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On Tuesday, in my Financial Crisis seminar, we discussed the types of securities claims that have been filed by investors in mortgage-backed securities.  I opened by telling my students that one of the critical takeaway points is the importance of civil procedure.  The substance of the law matters, sure, but (as I posted when discussing class action standing), cases are won and lost on procedural grounds.

Case in point: Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, which was argued before the Supreme Court on Monday.  (Transcript here.)  Omnicare concerns the question of opinion-falsity in the context of claims under Section 11 of the Securities Act of 1933. 

Section 11 of the Securities Act imposes strict liability on issuers who include false statements of material fact in registration statements.  In a case called Virginia Bankshares, Inc. v. Sandberg, the Supreme Court held that even expressions of opinion may count as “material facts” for the purposes of the securities laws – such as, for example, a proxy statement that recommends a merger as “fair” to shareholders.  In Omnicare, the Supreme Court will decide what, exactly, it means for a statement of opinion to…

Bear with me while I connect a loose thread between my research interests and the BLPB readership’s broader interests and talk about the legal status of plan advisors to investment accounts (think 401k).  More so than with a traditional benefits plan (think pension) fiduciaries and their corresponding duties raise difficult questions in the context of self-directed retirement accounts (again, think 401k). Standing  between employee/beneficiary and the investment assets are a myriad of third parties servicing the plan– like the employer sponsor, the plan administrator, the record keeper, the plan advisor, the organizational machines of the individual funds listed in the plans.  Each of these parties touch the assets in some way and effect the outcome of the investment at least in some respect.  Not all of these third parties, however, are fiduciaries under ERISA and even those that are, often owe diluted fiduciary duties to beneficiaries due to the “self-direction” that you and I exercise over our retirement accounts by allocating between stocks and bonds or target date funds when we were hired, or annually for those of us that actively monitor our accounts.  (For those ERISA folks out there, forgive this over simplification).

A big legal issue in the…

Skittles

(demonstrating that variety isn’t always a good thing)

Well, Halloween was yesterday, but the chocolate-y remains will last for … at least another 5 3 2 hours.  Which brings me to this article on how, despite increases in chocolate prices, sales of chocolate continue to rise:

Chocolate candy sales for last Halloween hit $217 million, up 12 percent from the year before, the consumer market research firm Packaged Facts reported in September. For all of 2013, the American market for chocolate grew 4 percent, to $21 billion in sales. But chocolate lovers took a hit this summer, when Hershey and Mars announced price increases of 8 percent and 7 percent…  But don’t expect higher prices to dampen sales, analysts said….

Chocolate makers have also adopted a marketing strategy that is increasingly driving sales: the variety bag, a single package filled with several different types of bars. Mars said sales of the variety bag it introduced a few years ago (with Milky Ways, Three Musketeers and such) grew by 14.5 percent in 2012, accounting for 54 percent of its total Halloween sales growth, and have remained strong.

Scientists who research how our brains respond to food have another term for variety:

…

Compliance is a hot business law topic in and outside of the industry.  JD as compliance officers is a very likely future as law schools respond to hiring market pressures and what corporate employers’ need.  So what does this mean in terms of curriculum and in a future practice?  A handful of law schools now offer courses focusing on compliance (see this Harvard Forum on Corporate Goverance and Financial Regulation Post from May 2014).  Professors like Jenifer Arlen as the Director of the Program on Corporate Compliance and Enforcement at NYU and Mike Koehler, at Southern Illinois University School of Law with his FCPA Professor Blog, are certainly pioneers in the emerging field.  At my law school–Georgia State University in Atlanta, GA–we are wondering how best to utilize the industry resources in our backyard.  I am a new board member of a compliance-focused round table that draws membership from our fortune 500 corporate neighbors . With these questions at the forefront of my mind, I found today’s article on the FCPA Blog (an industry-focused resource) titled, Memo to law schools: The world needs compliance officers to be particularly interesting. In this post, law schools are encourged to:

Teach [students]

…

Minor Myers and Charles Korsmo have a new paper that compares fiduciary duty merger litigation to appraisal litigation to determine whether fiduciary duty claims add any value for shareholders. 

After scrutinizing takeover challenges between 2004 and 2013, they find that the larger the deal, the more likely it is to be targeted in a fiduciary duty class action.  By contrast, whether there is a smaller merger premium – regardless of deal size – does not appear to be correlated with class action litigation.  Appraisal litigation, however, works differently; plaintiffs who bring appraisal claims tend to do so when the merger premium is low, regardless of deal size.

They also found that fiduciary suits are not associated with an increase in merger consideration.  I.e., they do not generate statistically significant benefits to shareholders.

Myers and Korsmo conclude from this that fiduciary duty class actions are not usually based on merit, and that such actions are brought for their nuisance value.  They recommend changes to the structure of fiduciary litigation, such as allowing investors who acquire stock after the deal announcement to serve as lead plaintiff, and switching to an opt-in model.

But there’s a wrinkle that comes in the form of…

928 days.

That’s how long we’ve been waiting for the SEC’s exemption for crowdfunded securities offerings.

The JOBS Act, which authorized the crowdfunding exemption, was signed by President Obama on April 5, 2012. The act required the SEC to enact the necessary rules within 270 days. The SEC has now missed that deadline, December 31, 2012, by 658 days.

To put it in context, when the JOBS Act passed, I had three grandchildren. I now have six. I may have great grandchildren by the time the SEC acts.

The 270-day deadline was unrealistic, given the time required to draft rules from scratch and the delay imposed by the notice-and-comment requirements of the Administrative Procedure Act. But the SEC finally proposed the rules on October 23, 2013, almost a year ago. The deadline for commenting on the proposal expired last February and the SEC still hasn’t done anything. It’s getting a little ridiculous.

I’m on record that the crowdfunding exemption passed by Congress is unlikely to be very useful. (See my article analyzing the JOBS Act’s crowdfunding provisions.) But we won’t know until we actually have a crowdfunding exemption. At the SEC’s current rate of progress, some new technology…