Category Archives: Investigations and Enforcement

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SEC Enforcement Action Under Regulation FD For Implicit Communications To Selected Analysts

On October 21, 2010, the Securities and Exchange Commission announced enforcement actions against Office Depot, Inc. and two executive officers for violating Regulation FD by selectively conveying to analysts and institutional investors that Office Depot would not meet analysts’ earnings estimates.… Continue Reading

New York State Amends Power of Attorney Law

On August 13, 2010, New York State Governor David Paterson signed into law amendments to New York’s Power of Attorney Law (A.8392-C/S.7288-A) (the "2010 Amendments"). The 2010 Amendments become effective September 12, 2010 and will be retroactive to September 1, 2009, the effective date of the prior amendments to the New York State Power of Attorney … Continue Reading

One’s Crisis is Another’s Opportunity: Section 363 Sales

With the increasing numbers of companies which were once thought to be giants of industry filing for bankruptcy, more opportunities to purchase major assets are becoming available to savvy buyers looking to expand their business or asset base. The Bankruptcy Code provides debtors with the ability to liquidate all or a part of their assets through … Continue Reading

SEC Revamps Its Division Of Enforcement With Specialized Units And Cooperation Agreements With Insiders

The United States Securities and Exchange Commission (“SEC” or the “Commission”) recently made changes that could affect the speed and efficiency with which investigations are handled and enforcement actions are brought. Stung with allegations of investigative failures in the wake of revelations regarding the Bernard Madoff Ponzi scheme, the SEC is centralizing its intake of tips, … Continue Reading

Lower Filing Thresholds for HSR Act Premerger Notifications and Interlocking Directorates Announced

1. Lower Thresholds For HSR Filings On January 19, 2010, the Federal Trade Commission announced revised, lower 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. For the first time, the thresholds have been reduced. They will be … Continue Reading

Ninth Circuit Declines Application Of Loss Causation Principles In Dura Pharmaceuticals In Connection With Criminal Securities Fraud

In United States v. Berger, No. 08-50171, 2009 WL 4141478 (9th Cir. Nov. 30, 2009), a three-judge panel of the United States Court of Appeals for the Ninth Circuit declined to apply loss causation principles in civil securities fraud litigation established by the United States Supreme Court in Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. … Continue Reading

First SEC enforcement action under Regulation G for Misleading Non-GAAP Financial Measures

On November 12, 2009, the SEC announced that it had settled charges against SafeNet, Inc. and some of its former officers, employees and accountants, in connection with earnings management and options backdating schemes. This case represents the SEC’s first enforcement action brought under Regulation G, and it provides important reminders to issuers on financial reporting … Continue Reading

Smaller Reporting Companies Given Additional Time to Comply with Auditor Attestation Report on Internal Control over Financial Reporting

On October 2, 2009, the U.S. Securities and Exchange Commission, or the SEC, delayed the requirement for small reporting companies[1] to include in their annual reports an auditor attestation report on internal control over financial reporting.[2] Prior to this announcement, a smaller reporting company was required to include the auditor’s attestation report in its annual … Continue Reading


In Abu Dhabi Commercial Bank v. Morgan Stanley & Co., Inc., 2009 WL 2828018 (S.D.N.Y. Sept. 2, 2009), the United States District Court Southern District of New York (Scheindlin, J.) held recently that First Amendment free speech immunity does not protect credit rating agencies from claims by investors “where a rating agency has disseminated their … Continue Reading


In Dreiling v. America Online, Inc., 2009 WL 2516325 (9th Cir. May 5, 2009), the United States Court of Appeals for the Ninth Circuit held that Section 16(b) of the Securities Exchange Act of 1934 — which, broadly speaking is intended to “prevent corporate insiders from exploiting their access to information not generally available to … Continue Reading

New Cases Give LLC Owners More Avenues to Avoid the Passive Activity Loss Limitations

Two recent cases have given members of an LLC greater ability to avoid the passive activity loss limitations. Under Garnett, decided by the Tax Court in June, and now Thompson, decided July 20 by the Court of Federal Claims, a member of an LLC cannot be automatically treated as a "limited partner" under the passive … Continue Reading

SEC approves NYSE Rule change regarding Broker Non-Votes

The Securities and Exchange Commission (SEC) recently approved a New York Stock Exchange (NYSE) proposed amendment to NYSE Rule 452 to prohibit broker’s from exercising "discretionary voting" in all director elections. The amendment will apply to shareholder meetings held on or after January 1, 2010. Importantly, the NYSE Rules apply to NYSE member brokers in all of their … Continue Reading

DOJ Says OK to Buy First, Investigate Later

On June 13, 2008, the Department of Justice ("DOJ") issued Opinion Procedure Release 08-02 which allowed Halliburton Company ("Halliburton") to acquire Expro International Group, PLC ("Expro"), a foreign (U.K.) corporation with potential Foreign Corrupt Practices Act ("FCPA") violations, without exposing Halliburton to immediate FCPA liability.  Specifically, the DOJ agreed that it would forgo action against … Continue Reading

