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”

Supreme Court Has Second Chance to Resolve Circuit Split on Two Criminal Securities Fraud Issues

SchaerrGuest Commentary

By Gene C. Schaerr, a Partner with Schaerr Duncan LLP in Washington, DC. Mr. Schaerr is Counsel of Record for the petitioners on the certiorari petition discussed here.

The U.S. Supreme Court may be about to resolve two issues of enormous importance to anyone involved, directly or indirectly, in the sale of securities.  The case that may provide the vehicle for such a ruling, Ellison v. United States, was recently the subject of an order directing the U.S. Solicitor General to file a response to the defendants’ petition for certiorari by May 21.  That petition challenges a U.S. Court of Appeals for the Ninth Circuit decision that, as the Cato Institute, Reason Foundation, and a group of law professors explained in a supporting amicus brief, exacerbates a “system” already “stacked in favor of the government.” Continue reading “Supreme Court Has Second Chance to Resolve Circuit Split on Two Criminal Securities Fraud Issues”

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”

WLF Webinar to Feature Two Seasoned FCPA Compliance Practitioners

LowmoyerThe FCPA Approaches Middle Age: Is the Anti-Corruption Law Slowing Down or as Spirited as Ever?

Tuesday, November 14, 1:00-2:00 p.m. EST

Live webcast, click here to view

Speakers: Homer E. Moyer, Jr., Miller & Chevalier and Lucinda A. Low, Steptoe & Johnson

Description: For 40 years, the Foreign Corrupt Practices Act has kept business interaction with overseas government officials on a short leash. But four decades of federal enforcement dominated by voluntary disclosures and widely disparate settlements has deprived FCPA targets of clear standards and guidance. Our speakers will derive lessons and trends from recent DOJ and SEC actions, forecast what the law’s next decade may bring, and identify possible vulnerabilities ripe for judicial review.

“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”

Will “Kokesh v. SEC” Put a Kink in the Federal Trade Commission’s Disgorgement Hose?

Featured Expert Column: Antitrust & Competition Policy — Federal Trade Commission

06633 - Royall, M. Sean ( Dallas )By M. Sean Royall, a Partner with Gibson, Dunn & Crutcher LLP, with Richard H. Cunningham, Of Counsel in the firm’s Denver, CO office.*

Ed. Note: This is Mr. Royall’s debut column as the WLF Legal Pulse‘s new Antitrust & Competition Policy, FTC “Featured Expert Contributor.” WLF recognizes and appreciates former FTC Featured Expert Contributor Andrea Murino‘s four years of serving in that pro bono position.

On June 5th, 2017, the Supreme Court held in Kokesh v. SEC that disgorgement is a “penalty” subject to a five-year statute of limitations under 28 U.S.C. § 2462.  With that ruling, the Court explicitly rejected the long-standing assertion of the Security and Exchange Commission (SEC) that it possesses authority to reach back indefinitely when seeking the disgorgement of ill-gotten gains.  While the Kokesh opinion explicitly limits its holding to disgorgement “as it is applied in SEC enforcement proceedings,”1 the Court’s logic extends to disgorgement actions brought by other agencies proceeding under analogous statutory authority, including the Federal Trade Commission (FTC). Continue reading “Will “Kokesh v. SEC” Put a Kink in the Federal Trade Commission’s Disgorgement Hose?”