Musk’s $56 billion: Pay, Incentives, or Rewards?

By Jeffrey L. Coles, Naveen D. Daniel and Lalitha Naveen October 11, 2024 by renholding

A great deal of space has been devoted by the media to discussions relating to the pay of Elon Musk, CEO of Tesla.  The media outrage centers around his 2018 pay package, with many of the headlines reporting a whopping …

Wachtell Lipton Discusses California Climate Disclosure Law

By Ronald C. Chen, Raaj S. Narayan and Carmen X. W. Lu October 11, 2024 by renholding

Last week, California Governor Gavin Newsom signed into law Senate Bill 219, which applies broadly to public and private companies “doing business” in California.  The law will require companies that have total annual revenues of over $1 billion dollars …

Serendipity and Self-Regulation: The Case of Cryptocurrency-Based ETPs

By Onnig H. Dombalagian October 10, 2024 by renholding

Cryptocurrency enthusiasts rejoiced when the Securities and Exchange Commission (SEC) approved the listing of bitcoin – and ether-based exchange-traded products (ETPs) – on U.S. stock exchanges earlier this year. There is yet a certain irony in this outcome: Why did …

Cooley Discusses SEC Charges Against Director for Failing to Disclose Lack of Independence

By Cydney Posner October 10, 2024 by renholding

Last week, the SEC announced settled charges against James R. Craigie, a former CEO, Chair and board member of Church & Dwight Co. Inc., an NYSE-listed  “manufacturer of consumer-packaged goods,” for “violating proxy disclosure rules by standing for election as …

The Conservative Case for ESG

By Richard W. Painter October 9, 2024 by renholding

The standard explanation for the division along party lines on the role of ESG in corporate governance is this: Liberals think ESG factors are important in investment and business decisions.  Conservatives think ESG is a harmful distraction, presumably because corporate …

Morrison & Foerster Discusses SEC’s Active Enforcement of Tender Offer Rules

By Spencer Klein, Joe Sulzbach, Rebecca Chacon Naranjo, Sahana Ragunathan and Hannah Yang October 9, 2024 by renholding

On September 6, 2024, the United States Securities and Exchange Commission (the SEC) charged Esmark Inc. (“Esmark”) and its Founder/Chairman and former CEO James Bouchard under Section 14(e) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 14e-8…

How Comply-or-Explain Disclosure Regulation Can Improve Corporate Governance and Gender Equality

By Aaron A. Dhir, Sarah Kaplan and Maria Arabella Robles October 8, 2024 by renholding

In 2020, the Nasdaq stock market filed a proposal with the U.S. Securities and Exchange Commission seeking permission to adopt a board diversity-related disclosure requirement for its listed companies. In 2021, the SEC approved the proposal, making Nasdaq the most …

SEC Whistleblower Program Marred by Too Much Secrecy, Two Commissioners Say

By Hester M. Peirce and Mark T. Uyeda October 8, 2024 by renholding

The Commission recently issued two whistleblower award determinations awarding an aggregate $122,000,000 among four claimants.[1] We did not support these determinations, but we are unable to explain our reasons because the public final orders determining the awards redact certain …

How Stakeholder Orientation Affects Labor Investment Efficiency

By Rajib Chowdhury, John A. Doukas and Jong Chool Park October 7, 2024 by renholding

In corporate governance, the focus is increasingly shifting toward non-financial stakeholders, particularly employees, as important contributors to a firm’s competitive advantage and long-term success. Historically, investment in labor has been a big topic in corporate finance, especially within agency theory. …

Debevoise & Plimpton Discusses Reporting Deadline for Corporate Transparency Act

By Satish M. Kini, Aseel M. Rabie, Jonathan Steinberg and Gabriela Urias October 7, 2024 by ngodridge

It appears a new item must soon be added to the list of life’s certainties: “death, taxes and the CTA.”

Effective January 1, 2024, the Corporate Transparency Act (“CTA”) requires many entities to report information about their beneficial owners, senior …

How Raising Equity During Economic Downturns Can Reduce Financial Strain

By Styliani Panetsidou and Angelos Synapis October 4, 2024 by renholding

Economic downturns disrupt firms’ operations and strategic decisions and impair their financial health. During the recent pandemic, for example, many companies were forced to reduce expenses or lay off employees, driving the U.S. unemployment rate to 14.7 percent in 2020, …

Simpson Thacher Discusses SEC Enforcement Sweep for Section 13 and 16 Reporting Failures

By Joseph Kaufman, Karen Hsu Kelley, Charles Mathes and James Rapp October 4, 2024 by renholding

On September 25, 2024, the Securities and Exchange Commission (“SEC”) announced that it had settled charges against 23 entities and individuals relating to failures to file and/or amend on a timely basis Schedules 13D and 13G and Forms 3, 4 …

Delaware Chancery Weighs In on Maximizing Shareholder Value

By J S Liptrap October 3, 2024 by renholding

The relationship between directors’ fiduciary duties and shareholder wealth maximization under Delaware law has long been a prickly topic. Some commentators argue the relationship is merely a default capable of adjustment through private ordering.[1] Others, pointing to cases like …

Is Financial Disclosure Worth It for Private Firms?

By Joachim Gassen and Maximilian Muhn October 2, 2024 by renholding

Private firms are the backbone of our economies, influencing everything from investment levels to job creation to market competition. Given their collective significance, various regulatory agencies outside the U.S. impose financial disclosure (and sometimes audit) requirements on these firms. In …

Davis Polk Discusses Key Takeaways from Bank Merger Policy Updates

By Luigi L. De Ghenghi, Randall D. Guynn, Eric McLaughlin, David L. Portilla and Howard Shelanski October 2, 2024 by eorozco

The DOJ, FDIC and OCC have revised their bank merger review standards. The new standards are a major shift for bank M&A and will require a careful, detailed analysis to evaluate the viability of any proposed transaction.

The Federal Deposit …

The Equity in Corporate Law

By Andrew S. Gold and Henry E. Smith October 1, 2024 by renholding

It is well-known that equity is a central part of corporate law, and courts do not hesitate to remind litigants of that fact. Yet, a fuller appreciation of what equity means for corporate law is still lacking. In a recent …

Debevoise & Plimpton Reviews 2024 Proxy Season

By Eric T. Juergens, Maeve O'Connor, Benjamin R. Pedersen, William D. Regner and Amy Pereira October 1, 2024 by renholding

The 2024 proxy season was characterized by a high volume of shareholder proposals submitted to companies, including proposals relating to topical issues such as artificial intelligence (“AI”) and political lobbying and spending. In addition, the number of no-action requests submitted …

How Board Independence Can Affect Employee Safety and Health

By Lixiong Guo and Zhiyan Wang September 30, 2024 by renholding

Since the 1990s, regulatory reforms worldwide have significantly increased the independence of corporate boards. By 2023, nearly all of the top 50 equity markets had implemented minimum requirements for board or board committee independence. While extensive literature highlights the benefits …

Debevoise & Plimpton Discusses Proposed Regulations on 15% Corporate Minimum Tax

By Michael Bolotin, Stephen M. Jordan, Rafael Kariyev, Peter F.G. Schuur and Lena E. Smith September 30, 2024 by ngodridge

The Treasury Department and the IRS have released long-awaited proposed regulations (the “Proposed Regulations”) on the 15% corporate minimum tax on the book income of certain large corporations (the “CAMT”), more than two years after the CAMT was created as …

Smart Contract Arbitration Should Balance Transparency With Anonymity

By Bahadir Köksal September 27, 2024 by renholding

In the rapidly evolving world of blockchain technology, smart contracts have emerged as a revolutionary tool for documenting transactions. These self-executing contracts, with terms transcribed directly into code, are designed to automate and enforce agreements without the need for intermediaries.

…

DOJ Announces Revisions to Corporate Compliance Guidance

By Nicole M. Argentieri September 27, 2024 by renholding

The Criminal Division is on the front lines of the Justice Department’s efforts to hold culpable individuals and companies accountable for corporate crime. We also develop innovative policies both to encourage companies to be good corporate citizens and to enhance …

Watching the Watchdogs: Tracking SEC Inquiries Using Geolocation Data

By William Christopher Gerken, Steven Irlbeck, Marcus Painter and Guangli Zhang September 26, 2024 by renholding

The Securities and Exchange Commission plays a crucial role as the watchdog of Wall Street by detecting financial misconduct and enforcing securities laws, but much of its investigative process has remained opaque to researchers and the public. In a new …

Arnold & Porter Discusses Final FinCEN Rules for Investment Advisers Under Bank Secrecy Act

By Veronica E. Callahan, Ellen Kaye Fleishhacker, Michael A. Mancusi, Kevin M. Toomey and Trevor Kirby September 26, 2024 by ngodridge

On August 28, 2024, the Financial Crimes Enforcement Network (FinCEN) issued a final rule to add “investment adviser” to the definition of “financial institution” under the regulations implementing the Bank Secrecy Act (BSA). The final rule defines the term “investment …

How IRS Monitoring Increases Corporate Non-Financial Misconduct

By Duke Ferguson, Robert Hills and Trent Krupa September 25, 2024 by renholding

The Internal Revenue Service (IRS) routinely monitors public companies to assess compliance with tax laws. The frequency of this monitoring is expected to increase significantly since the IRS recently announced its updated Strategic Operating Plan associated with the Inflation Reduction …

SEC Commissioners Testify Before U.S. House Committee on Financial Services

By Gary Gensler. Hester M. Peirce, Caroline A. Crenshaw, Mark T. Uyeda and Jaime Lizárraga September 25, 2024 by renholding

Good morning, Chairman McHenry, Ranking Member Waters, and members of Committee. Thank you for the opportunity to testify before you today about the work of the U.S. Securities and Exchange Commission.

