A Guide to Directors’ Duties and Liabilities in Europe

europeOne of the vestiges of the global financial crisis is that company directors and officers now face more scrutiny than ever. This scrutiny, in turn, has led to a greater liability exposure for corporate officials, as well.  This increased scrutiny and amplified liability exposure applies not only in the U.S., but in other countries, including, in particular, in Europe, according to a recent report. The report, issued earlier this week by the European Confederation of Directors’ Associations (ecoDa) in conjunction with AIG and entitled “Guide to Directors’ Duties and Liabilities” (here) examines the risks facing directors of European countries and highlights the specific risks in a number of countries. As the report details, the nature of directors’ duties and liabilities and the manner in which they are enforced can be affected by the differences in legal environments and board structures across Europe. The report also discusses the role of D&O insurance in helping to address these risks. The October 5, 2015 press release from ecoDa about the report’s publication can be found here.   Continue Reading

Guest Post: Access to Internal Investigation Records by Shareholders


Mary Gill


Courtney Quirós

In many instances when allegations of wrongdoing surface at a company, the appropriate course for the company’s board will be to appoint an independent committee to investigate the allegations. The investigation can be conducted in a way to preserve confidential information and privileges. However, recent case law developments underscore the fact that in some instances the company’s shareholders may have access to the records of the investigation even when all steps are taken to preserve confidentiality and privileges. In the following guest post, Mary Gill and Courtney Quirós of the Alston & Bird law firm take a look at the recent case law developments and consider the implications of these recent cases.  Mary is a partner and Courtney is an associate in the Securities Litigation Group at the firm.  This article was prepared for a panel at the 23rd Annual Securities Litigation and Regulatory Practice Seminar, to be held in Atlanta on October 23, 2015.


I would like to thank Mary and Courtney for their willingness to publish their guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Mary and Courtney’s guest post.




I. Introduction

In the current environment, it is not uncommon for a company, its executives, or directors to be presented with allegations of wrongdoing.    Whether the issues are raised by a concerned or disgruntled employee, the Securities Exchange Commission, or the Department of Justice, the company should be prepared to promptly determine the nature and severity of the potential problem.  Generally, the appropriate course in these situations is for the board of directors of the company to appoint an independent committee to oversee an internal investigation into the allegations.  Through an internal investigation, the company can determine the factual nature and scope of the alleged misconduct and analyze the legal implications of the situation, which will allow the company’s board of directors to take appropriate remedial action if necessary. The investigation should be conducted in such a way to achieve maximum credibility, integrity, and accuracy, while at the same time preserving all applicable privileges and legal defenses for the company to the greatest extent possible.  A recent Delaware Supreme Court decision serves as a reminder that even where companies and their counsel take care to protect the confidentiality of an internal investigation, there is no guarantee against shareholders’ access to these records. Continue Reading

Defense Costs Paid Under Reservation of Rights Do Not Erode Fiduciary Liability Policy’s Limit of Liability?

missAs part of our beat here at the The D&O Diary, we read a lot of judicial opinions. We are quite accustomed to the fact that the case outcomes can be and often are all over the map. Just the same, every now and then we read a decision that really makes us scratch our heads. That was our reaction when we read Southern District of Mississippi Chief Judge Louis Guirola, Jr.’s October 2, 2015 opinion in the Singing River Health Systems case (here), in which Judge Guirola, applying Mississippi law, held that when a fiduciary liability insurer defends its insured under a reservation of rights, the defense expense payments do not erode the policy’s limits of liability. A number of questions and concerns may fairly be raised about this decision, as discussed below. The Traub Lieberman Insurance Law Blog has an October 5, 2015 post about Judge Guirola’s decision, here. Continue Reading

Guest Post: Supreme Court Declines To Consider Second Circuit’s Landmark Insider Trading Ruling

paul weiss largeThe U.S. government’s petition for writ of certiorari in the case of United States v. Newman had been very closely watched. The government hoped to have the Supreme Court set aside the Second Circuit’s 2014 decision in the case (here), which had overturned the convictions of two hedge fund managers accused of insider trading. In an unexpected development, on the first day of the Supreme Court’s 2015-16 term, the Court declined take up the case.


The following guest post from the Paul Weiss law firm takes a look at this development and analyzes the implications. I would like to that the authors for their willingness to publish their article on this blog. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the Paul Weiss firm’s guest post.




Yesterday, the United States Supreme Court declined to hear the petition for a writ of certiorari (the “Petition”)  filed by the United States Department of Justice (“DOJ”) in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), a landmark decision that dismissed indictments against two insider trading defendants.  By declining to hear the Petition, the Supreme Court ensured that the Second Circuit’s decision in Newman will remain binding in the Second Circuit and influential across the country.


As we explain below, two of Newman’s holdings are particularly important: first, that the government must prove that a remote tippee knew or should have known of the personal benefit received by a tipper in exchange for disclosing nonpublic information; and second, that the benefits alleged by the government in United States v. Newman were not sufficient to support a conviction, as they were not sufficiently “consequential.” Continue Reading

Tesco Securities Suit: Applicability of U.S. Securities Laws to Unlisted ADRs?

tescoIt has been over five years since the U.S. Supreme Court’s June 2010 decision in Morrison v. National Australia Bank restricted the ability of shareholders of non-U.S. companies who purchased their shares outside the U.S. to file securities fraud lawsuit in U.S. courts under the U.S. securities laws. During that five year period, the lower courts have sorted out many of the issues the Morrison decision raises. But one issue continues to percolate – that is, the question of Morrison’s effect on securities suits brought in U.S. court under U.S. law against non-U.S. companies by investors who purchased the companies’ unlisted ADRs over- the-counter in the U.S. The investor lawsuits filed in U.S. court just in the last few days by holders of unlisted Volkswagen ADRs raise this very issue.


