All items from Securities and Financial Sector Legal Review

Associate Michael Rueda co-authored this article.
1. SIFMA Guidance on Accredited Investor Verification
Last week, the Securities Industry and Financial Markets Association (SIFMA) issued guidance to registered broker-dealers and investment advisers on some accredited investor verification methods. The guidance includes a form of a Rule 506(c) accredited investor questionnaire as well as a form of written confirmation.
2. SEC Announces Fraud Charges Against Three Former Regions Bank Executives in Accounting Scheme
The Securities & Exchange Commission announced fraud charges against three former senior managers of Regions Bank for intentionally misclassifying loans that should have been recorded as impaired for accounting purposes. The SEC also entered into a deferred prosecution agreement with Regions Financial Corp., which substantially cooperated with the agency’s investigation and undertook extensive remedial actions. Regions will pay a total of $51 million to resolve parallel actions by the SEC, Federal Reserve Board, and Alabama Department of Banking.
3. SEC Charges Former Brokers with Trading Ahead of IBM-SPSS Acquisition



Posted 3 weeks 5 days ago

On June 23, 2014, the Supreme Court issued its Decision in Halliburton v. Erica P. John Fund (“Halliburton II”). The decision upholds the Court’s prior Basic v. Levinson decision allowing the fraud on the market theory that presumes reliance, however; the Court agreed with Halliburton that defendants could rebut the presumption pre-class certification with evidence that an alleged misrepresentation did not actually affect the stock price. According to Law360, the decision “will likely make it somewhat more difficult for plaintiffs to bring securities class actions, but it stopped short of closing a major door.”
Chief Justice Roberts delivered the opinion of the Court, joined by Justices Kennedy, Ginsburg, Breyer, Sotomayor and Kagan.  Justice Ginsburg filed a concurring opinion, in which Justices Breyer and Sotomayer joined.  Justice Thomas filed an opinion concurring in the judgment, which Justices Scalia and Alito joined.



Posted 4 weeks 5 days ago

Today, the Supreme Court issued its Decision in Halliburton v. Erica P. John Fund. The decision upholds the Court’s prior Basic v. Levinson holding allowing the fraud on the market theory that presumes reliance, however; the Court agreed with Halliburton that defendants could rebut the presumption pre-class certification with evidence that an alleged misrepresentation did not actually affect the stock price. According to Law360, the decision “will likely make it somewhat more difficult for plaintiffs to bring securities class actions, but it stopped short of closing a major door.”
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We will update this post with more analysis.
 



Posted 5 weeks 2 days ago

 
GENERAL UPDATES
1. CORPORATE SENSITIVITY TO ENVIRONMENTAL CONCERNS OF SHAREHOLDERS INCREASING
Recent studies indicate that over the past year companies have become more sensitive to environmental, social, and governance (ESG) concerns of shareholders. One article describes a study compiled by the Institutional Shareholder Services that relies on data from investor complaints lodged during recent proxy seasons and suggests that social responsibility investors (SRI) have been encouraged by company action.
Indeed, shareholder litigation after regulatory/enforcement action has increased and led to shareholder lawsuits in which directors have been named and claimants have sought damages for the environmental remediation costs the company incurred. Coupled with efforts this year by the United Nations Global Compact that encouraged investors to submit their sustainability desires to the World Federation of Exchanges, investors have been influencing companies’ attention to climate change and sustainability. Their actions may soon influence the ESG reporting standards required by the New York Stock Exchange.
2. SEC ISSUED PARTIAL STAY OF CONFLICT MINERALS RULES



Posted 6 weeks 22 hours ago

Today, the Second Circuit Court of Appeals vacated Judge Rakoff’s November 28, 2011 Order, which rejected the Citigroup-SEC settlement on a number of grounds, including that it allowed Citigroup to avoid admitting guilt. We have covered this settlement extensively (see, here, here and here).
Circuit Judges Pooler, Lohier and Carney’s opinion found three specific errors by the District Court:
(i) the court found that the District Court had abused its discretion by requiring that the SEC “establish the ‘truth’ of the allegations against a settling party as a condition for approving the consent decrees.”



Posted 7 weeks 6 days ago

Associate Aartie Manansingh co-authored this post.
A. Confidential Treatment Requests:  THE DIVISION OF CORPORATE FinANCE  WILL NOT Directly Inform You If Granted CTRs Had “No Review”
On April 9th, 2014, the Division of Corporation Finance announced that, in cases where it has determined to grant a request for confidential treatment (CTR) without providing comments, it will no longer separately notify the applicant. Instead, the applicant must keep an eye on the company’s filing history on Edgar to look for an order indicating that the CTR was granted. The applicant still will receive a call or letter if there are comments to a CTR or if the CTR is denied.
B. SEC ISSUES REVISED CD&Is on INTRASTATE CROWDFUNDING
On April 10th, 2014 the SEC’s Division of Corporation Finance issued new compliance and disclosure interpretations on intrastate crowdfunding. In summary, the C&DIs advised that:
1. Rule 147 does not prohibit general advertising or general solicitation. (See Question 141.03)



Posted 10 weeks 1 day ago

New York Attorney General Eric T. Schneiderman yesterday penned an New York Daily News op ed criticizing high speed trading as using “questionable practices” and “driving up the cost for other purchasers of stock.”
Schneiderman’s op ed, available here, comes on the heels of his statements last month calling for “tougher regulations and market reforms intended to eliminate the unfair advantages commonly provided to high-frequency trading firms at the expense of other investors.”
The AG’s March 18th Press Release stated:



Posted 16 weeks 5 days ago

Associate Krista Giannattasio co-authored this post.
A.   Reform on the Horizon for the Uniform Unclaimed Property Act
The Uniform Unclaimed Property Act (UUPA) was promulgated with the intention of abolishing the common law on abandoned property.  The UUPA provides a system for transferring intangible personal property and personal property in safety deposit accounts, held by an entity other than the rightful owner, to the state when it is deemed abandoned by the rightful owner.  The act was originally promulgated in 1954 by the Uniform Law Commission (ULC) as the Uniform Disposition of Unclaimed Property Act.  It was amended in 1966 and wholly revised in 1981 to become the UUPA.  The UUPA was last revised in 1995 and is due for a revision.  In anticipation of the revision, the Drafting Committee of the UUPA has noted 76 issues for consideration and has requested comments by April 22, 2014.
A  statement of the issues can be found here.
B.   PCAOB No Longer Pursuing Mandatory Audit Rotation in the United States



Posted 16 weeks 6 days ago

Associate Alina Mejer co-authored this post.

  1. SEC Enforcement Chief Speaks to Washington Post

Andrew Ceresney, the enforcement chief at the SEC, spoke with the Washington Post regarding his agenda. Ceresney discussed a new policy initiative which involves demanding admissions of wrongdoing in certain matters. The criteria the SEC will consider when deciding whether to demand admissions include harm to large numbers of investors, significant risk to investors and/or the markets, and situations where admissions would put investors on notice in future dealings with defendant in a way that is unambiguous. Additionally, Ceresney noted that the SEC will boost its enforcement efforts under the recently created Financial Reporting and Audit Task Force which focuses on detecting misconduct involving accounting and financial reporting disclosures, as well as audit failures.
The article can be found here.
 



Posted 21 weeks 2 days ago