In the wake of the Supreme Court’s holding in Cyan, Inc. v. Beaver County Employees Retirement Fund that state courts have concurrent jurisdiction over Securities Act claims, even if asserted as class actions, there has been an influx of Securities Act class actions filed in state courts. A key question has divided courts and commentators: Does the Private Securities Litigation Reform Act (“PSLRA”) discovery stay apply in state court? For example, in September 2018, a Superior Court in California held that the stay did not apply in state court, while in May 2019 a Superior Court in Connecticut … Read more
A host of top attorneys, judges, scholars, regulators, and advisers debated the latest issues in corporate and securities law on June 7 at a Columbia Law School conference in New York, offering cutting-edge thoughts on everything from cybersecurity to shareholder activism to the potential regulation of proxy advisers.
The day-long event featured a keynote conversation with U.S. Securities and Exchange Commissioner Robert J. Jackson, Jr., who among other topics discussed whether the SEC’s new Regulation Best Interest went far enough in protecting retail investors. Appearing on panels about M&A, Delaware law developments, and shareholder activism were the likes of Delaware … Read more
The Securities and Exchange Commission today [June 5, 2019] voted to adopt a package of rulemakings and interpretations designed to enhance the quality and transparency of retail investors’ relationships with investment advisers and broker-dealers, bringing the legal requirements and mandated disclosures in line with reasonable investor expectations, while preserving access (in terms of choice and cost) to a variety of investment services and products. Specifically, these actions include new Regulation Best Interest, the new Form CRS Relationship Summary, and two separate interpretations under the Investment Advisers Act of 1940.
Individually and collectively, these actions are designed to enhance and clarify
… Read more
Let me begin by thanking the staff in the Division of Corporation Finance, including Division Director Bill Hinman, for their hard work in developing the May 3 release and for helpful briefings throughout this process.
The May 3 proposal governs the financial information firms give investors relating to mergers and acquisitions, among other things. It provides several necessary updates to our rules. But I’m concerned that the proposal treats mergers as an unalloyed good—ignoring decades of data showing that not all acquisitions make sense for investors. Thus, while I vote to open this proposal for public comment, I urge investors … Read more
On March 20, 2019, the SEC announced the adoption of amendments to Regulation S-K intended to modernize and simplify disclosure requirements applicable to SEC reporting companies. Highlighted below are two changes of note for companies in the technology, media and telecommunications (“TMT”) sector.
Omission of Schedules to Exhibits
M&A deal activity in the TMT sector has been particularly strong in recent years. When publicly filing a merger, acquisition or similar agreement for these deals, reporting companies customarily exclude from the filing the disclosure schedules and other immaterial attachments to the agreement. While these omissions previously were permitted only for material … Read more
When it comes to the U.S. securities markets, the game has changed. Historically, the U.S. securities markets were dominated by retail investors who engaged in a buy and hold strategy: purchasing stocks as a vehicle to invest in a corporation and, if so inclined, to have a voice in a corporation’s internal governance. To that end, these investors relied heavily on corporate disclosures and filings required under the law and regulated by a number of agencies, including the Securities and Exchange Commission (the “SEC”).
Now, however, the U.S. securities markets are dominated by large institutional investors that, at last count, … Read more
In 2018, U.S. companies spent $1 trillion to buy back their shares, while they spent $4 trillion to do so between 2008 and 2017. This is raising strong criticism from different quarters in the political sphere. Not only do key Democrats consider it an anathema, but Republican Senator Marco Rubio proposed to end the preferential tax treatment of share buybacks. Other Republicans, though, see it as normal.
There is no substantial financial and economic difference between the distribution of a special dividend and a share buyback. However, dividends are taxed immediately, while share buybacks induce an … Read more
The U.S. Securities and Exchange Commission (SEC) recently identified incidents in which top executives sold shares before disclosing to the public negative information about cyberattacks. For example, the former chief information officer of Equifax, Jun Ying, exercised his stock options and sold nearly $1 million in shares about a week before Equifax disclosed the hack of its database in September 2017, gaining $480,000. Equifax stock dropped over 30 percent after news of the data breach became public. Motivated by the SEC’s concerns, we examine the relation between insider trading and corporate disclosure policies around cyberattacks.
When a cyberattack with material … Read more