The IRS recently issued proposed regulations that provide new examples that illustrate what types of investments qualify as "program-related investments" (PRIs). These new examples are based on published guidance and on financial structures that had previously been approved in private letter rulings.Continue Reading IRS Issues New Guidance to Private Foundations on Program Related Investments

By Robert Magielnicki and Malika Levarlet

One does not usually associate the possibility of criminal penalties with the Hart-Scott-Rodino Act premerger review process. However, on May 3, 2012, the U.S. Department of Justice ("DOJ") announced that an executive of a South Korean company agreed to plead guilty to obstruction of justice charges and to serve five months in prison for altering documents filed with the DOJ and the Federal Trade Commission ("FTC") in connection with a proposed merger.Continue Reading Tampering with documents in connection with a merger investigation can land you in jail!

The staff of the Securities and Exchange Commission (“SEC”) recently released a study on the cross-border scope of the private right of action under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78j(b), and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder. The study, mandated by Congress following the United States Supreme Court’s decision in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), outlines a number of legislative options for extending the scope of private actions for international securities fraud that may provide a roadmap for future Congressional action.Continue Reading SEC Staff Issues Report on the Cross-Border Scope of Private Rights of Action for Securities Fraud

On April 5, 2012, President Obama signed the Jumpstart Our Business Startups (JOBS) Act, enacting it into law. The JOBS Act is intended to make it easier for smaller and earlier stage companies to raise capital and also to revitalize the U.S. market for initial public offerings, which has been in decline since the beginning of the last decade.

The provisions of the JOBS Act represent a watershed change to the laws and regulations governing capital raising for private companies. Some of the provisions – such as the “IPO on-ramp” provisions and the increase in the number of holders triggering mandatory registration and public reporting under the Securities Exchange Act of 1934, are effective immediately. Others, including the new crowdfunding exemption, the removal of the ban on general solicitation for offerings under Rule 506 to accredited investors and Rule 144A to QIBs, and the new exemption modeled on Regulation A, will require SEC rulemaking before they come into force.

We have previously blogged about the original House version of the Act and the changes the Senate adopted, which changes were enacted into law. This article discusses the full Act as enacted.Continue Reading President Obama Signs JOBS Act: Landmark Reform for Small and Emerging Growth Companies Now Law

In Securities & Exchange Commission v. Citigroup Global Markets, Inc., 2012 WL 851807 (2d Cir. Mar. 15, 2012), the United States Court of Appeals for the Second Circuit essentially approved the terms of a settlement between the Securities and Exchange Commission (the “SEC”) and Citigroup Global Markets, Inc. (“Citigroup”) that had been notoriously rejected by the United States District Court for the Southern District of New York (Rakoff, J.) as “neither reasonable, nor fair, nor adequate, nor in the public interest.” Among other things, the district court had found that a crucial factor missing from the parties’ consent judgment was the lack of admission by Citigroup of any liability. This case stands out because, despite that Citigroup was one of the chief actors behind the financial crisis that began in 2008, its primary regulator is under no legal obligation to insist upon an admission of fault or wrongdoing by Citigroup as part of a settlement of all government claims against the bank.Continue Reading Second Circuit Effectively Reverses Rejection of SEC’s Settlement with Citigroup

In Roland v. Green, 2012 WL 898557 (5th Cir. Mar. 19, 2012), the United States Court of Appeals for the Fifth Circuit held that in order for a plaintiff’s state law class action lawsuit alleging fraud to be properly removable to federal court and precluded under the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”), the allegations of the fraudulent activity must be more than “tangentially related” to transactions in “covered securities.” In so doing, the Fifth Circuit adopted the Ninth Circuit’s test regarding the scope of the “in connection with” language under SLUSA, declining to follow what it perceived to be more stringent tests applied by other circuits. In light of the clear circuit-split, this issue appears ripe for review by the United States Supreme Court.Continue Reading Fifth Circuit Requires More than “Tangential Relationship” Between Alleged Fraud and Transactions in “Covered Securities” to Support Dismissal Under the Securities Litigation Uniform Standards Act of 1998

On March 26, 2012, the House of Representatives passed the version of the Jumpstart Our Business Startups (JOBS) Act that was approved by the Senate on March 22, 2012. The House vote was 380-41. President Obama is expected to sign the bill this week. We discussed the JOBS Act and the Senate’s modifications to the crowdfunding provisions of the JOBS Act here and here.Continue Reading House Passes Modified JOBS Act and sends to President Obama – Expected to Become Law this Week

On March 22, 2012, the Senate passed the Jumpstart Our Business Startups (JOBS) Act by a vote of 73-26. The House of Representatives passed the JOBS Act on March 8, 2012 by a vote of 390-23. The Senate bypassed its typical committee process to rush the bill to a floor vote. Legislators in both parties and the President have adopted the JOBS Act as an election-year demonstration of their commitment to small businesses and entrepreneurialism, and they have paid little heed to strongly-worded opposition from SEC Chairman Mary Schapiro, state regulators and organizations ranging from the Council for Institutional Investors to the AARP.Continue Reading Senate Passes Modified JOBS Act – Regulatory Reform for Small and Emerging Growth Companies Speeds Closer to Fruition

In Hermelin v. K-V Pharmaceutical Co., C.A. No. 6936-VCG, 2012 WL 395826 (Del. Ch. Feb. 7, 2012), the Delaware Court of Chancery considered whether the former chief executive officer (“CEO”) of a pharmaceutical company, against whom several regulatory and criminal actions had been brought, had been successful “on the merits or otherwise” such that he was entitled to mandatory indemnification under Section 145 of the Delaware General Corporation Law (“DGCL”) and/or under his indemnification agreement with the corporation. The court concluded that the CEO, who had pled guilty to certain criminal charges and was subjected to stiff regulatory penalties, had been successful (and thus entitled to indemnification) in only one of four underlying suits at issue. This decision provides guidance to corporate officers regarding their indemnification rights under Delaware law.Continue Reading Delaware Chancery Court Clarifies When Corporate Officers and Directors are Entitled to Mandatory Indemnification Under DGCL § 145

Building on months of momentum in Congress, on March 8, 2012, the U.S. House of Representatives passed the Jumpstart Our Business Startups (JOBS) Act by a bi-partisan vote of 390-23. A similar bill, S. 1933, has been introduced in the Senate and may be voted on this month. The JOBS Act is intended to address the sharp decline in U.S. public offerings during the last decade and to facilitate capital raising by smaller companies. The provisions of the JOBS Act will, if enacted, represent a watershed change to the laws and regulations governing capital raising for private companies and would create a limited, temporary and scaled regulatory compliance pathway, referred to as an “IPO on-ramp,” for companies going public and newly public companies. The IPO on-ramp is designed to reduce the costs and uncertainties of accessing public capital.Continue Reading The March Towards Meaningful Reform for Small and Emerging Growth Companies Moves Forward – House Passes Measures to Open Private Capital Raising and Facilitate an On-Ramp of New IPOs