These days, it often seems like technology is eradicating the difference between our public and private selves, and apparently, the SEC is going down the same path with respect to companies.

Matt Levine at Bloomberg is fond of saying that private markets are the new public markets, by which he means that companies no longer seek to raise capital by tapping the public markets; instead, they do that in private offerings, and turn to public markets when early investors want to cash out.  This is made possible by the fact that Congress and the SEC have, over the years, loosened many of the rules that required companies seeking large capital infusions to register their shares publicly.  Today, due to Rule 506 and other exemptions, companies can grow to enormous sizes solely based on the investment of accredited investors.  These investors are usually institutions, like venture capital funds, but also the stray mutual fund or sovereign wealth fund.  Other rule amendments have made it easier for private companies to pay their employees in stock and stock options, which allows them to free up capital.

But now the SEC is working to make it easier for new classes of individuals to…

One of the things I’ve talked about before is how courts adjudicating securities claims must perennially police the line between “fraud” and “mismanagement.”  The issue goes back to the Supreme Court’s decision in Santa Fe Indus. v. Green, 430 U.S. 462 (1977), which held that “the language of § 10(b) gives no indication that Congress meant to prohibit any conduct not involving manipulation or deception.”  Thus, Section 10(b) claims cannot be based on mismanagement or breach of fiduciary duty alone.

That said, as federal securities regulation increasingly enters into the governance space, the distinction between fraud and mismanagement is harder and harder to identify.  In general, courts hold that if there’s been a false statement, then the claim is properly stated as securities fraud; if not, not.  The problem is, as the SEC imposes more and more disclosure requirements, many of which concern core aspects of governance (ethics codes, risk taking, and whatnot), the “deception” test does not seem to emotionally do the work of distinguishing a claim based on poor governance from a claim based on fraud.

As I’ve repeatedly blogged about – and written articles about, most extensively in Reviving Reliance– given this problem, courts have…

As part of what is apparently my continuing series on developments concerning the use of corporate bylaws and charter provisions to limit federal securities claims….

Earlier this month, the Delaware Supreme Court heard oral argument on whether corporations may include provisions in their charters and bylaws requiring that federal Section 11 claims be heard only in federal court (video of oral argument here; prior posts on this issue here and here and here and here… you get the idea)

Running parallel with that, Professor Hal Scott of Harvard Law School submitted a proposal under 14a-8 requesting that Johnson & Johnson adopt a bylaw requiring that all federal securities claims against the company be arbitrated on an individualized basis. As I blogged at the time, the SEC granted J&J’s request to exclude the proposal on the ground that it appeared that NJ, the state of incorporation – following what it believed to be Delaware law – did not permit federal claims to be governed by corporate charter/bylaw provisions.  Scott filed a federal lawsuit over that, and the action was voluntarily stayed pending the Delaware Supreme Court’s ruling.

But Scott has not let the crusade rest.  As I…

Hey, everyone.  Two very quick hits today.  First, as any follower of this blog knows, I have been avidly following the Salzberg v. Sciabacucchi litigation (see prior posts here and here and here, etc), not because I care very much about whether corporations can select a federal forum for Section 11 claims, but because I think if corporations can use their charters and bylaws to select a federal forum for Section 11 claims, the next step is using charters and bylaws to adopt provisions requiring individualized arbitration of federal securities claims, and that opens up a whole new can of worms.  (For newcomers, my article on the subject of arbitration clauses in corporate charters and bylaws is here).

In any event, on Wednesday, the Delaware Supreme Court heard oral argument on federal forum provision issue. I don’t really have any insights about it – although the justices asked several questions at the beginning of each advocate’s presentation, they were, for the most part, quiet – but if you want to see for yourself, the video is here.

Additionally, last week I had the opportunity to speak on a panel with Sean Griffith and Adriana Robertson, moderated by…

Most readers are probably familiar with the case of Morrison v. Berry.  There, Fresh Market was taken private by Apollo in a two-step tender offer.  After the deal closed, a shareholder filed a lawsuit alleging that the directors had breached their duties and failed to obtain the best price for shareholders because Ray Berry, founder of Fresh Market and Chair of the Board, along with his son, colluded with Apollo to roll over their shares in the new company and rig the sales process in Apollo’s favor.  Defendants contended that shareholders’ acceptance of Apollo’s offer cleansed any breaches under Corwin; therefore, the critical question was whether the shareholders were fully informed.  VC Glasscock held that any omissions were immaterial as a matter of law, and the Delaware Supreme Court reversed, holding that omissions regarding the Berrys’ level of precommitment to Apollo were material.

After remand, the plaintiff filed a new complaint and the defendants renewed their motions to dismiss.  And on December 31, VC Glasscock granted in part and denied in part those motions.  In particular, he held:

(1) The directors other than Ray Berry were independent and disinterested, and neither the sales process nor the…

I’ve previously blogged about – and written an essay about – how one of the knock-on effects of Corwin and MFW is to increase the distance between the treatment of controlling shareholder transactions, and other transactions, under Delaware law.  As a result, the outcome of many a motion to dismiss turns solely on the presence or absence of a controlling shareholder – which puts increasing pressure on the definition of control in the first place.  In particular, I’ve argued, courts uncomfortable with Corwin’s Draconian effects may be tempted to expand the definition of control in order to avoid early dismissals of cases that smack of unfairness.

The latest example of the genre comes by way of Vice Chancellor McCormick’s ruling on the motion to dismiss in Garfield v. BlackRock Mortgage Ventures et al.  There, an enterprise organized as an “Up-C” sought to transform itself into an ordinary corporation, largely for the benefit of the two founding investors, BlackRock and HC Partners, as well as several directors and corporate officers.  The question was whether the transaction was fair to the public stockholders, who overwhelmingly voted in favor of the deal.  If BlackRock and HC Partners were not deemed to…

I have previously commented that many investments describe themselves as “sustainable” or “ESG” (environmental, social, governance) focused, without much standardization as to what those terms mean – and I’ve criticized the SEC for failing to step in to create a set of uniform definitions.

Turns out, the SEC might finally be taking some action, though it’s not necessarily what I’d hoped for:

Many investment firms have been touting new products as socially responsible. Now, regulators are scrutinizing some funds in an attempt to determine whether those claims are at odds with reality.

The Securities and Exchange Commission has sent examination letters to firms as record amounts of money flow into ESG funds. These funds broadly market themselves as trying to invest in companies that pursue strategies to address environmental, social or governance challenges, such as climate change and corporate diversity.

But there have been critics of the growth in these funds. Some argue investment funds should focus solely on returns, and some firms have faced questions about how strictly they adhere to ESG principles….

One letter the SEC sent earlier this year to an investment manager with ESG offerings asked for a list of the stocks it had

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