The action filed in Southern District of New York in October 2014 by holders of unlisted ADRs of Tesco raise these same issues as well. The parties’ briefing in connection with the defendants’ motion to dismiss in the Tesco case present a detailed examination of the issues involved in the question of the applicability of Morrison to transactions in unlisted ADRs, as discussed below. Continue Reading

Litigation Funding Firm Announces German Securities Action on Behalf of Volkswagen’s German Shareholders

vwThe recent revelation that Volkswagen had been using a sophisticated software “defeat device” to rig the emissions performance of some of its diesel-engine base vehicles devastated the price of the company’s shares, leading to the filing of a securities class action lawsuit in the U.S. on behalf of purchasers of the company’s ADRs, as well the initiation of efforts to launch procedures in the Netherlands on behalf of VW shareholders who purchased the company’s shares through a Dutch bank or broker.


In my recent post discussing these VW-related securities litigation developments, I raised the question whether investors might also try to file a separate action against VW in Germany, under German law, on behalf of shareholders who purchased their VW shares in Germany. It now appears that a litigation funding firm’s effort to organize a German shareholder action is already underway. Continue Reading

D&O Insurance: HIPAA Supoenas, Interrelatedness, and Regulatory Claim Sublimits

caliIn an interesting September 30, 2015 opinion, Southern District of California Cynthia Bashant, applying California law, held that a series of HIPAA-related subpoenas that the U.S. Department of Justice served on Millennium Laboratories were not interrelated with prior qui tam lawsuits that had been filed against the company, and held further that coverage under Millennium’s D&O insurance policy for the company’s costs of responding to the subpoenas was not limited by the policy’s $100,000 sublimit for Regulatory Claims. A copy of Judge Bashant’s opinion can be found here. Continue Reading

A New U.K. Class Action Litigation Wave?

uk flagIs collective action litigation in the U.K. about to get a significant boost? That is the question many are asking as the new collective action regime introduced by the Consumer Rights Act of 2015 goes into effect on October 1, 2015. The Act’s provisions facilitate collective proceedings for competition law breaches before the Competition Appeal Tribunal (the CAT), by granting the CAT the power to grant collective proceedings orders and to grant collective settlement orders. As discussed in a September 30, 2015 memo from the Allen & Overy law firm (here), these changes have raised concerns that the new regime will “lead to a surge of U.S.-style class actions in the U.K.” Continue Reading

Thinking About Directors’ Duties and Directors’ Liabilities

board-of-directorsWhen the U.S. Department of Justice recently announced a renewed emphasis on the prosecution of individual directors and officers in instances of corporate misconduct, it raised the possibility that in the future we could see increased numbers of corporate officials prosecuted and convicted for actions they took as representatives of their company. There are times when popular sentiment rallies in favor of the prosecution of corporate officials – as, for example, was the case during and after the recent global financial crisis. And while there have been instances in the U.S. where corporate officials have in fact been convicted for criminal misconduct, it has been rare. I suspect that even under the new guidelines it will be only the unusual or egregious cases that will involve criminal prosecutions of individuals.


Of course, it is not preordained that criminal prosecutions of corporate individuals should be rare. In fact, there are places now where criminal prosecutions of corporate officials are more common. One of those places is China, as discussed in Steve Dickinson’s  September 26, 2015 China Law Blog post entitled “China Company Directors and China Criminal Liability” (here). Dickinson’s discussion of these issues raises some interesting questions about the role of criminal law in policing director misconduct. Continue Reading

Guest Post: SEC’s Regulatory Action Against R.T. Jones: Did the Other Cybersecurity Shoe Just Drop?

weilOn September 22, 2015, in what has been described as the SEC’s first cybersecurity-related enforcement action, the SEC announced that it had entered a settlement St. Louis-based investment advisor R.T. Jones Capital Equities Management, Inc., based on charges that the company had failed to establish the required cybersecurity policies and procedures in advance of a breach that compromised the personally identifiable information (PII) of approximately 100,000 individuals, including thousands of the firm’s clients.  A copy of the SEC’s order related to the settlement can be found here.


In the following guest post, David Wohl and Paul Ferrillo of the Weil Gotshal law firm take a look at the SEC’s settlement with R.T. Jones and examine the implications of the settlement, and of the recent guidance from SEC’s Office of Investor Education and Advocacy, for future regulatory action, from the SEC and other agencies. A version of the guest post previously was published as a Weil client alert.


I would like to thank David and Paul for their willingness to publish their article on this blog. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is David and Paul’s guest post.




Just days after the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued its second round of cybersecurity guidance for its upcoming examinations of registered investment advisers and broker-dealers,[i] the SEC settled an administrative proceeding on cybersecurity issues arising out of a breach at a registered investment adviser, R.T. Jones Capital Equities Management, Inc.  (“R.T. Jones”).[ii]  As a result of the settlement, R.T. Jones was censured and fined $75,000.  On the heels of the recent OCIE guidance and following a year of major cybersecurity breaches (especially at financial institutions),[iii] this proceeding is instructive on a number of points, especially on the question “What happens when you don’t adopt policies and procedures to safeguard client data?” Continue Reading