SEC: Whistleblower Reports and Awards Continue at Elevated Levels

According to the latest annual report from the SEC’s Office of the Whistleblower, the number of whistleblower reports and the total value of whistleblower awards continued at elevated levels during fiscal 2019 (which ended September 30, 2019). Though the reports and awards remained high during the fiscal year, both were down relative to the prior fiscal year. And while the aggregate award values and even several individual awards during the fiscal year are impressive, the small number of awards relative to the vast numbers of whistleblower reports is noteworthy and striking, as is discussed further below. The Office of the Whistleblower’s November 15, 2019 report can be found here. Continue Reading

Multiplied and Parallel Litigation: The Mess that Cyan has Wrought

As observers have discussed the kinds of problems that the U.S. Supreme Court’s Cyan decision can create, specific concerns have included the possibility of parallel state and federal court litigation, and even the possibility of parallel litigation in multiple states. In the course of the discussion of these issues, these litigation risks might have seemed merely theoretical. However, a series of lawsuits filed against a recent IPO company show that these kinds of multiple and parallel litigation risks are far from merely theoretical. The raft of jurisdictionally complicated litigation the company now faces shows the extent of the problems that Cyan creates. The company’s situation also underscores the dramatic need for Congress to address revise the securities laws in order to prevent these kinds of situations. Continue Reading

Insurer’s Bid to Dismiss Complaint Seeking Coverage for Payment Instruction Loss Denied

One of the more challenging issues businesses must confront as wrongdoers have turned Internet tools into criminal devices has been the rising threat of payment instruction fraud, or, as it is sometimes called, social engineering fraud. Along with these crimes have come vexing questions of insurance coverage for the ensuing losses. Courts have struggled to determine whether or not payment instruction fraud losses are covered under Crime policies. A recent case in the Southern District of New York raises the question whether a payment instruction fraud loss is covered not under a Crime policy but rather under insurance policy containing both E&O and Cyber coverages. Continue Reading

The SEC’s Enforcement Division Reports Elevated Enforcement Action and Monetary Recovery Levels

The SEC’s Enforcement Division had another active enforcement year in fiscal 2019, which ended September 30, 2019, that resulted in substantial recoveries. According to the Division’s latest annual report, the agency pursued more enforcement actions in fiscal 2019, including more standalone actions, than in the past several years. The agency’s enforcement action monetary recoveries, including both penalties and disgorgement, also were at the highest level in years. As the report points out, the agency maintained this level of activity and recoveries despite a number of factors – what the report describes as “significant headwinds” — that constrained the agency’s efforts and recoveries. The Enforcement Division’s November 6, 2019 annual report can be found here. The agency’s November 6, 2019 press release about the report can be found here. Continue Reading

PLUS Conference in Washington         

This week, I was at the Gaylord National Harbor outside Washington D.C. to attend the annual PLUS Conference event, with more than a thousand industry colleagues and friends. As always, it is a great fun to be able to be a part of this event and to catch up with so many professionals from around the industry. Continue Reading

WeWork, SoftBank, Neumann Hit with Shareholder Lawsuit

WeWork may not have been able to complete its once-planned IPO, but even so it now has something that many IPO companies often experience – a shareholder class action lawsuit. On November 4, 2019, a WeWork investor filed a lawsuit in California state court on behalf the company’s minority shareholders as well as on behalf of the company itself. As discussed below, the shareholder complaint makes a number of interesting allegations and raises some interesting issues as well. Continue Reading

Autumnal London

The D&O Diary is on assignment in Europe this week, with the first stop on the itinerary in London. I have been to London in November many times before and I know that the weather can be OK or it can be lousy. On this trip,  I had a pretty even mixture of both. But even if there were no single full day of sunshine, there was also no single entirely rainy day. In between the intermittent rain, I had several chances to enjoy some late fall sunshine in London. Continue Reading

SEC’s Whistleblower Protections Extend Beyond Just Employees

While the most common type of whistleblower may be a disgruntled employee, others can be whistleblowers, too. And as a recent SEC enforcement action highlights, interfering with these others’ attempts to communicate with the SEC can violate the agency’s whistleblower protection rules. In an amended complaint filed on November 4, 2019 in a pending SEC enforcement action, the agency alleges that the defendant company and one of its principals violated the SEC’s whistleblower rules by requiring the company’s investors to enter agreements in which the investors agreed not to contact the SEC or other regulatory enforcement authorities. The SEC alleges that these actions violated the agency’s whistleblower rules. A copy of the SEC’s November 4, 2019 press release about the amended complaint can be found here.   Continue Reading

Delaware Supreme Court: What is a “Securities Claim”?

Most public company D&O insurance policies provide coverage for the corporate entity only for “Securities Claims.” But what constitutes a “Securities Claim”? That is the question the Delaware Supreme Court addressed in a recent appeal of an insurance coverage dispute in which a bankruptcy trustee had sued Verizon for breach of fiduciary duty, unlawful payment of a dividend, and violation of the uniform fraudulent transfer act. The trial court had entered summary judgment for Verizon, ruling that the bankruptcy trustee’s claims represented “Securities Claims” within the meaning of the policy. In an October 31, 2019 decision (here), the Delaware Supreme Court reversed the lower court, ruling that the bankruptcy trustee’s claims were not Securities Claims within the meaning of the policy. As discussed below, the decision raises some interesting issues. Continue Reading