Securities Regulation

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Hennion and Walsh, a FINRA member firm, has taken an unusually aggressive position, claiming that because it has procured expungements through the FINRA forum, members of the public cannot discuss the underlying conduct. A cease and desist letter sent to a law firm claims that the firm “posts information relating to Hennion and Walsh, Inc. and its’ [sic] employees which has been found to be false and has been ordered to be expunged.” The letter goes on to claim, without authority, that it’s “illegal to provide a false statement . . .of an individual’s character and/or reputation” and that unspecified “relevant records reflect the information you have posted for public consumption has been deemed to be false, was ordered to be expunged and that order has been confirmed in a court of competent jurisdiction.”

The letter doesn’t specify exactly what statements it wants removed, but I presume it’s blog posts or other things featuring news of past Hennion and Walsh settlements or complaints against Hennion and Walsh employees. These are all fairly typical things for a plaintiff-side firm to post. If one investor has filed or settled a claim against a particular broker, there may be other aggrieved…

Yesterday, Judge Badalamenti denied Target’s motion to dismiss a securities fraud claim against it arising out of its decision to run a pride campaign. The securities fraud claim was brought by America First Legal and other firms. They issued the following statements after the decision:

Statement from Reed D. Rubinstein, America First Legal Senior Vice President:

“Today’s decision is a warning to publicly traded corporations’ boards and management: Our federal securities laws mandate fair and honest disclosure of the market risk created by management when it uses shareholder resources, including consumer goodwill, to advance idiosyncratic and extreme social or political preferences. The risk of ESG mandates and DEI initiatives, such as Target’s “Pride Month” that targeted young children, cannot be whitewashed with boilerplate language or ignored,” said Reed Rubinstein.

Statement from Jonathan Berry, Managing Partner of Boyden Gray PLLC:

“Today’s ruling is an important win for our clients; we look forward to continuing to litigate this case to obtain relief for our clients and hold Target accountable for their actions,” said Jonathan Berry.

The decision certainly sends a message to corporations about what to expect. Candidly, the decision surprised me. After the initial complaint in the matter, I expected…

The D.C. Circuit issued its opinion in the Alpine case this morning. I’ve covered this case repeatedly and have links to much of the briefing. The majority opinion summarized the state of play and its holding this way:

We now reverse only to the extent the district court allowed FINRA to expel Alpine with no opportunity for SEC review. Alpine is entitled to that limited preliminary injunction because it has demonstrated that it faces irreparable harm if expelled from FINRA and the entire securities industry before the SEC reviews the merits of FINRA’s decision. Alpine has…

Two days after the US election, I moderated and participated on a Society of Corporate Compliance and Ethics (SCCE) panel on  ESG through the life cycle of a business with Eugenia Maria Di Marco, who focused on startups and international markets, and Ahpaly Coradin, who focused on M&A, private equity, and corporate governance.

I shared these stats with the audience before we delved into the discussion:

  • In July 2024, SHRM, the
    • …

     The Society of Corporate Compliance and Ethics is hosting a virtual ESG and Compliance Conference on November 7.  I love to hear academics talk about these issues at conferences but because I still engage in the practice of law and I teach about compliance, governance, and sustainability, I find the conversations are very different when listening to practitioners.

    My panel is titled ESG Due Diligence Across the Corporate Lifecycle From Start-Up to Maturity: The Roles of Compliance, Ethics, Legal, and the Board. My co-panelists, Ahpaly Coradin, Partner, Pierson Ferdinand, and Eugenia di Marco, a startup founder and international legal advisor, and I will focus on:

    •  how to measure and prioritize ESG factors at different stages of a company's life cycle, according to a company's industry, and technology use.
    •  how ESG creates value in M&A  beyond risk mitigation and learn the impact of ESG on target selection, valuation, and integration.
    • board and management responsibilities in overseeing and managing ESG-related risks, particularly in light of Caremark duties and Marchand.

    Date & Time: Thursday, November 7 from 12:45 PM – 1:45 PM central time

    Other topics that speakers will discuss include:

    • Supply chains and European due diligence 
    • Global regulatory and legislative developments
    • Sustainable governance

    …

    I am please to be able to publish this post authored by our former BLPB editor/co-blogger Stefan Padfield.  We miss his voice here, but he is doing good work in his current role, as this post shows!  Thanks for contributing this, Stefan.

    +++++

    On November 14, 2023, the National Center for Public Policy Research (NCPPR) – where I work – submitted a shareholder proposal to Johnson & Johnson that sought disclosures related to overboarding. (For the uninitiated, overboarding refers to the issue of corporate directors sitting on too many boards but can also be extended, as it is here, to other commitments.) On March 1, 2024, the SEC staff informed J&J that no action would be recommended against the company by the staff if J&J excluded NCPPR’s proposal. This no-action relief arguably represents a change in the long-standing SEC practice of supporting proposals related to overboarding and is thus worthy of further examination. (The underlying documents can be accessed here; the SEC staff also granted no-action relief to Verizon and Lowe’s on the same proposal.)

