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SEC Investor Advocate Discusses Mandatory Arbitration as Illusory Remedy for Shareholders

By Rick A. Fleming February 27, 2018 by renholding

Today [February 24, 2018] is a special day for the [Securities and Exchange Commission’s] Office of the Investor Advocate.[1] I started this job four years ago today, and because I am the first Investor Advocate that is also the …

The Cost of Disclosure Regulation: Evidence from D&O Insurance and Non-Meritorious Securities Litigation

By Dain C. Donelson, Justin J. Hopkins and Christopher G. Yust February 22, 2018 by renholding

There is an extensive literature on the benefits of mandatory disclosure by firms, but measuring the costs of such disclosure has been more challenging (Leuz and Wysocki 2016). In particular, while some believe that mandatory disclosure could increase litigation against …

SEC Releases Guidance on Disclosing Cybersecurity Risks and Incidents

By Jay Clayton February 22, 2018 by renholding

On February 20, the Securities and Exchange Commission approved the issuance of an interpretive release, available here, to provide guidance to public companies when preparing disclosures about cybersecurity risks and incidents. The release also communicates the Commission’s views on the

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Cleary Discusses 2017 Developments in Securities and M&A Litigation

By Jared Gerber, Abena Mainoo, Amanda Ravich, Vanessa C. Richardson and Gregory N. Wolfe February 20, 2018 by charlesbluesky

The trend of increased securities class action filings in federal courts continued from 2016 to 2017.^[1] Federal court filings of class actions related to M&A transactions again contributed to the increase.^[2] Foreign issuers remained frequent targets of federal …

Perpetual Dual-Class Stock: The Case Against Corporate Royalty

By Robert J. Jackson, Jr. February 16, 2018 by renholding

My first few weeks at the Securities and Exchange Commission have been a whirlwind—and just to be clear, I am not talking about the markets.[1] In a few short weeks, I have gotten a crash course on SEC policymaking—and

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Clifford Chance Discusses the Role of the CFTC in the Regulation of Bitcoin

By David Felsenthal, Daniel Silver, Jesse Overall and Brian Yin February 16, 2018 by charlesbluesky

The remarkable growth and volatility of Bitcoin and other virtual currencies has raised the question of how these markets are regulated. The CFTC has emerged as “the federal overseer of digital currencies like bitcoin,” according to Bloomberg.[1] Other federal …

Debevoise on Blockchain Tokens and Initial Coin Offerings: New Year, New Perspective

By Byungkwon Lim, Morgan J. Hayes and Gary E. Murphy February 15, 2018 by Carly Goeman

Sales of blockchain tokens in so-called initial coin offerings (“ICOs”)[1] exploded in 2017. According to CoinSchedule, a website that tracks ICO (or digital token sale) data, the total amount raised in ICOs in 2017 was $3,700,682,293, which compares to …

How Shareholder Litigation Affects Firm Disclosure

By Audra Boone, Eliezer Fich and Thomas Griffin February 14, 2018 by renholding

Litigation allows shareholders to seek remedies for fiduciary breaches by managers or directors, such as when there has been a misrepresentation of financial results or illegal insider trading. Twitter, for example, faces a derivative lawsuit alleging that executives provided misleading …

Cleary Discusses SEC’s Freeze of Allegedly Fraudulent “Decentralized Bank” ICO

By Rahul Mukhi and James Michael Blakemore February 14, 2018 by renholding

On January 30, 2018, the U.S. Securities and Exchange Commission (SEC) announced[1] that it had obtained an order from a U.S. District Court in Dallas, Texas, halting an allegedly fraudulent initial coin offering scheme. The SEC’s complaint alleges that …

Financial Supervisors and RegTech: Four Roles and Four Challenges

By Luca Enriques February 12, 2018 by renholding

Financial institutions and their regulators have long been early adopters of new information technologies (IT). In a short essay based on two posts for the Oxford Business Law Blog (available here and here), I first identify four uses of …

Does Conservative Reporting Deter Securities Class Action Lawsuits?