A Single “At Will” Clause Does Not An Employee Make

On September 15, 2008, a California Court of Appeal decided the case of Varisco v. Gateway Science and Engineering, Inc., holding that – where all other indicators point to a valid independent contractor relationship – a single clause in a contract allowing either party to terminate the relationship "at will" does not transform it into … Continue Reading

California Amends Corporations Law To Accommodate The SEC’S E-Proxy Rules By Allowing Electronic Delivery Of Annual Reports Without Prior Shareholder Consent

California has amended its corporations law to accommodate the SEC’s e-proxy rules.  The amendment permits corporations to comply with the annual report delivery requirements under California law by complying with the federal rules permitting the electronic delivery of annual reports and proxy statements without prior shareholder consent.  The amendment eliminates a conflict between California and … Continue Reading

Retailers Face Surge of Lawsuits Over Asking For Zip Codes During Credit Card Transactions and Requesting Personal Information During Merchandise Returns

California’s Song-Beverly Credit Card Act prohibits the requesting and recording of personal information in connection with credit card transactions. The statute provides for civil penalties "not to exceed two hundred fifty dollars ($250) for the first violation and one thousand dollars ($1,000) for each subsequent violation . . ." Recently, two new trends in Song-Beverly … Continue Reading

Ninth Circuit Allows Reinstatement Of Criminal Fraud Charges Against Defendants Who Voluntarily Cooperated With SEC Investigators

In United States v. Stringer, 2008 WL 901563 (9th Cir. Apr. 4, 2008), the United States Court of Appeals for the Ninth Circuit vacated a final order of the United States District Court for the District of Oregon that had dismissed criminal indictments against three individual defendants.  Those defendants had argued successfully before the district … Continue Reading

Supreme Court Severely Limits Secondary Actors’ Exposure To Securities Fraud Lawsuits

In Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 2008 WL 123801 (U.S. Jan. 15, 2008) (Kennedy, J.), the Supreme Court rejected an attempt by a class action plaintiff to assert securities fraud claims against suppliers and customers of an issuer in whose stock the plaintiff invested.  Those suppliers and customers, it was alleged, knowingly agreed … Continue Reading

“Literally True” Statement In A Prospectus Can Still Support A Federal Securities Claim If, In Context, The Statement Is Materially Misleading

In Miller v. Thane Int’l, Inc., 2007 WL 4147327 (9th Cir. Nov. 26, 2007), the Ninth Circuit held that even “literally true” statements in a prospectus may be actionable under Section 12(a) of the Securities Act of 1933 and, for the first time in the Ninth Circuit, held that a representation by a company that … Continue Reading

Presentation Of Special Committee Report To Full Board Waives Attorney-Client Privilege

In Ryan v. Gifford, C.A. No. 2213, 2007 WL 4259557 (Del. Ch. Nov. 30, 2007), the Delaware Chancery Court ruled that the presentation of a Special Committee report to the full Board of Directors of Maxim Integrated Products, Inc., including individual director defendants and their counsel, waived the attorney-client privilege as to all communications between … Continue Reading

Personal Jurisdiction Over Nonresident Officer Proper Under Delaware Law Only If There Was Active Conduct Performed In Officer’s Official Capacity

In Ryan v. Gifford, C.A. No. 2213-CC (Del. Ch. Nov. 21, 2007), the Delaware Chancery Court ruled that it could not exercise personal jurisdiction over certain nonresident officers of a Delaware corporation pursuant to 10 Del. C. § 3114(b).  That statute authorizes the exercise of jurisdiction in Delaware over a nonresident officer of a Delaware corporation … Continue Reading

DOJ, Courts Lessen Pressure On Corporations To Deny Indemnification To Management Targets Of Prosecutions

As we reported in May 2006 (link), prosecutors in recent years have been pressuring corporations to “cooperate” with prosecutions and investigations by denying indemnification and ceasing payment of defense costs of targeted individual officers and directors.  The Department of Justice was particularly proactive in pressing corporations to cease advancement of defense costs, citing a memorandum … Continue Reading

Delaware Chancery Court Declines To Enjoin Merger, Recognizing High Burden To Succeed In Enjoining Premium Transaction In Absence Of Competing Bid

In In re CheckFree Corporation Shareholders Litigation, No. 3193-CC (Del. Ch. Nov. 1, 2007), Delaware Chancellor Chandler denied plaintiff shareholders’ motion to preliminarily enjoin a merger between CheckFree Corporation and Fiserv, Inc.  In his opinion, Chancellor Chandler held that while “directors have a duty to disclose all material information in their possession to shareholders when … Continue Reading

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