In April, we continued to see a steady pace in the seriousness and frequency of crypto enforcement actions by state and federal law enforcement. (See our March 2022 Crypto Enforcement Actions Roundup blog here where we discuss the regulatory guidance and jurisdiction of federal and state agencies to enforce these matters.)
Continue Reading April 2022 Crypto Enforcement Actions And Regulatory Guidance Roundup
In Crest v. Padilla, No. 20STCV37513 (Cal. Super. Apr. 1, 2022), the Superior Court of California for the County of Los Angeles (Green, J.) declared that Section 301.4 of the California Corporations Code is unconstitutional under the California state Constitution. Section 301.4 requires publicly held corporations which have their principal executive offices located in California to include “underrepresented communities” on their boards of directors. The trial court granted the taxpayer plaintiffs’ motion for summary judgment, concluding that the statute violated equal protection clause of the California Constitution. The court’s decision renders the constitutionality of Section 301.4 ripe for appellate review by the California Court of Appeal.
Continue Reading Los Angeles Superior Court Invalidates California Board Diversity Statute, Rendering It Ripe for Review by the California Court of Appeal
In the wake of President Biden’s March 9, 2022, executive order outlining his Administration’s desire to establish a comprehensive federal approach to crypto policy and regulation,[1] federal agencies are continuing to focus on enforcement of crypto under existing regulations. Although NFTs and cryptocurrencies are novel technologies, they still fall squarely within the jurisdiction of various federal agencies’ current jurisdictions, as illustrated by three recent enforcement actions by the CFTC, the SEC, and the DOJ.[2]
Continue Reading March 2022 Crypto Enforcement Actions Roundup
In Tola v. Bryant, No. 16150, 2022 Cal. App. LEXIS 241 (Cal. App. Mar. 24, 2022), the First Appellate District of the California Court of Appeal applied Delaware’s new formulation of the test for determining whether a stockholder has standing to assert derivative claims on behalf of a company. Under the test articulated by the Delaware Supreme Court in United Food & Commercial Workers Union v. Zuckerberg, 262 A.3d 1034, 1058 (Del. 2021), a stockholder of a Delaware corporation has standing to assert derivative claims when the stockholder can plead particularized facts, on a director-by-director basis, demonstrating that at least half of the board in place at the time the complaint is filed:
Continue Reading California Court of Appeal Addresses Derivative Standing and Failure of Oversight Claims Under Delaware Law
On March 30, 2022 the U.S. Securities and Exchange Commission (“SEC”) announced its 2022 examination priorities. Among the “significant focus areas” is Environmental, Social, and Governance (“ESG”) investing. SEC examiners will be scrutinizing disclosures by registered investment advisors (“RIA”) that advertise ESG strategies or claim to incorporate certain ESG criteria, to ensure disclosures regarding portfolio management practices do not involve materially false and misleading statements or omissions.
Continue Reading SEC Announces 2022 Examination Priorities, Includes ESG
The U.S. Securities and Exchange Commission (“SEC”) has announced its examination priorities for the fiscal year 2022. Among them is crypto-assets. Specifically, the SEC is targeting robo-advisers, fractionalization, and other crypto-custody arrangement practices.
Continue Reading SEC Announces 2022 Examination Priorities, Includes Crypto-Assets
On March 21, 2022, the U.S. Securities and Exchange Commission (the “SEC”) published the proposed rule entitled the “Enhancement and Standardization of Climate-Related Disclosures” that would require registered public companies to disclose certain climate-related information in registration statements and periodic reports.[1] The proposed rule and amendments, “would provide investors with consistent, comparable, and decision-useful information for making their investment decisions, and it would provide consistent and clear reporting obligations for issuers,” said SEC Chair Gary Gensler.[2]
Continue Reading SEC Proposes Rules Requiring Climate-Related Disclosures from Registered Public Companies
On February 10, 2022, the U.S. Securities and Exchange Commission (the “SEC”) proposed amendments to accelerate the filing deadlines for Schedule 13D and Schedule 13G beneficial ownership reports, expand beneficial ownership reporting obligations to include the acquisition of certain derivative securities and clarify the standards for formation of a group that would be subject to beneficial ownership reporting obligations. The proposed amendments are intended to provide more timely information to meet the needs of the current financial markets. SEC Chair Gary Gensler stated, “These amendments would update our reporting requirements for modern markets, reduce information asymmetries, and address the timeliness of Schedule 13D and 13G filings. Investors currently can withhold market moving information from other shareholders for 10 days after crossing the 5 percent threshold before filing a Schedule 13D, which creates an information asymmetry between these investors and other shareholders. The filing of Schedule 13D can have a material impact on a company’s share price, so it is important that shareholders get that information sooner.”
Continue Reading SEC Proposes Amendments to Schedule 13 Beneficial Ownership Reporting Requirements
The U.S. Securities and Exchange Commission (SEC) recently issued proposed amendments to the Securities Exchange Act [1] (the “Exchange Act”) that would significantly broaden the definition of “exchange” for purposes of regulation under the Exchange Act (“Proposed Rule”).[2] Designed to address a “regulatory gap,”[3] the Proposed Rule would cover “platforms for all kinds of asset classes that bring together buyers and sellers.”[4] Under the Proposed Rule, communication protocol systems—trading systems that offer the use of non-firm trading interest and provide protocols to bring together buyers and sellers of securities—would have to register with the SEC as an exchange unless otherwise exempt.[5] As we previously reported, this amendment, if passed, likely would have a significant impact on the decentralized finance (“defi”) industry.
Continue Reading SEC Proposed Amendments Could Significantly Impact DeFi Companies
Although the number of corporate mergers surged during President Biden’s first year in office, all signs point to a tougher regulatory environment for deals going forward.
In 2021, $5.8 trillion changed hands as a result of corporate mergers across the globe.[1] This 64 percent increase over 2020 far surpassed the previous annual record,[2] and now the Biden Administration appears to be taking steps toward fulfilling the President’s goal of ramping up antitrust enforcement.[3] One such measure includes taking a more critical approach when evaluating proposed mergers, and federal agencies have already filed several high-profile investigations.[4]
Continue Reading Looking Ahead to Tougher Merger Guidelines and Enforcement
On January 24, 2022, the Federal Trade Commission announced revised, higher thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The filing thresholds are revised annually, based on the change in Gross National Product (GNP) and after last year’s atypical decrease they have again increased.