The SEC at 90 Years

At the SEC, we …

Do Legal Risks Rise When the Corporate Secretary Is Also the Chief Legal Officer?

By Jagadison K. Aier, Justin Hopkins and Syrena Shirley September 24, 2024 by renholding

In the corporate governance literature, there’s little about the corporate secretary, an information intermediary for the board, who attends all board meetings and serves a role inextricably linked to the risk of litigation. Corporate secretaries (CSs) advise the board and …

Fifth Circuit Ruling Underscores a Shortcoming of the SEC Whistleblower Program

By Andrew Feller and Geoff Schweller September 24, 2024 by renholding

Whistleblowers who exposed what has been called “one of the biggest frauds in Texas history” are not eligible to receive Securities and Exchange Commission (SEC) whistleblower awards based on the collections recovered in a bankruptcy proceeding, according to a recent …

CFTC Jurisdiction Should Not Extend to Event Contracts

By Ilya Beylin September 23, 2024 by ilyabeylin

Two weeks ago, there was big news for “event contracts,” which provide for fixed payouts upon the occurrence of specified events and are sometimes referred to as “prediction” products.  Kalshi – an exchange that has popularized event contracts on everything …

Sullivan & Cromwell Discusses Delaware Decision Dismissing Claims Against Controlling Shareholder

By Jacob E. Cohen, Brian T. Frawley and John L. Hardiman September 23, 2024 by renholding

Vice Chancellor J. Travis Laster dismissed claims two weeks ago against a controller in Clement v. Apollo Global Management, LLC. Plaintiff alleged that a merger was unfair because the controller allegedly extracted “unique benefits” in the merger. The court …

Money: A Functional Analysis 

By Steven L. Schwarcz September 20, 2024 by renholding

Although we use money every day, few of us really understand it. Most define it by its most obvious manifestation – government-issued paper certificates or coins that specify units of currency, such as dollars or euros. But that superficial definition …

Wachtell Lipton Discusses the SEC’s Disbanding of Its ESG Enforcement Task Force

By John F. Savarese, Wayne M. Carlin, David B. Anders and Carmen X.W. Lu September 20, 2024 by renholding

The U.S. Securities and Exchange Commission (“SEC”) has disbanded its Climate and ESG Task Force in the Division of Enforcement.  The Task Force was established in March 2021 with the purpose of identifying ESG-related misconduct, including material gaps or misstatements …

Why Boards Should Think Twice Before Entering into Cooperation Agreements With Activists

By Jennifer O’Hare September 19, 2024 by renholding

In a typical activist campaign, the activist threatens to launch a proxy fight unless the board of directors agrees to take certain actions to increase shareholder value, such as selling off company assets or replacing the CEO. Increasingly, however, there …

SEC Chair Gensler on Tick Sizes and Other Updates to Equity Market Rules

By Gary Gensler September 19, 2024 by renholding

Today [September 18], the Commission will consider updating rules for the $55 trillion equity markets. I am pleased to support these rules because they would enhance competition, efficiency, and fairness, benefitting investors and capital formation alike.

In 1975, Congress tasked …

A Broader Corporate Purpose Requires Sharing Corporate Power

By Grant Hayden and Matthew Bodie September 18, 2024 by renholding

Can we speak of a “purpose” for corporations or, more broadly, corporate law?  The doctrine of shareholder primacy has long had an easy answer: Both individual corporations and corporate law should strive to maximize shareholder wealth.  But this reductive and …

Gibson Dunn Offers Securities Litigation 2024 Mid-Year Update

By Craig Varnen, Monica Loseman, Brian Lutz, Jefferson Bell and Chase Weidner September 18, 2024 by renholding

This update provides an overview of the major developments in federal and state securities litigation since our Securities Litigation 2023 Year-End Update. A recent NERA Economic Consulting (NERA) study provides an overview of recent developments in filings. This section …

Rethinking Private Benefits of Control

By James An September 17, 2024 by renholding

The term “private benefits of control” refers to the privileges and advantages that accrue to controlling shareholders at the exclusion of minority shareholders. These benefits can take a variety of forms, ranging from cash extractions to more intangible manifestations, such …

Will Large Language Models Propel Financial Statement Analysis Into a New Era?

By Alex G. Kim, Maximilian Muhn and Valeri Nikolaev September 16, 2024 by renholding

Since the introduction of ChatGPT, large language models (LLMs) have completed a variety of tasks with impressive results, from summarizing complex documents to conducting sentiment analysis to extracting relevant information. But are LLMs up to even greater challenges like, say, …

New Survey Reveals Strong Shareholder Support for Companies to Follow a Code of Conduct for Political Spending

By Bruce F. Freed, William S. Laufer and Karl Sandstrom September 16, 2024 by renholding

How do shareholders want companies to manage political spending? This is a critical question for senior management and boards as the 2024 elections enter the final stage and the 2025 proxy season opens. It’s particularly important and timely as companies …

When Do Firms Use Good Faith Provisions in Strategic Alliance Contracts?

By Lorenz Graf-Vlachy, Marvin Hanisch, Carolin Haeussler, Andreas König and Theresa S. Cho September 13, 2024 by renholding

Strategic alliances are pivotal in industries like biopharmaceuticals, where collaboration can make or break innovation and success. A key yet under-explored element of these alliances is good faith provisions – clauses that require parties to act with good intentions and …

Let the Light Shine on Bank Supervisors’ Examination Ratings

By Hamid Mehran and Chester Spatt September 12, 2024 by renholding

We have argued that bank regulators should disclose more bank information than is now required.[1]  This is because supervisory practices generally do little to promote transparency, which leads to opacity that interferes with the pricing of risk and undermines …

Cohen Milstein Discusses Two U.S. Supreme Court Cases that May Increase Hurdles for Securities Fraud Plaintiffs

By Laura H. Posner and Alexandra Gray September 12, 2024 by renholding

In November, the U.S. Supreme Court will hear two cases from the Ninth Circuit Court of Appeals that will implicate the ability of investors to bring securities fraud claims. The most worrisome – NVIDIA Corp. v. E. Ohman J:or Fonder …

A New Approach to Measuring Shareholder Damages in Securities Class Actions

By Michael McDonald September 11, 2024 by renholding

Securities class-action lawsuits play a crucial role in holding corporations accountable for financial misdeeds. They typically involve allegations of securities fraud, where a company makes misleading statements or omits important information that leads to an inflated stock price. When the …

Is UCC Rule on Risk of Loss for Breach a Commercial Law Blunder?

By Steven L. Schwarcz September 10, 2024 by renholding

Commercial law, as codified by the Uniform Commercial Code (“UCC”), recognizes certain important commercial realities as a basis to override property law. In a new article, I examine that recognition in connection with the UCC’s allocation of the risk of …

Paul Weiss Discusses Ruling on Limits of European Commission’s Power to Review Deals

By Nicole Kar, Rich Pepper, William Feerick, Andrea Wei Ling Chong and Timothy Noelanders September 10, 2024 by renholding

The European Court of Justice (“ECJ”) has upheld an appeal against the European Commission’s ability to accept referrals under Article 22 of the EU Merger Regulation (“EUMR”) from national competition authorities who are not competent to …

Congress Should Repeal the Least-Cost Requirement for Resolving Failed Banks

By Jeremy C. Kress September 9, 2024 by renholding

JPMorgan’s acquisition of First Republic Bank after its spectacular collapse in April 2023 sparked immediate outrage among some financial policymakers. Democratic Senator Elizabeth Warren decried the transaction as  “troubling,” and Republican Senator JD Vance called it “a really bad deal …

Davis Polk Discusses FDIC Proposal to Expand Reach Over Bank Holding Company Investments

By Luigi L. De Ghenghi, Paul Drexler, Justin Levine, David L. Portilla and Margaret E. Tahyar September 9, 2024 by renholding

The Federal Deposit Insurance Corporation (FDIC) recently proposed and published a Federal Register notice for a proposed rule that would revise the agency’s Change in Bank Control Act (CIBCA) regulations. Specifically, the proposed rule would add a second layer …

How Board Networks Reinforce Corporate Innovation

By Yang Fan and Mu-Jeung Yang September 6, 2024 by renholding

In recent years, technological advances and structural shifts have catalyzed a surge in corporate investments in research and development (R&D), intellectual property, and other intangible assets. These developments reflect the growing importance of innovation-driven growth in the modern economy. In …

How the U.S. Oversight Doctrine Gained a Toehold in Europe

By Timo Kaisanlahti September 5, 2024 by renholding

In the realm of corporate law, board directors are bound by fiduciary duties of loyalty and care to both the company and its stockholders.[1] The interpretation of these duties, however, is national, even in the European Union, despite its …

