Companies navigating the current heath crisis and dealing with its financial effects face a number of risks. Among the many risks is the possibility of business litigation. For publicly traded companies, the litigation risks include the possibility of securities class action litigation. Even in the midst of a pandemic, the steps companies can take to try to mitigate their securities class action litigation remain the same – manage disclosures, control insider trading, and handle bad news appropriately, among other things – but the coronavirus outbreak has added new dimensions to these steps. Well-advised companies will be making the appropriate adjustments, and, as discussed below, D&O insurance underwriters will be (or perhaps, should be) monitoring companies closely to see which companies are making the adjustments.
Continue Reading Securities Litigation Loss Prevention in the Midst of a Pandemic

If the uncertainty creates risk, then the current state of play on the United Kingdom’s efforts to withdraw from the European Union represents risk in a highly concentrated form. On November 25, 2018, the 27 EU members approved the divorce pact that the U.K. negotiated with its EU counterparts, but the pact must now face a Parliamentary vote, on December 11, 2018. In the meantime, the March 29, 2019 withdrawal date looms. These upcoming events present uncertainties at both the economic and enterprise levels. The uncertainties in turn create challenges for potentially affected companies, including among other things the challenge of communicating about these issues to investors. As discussed below, SEC Chair Jay Clayton recently emphasized that the agency is “sharpening its focus” on Brexit-related disclosures, highlighting the significance of the disclosure-related concerns.
Continue Reading Brexit Uncertainty, Disclosure Concerns, and Potential Liability

sup ct 5In the D&O insurance world, private company liabilities, exposures, and insurance are viewed as categorically distinct from public company liabilities, exposures, and insurance. There are completely separate and distinct insurance policy forms for each of the two categories of companies. In this traditional view, one of the key distinctions between two kinds of companies is the potential liability of public companies and their directors and officers under the federal securities laws. However, it has recently become apparent to me that this perceived difference between the two categories of companies may be less distinct than I had perceived. For example, as I noted in a recent post, the SEC has recently made it clear it is watching private companies, and is particularly concerned with so-called “unicorns” (private start-up firms with valuations greater than $1 billion).

This issue of the potential private company liabilities under the federal securities laws came up again for me recently when I read about a petition for a writ of certiorari that a securities claim plaintiff has filed in the U.S. Supreme Court. As discussed in a June 8, 2016 post on Jim Hamilton’s World of Securities Litigation (here), the petition asks the Court to address the question whether a privately held corporation trading in its own stock has an Exchange Act duty to disclose all material information or abstain from trading. As discussed below, the petition and the underlying claim raise important questions about the potential liabilities of private companies under the federal securities laws. The May 31, 2016 cert petition in the case of Fried v. Stiefel Laboratories, Inc. can be found here.
Continue Reading Supreme Court Asked to Clarify Private Company’s Federal Securities Law Stock Purchase Disclosure Duties