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Securities Regulation

“Cyan,” Reverse-“Erie,” and the PSLRA Discovery Stay in State Court

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In the wake of the Supreme Court’s holding in Cyan, Inc. v. Beaver County Employees Retirement Fund[1] 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,[2] while in May 2019 a Superior Court in Connecticut … Read more

SEC Commissioner Peirce Talks Exchange-Traded Funds

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Welcome to all of you. We are so delighted to be able to host you at the Securities and Exchange Commission for today’s workshop on exchange-traded funds (ETFs). The discussion today is sure to be fascinating. Aside from my greeting, everything I say reflects my own views and not necessarily those of the Commission or my fellow Commissioners.[1]

It is graduation season, so if you have time to walk around the city, you might see graduates of our local schools celebrating in their caps and gowns. The big story of this graduation season was the announcement by a wealthy

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Deals, Activism, and SEC Regulation Get Lively Airing at M&A and Corporate Governance Conference

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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

SEC Chairman Discusses Recent Legal Decisions and the Impact of Data Collection

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Thank you, Jeff [Boujoukos], for that kind introduction. I am pleased to have the opportunity to speak with the SEC’s federal and state partners in my home town of Philadelphia. Thank you to the Philadelphia Regional Office for organizing this terrific event.[1]

Before I start, let me remind you that the views I express today are my own and do not necessarily reflect the views of my fellow Commissioners or the SEC staff.

Today I will focus on recent legal decisions impacting our enforcement efforts, and how the thoughtful and responsible use and collection of data from market participants

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SEC Adopts New Rules on Relationship Between Retail Investors and Financial Professionals

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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

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SEC Commissioner Jackson Speaks on Final Rules Governing Investment Advice

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Our nation is facing a savings crisis. Many young workers are unable to save at all; half of America’s retirees have saved less than $65,000 and face the terrifying prospect of running out of money in retirement.[1] Every time those Americans seek help from financial professionals, they’re asked to trust someone whose interests can be contrary to their own. And when that conflict leads to bad advice, investors suffer costs that American savers simply cannot afford.

I believe that the SEC’s most crucial task is to protect investors from the dangers this basic economic reality presents. Since I’ve been

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SEC Commissioner Talks a Quarter Century of Exchange-Traded Fun

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Since the first exchange-traded fund (“ETF”) launched in 1993, ETFs have proven to be one of the most useful and successful innovations in the registered fund space under the Investment Company Act (“Act”) of 1940. The innovation did not stop with that first ETF. Besides being one of the fund industry’s most successful financial innovations, ETFs have been, and have the potential to continue being, the wrapper within which future financial innovations occur. Today, I want to share my thoughts on how ETFs can be used to facilitate further financial experimentation and innovations and how the SEC can fulfill its

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SEC Commissioner Peirce on the Need to Reexamine Rules

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Thank you, Peter [Easton] for that kind introduction. I appreciate the chance to be with you at today’s conference to discuss Hot Topics at the Securities and Exchange Commission. It is a small population of people who would describe anything the SEC does as hot, but I suspect there are more than a few in this room who might be a part of that unusual crowd. Given that we share an interest in these issues, I hope that we can keep the conversation as interactive as possible, but I will start with a few observations about SEC rulemaking and the

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SEC Chairman Announces Roundtable on Management, Reporting, and Regulation

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Our capital markets benefit from a level of retail investor participation that is unparalleled among the world’s large industrialized countries. Our Main Street investors who, day in and day out, put their hard-earned money to work for the long term are the reason why we have the deepest, most dynamic and most liquid capital markets in the world.

