inc. v. Resh (click here for WLF’s amicus brief) the U.S. Supreme Court ostensibly will be considering a technical issue regarding statutes of limitations: when should the doctrine of “equitable tolling” be applied to extend the deadline for filing a class action lawsuit? But how the justices determine the scope of that judge-made doctrine has little to do with applying well-established equitable doctrines in this area of the law (there aren’t any) and everything to do with how warmly they feel about class litigation as a vehicle for providing effective relief for large numbers of plaintiffs with small claims. The evidence suggests that the Court is far less enamored with class actions than it once was and will use China Agritech to cut back on their use. Continue reading ““China Agritech” SCOTUS Case Will Turn on Justices’ Opinions of Class Actions”

Settlement of Lawyer-Driven “Merger Tax” Litigation Stumbles in New York

ny state courtsTo paraphrase an Oscar-winning song, it’s hard out there for a corporate merger.  In recent years, opportunistic plaintiffs’ attorneys have descended upon proposed mergers of publicly owned companies, filing lawsuits to delay the proceedings alleging that management breached its fiduciary duty to the shareholders.

But one look at the typical settlement demonstrates that these cases are almost always cash grabs for the attorneys while providing almost no benefit for the allegedly harmed shareholders.  The defendant usually agrees to “disclose” additional, trivial information about the merger, while paying the plaintiffs’ attorneys thousands of dollars in legal fees.  It comes as little surprise that these claims are colloquially known as “merger tax” suits, with the “tax” being the attorneys’ fees public corporations now feel obligated to pay any time they want to combine. Continue reading “Settlement of Lawyer-Driven “Merger Tax” Litigation Stumbles in New York”

Perpetual Dual Class Stock versus the SEC’s Dubious Raised Eyebrow Power

bainbridgeFeatured Expert Contributor, Corporate Governance/Securities Law

Stephen M. Bainbridge, William D. Warren Distinguished Professor of Law, UCLA School of Law.

Newly confirmed SEC Commissioner Robert J. Jackson, Jr., gave his inaugural speech at Berkeley on February 15, 2018. In it, he criticized—in an admittedly nuanced way—the growing phenomenon of dual class stock. As he explained, most U.S. public corporations have a single class of common stock in which all shares have one vote per share. In recent years, however, some companies—especially in the tech sector—have gone public with a so-called dual class capital structure, which typically has two classes of common stock.

One class will have the traditional one vote per share, but the other will have multiple votes—usually 10—per share. The former shares are the ones sold to the public in the IPO, while insiders hold the super-voting shares. Facebook is a paradigmatic example: Mark Zuckerberg’s super-voting shares represent only 16% of the company’s equity but give him 60% of the total voting power. Continue reading “Perpetual Dual Class Stock versus the SEC’s Dubious Raised Eyebrow Power”

“U.S. v. Martoma”: Second Circuit’s Latest, but Perhaps not Last, Word on Insider-Trading Tippee Liability

Featured Expert Contributor, Corporate Governance/Securities Law

bainbridgeStephen M. Bainbridge, William D. Warren Distinguished Professor of Law, UCLA School of Law.

Matthew Martoma was a portfolio manager at S.A.C. Capital Advisors, LLC, a hedge fund owned and managed by Steven A. Cohen, which had been the subject of numerous insider trading investigations. One of those investigations resulted in Martoma being charged with insider trading on the stocks of a pair of drug companies developing a new Alzheimer’s disease drug treatment. Martoma had received tips of material nonpublic information about the treatment from two drug company employees. Martoma was convicted and appealed.

In a 2-1 opinion by Chief Judge Katzmann, the Second Circuit affirmed Martoma’s conviction. Its decision in United States v. Martoma is the first major interpretation of the Supreme Court’s decision in Salman v. United States, and the first effort to determine the remaining scope, if any, of the Second Circuit’s 2014 decision in United States v. Newman. Continue reading ““U.S. v. Martoma”: Second Circuit’s Latest, but Perhaps not Last, Word on Insider-Trading Tippee Liability”

The Supreme Court’s NOT Top 10: October Term 2016 Cert Petitions the Justices Should Have Granted

supreme courtIn a year when the U.S. Supreme Court heard six(!) cases where Washington Legal Foundation supported grants of certiorari with  amicus curiae briefs (leading all non-profit groups “by quite a large margin,” according to EmpiricalSCOTUS.com), it seems a bit churlish to pick on the Court for rejecting a number of important cases.  Then again, the entire point of this feature is to identify such oversights.  Even though the Court granted some 43 percent of the cases in which WLF supported cert, it still overlooked a host of worthwhile appeals, once again taking on an exceedingly light docket.

One thing stands out in this fourth annual retrospective look at last term’s disappointeds docket: namely, how many so-called business cases the Court granted.  Although many commentators have called this a “boring” term, court watchers who value clarity and certainty couldn’t help but appreciate the Court’s resolving multiple controversies that, while minor in the grand scheme of things, have nonetheless vexed litigants and divided lower courts.  Perhaps because the Court was down a justice and evenly divided for over a year, it took the opportunity to grant cert to cases on lower-profile subjects that might get passed over when meatier fare is desired.  If it did so in a quest for consensus, the happy results are the silver lining of the Court’s unusually long interregnum. Continue reading “The Supreme Court’s NOT Top 10: October Term 2016 Cert Petitions the Justices Should Have Granted”

SCOTUS Report: A Fruitful Term for Free Enterprise, the Rule of Law—and WLF

supreme courtAn economic system based on free enterprise requires an objective, clear, predictable, stable, and uniform body of rules around which commercial enterprises can organize their business affairs. For 40 years, Washington Legal Foundation (WLF) has championed fundamental free-enterprise principles in courts and regulatory agencies, as well as in the court of public opinion.

Because the US Supreme Court has the last word on many laws and regulations that affect free enterprise, WLF focuses a significant portion of its litigation activities each year on convincing the justices to decide cases in a manner that promotes legal clarity and uniformity. This past term, which concluded at the end of June, was one of WLF’s most successful in its long history of Supreme Court advocacy. Our view not only prevailed in 8 of the 10 cases in which we filed amicus briefs on the merits, but in 6 of those 10 cases, WLF also successfully supported the Petitioner’s effort to obtain Supreme Court review. Below is a list of those cases with links to press releases and related WLF commentary:

Cases in which WLF filed briefs at the cert. and merits stages

Cases in which WLF filed a brief only at the merits stage

Most of those decisions, and others that impact America’s free-enterprise system, were discussed at WLF’s 28th annual end-of-the-term Supreme Court briefing: