securities fraud
Gauging Share-Price Response to News in Securities Litigation
Courts handling shareholder class actions and other types of securities litigation have expressed different views about how often stocks should respond to material news. Despite the importance of this issue in determining whether shares trade in an efficient market, these …
Latham & Watkins discusses the Iran Nuclear Agreement: Top 10 Observations
Six months have passed since the implementation of the nuclear agreement with Iran, officially known as the Joint Comprehensive Plan of Action (the Nuclear Agreement), and the related easing of certain trade and economic sanctions on Iran. As discussed …
Shearman & Sterling’s 2016 Mid-Year Review of Securities Enforcement
Executive Summary[1]
The Securities and Exchange Commission (SEC or Commission) brought over 400 enforcement actions in the first half of fiscal year (FY) 2016, and is on pace to surpass its record of 807 enforcement actions in a single …
Davis Polk discusses the SEC’s Proposed Disclosure Reforms
On July 13, the Securities and Exchange Commission issued a proposal aimed at eliminating or updating duplicative, overlapping and obsolete disclosure requirements. The proposal is welcome, but largely technical in nature and generally focused on duplicative requirements. As a result, …
Cahill discusses SEC’s Amendments to Rules of Practice for Administrative Proceedings
On July 13, 2016, the Securities and Exchange Commission (“SEC”) adopted important amendments updating its rules of practice governing its administrative proceedings.[1] These changes concern, among other things, the timing of hearings in administrative proceedings, depositions, summary disposition, the …
Solving The Paradox of Insider Trading Compliance for Issuers
Regulators demand the impossible when they require issuers to design and implement an effective compliance program to guard against insider trading, a crime that neither Congress nor the SEC has defined with any specificity. This problem is then compounded by …
A Proposal to End Executive Manipulations of Incentive Compensation
Options backdating? Who would be so arrogant to be still backdating their options? It has been exactly ten years since the Wall Street Journal’s exposé on “lucky CEOs.”[1] The intriguing question though is whether the executives could resist temptation …
The Legality of Opportunistically Timing Public Company Disclosures in the Context of SEC Rule 10b5-1
Ever since the SEC adopted Rule 10b5-1in 2000 the rule has been the subject of controversy. Some have questioned its validity, others have claimed that it has been abused. The commentary that follows addresses one suspected abuse of Rule 10b5-1, …
Securities Class Actions Compared to Derivative Lawsuits: Evidence from the Stock Option Backdating Litigation on Their Relative Disciplining of Fraudster Executives
In this study, Securities Class Actions Compared to Derivative Lawsuits: Evidence from the Stock Option Backdating Litigation on their Relative Disciplining of Fraudster Executives, 35% of the 151 stock option backdating litigation observations included private securities class actions (in …
Is the Event Study Methodology Reliable In Securities Litigation?
In Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398 (2014), known as Halliburton II, the U.S. Supreme Court held that defendants may defeat the fraud-on-the-market presumption of reliance at the class-certification stage with evidence …
Proskauer discusses Supreme Court’s Omnicare Decision, Clarifying Liability for Statements of Opinion in Registration Statements
The U.S. Supreme Court ruled today that a statement of opinion in a registration statement cannot be actionable as a misstatement of fact under § 11 of the Securities Act of 1933 if the issuer actually believed the opinion expressed. …
Evidence on Contagion in Management of Earnings
In this paper, we study peer firm behavior to ascertain (i) whether exposure to financial misrepresentation fuels similar behavior or deters it among peer firms; and (ii) what factors increase or decrease the likelihood of contagion? The prior years have …
Why Don’t The Lawyers Learn What Investors Are Taught?
In December 2013, the SEC at the direction of Congress under the JOBS Act dutifully provided an initial SEC staff report addressing securities disclosure requirements for public companies to question whether the SEC’s detailed disclosure mandates for public company disclosure …
Paul Hastings discusses Second Circuit Decision That Failure to Make Required Item 303 Disclosure Can Provide Basis for Securities Fraud Claim
Recently, the United States Court of Appeals for the Second Circuit in Stratte-McClure v. Morgan Stanley, No. 13-0627-CV, 2015 WL 136312 (2d Cir. Jan. 12, 2015) affirmed dismissal of a securities fraud class action lawsuit. The Court also ruled, …
Marketplace of Ideas: United States v. Newman
Yesterday and today, we are running a number of posts related to the recent United States v. Newman decision in which the Second Circuit overturned the convictions for insider trading and conspiracy to commit insider trading of Todd Newman and …
Newman Reins in Criminal Prosecution of Remote Tippees for Insider Trading
In its recent decision in United States v. Newman,[1] the United States Court of Appeals for the Second Circuit provided important guidance on the scope of insider trading liability. The case concerned the liability of two hedge fund …
The Newman-Chiasson Insider Trading Case Reinforces the Need for Change
The recent reversal of convictions of hedge fund managers Todd Newman and Anthony Chiasson highlights the weakness of using a common law approach when interpreting Rule 10b-5 to reach remote tippees accused of insider trading. The decision reinforces the need …
Newman and Selective Disclosure
If someone had asked me back in the mid-1980s whether an insider trading case required proof that the tippee was aware that the tipper was acting for personal gain, I would have said yes without much hesitation, because that’s what …
Why Newman Leaves Me With a Queasy Feeling, or Deregulating the Demand for Insider Information
Among several independent holdings stated by the court on its way to reversing the convictions of Todd Newman and Anthony Chiasson, the Newman court declared that: “in order to sustain a conviction for insider trading [against a remote tippee], the …