SEC Commission Michael Piwowar caused quite a stir last summer when he suggested that the SEC would favorably view submissions by IPO companies that included bylaw provisions requiring mandatory arbitration of securities claims. The idea of mandatory arbitration for shareholder claims has continued to circulate in the intervening months. In the past few days, several current and former SEC Commissioners and SEC representatives have weighed in on the issue, mostly to pour cold water on the idea. Because I believe this idea will continue to percolate, I survey the latest statements below. Even though the most recent statements strongly suggest a lack of support for the idea in many circles, I suspect we will continue to hear more about this issue.
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A Closer Look at Warren Buffett’s Latest Letter to Berkshire Shareholders
The publication of the annual letter of Warren Buffett, Berkshire Hathaway’s legendary Chairman, to the company’s shareholders is a much-anticipated event. Investors and observers value the letter for its comments about investing, the economy, and Buffet’s own outlook for the future, as well as for his occasional doses of humor and worldly wisdom. The 2017 letter, published on the company’s website on Saturday morning, does not disappoint. This year’s version has much to justify a full reading. The letter also has a long real-life parable for the benefit of ordinary investors hoping to maximize their investment gains. The February 24, 2018 letter can be found here. Full disclosure: I own BRK-B shares, although not nearly as many as I wish I did.
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Guest Post: SEC Guidance Affirms Need for Board Oversight of Cybersecurity Risks
As I noted in a post last week, on February 21, the SEC released a statement and guideance for reporting companies with respect to Cybersecurity Disclosure. In light of the statements in the SEC’s new guidance about the responsibility of corporate directors regarding cybersecurity disclosure, David M. Furbush and David M. Lisi of the Pillsbury Winthrop Shaw Pittman law firm have updated their prior guest post on the topic of what corporate directors need to know about cybersecurity. I would like to thank David and David for submitting this update. 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 David and David’s update.
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PLUS Canadian Chapter Event in Toronto
It was my honor and pleasure this past Thursday to be a part of the PLUS Canadian Chapter event in Toronto, Ontario. It was a well-organized and really well-attended event — so well-attended in fact that it was sold out. It was standing room only. I was also fortunate with weather for my visit. There was some occasional sun while I was there and the temperatures were generally mild, at least for this time of year in Canada, so I had a little chance to look around some as well.
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SEC Releases Cybersecurity Disclosure Guidance
After a bit of last-minute drama, the SEC on Wednesday issued its guidance for public company cybersecurity disclosures. The Commission’s guidance document emphasizes companies’ disclosure obligations under existing law and requirements. The statement also underscores the Commission’s concerns about insider trading prohibitions and the obligation of reporting companies to refrain from making selective disclosures about nonpublic information. As discussed below, the Commission’s Democratic members criticized the statement for not going far enough. The Commission’s February 21, 2018 press release about the cybersecurity disclosure guidance can be found here. The Commission’s statement and guidance on cybersecurity disclosure can be found here. SEC Chair Jay Clayton’s statement about the Commission’s guidance can be found here.
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U.S. Supreme Court Adopts Narrow View of Who Can Rely on Dodd-Frank Act’s Anti-Retaliation Protections
The U.S. Supreme Court ruled on February 21, 2018 that the Dodd-Frank Act’s anti-retaliation provisions protect only whistleblowers that make a report to the SEC, and do not apply to whistleblowers who report internally. The Court’s ruling, which resolved a circuit split on the question of who was entitled to the Act’s provisions, will significant limit the scope of the anti-retaliation protections. The Court’s February 21, 2018 opinion in Digital Realty Trust, Inc. v. Somers can be found here.
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Company Capitalizing on Blockchain Mania Draws Securities Suit
One of the most distinct phenomena at the peak of the Internet bubble in the late 90s was the way that so many otherwise entirely ordinary companies added “dot com” to their names to try to cash in on the frenzy. It now looks as if some companies are attempting moves from the same playbook amidst the current cryptocurrency mania. Companies with no prior connection either to bitcoin or blockchain are adopting names or strategies as a way to try to ride the current wave, even where the companies have little or no experience with the technologies. Regulators noting these developments have started sounding the alarm bell. And in at least one instance, these kinds of developments have led to securities litigation.
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New York Court Rejects “Utterly Useless” Disclosure-Only Merger Objection Suit Settlement
In a series of rulings culminating in the January 2016 decision in Trulia (about which refer here), Delaware’s courts have evinced their hostility to the kind of disclosure-only settlement in which merger objection suits are frequently resolved. Since that time, plaintiffs’ lawyers increasingly have filed merger-objection lawsuits outside of Delaware, either in federal court or courts in other states. The question since then has been whether other jurisdictions’ courts would follow Delaware’s courts’ lead in rejecting disclosure-only settlements. Many courts have followed Delaware, but others have followed a different path. In particular, New York, in an intermediate appellate court decision in Gordon v. Verizon (about which refer here), set a lower standard than Delaware’s courts for accepting disclosure-only settlements.
However, the apparently more lenient New York standard did not stop New York Supreme Court Judge Shirley Werner Kornreich from rejecting a proposed disclosure-only settlement of a lawsuit challenging Martin Marietta’s 2014 acquisition of Texas Industries. In a scathing February 8, 2018 opinion (here), Judge Kornreich rejected the proposed settlement as “utterly useless to shareholders.” Her opinion shows that even under New York’s seemingly more lax standard, disclosure only settlements could face significant scrutiny and could be rejected where the additional disclosures do not provide benefits to shareholders.
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Guest Post: Court Requires Insurers to Advance Insureds’ Defense Costs
In the following guest post, Syed Ahmad, Brittany Davidson, and Andrea DeField of Hunton & Williams LLP take a look at a very interesting New York trial court decision relating to D&O insurers’ duty to advance defense costs. I would like to thank the authors for their willingness to allow me to publish their article as a guest post on my site. 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 the authors’ guest post.
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Guest Post: 2017 Year in Review — Securities Litigation
This past year was an eventful one in the corporate and securities litigation arena. In the following guest post, Haynes and Boone, LLP Partners Dan Gold, Kit Addleman, Thad Behrens, Emily Westridge Black, Carrie Huff, Tim Newman, David Siegal, and Odean Volker take a look at the important securities litigation developments during 2017. This article was previously published as a Haynes and Boone client alert. I would like to thank the authors for their willingness to publish their memorandum on this site. I welcome guest post submissions from responsible authors on topics of interest to readers of this site. Please contact me directly if you are interested in submitting a guest post. Here is the authors’ guest post.
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