By Michael Ettredge, Ying (Julie) Huang and Weining Zhang February 8, 2018 by renholding

The number of accounting-related class action lawsuits has increased in recent decades, imposing billions of dollars of direct and indirect costs on public companies and, eventually, their shareholders each year. Although accounting theory says that litigation risk generates accounting conservatism …

SEC Chair Clayton Testifies About Virtual Currencies

By Jay Clayton February 8, 2018 by renholding

Chairman Crapo, Ranking Member Brown and distinguished senators of the Committee, thank you for the opportunity to testify before you today.[1] I am pleased that the Committee is holding this hearing to bring greater focus to the important issues …

Optimal Disclosure and Litigation Rules around IPOs and SEOs

By Onur Bayar, Thomas Chemmanur and Paolo Fulghieri February 6, 2018 by renholding

In recent years, there have been a number of reforms to the legal and regulatory framework governing disclosures and litigation around initial public offerings (IPOs) and seasoned equity offerings (SEOs). The most prominent of these are the JOBS Act of …

How Chinese Investments Can Pass CFIUS Scrutiny

By Laura Fraedrich and Chase D. Kaniecki February 6, 2018 by charlesbluesky

It is no secret that Chinese investments in the United States can face an uphill battle at the Committee on Foreign Investment in the United States (“CFIUS”). CFIUS is an interagency committee of the U.S. government that has broad jurisdiction …

Materiality Disclosures and Their Effect on Investors’ Decisions

By Brant E. Christensen, Aasmund Eilifsen, Steven M. Glover and William F. Messier, Jr February 5, 2018 by renholding

Auditors consider misstatements or omissions in financial statements to be material if they could influence the economic decisions of financial statement users. Additionally, materiality affects how auditors plan and perform an audit and evaluate identified misstatements. Regulators in the UK …

Wachtell Discusses What to Expect in White Collar and Regulatory Enforcement for 2018

By John F. Savarese, Ralph M. Levene, Wayne M. Carlin, David B. Anders, Jonathan M. Moses and Marshall L. Miller January 31, 2018 by renholding

In our memo last year, we acknowledged that it was close to impossible to predict the likely impact that the newly elected Trump administration would have on white-collar and regulatory enforcement. (White Collar and Regulatory Enforcement: What to Expect …

Clifford Chance on France’s Pioneering Blockchain Legal Framework for Unlisted Securities

By Frédérick Lacroix, Sébastien Praicheux and Pierre d'Ormesson January 29, 2018 by Carly Goeman

While blockchain, legally referred to as distributed ledger technology (DLT), or dispositif d’enregistrement électronique partagé (DEEP) in French, was first developed for the creation of virtual currencies such as bitcoin, it is also a technology that allows for …

Gibson Dunn Offers Securities Enforcement Update for 2017

By Marc J. Fagel January 26, 2018 by renholding

2017 was the prototypical transition year for the SEC. In contrast to many other federal agencies under the current administration, the new SEC leadership did not promise a wholesale rethinking of the agency’s mandate. Rather, they seemed to signal minor …

Preserving Capital Markets Efficiency in the High-Frequency Trading Era

By Gaia Balp and Giovanni Strampelli January 25, 2018 by renholding

Automation and new technology have dramatically changed trading on equity markets over the past 20 years, and algorithmic and High-Frequency Trading (HFT) have become prominent in U.S. and European financial markets, while regulation has been slow to adapt. Despite increasing …

SEC Chair Talks Blockchain Scrutiny, Dodd-Frank Rulemaking, and Expectations for Gatekeepers

By Jay Clayton January 23, 2018 by renholding

Thank you for that warm welcome.[1] I am delighted to join you today by videoconference. I know Meredith [Cross] has prepared questions. I look forward to answering those, as well as questions from this distinguished audience. When I was

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