Wachtell Lipton Offers Summer Takeaways in SEC Enforcement

By John F. Savarese, Wayne M. Carlin and David B. Anders September 5, 2024 by renholding

With the Labor Day holiday now behind us, it is a good time to review the SEC’s active enforcement docket and to look ahead to likely areas of continuing enforcement attention as we head into the fall.  The record over …

How Noisy Data Can Help Firms Pick Better Managers

By Felix Feng, Wenyu Wang, Yufeng Wu and Gaoqing Zhang September 4, 2024 by renholding

High-quality information and managers are essential to firms’ success, with the former allowing firms to accurately evaluate prospective investments and the latter helping to ensure those investments pay off. Yet the value of information and managers to a firm are …

Why Fiduciary Duties Fail to Bridge the Public-Private Law Gap

By Lauren R. Roth September 3, 2024 by renholding

As corporate directors and other private actors have taken on public or quasi-public functions like reigning in conflicted executives or approving healthcare claims, fiduciary duties have expanded to protect the vulnerable and bridge the gap between public and private law.…

The Promise and Perils of Using AI at Law Reviews

By Hadar Y. Jabotinsky and Roee Sarel August 30, 2024 by renholding

The legal world is no stranger to technological advancements, but the surge in artificial intelligence (AI) capabilities has sparked a movement that is reaching even law reviews. Every submission cycle, Scholastica – the largest platform for law-review submissions – releases …

Nevadaware Divergence: How Nevada and Delaware Really Differ in Corporate Law

By Wendy Gerwick Couture August 29, 2024 by renholding

The differences between Nevada and Delaware corporate law – which I call “Nevadaware divergence” – are the subject of media attention, scholarly critique, and current litigation. The common wisdom is that Nevada is, as some say, “the place to reincorporate …

The Impact of ESG Scores and Board Structure on Firms’ Profitability

By Luis A. Seco, Azin Sharifi and Shiva Zamani August 28, 2024 by renholding

In recent years, climate change and stakeholder demand for sustainable practices have prompted increasing numbers of companies to account for environmental, social, and governance (ESG) factors in their business strategies. Companies’ success in doing so can be measured with ESG …

Morrison & Foerster Discusses Top Five SEC Enforcement Developments for July 2024

By Nicole K. Serfoss, Michael D. Birnbaum, Haimavathi V. Marlier, Craig D. Martin and Mamie Tabet August 28, 2024 by renholding

1. SDNY Judge Holds SEC Failed to Adequately Plead Risk Disclosure and Controls Claims in SolarWinds

On July 18, 2024, the United States District Court for the Southern District of New York issued an opinion in Securities and Exchange Commission …

ESG, the Corporate Contract, and Managers’ Incentives

By Martin Edwards August 27, 2024 by renholding

Each of the two most oft-propounded notions of ESG – environmental, social, and governance – carries some persuasive weight in the debate about ESG’s impact on corporate governance.  If ESG results in a sharper focus on risk management and better …

Skadden Discusses Banking Agencies’ Increasing Scrutiny of Bank-Fintech Partnerships

By Mark Chorazak, Adam J. Cohen, Darren M. Welch and Bryan A. Burcat August 27, 2024 by renholding

On July 25, 2024, the U.S. prudential bank regulators released a Joint Statement on Banks’ Arrangements With Third Parties To Deliver Bank Deposit Products and Services (Joint Statement),¹ along with a request for information on bank-fintech arrangements (RFI) issued …

How Common Venture Capital Investors Are Reshaping the Startup Landscape

By Jillian Grennan and Michelle Lowry August 26, 2024 by renholding

The venture capital (VC) industry has undergone a profound transformation over the past two decades with the emergence of common VC investors — that is, VC firms that hold ownership stakes in multiple startups within the same industry or product …

Wachtell Lipton Discusses Nationwide Injunction Blocking FTC Non-Compete Ban

By Michael J. Schobel, Erica E. Aho and Jonathan C. Nickas August 26, 2024 by renholding

On August 20, 2024, Judge Ada Brown of the U.S. District Court for the Northern District of Texas issued a permanent injunction setting aside the Federal Trade Commission’s final rule banning non-compete agreements in Ryan LLC v. FTC.  Last …

The SEC Can Learn a Thing or Two from Europe About Regulating Digital Assets    

By Alexandros Kazimirov August 23, 2024 by renholding

In its approach to digital assets, the Securities and Exchange Commission has been criticized for regulating by enforcement. In reality, the SEC has taken a twofold approach. In addition to bringing lawsuits against crypto exchanges, the commission has proposed amending …

Business Judgment and ESG

By Michael Simkovic August 22, 2024 by renholding

New research provides evidence that legally nonbinding commitments from corporate managers to Environmental, Social, and Governance (ESG) principles may help predict subsequent corporate behavior. [1]  This study provides cautiously optimistic evidence that CEOs who claim to consider the ethical implications …

Queers, Closets, and Corporate Governance

By Darren Rosenblum August 21, 2024 by renholding

Over the past couple of decades, we’ve witnessed enormous progress on LGBTQ+ issues. As a result, the closet remains largely off people’s radar – but for the generation of those who occupy corporate leadership positions, it’s very much a live …

Debevoise Discusses Proposed FDIC Regulations on Brokered Deposits

By Gregory J. Lyons, Chen Xu, Tejas N. Dave and Alexandra N. Mogul August 21, 2024 by renholding

On July 30, 2024, on a party line 3-2 vote of its Board of Directors, the Federal Deposit Insurance Corporation (the “FDIC”) approved a Notice of Proposed Rulemaking^[1] (the “Proposal” or the “Proposed Rule”) to substantially broaden the scope …

The New Corporate Political Governance

By Tom C.W. Lin August 20, 2024 by renholding

Corporate governance and political governance are increasingly intersecting, as corporations engage in some of the most contentious and important social challenges of our time with their voice, capital, and actions. In a recent article, I examine this new convergence …

AI, New Technologies, and Corporate Governance

By Martin Petrin August 19, 2024 by renholding

Business has always had to adapt to new technologies, from the steam engine to the automobile to personal computers. Today, artificial intelligence (AI) and closely related developments like Big Data analytics and machine learning are the technologies transforming business, along …

Morrison & Foerster Discusses the Top 10 International Anti-Corruption Developments for July 2024

By Charles E. Duross, James M. Koukios, Eduardo Schneider and Rishikeesh Wijaya August 19, 2024 by renholding

Why did two federal courts refuse to throw out Foreign Corrupt Practices Act (FCPA) charges against two different commodities traders? What revisions did Congress make to the Foreign Extortion Prevention Act (FEPA)? How has China increased its anti-corruption scrutiny of …

The Governance Challenges from DOJ’s New Whistleblower Pilot Program

By Michael W. Peregrine and Ashley C. Hoff August 16, 2024 by renholding

Corporate boards and their leadership teams face unique compliance oversight challenges from the Department of Justice (“DOJ”)’s new Corporate Whistleblower Awards Pilot Program (“the Program”), the details of which were announced on August 1 by Principal Deputy Assistant Attorney General …

SEC Hits Dozens of Firms With $390 Million Penalty for Recordkeeping Failures

By Securities and Exchange Commission August 16, 2024 by renholding

The Securities and Exchange Commission on August 14 announced charges against 26 broker-dealers, investment advisers, and dually-registered broker-dealers and investment advisers for widespread and longstanding failures by the firms and their personnel to maintain and preserve electronic communications.

The firms

…

How Do Multiple Regulators Regulate?

By Phil Berger, Rachel Geoffroy, Claudia Imperatore and Lisa Yao Liu August 15, 2024 by renholding

The process of producing and disseminating financial reporting disclosures often involves multiple parties, each of whom is under the authority of a specialized regulator. For example, certain information in 10-K filings is provided by third parties who operate under a …

Is Fiduciary Loyalty Really Loyalty?

