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The directors’ and officers’ liability environment is always changing, but 2024 was a particularly eventful year, with important consequences for the D&O insurance marketplace. The past year’s many developments also have significant implications for what may lie ahead in 2025 – and possibly for years to come.  I have set out below the Top Ten D&O Stories of 2024, with a focus on future implications. Please note that on Wednesday, January 15, 2025 at 11:00 AM EST, my colleagues Marissa Streckfus, Chris Bertola, and I will be conducting a free, hour-long webinar in which we will discuss The Top Ten D&O Stories of 2024. Registration for the webinar can be found here. I hope you can join us for the webinar.Continue Reading The Top Ten D&O Stories of 2024

The number of federal court securities class action lawsuit filings increased in 2024 for the second year in a row, to the highest level since 2020. The increased number of federal court securities suit filings during the past year is due to several factors, including continuing filings relating to ongoing trends such as new lawsuit filings relating to SPACs, COVID-related suits, and cryptocurrencies, as discussed further below.Continue Reading Federal Court Securities Class Action Lawsuit Filings Increased in 2024

After the November 2022 debut of ChatGPT, the public commentariat pitched itself into a virtual frenzy declaring AI’s transformative or even catastrophic potential. However, from my perspective, the reality of AI, at least so far, is that, while AI-powered tools are sometimes impressive and occasionally amazing, the AI-generated results are sometimes clunky or non-responsive and often error-filed. I am skeptical of much of the AI hype.

However, over this past weekend, I used a new AI-powered tool that absolutely blew my mind. For the first time ever, I see the sheer raw potential of AI – and yes, I now see its transformative power as well.Continue Reading I Can See the Future. You Can, Too. (Seriously. The Future. Except, You Know, Now.)

Investors and entrepreneurs everywhere are impressed with the potentially transformative promise of artificial intelligence. Unfortunately, AI’s seemingly unlimited promise has also attracted companies and other players who, in order to participate in the current AI wave, overstate their AI capabilities. These kinds of statements have already attracted the attention of plaintiffs’ lawyers and the SEC. Now the Federal Trade Commission (FTC) has gotten into the act. The agency has launched a “crackdown on deceptive AI claims and schemes” called Operation AI Comply. In a September 25, 2024, press release (here), the FTC announced five recent law enforcement actions the agency has launched against “operations that use AI hype or sell AI technology that can be used in deceptive and unfair ways.” The agency’s initiative highlights the regulatory scrutiny companies can face with respect to the AI-related operations and marketing.Continue Reading FTC Crackdown Highlights AI-Related Regulatory Risk

In recent months, the SEC Chair and other government officials have made it clear that they are closely watching for companies that try to catch the AI wave by making exaggerated or false claims about the AI capabilities of their products or services. In the latest example of the crack down on these kinds of AI-related misrepresentations, both the U.S. Attorney  for the Southern District of New York and the SEC have filed charges against the former CEO and Chairman of the tech company Kubient. The government alleges that the executive, Paul Roberts, inflated the company’s revenues and also lied about one of its signature products, an AI-powered tool that was supposed to detect ad fraud in the digital advertising industry. There are some interesting features of the charges against Roberts, as discussed below.Continue Reading Tech Exec Charged with AI-Related Misrepresentations and Fraudulent Revenue Recognition

At this point, there is nearly universal agreement that artificial intelligence (AI) is (or at least will be) transformative. It is also clear that as companies struggle to adapt to the new technology, they also face a host of challenges, including disclosure and regulatory risks, and the related risk of litigation. As a result, AI poses an exceptionally difficult set of circumstances for corporate directors, as discussed in an August 14, 2024, Wall Street Journal article entitled “Why AI Risks Are Keeping Board Members Up at Night” (here). As the article makes clear, while many directors recognize the importance of getting a handle on AI and how it might affect their companies, they are struggling to find the right approach even as AI-related questions become more pervasive.Continue Reading Boards of Directors and AI-Related Concerns

The rise of artificial intelligence (AI) presents just about every enterprise with both opportunities and risks. AI also represents a challenge for companies and their boards as the companies seek to incorporate AI Into operations, functions, and processes. Because of AI’s potentially disruptive impact in many industries and for individual companies, many boards may find themselves under scrutiny for the way they address the risks associated with AI. All of which raises the question of the appropriate ways for boards to address and manage the AI-associated risks, a topic discussed in a July 22, 2024, Harvard Law School Forum on Corporate Governance post by attorneys from Debevoise & Plimpton law firm entitled “AI: Are Boards Paying Attention?” (here).  Continue Reading Artificial Intelligence and Corporate Boards

In a speech last December, as well as in several subsequent statements, SEC Chair Gary Gensler has emphasized the agency’s concerns with companies that are over-hyping their artificial intelligence (AI) capabilities in ways that mislead investors. In March, the agency filed enforcement actions against two investment advisors that allegedly misled investors about the firms’ AI-enabled services.

In the latest example of the agency’s AI-related campaign, earlier this week the agency filed an enforcement action against the CEO and Founder of Joonko Diversity, Inc., an Artificial Intelligence-based employee recruitment startup, alleging among other things that the individual made false AI-related claims about the company’s services. In bringing the action, the agency emphasized the significance of the action’s AI-related allegations. A copy of the agency’s June 11, 2024, press release about the action can be found here. The agency’s complaint in the action can be found here.Continue Reading SEC Files “AI-Washing” Enforcement Action Against AI-Based Start-Up Founder

In the following guest post, Ed Whitworth, the Head of Financial Lines at Inigo, and Yera Patel, Chief Legal officer and Head of Financial Lines Claims for Inigo, summarize the results of a recent survey Inigo conducted of U.S. securities litigation defense counsel. The original of the survey summary previously was published on Inigo’s blog, here. I would like to thank Ed, Yera, and Inigo for allowing me to publish the report summary on this site. I welcome guest post submissions from responsible authors on topics of interest to the blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article. Continue Reading Guest Post: Inigo’s 2024 Defense Counsel Survey