    By way of background, the SEC staff is on record as saying that an overboarding proposal “relates to director qualifications.” Accordingly, the SEC…

    The School of Law at Texas Tech University invites applications for a full-time, 9-month tenure-track Professor of Law position to begin in August of 2025.  The position is open to both entry-level candidates and candidates who are on the tenure-track or tenured at another school.  Candidates who satisfy Texas Tech University’s requirements to be hired with tenure will also be eligible to hold the Frank McDonald Endowed Professorship in business law.

    Required Qualifications

    In line with TTU’s strategic priorities to engage and empower a diverse student body, enable innovative research and creative activities, and transform lives and communities through outreach and engaged scholarship, applicants should have experience or demonstrated potential for working with diverse student populations at the undergraduate and/or graduate levels within individual or across the areas of teaching, research/creative activity, and service.

    Specific required qualifications are:

    1. Candidates should have a J.D.;
    2. Candidates should have a demonstrated potential for excellence in research, teaching, and service; and
    3. Candidates should have demonstrated potential for excellence in the areas of Contracts and in corporate/business law, such as Business Entities, Securities Regulation, Mergers & Acquisitions, and related courses.

    Preferred Qualifications

    In addition to the required qualifications, individuals with the following preferred qualifications are…

    ESG greenwashing has been getting attention among legal academics.  In Rainbow-Washing, 15 Ne. U. L. Rev. 285 (2023), LMU Law's John Rice explores the

    increasingly common, but destructive, practice in which corporations make public-facing statements espousing their support of the LGBTQIA+ community . . . to draw in and retain consumers, investors, employees, and public support, but then either fail to fulfill the promises implicit in those statements or act in contravention to them. 

    My own forthcoming article in the University of Pennsylvania Journal of Business Law, presented at the November 2023 ILEP-Penn Carey Law symposium honoring Jill Fisch, mentions the increasing notoriety of ESG greenwashing and cites to John's article.

    Last week, UVA Law Professor Naomi Cahn called out ESG greenwashing in Forbes, citing to a study to be published in the Journal of Accounting Research that finds "firms’ ESG rhetoric may not match their reality."  She suggests that "a meaningful analysis of a firm’s ESG commitment requires much further digging, and ultimately it requires meaningful oversight from outside the ESG community on what should be disclosed and the accuracy of the reports."  The article references a forthcoming book coauthored by Cahn, June Carbone (Minnesota…

    Corporate & Securities Litigation Workshop: 

    Call for Papers 

    UCLA School of Law, in partnership with the University of Illinois College of Law, University of Richmond School of Law, and Vanderbilt Law School invites submissions for the Eleventh Annual Workshop for Corporate & Securities Litigation. This workshop will be held on September 20-21, 2024 in Los Angeles, California. 

    Overview 

    This annual workshop brings together scholars focused on corporate and securities litigation to present their scholarly works. Papers addressing any aspect of corporate and securities litigation or enforcement are eligible, including securities class actions, fiduciary duty litigation, and SEC enforcement actions. We welcome scholars working in a variety of methodologies, as well as both completed papers and works-in-progress at any stage. Authors whose papers are selected will be invited to present their work at a workshop hosted by UCLA School of Law. Participants will pay for their own travel, lodging, and other expenses. 

    Submissions 

    If you are interested in participating, please send the paper you would like to present, or an abstract of the paper, to corpandseclitigation@gmail.com by Friday, June 7, 2024 Please include your name, current position, and contact information in the e-mail accompanying the…

    I appreciate Ann's super helpful post on omissions liability after the U.S. Supreme Court's decision in Macquarie Infrastructure Corp. et al. v. Moab Partners, L. P., et al.  The hair splitting in that opinion is, in my view, dubious at best.  The Court's creation of a legally significant concept of "pure omissions" in a public company disclosure context is doctrinally counterfactual.  The omission to state a fact required to be disclosed under a mandatory disclosure rule like Item 303 of Regulation S-K necessarily occurs in a veritable river of disclosures in SEC filings and more generally and has the potential of making those disclosures misleading.  If material, such an omission should be actionable as deceptive or manipulative conduct under Section 10(b) of and Rule 10b-5 under the Securities Exchange Act of 1934, as amended.  Period.

    Of course. civil liability would require proof of all elements of the claim, including (even for public enforcement officials) the requisite state of mind or scienter.  Private class action plaintiffs also would have heightened pleading burdens.  And a criminal prosecution can only be sustained if the predicate conduct is willful, as provided in Section 32(a) of the Exchange Act.

    The point is that…