By D. Gordon Smith and Marianna Gracheva August 14, 2024 by renholding

Loyalty has been much in the news lately. Vice President Kamala Harris recently suggested that Republican vice-presidential candidate J.D. Vance would be “loyal only to Trump, not to our country.”[1] Online retailer Etsy just announced its first-ever loyalty program …

Skadden Discusses Spotty Compliance With UK Crypto Financial Promotions Rules

By Sebastian J. Barling, Simon Toms, Joseph A. Kamyar and David Y. Wang August 14, 2024 by renholding

On August 7, 2024, the UK Financial Conduct Authority (FCA) published an update regarding its ongoing assessment of crypto firms’ adherence to the cryptoasset financial promotions rules introduced in October 2023. See our October 23, 2023 client alert “UK …

A New Approach to Contract Formation in Preliminary Acquisition Negotiations and Agreements

By Joseph Franco August 13, 2024 by renholding

Columbia Law School Professor Allan Farnsworth once confidently asserted that common law contract “doctrines, imaginatively applied, are both all that are needed and all that are desirable” to protect participants in preliminary contract negotiations and agreements (what I refer to …

SEC Chief Accountant Speaks on Updated Conceptual Framework in FASB Standard Setting

By Paul Munter August 13, 2024 by renholding

Recently,[1] the Financial Accounting Standards Board (“FASB” or the “Board”) completed a comprehensive update to its Conceptual Framework for Financial Reporting (“Conceptual Framework”).[2] Now that it has finalized this significant project, it is important that the Board actively …

Every Vote Counts: Mandatory Disclosure and Voting Outcomes

By Nan Li and Yeo Sang (Johnny) Yoon August 12, 2024 by renholding

The right of shareholders to vote is essential for maximizing the value of their shares and good corporate governance. However, in a diffusely held corporation, few shareholders have the incentive to monitor management at their own cost, leading to a …

Materiality Under the SEC’s Climate Risk Rule

By Tom Riesenberg August 12, 2024 by renholding

The concept of materiality has been called the “bedrock” or the “cornerstone” of the corporate disclosure system established by Congress in the federal securities laws.[1] But, despite its importance, determining how to use or apply the concept can be …

Should ESG Ratings Be Strictly Regulated? An EU Perspective

By Catherine Malecki August 9, 2024 by renholding

ESG ratings play an important role in helping companies and financial institutions integrate sustainability into their decisions. Yet critics argue that regulations are needed to address the ratings’ many shortcomings: a lack of transparency in the methodologies behind them, the …

Skadden Discusses New UK Government’s AI and Cybersecurity Reforms

By Nicola Kerr-Shaw and Aleksander J. Aleksiev August 9, 2024 by renholding

Last month the new Labour government in the UK announced in the King’s Speech that it will introduce new artificial intelligence (AI) rules alongside cybersecurity and digital information bills. A brief overview of these developments is set out below.

Artificial

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Should Ethereum ETFs Include Staking?

By David Krause August 8, 2024 by renholding

The approval of Ethereum Spot Exchange-Traded Funds (ETFs) by the U.S. Securities and Exchange Commission (SEC) in May 2024 marked a significant step forward for cryptocurrency in mainstream finance (Krause, 2024). This decision followed the precedent set by Bitcoin Spot …

Corporate Purpose, Social Enterprise Law, and the Future of the Corporation: A UK Perspective

By J S Liptrap August 7, 2024 by renholding

The U.S. debate on corporate purpose centers on whether corporations should prioritize shareholders’ interests over the well-being of non-shareholder constituencies. Though the debate dates back at least to the 1930’s Berle-Dodd exchange in the Harvard Law Review, it is …

Are the Big Three Asset Managers Beneficial Stewards or Corporate Overlords?

By Ruth V. Aguilera, Kurt A. Desender and Mónica LópezPuertas-Lamy August 6, 2024 by renholding

In the corporate governance landscape, the influence of passive index funds and common ownership has become a focus of scholarly and public debate. As the largest asset management firms in the world, the Big Three (BlackRock, Vanguard, and State Street …

Davis Polk Discusses Decision Denying Preliminary Injunction Against Non-Compete Ban

By Arthur J. Burke, Jesse Solomon, Suzanne Munck af Rosenschold, Howard Shelanski and Christopher Lynch August 6, 2024 by renholding

In a decision issued on July 23, 2024 (the ATS Decision), U.S. District Judge Kelley Brisbon Hodge for the Eastern District of Pennsylvania denied Plaintiff ATS Tree Services LLC’s motion for a stay of effective date and preliminary injunction against …

John C. Coffee, Jr. – What Would a Trump Administration Mean for Securities Regulation?

By John C. Coffee, Jr. August 5, 2024 by renholding

There can be no debate: The Administrative State has been scaled back. The rule-making powers of administrative agencies have clearly been curbed. Most blame the Supreme Court and particularly its decision in West Virginia v. EPA, 597 U.S. 697 …

The Impact of the Global Financial Crisis on Board Gender Diversity

By Shibashish Mukherjee and Sorin M.S. Krammer August 2, 2024 by renholding

The 2008-2009 global financial crisis (GFC) has cast a pall over several corporate governance mechanisms in many firms worldwide. Nonetheless, how the firms treated their female directors in the aftermath and whether they maintained gender diversity on their boards remain …

Assistant AG Kanter Speaks on New Unfair and Illegal Pricing Strike Force

By Jonathan Kanter August 2, 2024 by renholding

It is a privilege to join you today and talk about the work of the Justice Department’s Antitrust Division.

The purpose of this strike force — to “mak[e] sure corporations are held accountable when they try to rip off Americans”

…

Sullivan & Cromwell Discusses Banking Agencies’ Request for Information About Bank Relationships with Fintechs

By H. Rodgin Cohen, Mitchell S. Eitel, Michael T. Escue, Rebecca J. Simmons and Jordan M.H. Wish August 1, 2024 by renholding

On July 25, 2024, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency (together, the “Agencies”) issued a request for information (the “RFI”)[1] regarding arrangements …

Reg FD’s Dilemma: The Unseen Edge in Private Investor Meetings

By H. Scott Asay, Shana Clor-Proell and Michael T. Durney July 31, 2024 by renholding

Regulation Fair Disclosure (Reg FD) attempts to level the playing field for investors, stating that any “informational edge” should be due to investors’ “skill, acumen, or diligence” rather than “from their superior access to corporate insiders.”[1]However, Reg FD …

SEC Chair Gensler Speaks to Small Business Capital Formation Advisory Committee

By Gary Gensler July 31, 2024 by renholding

Good morning. I’m pleased to speak with the Small Business Capital Formation Advisory Committee. As is customary, I’d like to note that my views are my own as Chair of the Securities and Exchange Commission, and I am not speaking

…

How Audit Committee Chairs’ Service on Other Boards Enhances Non-GAAP Disclosure Quality

By Cheng-Hsun Lee July 30, 2024 by renholding

In today’s rapidly evolving corporate governance landscape, the role of audit committees in overseeing financial reporting has never been more important. Recent regulations, such as the updated Compliance & Disclosure Interpretations (“C&DIs”), have emphasized the need for audit committees to …

Paul Weiss Discusses Delaware Supreme Court Clarification of Tests for Advance Notice Bylaw Challenges

By Andre G. Bouchard, Chelsea N. Darnell, Jaren Janghorbani, Robert A. Kindler, James E. Langston and Laura C. Turano July 30, 2024 by renholding

Recently in Kellner v. AIM ImmunoTech, Inc., the Delaware Supreme Court clarified the legal tests applicable when stockholders challenge advance notice bylaws. A key aspect of the Supreme Court’s ruling is the importance of distinguishing between a facial and …

Fraud-on-the-Market Liability in the ESG Era

By Kevin S. Haeberle July 29, 2024 by renholding

Fraud-on-the-market (“FOTM”) suits are thought to generate considerable benefits for society – namely, those associated with increased stock-market price accuracy and liquidity. But these suits are also said to impose exceptionally large social costs relative to even those associated with …

Davis Polk Discusses Cyber Disclosure Case Against SolarWinds and Its CISO

By Robert A. Cohen, Fuad Rana, Michael Kaplan, John B. Meade and Paul J. Nathanson July 29, 2024 by renholding

A court rendered a mixed result in the SEC’s SolarWinds litigation. The court declined to dismiss the SEC’s claims that a website “Security Statement” overstated the strength of SolarWinds’ cybersecurity measures. However, the court dismissed claims based on SolarWinds’ SEC …

How Industry-Wide Regulatory and Reputational Risks Can Shape Executive Incentives

By Francesca Franco, Claudia Imperatore and Mariya Ivanova July 26, 2024 by renholding

Over the past two decades, regulators, lawmakers, and stakeholders have increasingly urged companies to give greater weight to the broader interests of society alongside traditional financial goals. As a result, a notable percentage of firms – 64 percent of the …

Just Friends? Managers’ Connections to Judges

By Sterling Huang, Sugata Roychowdhury, Ewa Sletten and Yanping Xu July 25, 2024 by renholding

The Code of Conduct for United States Judges prohibits judges from allowing personal relationships, including social connections with parties or attorneys involved in a case, to influence the judges’ conduct. However, the disclosure of such social conflicts, as well as …

A New Corporate Governance Regime for Carbon Majors

By Matteo Gatti, Suren Gomtsian and Alessandro Romano July 24, 2024 by renholding

The debate on corporate purpose is often grounded on an assumption that there is one right model of corporate purpose for all companies. Yet some companies have a much more significant impact on stakeholder groups than others. Just 90 corporations, …

Davis Polk Discusses Possible Delay of California Climate Disclosure Laws

By David A. Zilberberg, Loyti Cheng and Michael Comstock July 24, 2024 by renholding

The three “first-in-the-nation” California climate-related disclosure laws enacted late last year are each the subject of proposed amendments making their way through the legislative process. These proposed amendments, which require further legislative approvals and the governor’s signature, would delay key …

Corporate Sustainable Finance

By Paul Rose July 23, 2024 by renholding

Sustainable debt financing—bonds issued to support projects that benefit the environment or social welfare—has skyrocketed over the past decade, rising from a niche market to a trillion-dollar business. Public finance has been an essential catalyst for the market for sustainable …

ISS Discusses the Quiet Relevance of Social Concerns, the S in ESG

By Tom Inchley July 23, 2024 by renholding

It has often been argued that the ‘S’ in ESG has been overshadowed in the ESG acronym, having long played third-fiddle to corporate governance and environmental concerns. There are various reasons for this, one being that the social pillar has …

Contractual Remedies in Mergers: Lessons from Crispo v. Musk

By Dhruv Aggarwal, Albert H. Choi and Geeyoung Min July 22, 2024 by renholding

What remedy should a target be entitled to get from a breaching buyer in a merger transaction? This seemingly straightforward question has surprisingly vexed M&A practitioners and judges over the years.

