Change Coming for SEC’s Controversial Conflict Minerals Rule

Featured Expert Contributor — Corporate Governance/Securities Law

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

Section 1502 of the 2010 Dodd-Frank Act required the Securities and Exchange Commission (SEC) to develop disclosure rules requiring public companies to disclose whether their products contained “conflict minerals.” The minerals in question included cassiterite, columbite-tantalite, gold, wolframite, or their derivatives, all of which are used in a variety of common products, including computers, smart phones, and other everyday technology. In order to be deemed conflict minerals, they had to be sourced from the Democratic Republic of the Congo (DRC) or its adjoining countries. Continue reading

A Q&A with Federal Regulation Scholar Susan Dudley on Reconsidering Regulations

dudleysusan-2015_crop_webSusan E. Dudley is Director of the George Washington University Regulatory Studies Center, which she founded in 2009, and a distinguished professor of practice in the Trachtenberg School of Public Policy and Public Administration. From 2007 to 2009, she served as the Administrator of the Office of Information and Regulatory Affairs (OIRA) in the U.S. Office of Management and Budget.

WLF Legal Pulse: As promised, Congress and the Administration have quickly gotten to work reconsidering and removing a host of federal regulations while also setting the stage for a much different approach to regulation.  Let’s first talk about what Congress is doing.

Professor Dudley: Under the Congressional Review Act of 1996 (CRA), Congress has 60 legislative days after a regulation is published to vote to disapprove it.  The procedures for disapproval are streamlined (including requiring a simple majority in the Senate) and if a rule is disapproved, the agency cannot issue something substantially similar. Continue reading

US Supreme Court’s ‘Salman v. US’ Decision Answers One Insider-Trading Question, Leaves Others Unresolved

bainbridgeFeatured Expert Contributor — Corporate Governance/Securities Law

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

In Salman v. United States, the US Supreme Court returned to the problem of insider trading for the first time in almost two decades. The Court reaffirmed a rule from prior insider-trade caselaw that a gift of information between friends and family constitutes the requisite benefit. Justice Alito’s very brief opinion for a unanimous Court, however, left a number of more difficult questions unresolved.

Bassam Salman was convicted of insider trading for using information he had received from a friend and relative by marriage named Michael Kara who, in turn, had received the information his brother Maher Kara, who was a Citigroup investment banker. Salman argued that liability in such cases should arise only when “there is proof of a meaningfully close personal relationship that generates an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature,” citing the Second Circuit’s decision in United States v. Newman. Continue reading

Video of WLF’s 30th Annual Preview Briefing of US Supreme Court Term Now Available

Our annual briefing was moderated by WLF Legal Policy Advisory Board Chairman Jay Stephens and featured commentary on free-enterprise-oriented cases the Court will hear this Term by Neal Katyal of Hogan Lovells and Daryl Joseffer of King & Spalding LLP.

The following materials were provided to attendees:

SEC Drifting Further Away from Its Statutory Mission with Latest “Therapeutic Disclosure” Idea

bainbridgeFeatured Expert Contributor — Corporate Governance/Securities Law

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

*Editor’s Note: Washington Legal Foundation is pleased to have Professor Bainbridge joining our roster of WLF Legal Pulse Featured Expert Contributors. Professor Bainbridge is a member of WLF’s Legal Policy Advisory Board. He is a prolific scholar, whose work covers a variety of subjects, but with a strong emphasis on the law and economics of public corporations. He also authors ProfessorBainbridge.com, which over the last ten years has consistently earned ABA Top 100 law blog honors.

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An August 15, 2016 Wall Street Journal opinion piece critiqued the Securities and Exchange Commission’s (SEC) plan to require that public companies, in the words of SEC Chairman Mary Jo White, “include in their proxy statements more meaningful board diversity disclosures on their board members and nominees.”

This sort of disclosure, as Chairman White remarked when discussing another potential SEC disclosure mandate, is “directed at exerting societal pressure on companies to change behavior, rather than to disclose financial information.” So what she’s proposing now with regards to board diversity is known as therapeutic disclosure. Continue reading

Seventh Circuit Rejects Disclosure-Only Settlement in Merger Tax Suit, Embracing Delaware Chancery Court’s “Trulia” Decision

ARickeyK. Whittaker Guest Commentary

By Anthony Rickey, a solo practitioner at Margrave Law LLC in Georgetown, DE, and Keola R. Whittaker, an Associate with McGuireWoods LLP in its Los Angeles, CA office.

U.S. Court of Appeals for the Seventh Circuit Judge Richard Posner’s criticism of meritless settlements in In re Walgreen Co. Stockholder Litigation, (Aug. 10, 2016) will cheer hearts skeptical of the utility of mergers-and-acquisitions (M&A) class actions.  The opinion reversed and remanded a district court’s approval of a disclosure settlement arising out of the merger of Walgreen Co. and Alliance Boot GmbH.   Judge Posner explained why each of the six supplemental disclosures offered to the class as settlement consideration were, variously, “worthless,” “provided no new information,” or “could be derived by simple arithmetic from data in the proxy statement. . . .”   After reversing the trial court, the appellate court suggested that the class counsel who had supported such a settlement, and sought $370,000 in fees, had not adequately represented the class, and advised the district court on remand to seriously consider dismissing the suit or appointing new class counsel.  Continue reading

Former SEC Commissioner Brings Shareholder-Proposal Reform Ideas Advanced in WLF Working Paper to Capitol Hill

U_S_SEC_logoFormer Securities and Exchange Commission (SEC) Commissioner Daniel Gallagher, co-author of a 2015 WLF Working Paper, “Shareholder Proposals: An Exit Strategy for SEC,” testified before a subcommittee of the House Committee on Financial Services on May 17. The hearing was entitled, “Legislative Proposals to Enhance Capital Formation, Transparency, and Regulatory Accountability.”

Mr. Gallagher’s written testimony referenced the January 10, 2014 comments WLF filed with SEC criticizing the current proxy voting regime.  Echoing his arguments in the 2015 WLF Working Paper, Mr. Gallagher urged the Committee to move beyond attempting to reform federal regulation of the proxy voting process and instead leave such oversight to the states. He wrote, “These proposals are meant to approximate the increasingly antiquated notion of an in-person annual shareholder meeting. It’s like listening to a cassette recording of a Victrola, while everyone else is on their iPhones.” He wryly added in a footnote to that statement, “I will now wait for the hipsters of the corporate governance community to tell me that my analogy is wrong because the analog nature of the record and cassette recordings makes them preferable to the digital content on an iPhone.”