As the 2008 proxy season gets started, many companies are choosing whether to take advantage of the SEC's new e-proxy rules, which allow for the electronic delivery of proxy materials. As the attached Porter Wright Law Alert explains, the new rules are not without their disadvantages.
Earlier this week the U.S. Supreme Court ruled in Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc. that stockholders cannot sue third parties that participate in a securities fraud scheme because the stockholders have not directly relied on the advice of the third parties. Such third parties potentially include banks, accountants, and law firms. The law that allows stockholders to sue for fraud requires that they actually rely on the misinformation they receive. The Court determined that even if a third party such as an investment bank contributes to fraudulent activity in connection with the sale of securities, the third party does not directly communicate misinformation to stockholders, and therefore the stockholders have no fraud claim against the third party.
The case will have direct implications for Enron stockholders who have been waiting for the Stoneridge decision to determine whether they can sue Enron’s former bankers. Unless Congress creates a private right of action against third parties, the Supreme Court has determined that stockholders only have claims against the fraudulent issuer.
Not surprisingly, investor-advocate groups have criticized the decision as anti-investor. The ruling eliminates one theory of third party liability; however, the SEC continues to have authority to pursue claims against any party that participates in securities fraud.
The NASDAQ Listing Qualifications Department is currently accepting public comment on a new draft of its Marketplace Rules. The Rules, which describe the requirements for listing securities on NASDAQ, have been reorganized, and in some cases rewritten, to make them easier to navigate and understand; however, no substantive changes have been made.
Several improvements have been implemented, including a logical order for the Rules that begins with NASDAQ’s overall regulatory authority, then describes the requirements of each tier of the NASDAQ markets, including Global Select, Global, and Capital Markets, and then addresses corporate governance requirements, non-traditional securities listings, the process for regaining compliance, and fees, in that order.
Other new organizational features include more descriptive headings, a definitions section that precedes the Rules, elimination of sections that have been “reserved” due to deletions over the years, and discrete sections for interpretative materials.
NASDAQ will receive comments until February 1, 2008, and the changes will be filed with the SEC by the end of the first quarter 2008.
As of January 1, 2008, Delaware corporations seeking to discontinue their corporate existence in Delaware, either through dissolution, merger or conversion, must be current in (a) filing their Annual Franchise Tax Reports (“Annual Reports”) and (b) payment of any required franchise tax (this is not a new requirement). The State of Delaware will reject any dissolution, merger or conversion filing if the Delaware corporation that is dissolving, merging out of existence, or converting to an entity not subject to the Delaware Franchise Tax has not filed all of its Annual Reports and paid all of the required franchise tax due up to the time in which the dissolution, merger or conversion is to become effective.
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