With a public target, the buyer typically promises to …

Skadden Discusses What Decisions May Look Like After Chevron’s Demise

By Shay Dvoretzky, Parker Rider-Longmaid, Emily J. Kennedy and Sylvia O. Tsakos July 22, 2024 by renholding

In Garland v. Cargill, the U.S. Supreme Court held that the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) exceeded its statutory authority by issuing a rule that classifies bump stocks as “machineguns” under the National Firearms Act of …

Enhanced Scrutiny and the Omnipresent Specter of Political Bias

By Stefan Padfield July 19, 2024 by renholding

Corporate politicization, when companies take sides in our culture war and risk alienating half their potential customers, is a serious concern. Recent examples of companies that have felt its negative impact on shareholder value abound, including  Bud Light, Target, and …

Simpson Thacher Discusses Texas District Court Decision Staying Non-Compete Ban

By Gregory Grogan, Sara Razi, Abram Ellis, Daniel Venditti and Andrew Kofsky July 19, 2024 by renholding

On July 3, 2024, the United States District Court for the Northern District of Texas issued a preliminary injunction order that enjoins the Federal Trade Commission from enforcing the FTC’s so-called “Non-Compete Rule,” which would have banned most non-competes.^[1]…

How Shifting to Semi-Annual Financial Reporting Affects Market Dynamics and Governance

By Keren Bar-Hava July 18, 2024 by renholding

In recent years, regulatory shifts in financial reporting have garnered significant attention, especially concerning their implications for corporate governance and market dynamics. One notable change was the 2017 regulatory adjustment on the Tel-Aviv Stock Exchange (TASE), where small-cap firms were …

Reaching for the “Stars” in CEO Compensation

By Vikram K. Nanda, Swaminathan L. Kalpathy and Yabo Zha July 17, 2024 by renholding

In determining how much to pay their CEOs, U.S. companies typically use “benchmarking,” setting compensation  at or above the median of what peer firms pay their CEOs. This practice is designed to enable firms to retain talented CEOs and to …

Skadden Discusses Jarkesy’s Impact on Other In-House Enforcement Procedures

By Shay Dvoretzky, Parker Rider-Longmaid, Daniel Michael, Emily J. Kennedy and Sylvia O. Tsakos July 17, 2024 by renholding

In Securities and Exchange Commission v. Jarkesy, the U.S. Supreme Court held that “the Seventh Amendment entitles a defendant to a jury trial when the [Securities and Exchange Commission] seeks civil penalties against him for securities fraud.”

In its …

Does Expected Shareholder Litigation Affect Corporate ESG Reporting?

By Lijun (Gillian) Lei, Sydney Qing Shu and Wayne B. Thomas July 16, 2024 by renholding

Many firms now issue ESG reports voluntarily in response to fast-growing investor and stakeholder demand. Yet survey evidence shows that corporate lawyers consider ESG-related disputes a top source of litigation risk for their clients.[1] In a new study, we …

Wachtell Lipton Discusses the Supreme Court’s Business Docket Last Term

By John F. Savarese, Kevin S. Schwartz, Noah B. Yavitz, Adam L. Goodman and Akua F. Abu July 16, 2024 by renholding

On July 1, the U.S. Supreme Court concluded its most consequential Term in years, with a flood of decisions on contentious issues ranging from abortion access to the regulation of social media companies and gun possession to presidential immunity.  The …

There is No Carried Interest Loophole

By Steven Utke July 15, 2024 by renholding

Carried interest is a special, or disproportionate-to-ownership, allocation of profits to the managers of a private equity (PE) or hedge fund partnership. While fund managers typically own about 2 percent of a fund, carried interest may allocate about 20 percent …

Arnold & Porter Discusses Delaware Decision on Whether Soft-Earnout “Promises” Are Fraud or Puffery

By Thomas Yadlon and Tracy A. Belton July 15, 2024 by renholding

When a portion of the purchase price in an acquisition is contingent on the earnings or other performance metric(s) of the acquired business post-closing (i.e., an “earn-out” provision), buyers and sellers routinely discuss their aspirations and expectations regarding the go-forward …

Post-Fischer Decision Obstruction Laws Remain a Threat to Corporate Executives

By Michael W. Peregrine and Ashley C. Hoff July 12, 2024 by renholding

While the U.S. Supreme Court’s June 28 decision in Fischer v. United States rejected a broad application of certain Enron-era obstruction of justice laws, it reaffirmed the original corporate responsibility focus of those laws. In so doing, the decision reminds …

Wachtell Lipton Discusses Expansion of BlackRock’s Voting Choice Program

By Adam O. Emmerich, David A. Katz, Karessa L. Cain, Elina Tetelbaum and Carmen X.W. Lu July 12, 2024 by renholding

In recent years, one of the most significant developments in corporate governance has been the adoption and expansion of voting choice programs by the largest institutional investors.  Such changes have come in response to growing scrutiny and pressure from asset …

Shareholder Voting and Citizen Democracy Interact in Providing Public “Goods”

By Robin Döttling, Doron Levit, Nadya Malenko and Magdalena Rola-Janicka July 11, 2024 by renholding

Concerns that public policy and regulation have been ineffective in addressing climate change and similar challenges have led to a search for possible solutions in financial markets. Investor activism promoting socially responsible corporate practices, the rise in environmental and social …

SEC Enforcement Chief Speaks on Enforcing the Federal Securities Laws in the Age of Crypto

By Gurbir Grewal July 11, 2024 by renholding

I’m thrilled to be back at my law school alma mater. This is a special place – one that not only helped me hone my legal skills, but also one that helped mold me into a “citizen lawyer.”

For me,

…

The Emergence of the Actively Managed ETF

By Kevin S. Haeberle July 10, 2024 by renholding

In a January 2022 law review article, I argued that (1) the actively managed ETF was set to emerge as a significant feature of the investment landscape and (2) this emergence would have important implications for the main parties that …

Skadden Discusses Delaware Decisions on Controller Transactions, Standards of Review, and Disclosure Obligations

By Edward B. Micheletti, Peyton V. Carper and Emily A. Nowlan July 10, 2024 by renholding

The first half of 2024 has been a watershed moment for the development of controller law in the Delaware courts. Among the highlights, the Delaware Supreme Court reexamined and confirmed that transactions involving a conflicted controller will invoke entire fairness …

When SPACs Go Overseas

By Ekaterina E. Emm, Bo Han and Bochen Li July 9, 2024 by renholding

Special purpose acquisition companies (SPACs) are shell companies formed with the sole purpose of raising capital through initial public offerings (IPOs) and using the proceeds to acquire private operating companies. While traditionally regarded as vehicles for backdoor listings of weaker …

Elon Musk’s Threat

By Zohar Goshen July 8, 2024 by renholding

In the wake of a judicial decision invalidating Tesla CEO Elon Musk’s stock-option package, Tesla’s shareholders have voted overwhelmingly to ratify Musk’s pay. Rather than respect investors’ judgment, however, the lawyers who brought the case claimed that the shareholder vote …

Big Business Take Note: Rule by Judiciary Isn’t the Boon You May Think It Is

By Todd H. Baker July 8, 2024 by renholding

The press has largely reported the Supreme Court’s two recent decisions unravelling Chevron deference to administrative agency interpretations of law and extending the time for parties to challenge agency actions as big wins for big businesses — the culmination of …

SEC Commissioner Peirce Offers a Hitchhiker’s Guide to ESG

By Hester M. Peirce July 5, 2024 by renholding

The last time I was in Poland was approximately three decades ago. It was a brief but memorable stop on an unfocused American student’s hop across Europe. Among other things, Poland provided me my only hitchhiking experience. Some kind soldiers …

SEC Chair Gensler on Registration Form for Index-Linked Annuities

By Gary Gensler July 5, 2024 by renholding

Today [July 1], the Commission adopted amendments to provide a tailored form to register the offerings of registered index-linked annuities (“RILAs”) and registered market value adjustment annuities (“registered MVA annuities”). I am pleased to support this adoption because it fulfills …

Corporate Racial Responsibility

By Gina-Gail S. Fletcher and H. Timothy Lovelace, Jr. July 3, 2024 by renholding

What is the role of corporations in the fight against racism? In 2020, following the murders of George Floyd and Breonna Taylor, many corporations publicly embraced racial equity and expressed their support for the Black Lives Matter (BLM) movement and …

John C. Coffee, Jr. – Boeing and the Future of Deferred Prosecution Agreements

By John C. Coffee, Jr. July 2, 2024 by renholding

The Department of Justice (“DOJ”) must make a decision on Boeing – and fast. It has only until July 7 to take action under the Deferred Prosecution Agreement (“DPA”) it signed with Boeing in 2021. Newspaper accounts disagree on what …

Arnold & Porter Discusses Final CFPB Rule Creating Registry to Identify Nonbank Repeat Offenders

