In Absolute Activist Value Master Fund Ltd. v. Ficeto, 2012 WL 661771 (2d Cir. Mar. 1, 2012), the United States Court of Appeals for the Second Circuit held that, for purposes of applying the federal securities laws to transactions involving securities not traded on a U.S.-based stock exchange, a transaction is “domestic,” and thus within the reach of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78j(b), “if irrevocable liability is incurred or title passes within the United States.” The decision provides important clarification on the standard laid out by the United States Supreme Court in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), which held that Section 10(b) applies only to “transactions in securities listed on domestic exchanges and domestic transactions in other securities.”Continue Reading Second Circuit Clarifies Meaning of “Domestic Transactions” As Used In Morrison v. National Australia Bank

By William Manierre

As of January 1, 2012, two new subtypes of traditional business corporations may be organized under the California Corporations Code – benefit corporations (§§14600-14631) and flexible purpose corporations (§§2500-3503). Both free their directors from having to manage strictly for the economic benefit of shareholders, enabling them to address social objectives such as preserving the environment, promoting the interests of the underserved and improving human health. Patagonia, the outdoor apparel company, became California’s first benefit corporation on January 3rd. It remains to be seen whether the new corporate forms will be popular entity choices, whether they will be effective in promoting socially desirable goals, and whether unexpected problems will arise for early adopters as a result of their untested nature. While these types of entities are new, and as a result certain tax issues associated with their use may be unclear, there does not appear to be any obvious tax benefit to the use of either structure.Continue Reading California’s New Entities: Benefit Corporations and Flexible Purpose Corporations

In Lawson v. FMR LLC, No. 10-2240, 2012 U.S. App. LEXIS 2085 (1st Cir. Feb. 3, 2012), the United States Court of Appeals for the First Circuit, in a case of first impression, held that the whistleblower provision in Section 806 of Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A (“SOX”), applies only to employees of public companies, and does not protect employees of private companies who are contractors or subcontractors for the covered public company. This decision, the first decision by a United States Court of Appeals on this issue, helps clarify the definition of “covered employee” under whistleblower provisions of SOX.Continue Reading First Circuit Holds That Section 806 of the Sarbanes-Oxley Act Extends Only to Employees of Public Companies, Not Employees of Private Companies Who Are Contractors or Subcontractors for Covered Public Companies

On January 25, 2012, the New York Stock Exchange issued an Information Memo to its member organizations stating that effective immediately, brokers may not vote on corporate governance proposals supported by company management without instructions from their clients. NYSE’s rules affect the voting of all shares held in “street name” by NYSE member organizations, regardless of whether the vote is for an issuer listed on the NYSE. This new position follows a recent regulatory and legislative trend disfavoring discretionary broker voting. The notification is a significant departure from historical practice where brokers used their discretion to cast votes on behalf of “street name” shareholders who fail to provide voting instructions with respect to what were previously viewed as “routine” matters. The NYSE’s new position will affect the voting dynamics for company-supported governance proposals, including those that companies may put forward this proxy season to avoid shareholder proposals on similar matters.Continue Reading Public Company Control Alert: NYSE Acts to Further Limit Broker Votes on Specified Corporate Governance Proposals

1. Higher Thresholds For HSR Filings

On January 24, 2012, 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 and will be effective thirty days after publication in the Federal Register. Publication is expected within a week, so the new thresholds will most likely become effective in late February 2012. Acquisitions that have not closed by the effective date will be subject to the new thresholds.Continue Reading Higher Filing Thresholds for HSR Act Premerger Notifications and Interlocking Directorates Announced

As previously reported in the January 9th blog article, today is the last day to file Form 8937 to report 2011 corporate actions that affect stock basis, as required under Internal Revenue Code section 6045B. Because the actual IRS Form 8937 was only very recently released, and because a number of questions about the form have arisen following its release, the IRS issued a Notice (Notice 2012-11) stating that it will not impose penalties for reporting incorrect information, provided that the issuer makes a good-faith effort to report timely and accurately. Further, the Notice states that the issuer can satisfy its filing requirement by posting the required information in a readily accessible format to an area of its primary public Web site.

For further information, please contact Matthew Richardson at (213) 617-4222.Continue Reading Further Relief on Section 6045B Reporting

In Dow Chemical Canada ULC v. Superior Court, 2011 WL 6382110 (Cal. App. 2d Dist. Dec. 21, 2011), the California Court of Appeal, Second District, held that “plac[ing] products into the stream of commerce in a foreign country (or another state), aware that some may or will be swept into the forum state[,]” is not, by itself, sufficient to support the forum state’s exercise of personal jurisdiction over the manufacturer of the products. The Court’s decision explores the limits of personal jurisdiction after the recent decision by the United States Supreme Court in J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 8780 (2011), and provides more certainty to foreign corporations regarding the likelihood of being forced to litigate in California courts.Continue Reading Foreign Corporation’s Mere Awareness That Its Products May Ultimately End Up In a Forum State Is Not Sufficient Contact to Support Personal Jurisdiction

On January 6, 2012, the Securities and Exchange Commission (“SEC”) announced that it has modified its settlement policy for enforcement actions that also involve a criminal conviction or admissions by a defendant of criminal violations. Under its new policy, the traditional “neither admit nor deny” language will be deleted from its settlement documents. Instead, the SEC will recite the facts and nature of the related criminal proceeding. Enforcement staff will have the discretion to incorporate into SEC settlement documents any relevant facts admitted by the defendant in the criminal proceedings.Continue Reading SEC Changes Policy on Admitting Guilt in Settlements of Enforcement Actions

As previously reported in the March 15 blog article, Section 6045B of the Internal Revenue Code imposes new reporting requirements on issuers of "specified securities" engaging in organizational actions after December 31, 2010 that affect the tax basis of their specified securities. Generally, a "specified security" includes shares of stock and interests treated as stock (such as an American Depository Receipt).Continue Reading Update on New Reporting Rules for Stock Splits, Recapitalizations, Mergers and Acquisitions