A recent decision from Judge Andrew S. Hanen of the Southern District of Texas found that a pump and dump scheme could not be prosecuted as wire fraud.

I’m trying to wrap my head around it and struggling.  It seems to find that the government could not prosecute a pump and dump scheme because the defendants only wanted to make money and did not want to deprive any specific people of money or property.  The mere fact that the pump and dump scheme occurred through a market and not in direct personal transactions seems to have driven the decision.

Bloomberg’s Matt Levine has covered it.  It also made CNN.  

Notably, the indictment even includes statements that the Defendants said things like “we’re robbing … idiots of their money.”

For a long time, compensated non-attorney representatives (NARs) have been a blight on FINRA’s securities arbitration forum.  PIABA released a report highlighting problems with these groups in 2017.  After considering the issue, FINRA moved to largely ban non-attorneys from representing investors in securities arbitration.  The proposed rule change expressly permits law school clinics or their equivalent to continue to appear on behalf of investors.  The proposal was even approved by the SEC’s Division of Trading and Markets on January 18, 2024 pursuant to its delegated authority. 

Despite the lack of any opposition in the comment file, an unknown SEC Commissioner blocked the rule from going into effect under “Rule 431 of the Commission’s Rules of Practice” on January 19, 2024.  That rule provides that:

An action made pursuant to delegated authority shall have immediate effect and be deemed the action of the Commission. Upon filing with the Commission of a notice of intention to petition for review, or upon notice to the Secretary of the vote of a Commissioner that a matter be reviewed, an action made pursuant to delegated authority shall be stayed until the Commission orders otherwise. . . .

As it stands, the change has been indefinitely…

Vice Chancellor Laster recently requested information from litigants in Seavitt v. N-able, Inc. with this letter.  According to the complaint:

Plaintiff brings this action because N-able is presently flouting this foundational principle of Delaware law through a contractual arrangement designed to entrench and perpetuate certain favored stockholders’ control over N-able’s business and affairs. Specifically, in violation of DGCL Section 141(a), N-able has provided certain favored stockholders—affiliates of the private equity firms Silver Lake Group, LLC (“Silver Lake”) and Thoma Bravo, LLC (“Thoma Bravo,” and together with Silver Lake, the “PE Investors”)—with a contractual power to control the most important decisions and functions properly entrusted to the Company’s Board under our corporate system.  

. . . 

Third, in violation of DGCL Section 141(k) and in further derogation of the stockholder franchise, N-able has adopted an invalid provision in its operative Amended and Restated Certificate of Incorporation (the “Certificate”), purporting to provide that as long as the PE Investors own in the aggregate 30% of the voting power of the Company’s outstanding shares, “directors may be removed with or without cause upon the affirmative vote of the [PE Investors]. . .” This provision violates DGCL Section 141(k), which

…

Senator Sanders recently released the Majority Report for the Senate’s Health, Labor, Education, and Pensions Committee.  That report has some grim findings about American retirements.  About half of people 55 and older have no retirement savings.  As we all know, defined-benefit pensions have become increasingly rare.  Unfortunately, defined-contribution pensions are often unavailable for a huge chunk of the workforce.  About 50 million workers don’t have a way to save for retirement through their payroll.

The report and its figures has to be part of any conversation now about how to think about efforts to improve the quality of financial advice and retirement savings.

There is much more in the report than this quick summary, and if you write or think about retirement issues, you should check it out.

Vice Chancellor Laster has issued his opinion in the TripAdvisor case.  I’m still digesting it, but the overall framework does not surprise me.  As I can’t improve on the opinion’s recitation of the basic factual situation, here it is:

A Delaware corporation has two classes of stock. The CEO/Chair owns highvote shares carrying a majority of the outstanding voting power, giving him hard majority control. The board decides to convert the Delaware corporation into a Nevada corporation, and the CEO/Chair delivers the necessary stockholder vote. The board does not establish any protections to simulate arm’s length bargaining. The conversion is not conditioned on either special committee approval or a majority-ofthe-minority vote.

A stockholder plaintiff challenges the conversion.1 The plaintiff argues that Nevada law offers fewer litigation rights to stockholders and provides greater litigation protections to fiduciaries like the directors and the CEO/Chair. The plaintiff alleges that the directors and the CEO/Chair approved the conversion to secure the litigation protections for themselves. In support of those assertions, the plaintiff cites the materials the board considered, disclosures in the company’s proxy statement, the work of distinguished legal scholars about the content of Nevada law, and public statements by Nevada policy makers about

…

On March 1, 2024, the SEC will host an Investor Advocacy Clinic Summit both virtually and in Washington D.C.  The event will run from 11:00 a.m. to 4:00 p.m. EST.  It’s an opportunity for faculty and law students to:

LEARN about the work of the ten-law school investor advocacy clinics, and the benefits of these clinical programs for law students, law schools, and their communities.

HEAR perspectives from the SEC Chair, SEC Commissioners, and guest speakers.

ENGAGE with SEC staff about the work of the different Divisions within the Commission.

FIND out about job opportunities at the SEC and the federal government post-law school graduation.

This is the link to RSVP.

You can access the flyer for the event here:  Download 2024 IAC Summit Evite -RSVP

As I’ve mentioned before, the Department of Labor is now taking another go at improving advice standards for retirement accounts.  I put a quick letter together to give some reasons why I think it’s important to have high standards for advice in this context.

Although written to the Department of Labor, I tried to put the letter together in a way that would help journalists and others understand some of the critical issues facing Labor and the need to put some real protections in place.

One of the talking points often deployed by the industry here is that people should understand that they are in a sales environment and not rely overmuch on the insurance producer deploying every known psychological trick to generate trust.  In reality, many people–particularly older Americans do not understand that the advice is not free.  

My sense is that the rulemaking will probable go through and then we’ll find out how much room the courts will give to protect people here.