By Kevin Toomey, Kara Ramsey, Christopher Allen, Meredith Osborn and Anthony Raglani July 2, 2024 by renholding

As part of its ongoing efforts to reduce what it views as corporate recidivism, the Consumer Financial Protection Bureau (CFPB) issued a final rule on June 3, 2024 that will require certain nonbank financial companies to register with the CFPB …

The Upside for Retail Investors of Ethereum Spot Exchange Traded Funds

By David Krause July 1, 2024 by renholding

Investors and regulators are monitoring the impact of two cryptocurrency spot exchange traded funds (ETFs) approved by the SEC in 2024.[1] The Bitcoin spot ETFs, which began trading in January, have garnered substantial interest from both retail and institutional …

How Tesla Pumped the Vote

By Michael R. Levin July 1, 2024 by renholding

Tesla confronted an enormous challenge in winning support for the two controversial proposals at the 2024 Tesla annual meeting: to ratify CEO Elon Musk’s 2018 pay plan and to redomicile from Delaware to Texas. We thought it would take an …

Corporate Social Responsibility and Decent Work in China

By Mimi Zou and Glory Nwaugbala June 28, 2024 by renholding

Over the past decade, corporate social responsibility (CSR) has been an important agenda item in EU-China political dialogue and technical cooperation on promoting decent work and international labor standards. The EU has defined CSR as a process “whereby companies integrate …

Wachtell Lipton Discusses DOJ Insider Trading Verdict Based on Use of 10b5-1 Plans

By John F. Savarese, Wayne M. Carlin, David B. Anders, Randall W. Jackson and Michael W. Holt June 28, 2024 by renholding

Last week, a jury in Los Angeles returned a verdict in United States v. Peizer, finding that a company executive engaged in insider trading when, after learning of the likely termination of the company’s most important customer relationship, he …

Is DEI Valuable to Investors?

By Hoa Briscoe-Tran June 27, 2024 by renholding

In recent years, corporate diversity, equity, and inclusion (DEI) initiatives have become a hot topic in boardrooms and beyond. While many companies have embraced these efforts, investors have started to question whether DEI initiatives are truly valuable or merely a …

How Board Consultants Can Affect Corporate Governance and the Business Judgment Rule

By Maria Lucia Passador June 26, 2024 by renholding

In recent years, boards of directors have confronted a strategic dilemma: whether to appoint specialized directors or engage external consultants to advise them on various aspects of their business. This decision has significant implications for a board’s accountability, the application …

Sullivan & Cromwell Discusses Preliminary Injunction on Colorado Interest-Rate Cap on Out-of-State Banks

By Leslie B. Arffa, Morgan L. Ratner and Matthew A. Schwartz June 26, 2024 by renholding

On June 19, 2024, the U.S. District Court for the District of Colorado preliminarily enjoined the enforcement of a Colorado law that would have applied Colorado interest-rates caps to loans made by state-chartered banks—including banks located outside of Colorado—to Colorado …

Dual-Class Companies: Equal (and Unequal) Treatment Agreements

By Caley Petrucci June 25, 2024 by renholding

Dual-class companies – companies with two or more classes of common stock that differ in voting rights – are as popular as they are controversial. Among the dual class ranks are technology companies Facebook (Meta) and Google (Alphabet), food and …

SEC Corporation Finance Director Speaks on the State of Disclosure Review

By Erik Gerding June 25, 2024 by renholding

Good afternoon.[1] I appreciate the opportunity to speak with you again today as part of the Corp Fin Workshop. I wanted to make a few remarks about the important work being done in the Division’s Disclosure Review Program and

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The Dark Side of Safe Harbors

By Susan C. Morse June 24, 2024 by renholding

Safe harbors are useful and nifty. Consider the SEC’s accredited investor safe harbor under Rule 506 of Regulation D, which allows private securities offerings to sufficiently wealthy investors. Rule 506 facilitates capital formation and promotes efficient markets. Yet …

Sullivan & Cromwell Discusses SEC Charge of Internal Accounting Controls Failure Based on Cybersecurity Breach

By Peter C. Charnell, Robert W. Downes, Nicole Friedlander and Anthony J. Lewis June 24, 2024 by renholding

On June 18, 2024, the Securities and Exchange Commission (“SEC”) announced charges against R.R. Donnelley & Sons Company (“RRD”) for failure to maintain adequate internal accounting controls in violation of Section 13(b)(2)(B) of the Securities Exchange Act of 1934 (“Exchange …

Why Stablecoins and Central Bank Digital Currencies Need to Co-Exist

By Yuliya Guseva, Sangita Gazi and Douglas Eakeley June 21, 2024 by renholding

Money is a complex construct consisting of public and private elements. It is not all coined or printed by a government; a significant portion originates with private-sector entities like banks, against which other private parties have contractual claims. In a …

SEC Chair Gensler Speaks on Shortening the Settlement Cycle

By Gary Gensler June 21, 2024 by renholding

Last month, the U.S. smoothly shortened the settlement cycle for equities, corporate bonds, and municipal securities to one day after the transaction date (T+1). This step better unifies the U.S. market structure, where Treasuries, options, and mutual funds already largely …

Do Carbon Offsets Lead to Decarbonization or Transition-Washing?

By Sehoon Kim, Tao Li and Yanbin Wu June 20, 2024 by renholding

Voluntary carbon markets (VCMs) enable firms to offset their emissions by purchasing and retiring carbon-offset credits issued by third-party project developers. As nations and corporations increasingly commit to combating climate change, VCMs have emerged as a tool to support global …

Democracy, Discourse, and the Artificially Intelligent Corporation

By Michael R. Siebecker June 19, 2024 by renholding

Does the rise of artificially intelligent corporations threaten the integrity and legitimacy of democracy? This question looms large as the 2024 presidential election approaches. A growing number of academics, business leaders, and politicians warn that unchecked development and dissemination of …

Cleary Gottlieb Discusses How CFPB Has Fared Since Challenge to Its Funding Structure

By Nowell D. Bamberger, Elsbeth Bennett and Andrew Khanarian June 19, 2024 by renholding

The Supreme Court recently upheld the Consumer Financial Protection Bureau’s funding structure in a 7–2 decision that will likely pave the way for renewed regulatory activity by the agency in the near future.

Enacted as part of the Dodd-Frank Act, …

Is Mandatory Clearing of Single-Name Credit Default Swaps a Good Idea?

By Randy Priem June 18, 2024 by renholding

In a new paper, I discuss whether mandatory central clearing of single-name credit default swaps (CDS) should be adopted in the United States and Europe — an issue with important consequences for financial stability in both regions.

CDS are financial …

The Factors that Matter for Growth in Institutional Ownership

By Alon Brav, Dorothy S. Lund and Lin Zhao June 17, 2024 by renholding

The growth and concentration of the investment management industry has captivated the scholarly community. Recent scholarship has focused on the “Big Three” investment managers — Vanguard, BlackRock, and State Street Global Advisors — and charted their rapid accumulation of assets …

Cleary Gottlieb Discusses the Context for Analyzing Force Majeure Clauses in the UK

By Jonathan Kelly, Christopher P. Moore, Polina Lyadnova, James Norris-Jones and James Brady-Banzet June 17, 2024 by renholding

Following a long and somewhat sleepy existence on the margins of contractual interpretation case law, force majeure clauses (“FMCs”)  found themselves subject to a rude awakening with the global onset of COVID in 2020, and consequent interruptions to …

China’s Debt-Fueled Infrastructure Development Faces a Day of Reckoning

By Steven T. Kargman June 14, 2024 by renholding

In recent years, China has undertaken massive infrastructure development at home and abroad.  Under its widely heralded, globe-spanning Belt and Road Initiative (BRI), China’s financial institutions have financed infrastructure projects in numerous countries around the world.  Separately, through its so-called …

SEC Chair Testifies Before Senate Subcommittee on Financial Services

By Gary Gensler June 14, 2024 by renholding

Good morning, Chair Van Hollen, Ranking Member Hagerty, and members of the Subcommittee. Thank you for inviting me to testify today on the Securities and Exchange Commission’s Fiscal Year (FY) 2025 budget request. As is customary, I’d like to note …

Looking Under the Hood of Activist Fraud Campaigns

By Byung Hyun Ahn, Robert M. Bushman and Pano Patatoukas June 13, 2024 by renholding

Corporate fraud poses a significant agency cost for stock ownership. Activist short sellers, who conduct and publicize investigative research, play a crucial role in exposing such fraud, in contrast with most short sellers who quietly await price catalysts without public …

Skadden Discusses the UK ICO Strategy on AI Governance

By David A. Simon, Stuart D. Levi, Nicola Kerr-Shaw, Eve-Christie Vermynck and Jonathan Stephenson  June 13, 2024 by renholding

Rather than specifically regulating artificial intelligence (AI), the UK government has opted to rely on the existing web of laws and regulations applying to technology across a spectrum of sectors in its jurisdiction. But with this pro-innovation, principles-based approach comes …

How Restructuring Employee Compensation at Boeing Could Improve Airline Safety

By Hamid Mehran June 12, 2024 by renholding

Five years ago, 346 people tragically died in two separate crashes of Boeing’s 737 MAX airplanes. Both crashes were due to seriously flawed design features and inadequate training for pilots. More recently, a harrowing incident occurred when a plug door …

SEC Chair Speaks on Markets, Securities Laws, and the SEC

By Gary Gensler June 12, 2024 by renholding

I’d like to welcome you—the nearly 120 members of the “Class of 2024” attending the SEC’s International Institute on Securities Market Growth and Development. As is customary, I’d like to note that my views are my own as Chair of

…

Dissent Is a Fiduciary Duty

By Joseph W. Yockey June 11, 2024 by renholding

Many leading companies encourage their employees to dissent, believing that it can enhance organizational learning. When employees disagree with management, they can identify blind spots, counteract groupthink, and generally overcome gaps in understanding. These qualities help spur the innovation and …

Davis Polk Discusses Appeals Court Decision Vacating SEC’s Private Fund Advisers Rule

By Leor Landa, Gregory S. Rowland, Michael S. Hong, Sijia Cai and Michael W. Brasher June 11, 2024 by renholding

On June 5, 2024, a three-judge panel on the U.S. Court of Appeals for the Fifth Circuit unanimously ruled to vacate the SEC’s new rules and amendments under the Investment Advisers Act of 1940 (the Advisers Act) that targeted private …

Does the Moelis Decision Warrant a Quick Legislative Fix?

