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The current Department of Labor has shown little interest in continuing to defend its fiduciary rule after the Fifth Circuit struck it down.  The AARP and three different state attorney generals recently sought to intervene to request review by the entire Fifth Circuit.  The AARP has a substantial interest in the rule.  It argues that “the panel’s decision also presents an exceptionally important issue because it robs workers, retirees, and their families of crucial protections for their retirement investments.” 

Even though the SEC recently launched its investment-advice initiative by proposing  regulation Best Interest, Labor’s rule remains critical.  Insurance pitchmen now characterize themselves as “financial advisers” and sell a variety of insurance products.  In many instances, these “financial advisers” sell annuities or whole life insurance to people with little need for the products, causing them to miss out on substantial gains over time.   Without the Labor rule, there may be few restraints on improper insurance sales.

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I tell my students that corporate waste technically may be a mechanism for defeating the business judgment rule in the absence of any other evidence of lack of compliance with fiduciary duty, but – as one Delaware decision put it – it’s really more theoretical than real.  See Steiner v. Meyerson, 1995 Del. Ch. LEXIS 95.  When my students ask for some kind of real world example of waste, I tell them the facts of Fidanque v. American Maracaibo Co., 92 A.2d 311 (Del. Ch. 1952), where a corporation paid “consulting fees” to a 70-year-old former executive who had recently suffered a stroke that left him sufficiently incapacitated to be noticeable during his deposition.

I assumed that case was sui generis, but it turns out history has a way of repeating, this time in the form of Sumner Redstone’s contract with CBS.  As described in a recent opinion by Chancellor Bouchard, plaintiff stockholders of CBS adequately alleged that the Board made wasteful payments by refusing to terminate Redstone’s $1.75 million contract as Executive Chair once his declining health left him unable to eat or speak, and by designating him Chairman Emeritus – at a $1 million salary –…

Yesterday, the SEC announced three different proposals related to financial advice for retail customers.  The SEC’s press release summarized the proposals:

Under proposed Regulation Best Interest, a broker-dealer would be required to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer.  Regulation Best Interest is designed to make it clear that a broker-dealer may not put its financial interests ahead of the interests of a retail customer in making recommendations.

In addition to the proposed enhancements to the standard of conduct for broker-dealers in Regulation Best Interest, the Commission proposed an interpretation to reaffirm and, in some cases, clarify the Commission’s views of the fiduciary duty that investment advisers owe to their clients.  By highlighting principles relevant to the fiduciary duty, investment advisers and their clients would have greater clarity about advisers’ legal obligations.

Next, the Commission proposed to help address investor confusion about the nature of their relationships with investment professionals through a new short-form disclosure document — a customer or client relationship summary.  Form CRS would provide retail investors with simple, easy-to-understand information about the nature of their relationship with their

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As most readers are likely aware, Donald Trump has no love for the Washington Post, which frequently publishes articles that cast him in a negative light.  The Washington Post is owned by Jeff Bezos, who also is the founder, Chair, CEO, and largest shareholder of Amazon.  Trump’s rage at the Washington Post in general and Bezos as its owner has led him to threaten Amazon, both publicly and privately, with suggestions that – for example – it should pay the Post Office more for shipping, that its taxes should be increased, and perhaps even that it should not have access to certain critical government contracts.  Most recently, he even ordered a review of USPS finances, apparently as a mechanism for targeting Amazon.  As a result, Amazon’s stock price has suffered.

Egan-Jones Proxy Services recently posted a comment on this state of affairs, ultimately arguing that Bezos’s responsibilities to Amazon’s investors include limiting the Washington Post’s coverage.  As Egan-Jones put it, “Unless Mr. Bezos decides and is able to tone down, or better yet eliminate the content which is upsetting the President and his supporters he will continue to find he has created the most…

One new book worth picking up is David Webber’s The Rise of the Working-Class Shareholder: Labor’s Last Best Weapon.  When I heard this book was coming out, I jumped to order it immediately. David Webber is a uniquely talented writer. In the book, he takes the stories of ordinary workers and labor activists and uses them to help explain sophisticated corporate governance concepts. Along the way, he keeps his objectivity intact and resists the urge to mythologize the gritty labor activists that help him present key concepts. For example, he writes that one: “was no saint. He was highly confrontational and abrasive, with a tendency to overplay his hand. I don’t write about him to hold him up as a paragon. I write about him because he . . . punched [his] way to a new set of tactics that must be refined and widely adopted if labor is going to reassert itself in the twenty-first century.”

The balance he brings in his portrayal of labor leaders continues with his discussion of key legal concepts. You’ll find yourself appreciating how much a nuanced understanding of ERISA can improve options. Although it’s nearly impossible to make ERISA engaging, Webber’s writing holds…