In Roth v. The Goldman Sachs Group, Inc., No. 12-2509-cv, 2014 WL 305094 (2d Cir. Jan. 29, 2014), the United States Court of Appeals for the Second Circuit held that the short-swing profits rule imposed by Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p(b), requiring corporate insiders (including ten-percent stockholders) to disgorge profits earned from certain purchases and sales of their company’s securities that take place within a six month period, does not apply where the purchaser was an insider when it wrote call options, but was no longer an insider by the time that the same options expired less than six months later.  This decision, which adopts the views expressed by the Securities and Exchange Commission (“SEC”) in an amicus curiae brief, also clarifies that the expiration of a call option within six months is considered a “purchase” within the meaning of Section 16(b), and that “purchase” is paired with the “sale” which is deemed to occur at the time when the option was originally written.
Continue Reading Second Circuit Affirms Dismissal of Short-Swing Profit Claim Against Goldman Sachs Arising from Six-Month Call Options