By Jill E. Fisch and Anat Alon-Beck June 10, 2024 by renholding

On February 23, 2024, the Delaware Court of Chancery issued its decision in West Palm Beach Firefighters’ Pension Fund v. Moelis & Company, which invalidated a stockholder agreement between Moelis & Company (the “Company”) and its founder and controlling …

Skadden Discusses FTC-DOJ Request for Information on Serial Acquisitions and PE Roll-Ups

By Tara Reinhart, Ken Schwartz, Mike Sheerin, Dave Wales and Julia York June 10, 2024 by renholding

On May 23, 2024, the Federal Trade Commission (FTC) and Antitrust Division of the Department of Justice (DOJ) jointly announced a request for members of the public to provide information that the agencies can use “to identify serial acquisitions and …

Tesla Investors Deserve Musk’s Attention

By Lucian Bebchuk and Robert J. Jackson, Jr. June 7, 2024 by renholding

Yesterday’s news that Tesla’s chief executive, Elon Musk, asked a supplier to redirect scarce chips needed for artificial-intelligence development from Tesla to other Musk-owned companies followed reports that Donald Trump is considering Musk for a role in a new administration. …

Arnold & Porter Discusses EU’s Corporate Sustainability Due Diligence Directive

By Katia Yannaca-Small, Alexander Italianer and Ana S. Pirnia June 7, 2024 by renholding

On May 24, 2024, the Council of the European Union gave its final approval to the Corporate Sustainability Due Diligence Directive (CSDDD or directive) that was proposed by the European Commission in February 2022.[1] This milestone marks the completion …

The Elephant in Tesla’s Boardroom

By Lucian Bebchuk and Robert J. Jackson, Jr. June 6, 2024 by renholding

Next week, Tesla investors will cast an unprecedented vote on what a court called the “largest chief-executive pay package in the history of public markets.” While the vote has been closely watched, little attention has been paid to the elephant …

Sullivan & Cromwell Discusses Agency Proposals for More Restrictive Rules on Incentive Compensation

By H. Rodgin Cohen, Heather L. Coleman, Julia E. Paranyuk and Marc Treviño June 6, 2024 by renholding

On May 6, 2024, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Federal Housing Finance Agency re-proposed their joint rule to implement Section 956 of the Dodd-Frank Act, which requires federal financial regulators …

How Foundation Ownership Affects Creditor Governance

By Bonnie Buchanan and Caglar Kaya June 5, 2024 by renholding

Foundation ownership represents a distinct form of corporate governance that challenges the traditional profit-maximization motive of the shareholder capitalism model. Foundations are independent self-governing bodies that own and control companies and pursue both commercial and social (often philanthropic) goals. As …

Who Re-Classifies a Board of Directors?

By Michael R. Levin June 5, 2024 by renholding

Classified boards of directors (BoD) remain one of the sorest of sore spots about portfolio companies. Investors complain about them endlessly. Proxy advisors loathe them. Shareholder proposals to de-classify tend to succeed.

Sure, many new IPOs and de-SPAC companies start …

Oscar Law: Governance and Other Legal Issues Involving the Industry of Elite Entertainment Awards

By Reid K. Weisbord and Jordan Bondurant June 4, 2024 by renholding

Each year, roughly 35 million television viewers tune in to watch live telecasts of the Oscars, Grammys, Emmys, Tonys, and Golden Globes. That celebratory ritual of broadcast television, which honors the year’s best stage, screen, and recording performances, has grown …

Goodwin Procter Discusses Add-On Acquisitions in Private Equity

By Jim Moriarty, Gregory Cage and Victoria Woodward June 4, 2024 by renholding

Over the past several years, sponsors have increasingly relied on add-on acquisitions to increase the value of their portfolio company investments. As EBITDA and revenue multiples on larger platform acquisitions increased through 2021 and into the early part of 2022, …

Introducing Unilateral Choice-of-Law Clauses

By John Coyle June 3, 2024 by renholding

Over the past decade, so-called “unilateral” or “asymmetric” forum selection clauses have attracted a lot of attention. A unilateral forum selection clause does not name a court in which to resolve disputes at the time of …

SEC Enforcement Chief Discusses Five Principles of Effective Cooperation in Investigations

By Gurbir Grewal June 3, 2024 by renholding

This event, together with its East Coast and now Midwest counterparts, offers regulators like me a unique opportunity to speak directly to leaders of the securities bar about issues of mutual concern. That’s what I’d like to do this afternoon

…

McRitchie v. Zuckerberg: Fiduciary Duties are Firm-Specific

By Andrew A. Schwartz May 31, 2024 by renholding

In a recent case involving Meta (née Facebook), the Delaware Court of Chancery issued an important opinion that speaks to the fundamental nature of corporate governance. Nearly everyone knows that corporate directors owe fiduciary duties to “the corporation and its …

Cleary Gottlieb Discusses Scotus Ruling on Who Decides If a Dispute Is Arbitrable

By Jeffrey Rosenthal, Carmine Boccuzzi Jr., Ari MacKinnon, Mark McDonald and Katie Gonzalez May 31, 2024 by renholding

On May 23, 2024, the United States Supreme Court unanimously held in Coinbase, Inc. v. Suski that where there are two competing contracts – one requiring the arbitration of disputes (including the arbitrator deciding whether a dispute is arbitrable), and …

How Debt Investors Are Influencing Corporate Governance

By Narine Lalafaryan May 30, 2024 by renholding

Since the global financial crisis of 2007-2008, the corporate finance markets have been dramatically transformed. Most notable has been the rise of non-traditional providers of debt finance such as private credit funds, which now aggressively compete with traditional finance providers …

Davis Polk Discusses Crypto Market Structure Bill in U.S. House

By Joseph A. Hall, Billy Hicks, Justin Levine, Gabe Rosenberg and Zachary J. Zweihorn May 30, 2024 by renholding

In an important step forward, the House voted to pass a bill to establish a comprehensive regulatory framework for digital assets and offering important protections for customers. It could be improved by expressly discarding Howey, Reves or similar inherently …

Leveraging Information Forcing in Good Faith

By Hillary Sale May 29, 2024 by renholding

The duty of good faith and oversight, which is a branch of the duty of loyalty, has been the subject of considerable litigation in recent years, with cases revealing significant information asymmetries between directors and management. These cases are subject …

Ropes & Gray Discusses AI and the Copyright Liability Overhang

By David McIntosh, Georgina Jones Suzuki and Yam Schaal May 29, 2024 by renholding

Copyright law, as it relates to Artificial Intelligence (“AI”), is at a crossroads. Rapid innovation in AI has created a great deal of uncertainty regarding whether popular AI platforms infringe copyright. More than a dozen¹ suits are pending across …

Director Independence Reconceived

By Claire A. Hill and Yaron Nili May 28, 2024 by renholding

Independent directors were originally conceived as guardians of shareholder interests who could safeguard a corporate board’s ability to check management’s power. They have since become a marquee feature of modern corporate governance. What, though, makes a director independent? Scholars, regulators, …

Sullivan & Cromwell Discusses SEC Rule Amendments to Regulation S-P

By Alyx L. Brannan, Robert W. Downes, Nicole Friedlander, Marie-Louise M. Huth and Anthony J. Lewis May 28, 2024 by renholding

On May 16, 2024, the Securities and Exchange Commission (“SEC”) significantly expanded its consumer information protection framework by adopting rule amendments (the “Final Amendments”) to Regulation S-P, which governs the protection of consumer financial information held by broker-dealers, investment companies, …

What’s Needed to Make the Justice Department’s New Whistleblower Program Work?

