SEC Considering New Regulations Governing Capital Formation for Smaller Companies, Crowdfunding, Social and Other New Media
On April 6, 2011, Mary L. Schapiro, Chairman of the Securities and Exchange Commission ("SEC") sent a letter to Darrell E. Issa, Chairman of the Committee on Oversight and Government Reform, responding to a March 22, 2011 letter from Rep. Issa concerning capital formation issues. In her letter, Chairman Schapiro indicated that the SEC would consider revising the rules that govern the way in which small businesses are able to tap into equity markets in the new era of crowdfunding, social media and other new communications media that did not exist when the current SEC rules were established. Rep. Issa's letter discussed a number of perceived problems encountered in recent securities offerings, including the January 2011 decision by Goldman Sachs and Facebook to offer shares in a $1.5 billion private offering only outside the U.S. In her letter, Chairman Schapiro indicated that the review is intended to give the SEC "a fresh look at our rules to develop ideas for the Commission about ways to reduce the regulatory burdens on small business capital formation in a manner consistent with investor protection."
Continue Reading Questions & commentsSixth Circuit Reverses Dismissal of a Shareholder Derivative Action Based Upon the Lack of Independence of the Special Litigation Committee
In Booth Family Trust v. Jefferies, No. 09-3443, 2011 WL 1237583 (6th Cir. Apr. 5, 2011), the United States Court of Appeals for the Sixth Circuit reversed the district court dismissal of a shareholder derivative action, holding that the special litigation committee (“SLC”) of the board of directors, which recommended the dismissal, was not sufficiently independent of management. The Court reached its decision despite the fact that one of the two members of the SLC recused himself from considering claims against the defendant Robert S. Singer (“Singer”), CEO of Abercrombie & Fitch Co. (“Abercrombie”), with whom the SLC member had a personal relationship. In fact, the Court held that the SLC member’s recusal constituted an admission that he, and thus the SLC as a whole, lacked independence. This decision, which applies Delaware law, reinforces the high standard of independence imposed on members of SLCs.
