Federal Securities Law Source

FTC revises HSR and interlocking directorate thresholds

The Federal Trade Commission has announced annual filing threshold revisions under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act that set new antitrust reporting standards.

Jay Levine, our colleague at Antitrust Law Source, provides perspective about the updated HSR requirements in his recent blog post. Read the full article here: “FTC revises HSR and interlocking directorate thresholds.”

SEC enforces rules regarding use of non-GAAP measures and undisclosed perks

Last week, the Securities and Exchange Commission (SEC) made good on its promises to enforce violations of its non-GAAP financial measure disclosure rules. MDC Partners agreed to pay a $1.5 million dollar penalty to settle the SEC’s charges relating to non-GAAP disclosures made by the company. The SEC alleged that MDC Partners had misused several non-GAAP measures in its earnings releases and periodic reporting and that MDC Partners had failed to disclose perks that it had provided to its former chief executive officer. Continue Reading

Supreme Court affirms family insider trading conviction

On Tuesday, The United States Supreme Court unanimously affirmed an insider trading conviction by finding that inside information exchanged between relatives violates federal security laws. The case is Salman v. United States.

The decision provides new life to family insider trading prosecutions which had been stymied by the Second Circuit’s 2014 Newman decision. Newman held that, in order to convict a tipster of insider trading, the tipster had to have provided the information exchanged for some type of personal benefit.

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SEC forces Mickelson to return $1 million from insider trading

PGA golfer Phil Mickelson agreed to forfeit almost $1 million that the Securities and Exchange Commission (SEC) said was obtained through insider trading. Mickelson was named as a “relief defendant” in a criminal case, filed in the Southern District of New York against professional gambler William Walters and a former director of Dean Foods, Thomas Davis. Mickelson was not criminally charged but is subject to a SEC civil action requiring a claw back of profits he made from the improper trades.

According the SEC complaint, Walters received non-public, insider information from 2008 through 2012 about Dean Foods, the nation’s largest milk producer, from his long-time friend Davis, who was at the time chairman of Dean Foods. The inside information concerned plan to spin off subsidiary WhiteWave Foods Co.

In 2012, Mickelson received a telephone tip from Walters that Mickelson should purchase Dean Foods stock because the company was about to spin off its profitable subsidiary. At the time of the call, Mickelson owed Walters money over sports gambling bets. Walters is considered by many as the most successful sports bettor in the country. Continue Reading

Delaware Courts continue scrutiny of “disclosure only” settlements in M&A litigation

On Jan. 22, 2016, the Delaware Court of Chancery released its opinion in In re Trulia Stockholder Litigation in which it rejected a “disclosure only” settlement of a shareholders’ suit challenging an M&A transaction. This decision confirms the trend of increasing hostility of the Delaware courts towards “disclosure only” settlements and serves as a warning to plaintiffs firms that they will find it increasingly difficult to extract attorneys’ fees from companies in these types of settlements.

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Supreme Court to review insider trading case

The Supreme Court has agreed to consider something that lies at the center of nearly every insider trading case: what prosecutors need to prove to win an insider trading conviction. This case aims to determine exactly what benefits corporate insiders need to receive for tips they disclose to traders to be illegal. It is expected to resolve a split in federal appeals courts and will review a July ruling regarding trades made by Bassam Salman from the California-based 9th U.S. Circuit Court of Appeals. Specifically, the court will review whether prosecutors had to prove that Salman’s brother-in-law, Maher Ara, a Citigroup investment banker, disclosed the information in exchange for a personal benefit.

Salman was convicted in 2014 and received a three-year sentence. On appeal, Salman relied upon the recent decision in the U.S. Court of Appeals for the 2nd Circuit, United States v. Newman (Newman), to challenge his conviction. The 9th Circuit rejected the 2nd Circuit’s reasoning in Newman and upheld the conviction.

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Article sheds light on practice of private equity sponsored borrowers selecting lenders’ counsel

Andrew Ross Sorkin wrote an interesting article in Tuesday’s New York Times regarding the practice of private equity firms designating the legal counsel to be used by its lenders in a leveraged buyout financing. In other words, the private equity firms engaging in this practice are hand selecting, and paying the fees of, the lawyers that will be on the other side of the transaction negotiating on behalf of the banks against the private equity sponsored borrowers. This practice constitutes a clear conflict of interest that tilts the negotiations of the financing in favor of the private equity sponsored borrowers.

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Recent litigation illustrates the importance of keeping accurate stock records

Earlier this month, The Wall Street Journal published an article on the ongoing litigation in the wake of the 2014 sale of Tibco Software Inc. to Vista Equity Partners. The Tibco litigation involved an error in the calculation of the number of shares outstanding that resulted in Tibco shareholders receiving approximately $100 million less than the buyer was actually willing to pay. The Tibco litigation illustrates the importance of sound corporate record keeping, particularly with respect to stock issued and outstanding and the capitalization table of a company. Continue Reading

Diverse companies receive SEC approval to raise funds with Regulation A+

The SEC has approved 12 Regulation A+ offerings (and about 40 initial Form 1-A filings have been made) since the new Regulation A+ rules became effective in June. The companies now raising money under Regulation A+ include a dental device manufacturer, technology companies, an automaker, a cannabis company and a bank. Regulation A+ allows private companies to raise up to $50 million by selling debt or equity to the public without having to meet all of the requirements of a traditional initial public offering.

Many of the companies using Regulation A+ are true startups, but some are existing businesses with customer revenue and operations. Dental device manufacturer Sun Dental Holdings is notable because it is using a registered broker-dealer placement agent to conduct its offering. Many of the approved offerings seek to publicly sell securities that likely will not result in loss of control for the current owners or require mandatory distributions or dividends, despite potentially raising millions.

Below is a summary of the SEC-approved Regulations A+ offerings.  Continue Reading

Corruption and conspiracy charges hit sports world: DOJ indicts additional FIFA officials in corruption conspiracy

While the latest happenings in the governing world of soccer are not a typical blog topic for us, the legal issues and impacts are worth considering in a broader context. Soccer fan or not, certainly interesting times.

Late Thursday Attorney General Loretta Lynch announced that 16 additional defendants have been indicted in the on-going probe of FIFA, soccer’s world governing body. The superseding indictment names several high-ranking FIFA officials and charges corruption involving two generations of soccer officials in South and Central America over a 24 year period. The corruption scheme involves more than $200 million in bribes to win media and marketing rights for major tournaments. Continue Reading

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