By Stephen M. Kohn May 24, 2024 by renholding

On March 7, 2024, in a speech before the American Bar Association, Deputy Attorney General Lisa Monaco announced a “90-day sprint” to establish a new Justice Department whistleblower program.  In her speech, Monaco pointed to other highly successful whistleblower …

SEC Corporation Finance Chief Addresses Disclosure of Cybersecurity Incidents

By Erik Gerding May 24, 2024 by renholding

The cybersecurity rules that the Commission adopted on July 26, 2023[*] require public companies to disclose material cybersecurity incidents under Item 1.05 of Form 8-K.[1]  If a company chooses to disclose a cybersecurity incident for which it has …

Does Plaintiffs’ Attorney Marketing Predict Corporate Litigation Risk?

By Steven E. Kaplan, Adi Masli, Matt Peterson, and Eric H. Weisbrod May 23, 2024 by renholding

Plaintiffs’ attorneys often issue marketing releases after public companies announce adverse corporate events. These releases typically say the attorneys are “investigating potential claims” against the company and encourage shareholders who have been harmed to contact the law firm. In a …

Skadden Discusses Court’s Broad View of Copyright Preemption in Data Scraping Case

By Stuart D. Levi, M. Oren Epstein and Jordan Feirman May 23, 2024 by renholding

The recent California district court decision dismissing the complaint in X Corp. v. Bright Data Ltd. could have significant implications for companies that rely on their terms of use to prohibit unauthorized “data scraping” — that is, using automated tools …

Can Decentralized Finance Promote Democracy?  

By Peer Zumbansen May 22, 2024 by renholding

In a recent paper, I draw a rough map of the vast field of decentralized finance (DeFi). DeFi serves as an umbrella term for financial platform transactions that operate through automated protocols on blockchain and have prompted hard discussions …

Ropes & Gray Discusses Labor Department’s Final Fiduciary Rule

By Joshua Lichtenstein, Sharon Remmer, Jonathan Reinstein and Alexa Voskerichian May 22, 2024 by renholding

On April 23, 2024, the U.S. Department of Labor (“DOL” or “Department”) released its final fiduciary rule, marking the completion of its third attempt since 2010 to update the definition of what it means to be an investment advice fiduciary …

Undue Limitations in the Section 10(b) Purchaser-Seller Requirement

By Marc I. Steinberg and Antonio Partida May 21, 2024 by renholding

In a forthcoming article, we address recent restrictions and diverging approaches among the federal courts to the purchaser-seller requirement for a private action under Section 10(b) of the Securities Exchange Act and Rule 10b-5. The “Purchaser-Seller Rule,” commonly …

Goodwin Procter Discusses Equity on Ice: A Solution for the Repurchase Conundrum

By Matt M. Mauney May 21, 2024 by renholding

One of the keys of successful private equity investing is properly aligning the economic incentives and interests of the sponsor and its portfolio companies’ management teams as they evolve over time. Unlike a public company, where management may receive higher …

Autonomy Defaults in Contract Law

By Hanoch Dagan and Michael Heller May 20, 2024 by renholding

You can scribble an agreement on a napkin or hire lawyers to negotiate a contract that is hundreds of pages long. Either way, most of your contractual obligations won’t be in your agreement. They will be in the background rules …

Sullivan & Cromwell Discusses New IRS Ruling Policy on Spin-Off Transactions

By M. John Jo, Jameson S. Lloyd, Stephen J. Profeta and Davis J. Wang May 20, 2024 by renholding

On May 1, 2024, the IRS and the Department of the Treasury issued Rev. Proc. 2024-24 (the “New Rev. Proc.”), which establishes revised standards for taxpayers seeking private letter rulings on tax-free spin-offs, focusing in particular on, among other things, …

A Novel Explanation for Concentration Among Derivatives Intermediaries, and Its Implications

By Ilya Beylin May 17, 2024 by ilyabeylin

In derivatives markets, as in other financial markets, customers rely on intermediaries for access to products.  When transacting, a customer faces a choice of whether to return to a prior provider or seek a new one.  My post yesterday documented …

SEC Chair Gensler Speaks on Trends in Asset Management

By Gary Gensler May 17, 2024 by renholding

As is customary, I’d like to note that my views are my own as Chair of the Securities and Exchange Commission, and I am not speaking on behalf of my fellow Commissioners or the staff.

Jack Bogle, the father of

…

Examining High Concentration Among Derivatives Intermediaries

By Ilya Beylin May 16, 2024 by ilyabeylin

Derivatives are financial instruments used to shift risks, such as fluctuations in interest rates or foreign exchange rates or changes in the value of assets such as stocks, bonds, metals, or agricultural or energy products.  At first glance, entering into …

SEC Chief Accountant on Fostering a Healthy “Tone at the Top” at Audit Firms

By Paul Munter May 16, 2024 by renholding

Audit firms are private businesses with the same legitimate interest in making a profit that all private businesses have.[1] But audit firms have also been entrusted to be essential gatekeepers in maintaining the integrity of our capital markets. The …

Do Board Observers Improve Corporate Governance?

By Nizan Geslevich Packin and Anat Alon-Beck May 15, 2024 by renholding

In the complex world of corporate governance, a novel mechanism has reemerged: board observers. Operating without the conventional voting rights of board members, these individuals have become pivotal in bridging the gap between ambitious startups and their venture capital (VC) …

Skadden Discusses CFIUS Proposal to Expand Its Authority, Tighten Time Frames, and Boost Penalties

By Brooks E. Allen, Brian J. Egan, Michael E. Leiter, Tatiana O. Sullivan and Sruthi Venkatachalam May 15, 2024 by renholding

On April 15, 2024, the secretary of the Department of the Treasury, as chair of the Committee on Foreign Investment in the United States (CFIUS or Committee), published a notice of proposed rulemaking (Proposed Rule) to expand CFIUS’ investigation and …

How Bank Regulation and Supervision Can Weaken Financial Stability

By Hamid Mehran and Chester Spatt May 14, 2024 by renholding

We argue that bank regulation and supervision interfere with pricing risk by creating opacity. Given that market disclosures enhance the efforts of supervisors, and vice versa, more disclosure could enhance financial stability (see Spatt, 2010)[1]. In addition, we …

Morrison & Foerster Discusses the Foreign Corruption Risks of Electric Vehicle Production

By James M. Koukios, Charles E. Duross, Patrick Byxbee and Victor Lopez May 14, 2024 by renholding

The Biden-Harris administration has been keenly focused on mitigating climate risk, which has resulted in several executive and legislative actions promoting the use of electric vehicles (EVs), with a stated goal of having 50% of all new vehicles …

Should Companies Announce Reviews of Strategic Alternatives?

By Jenny Zha Giedt May 13, 2024 by renholding

A company’s announcement that it is undertaking a “review of strategic alternatives” is Wall Street code for exploring a potential sale or merger. Though no transaction may occur, the announcement signals that the company is due for a shake up, …

Sullivan & Cromwell Discusses State Requirements of “Fair Access” to Financial Services

By C. Michelle Chen, H. Rodgin Cohen, Matthew A. Schwartz, Marc Treviño and Leanne M. Van Allen May 13, 2024 by renholding

An increasing number of states have enacted or are considering enacting legislation requiring financial institutions to provide customers “fair access” to financial services. These fair access requirements, first appearing in Florida’s House Bill 3 (2023) (“FL HB 3”), generally prohibit …

Goodwin Procter Discusses Significant California and New York Regulation of the Virtual-Currency Industry

By Ximeng (Sammy) Tang, Kimberly Monty Holzel and Julia L. Dempewolf May 10, 2024 by renholding

California Digital Financial Assets Law

California enacted its own version of New York’s “BitLicense” law, the Digital Financial Assets Law (DFAL),[1] becoming one of the first US states to implement a virtual-currency-specific regulatory regime. Prior to the enactment of …

Faculty Governance Requires Faculty Accountability: A Response to David Pozen

By Joshua Mitts May 9, 2024 by renholding

In a recent Balkinization post, my colleague and friend Professor David Pozen critiques the power held by the office of Columbia University President Minouche Shafik and argues for a more “democratic model of internal governance.”  Alongside his …

Davis Polk Discusses New National Security Package

By Paul D. Marquardt, Will Schisa, Kendall Howell, Patrick Q. Sullivan and Charles Marshall Wilson May 9, 2024 by renholding

On April 24, 2024, President Biden signed into law the 21st Century Peace through Strength Act (the Act) as part of a broader foreign aid package providing funding to Taiwan, Ukraine, and Israel. The Act combines a series of unrelated …

Why Do Companies Keep Their Loan-Covenant Details Secret?

By Edward Xuejun Li, Monica Neamtiu and Zhiyuan Tu May 8, 2024 by renholding

It’s surprisingly tough to find detailed information about the loan agreements of many public companies. In fact, nearly 20 percent of those agreements are not publicly available, despite disclosure mandates. In a recent study, we shed light on this phenomenon, …

Stakeholder Governance and the Eclipse of Shareholder Primacy

By Martin Lipton and Kevin S. Schwartz May 8, 2024 by renholding

For decades, advocates of “shareholder primacy” as the North Star of corporate governance have steered our leading corporations and our Nation’s economic engine perilously off-course.  Since the 1970s, when the work of Milton Friedman, Michael Jensen, and Frank …

Insights on the Incidence, Disclosure, and Risk of Corporate Litigation

By Mary Brooke Billings, Robert W. Holthausen, Christine Petrovits and Danye Wang May 7, 2024 by renholding