Today’s Main Street investors have a substantial responsibility to fund their own retirement and other financial needs. As a result of increased life expectancy and a shift from defined benefit plans (e.g., pensions) to defined contribution plans (e.g., 401(k)s and IRAs), the

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SEC Commissioner Peirce Talks Digital Assets: How We “Howey”

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One year ago, I gave a speech—appropriately in Southern California—called “Beaches and Bitcoin.”[1] At that time—not so long ago in analog time but eons ago in digital time—the burning question was how to decide when issuing tokens constituted an offering of securities. The industry was rapidly developing and I worried that the SEC, as one of its potential regulators, would stifle its growth. I will admit today that I was very wrong, not about whether the SEC would stifle the industry’s growth—it has—but in how it would do it. Given that opening, I better give my disclaimer that my

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SEC Chairman Clayton Testifies to Senate on 2020 Budget Request

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Chairman Kennedy, Ranking Member Coons and Senators of the Subcommittee, thank you for the opportunity to testify today on the President’s fiscal year (FY) 2020 budget request for the U.S. Securities and Exchange Commission (SEC).[1]

It is an honor to appear before this Subcommittee again with my colleague, U.S. Commodity Futures Trading Commission (CFTC) Chairman Christopher Giancarlo.  This is the fourth time we have testified together before Congress, and since he is planning on leaving the agency soon, I want to express my deep appreciation for his work on behalf of our markets, our investors and, importantly, our country. 

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SEC Chairman Clayton Comments on Proposed Amendments to Sarbanes-Oxley

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Good morning. This is an open meeting of the U.S. Securities and Exchange Commission, under the Government in the Sunshine Act. Our only item on the agenda today is a recommendation from the Division of Corporation Finance to propose amendments to the definitions of “accelerated filer” and “large accelerated filer.”

Once again, the measured, thoughtful work of the Division of Corporation Finance shines through.

The matter before us today can be fairly characterized as a retrospective review of one component of the Sarbanes-Oxley Act of 2002. In this regard, I’ll take a step back and note that there are many

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SEC Commissioner Jackson Dissents from Proposed Amendments to Sarbanes-Oxley

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Thank you, Mr. Chairman, and thank you to the Staff in the Division of Corporation Finance, including John Fieldsend, Elizabeth Murphy, Felicia Kung, Lindsay McCord, and Director Bill Hinman, for their work in developing today’s release. I also appreciate the efforts of my colleagues in the Division of Economic and Risk Analysis, especially Director SP Kothari, Chyhe Becker, and Tara Bhandari.

Today my colleagues propose to roll back the requirement that auditors attest to the adequacy of certain companies’ internal controls. The proposal’s analysis of the costs of attestation is based on data that’s over a decade old, and the

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Top 10 Corporate and Securities Law Articles for 2018

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The Corporate Practice Commentator is pleased to announce the results of its twenty-fifth annual poll to select the ten best corporate and securities articles.  Teachers in corporate and securities law were asked to select the best corporate and securities articles from a list of articles published and indexed in legal journals during 2018.  Just short of 400 articles were on this year’s list.  Because of the vagaries of publication, indexing, and mailing, some articles published in 2018 have a 2017 date, and not all articles containing a 2018 date were published and indexed in time to be included in this

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SEC Commissioner Jackson Comments on Proposed Rule on Financial Disclosures for Mergers and Acquisitions

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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

SEC Chief Accountant Talks the Future of Financial Reporting

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I’m grateful for the opportunity to visit Baruch College’s Zicklin School of Business and speak at the annual financial reporting conference for the fourth time. Many students who were starting their collegiate work here when I first spoke at this conference are now members of the graduating class.

I could use other examples in tracking changes to make the same point: the world stops for no one. Financial reporting is not exempt from change. This conference also provides an opportunity to talk about current issues in financial reporting and to peer into the future together and explore the role of

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Debevoise Discusses SEC Disclosure Changes for Tech, Media, and Telecom Firms

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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

Beyond Disclosure: A New Way of Examining Securities Regulation

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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

Do Share Buybacks Deserve More Regulatory Scrutiny?

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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[1], but Republican Senator Marco Rubio proposed to end the preferential tax treatment of share buybacks.[2] Other Republicans, though, see it as normal.[3]

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

Insider Trading and Disclosure: The Case of Cyberattacks

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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