Securities Law Related Blogs

Policyholders are often surprised when their professional liability insurers contend they (that is, the insurers) have the right, after a determination of non-coverage, to seek recoupment of amounts paid under the policy. These disputes can be controversial enough even when the policy expressly provides the insurer with the right to seek recoupment; the controversy is greater when the policy does not expressly provide for recoupment but the insurer nonetheless seeks reimbursement in reliance on its reservation of its rights to seek recoupment. A recent decision by the Sixth Circuit, applying Michigan law, explored these issues and ultimately affirmed the district court’s ruling that the insurer was entitled to recoup amounts paid in defense after the underlying complaint was amended to remove the only covered claims, even though the policy contained no express recoupment provision. The appellate court’s decision raises several interesting issues, as discussed…

Did you notice electronic funds transferred out of your bank account? Did you authorize these transfers? If your answers are yes and no, respectively, you need to reach out to an Unauthorized Electronic Funds Transfers lawyer in New York, like the lawyers at Malecki Law, to review your circumstances. A threshold determination is whether the account at issue is a consumer account or a commercial/business account. This is because the law generally treats these types of accounts differently. There are two potential avenues for recourse, the Electronic Funds Transfer Act (EFTA) for consumer accounts and Article 4A under the Uniform Commercial Code (UCC) for commercial accounts. Notably, the UCC generally does not apply to scenarios which the EFTA governs. See § 4A-108. Relationship to Electronic Fund Transfer Act for more. You need to have a law firm well-equipped to analyze which law may govern, such as an Unauthorized Electronic Funds Transfers law firm like Malecki Law in…

On 23 April 2024, the European Parliament’s Economic and Monetary Affairs Committee (ECON) published its report on the proposal for a Regulation establishing a European Deposit Insurance Scheme. On 18 April 2024, the European Parliament issued a press release stating that the ECON had adopted the report. The file will be followed up by the new European Parliament after the 6-9 June European elections.

On 22 April 2024, the European Parliament issued a press release stating that it had adopted its position at first reading on the draft Directive on payment services and electronic money services in the internal market (PSD3) and the draft Payment Services Regulation (PSR). The press release provides that MEPs adopted proposals for an open and competitive payment service in the EU, with strong customer protection against fraud and data breaches. The European Parliament proposed changes to the draft PSR, which was adopted with 511 votes to 22 (and 75 abstentions). It also proposed changes to the draft Directive, which was adopted with 484 votes to 8 (and 118 abstentions). The press release adds that: The new rules mean that, to protect transfers, unique identifiers should be verified free of charge and payment services providers (PSPs) should ensure strong customer authentication. A PSP failing to apply appropriate fraud preventing mechanisms would be responsible for…

On 23 April 2024, the Financial Conduct Authority (FCA) published Consultation Paper 24/8 ‘Extending the Sustainability Disclosure Requirements regime to portfolio management’ (CP24/8). In CP24/8 the FCA sets out proposals to extend the Sustainability Disclosure Requirements (SDR) and investment labels regime to portfolio management services. Background On 25 October 2022, the FCA published Consultation Paper 22/20 (CP22/20) setting out proposals for a new anti-greenwashing rule and SDR and investment labels regime. In CP22/20 the FCA consulted on including portfolio management in the SDR and investment labels regime. On 28 November 2023, the FCA published Policy Statement 23/16 (PS23/16) in which it set out final rules and guidance for these measures. The anti-greenwashing rule applies to all FCA-authorised firms that make sustainability-related claims about products and services, while the SDR and investment labels regime applies to UK asset managers.  The…

On 23 April 2024, the Financial Conduct Authority (FCA) published its finalised non-handbook guidance (FG24/3) on the anti-greenwashing rule. The guidance is intended to help firms understand and comply with the anti-greenwashing rule, which comes into force on 31 May 2024. Background The anti-greenwashing rule is part of a package of measures the FCA finalised in 2023 and published in its Policy Statement on sustainability disclosure requirements and investment labels (PS23/16). When the FCA published PS23/16, it also launched a consultation on draft general guidance to support the implementation of the anti-greenwashing rule – for more details, see our briefing. By introducing the anti-greenwashing rule, the FCA aims to clarify to firms that sustainability-related claims about their products and services must be fair, clear and not misleading. It gives the FCA an explicit rule on which to challenge firms if it considers they are making misleading sustainability-related…

In the second in our series of Regulation Tomorrow Plus podcasts on the FCA’s intervention in the motor finance sector, we take a detailed look at the Financial Ombudsman Service (FOS)’s decisions upholding specific complaints in relation to historical discretionary commission arrangements. The decisions were one of the catalysts for the action the FCA is taking in the sector, and in this podcast we discuss the arguments presented by the firms to the FOS as well as the decisions reached by the FOS. The first podcast in this series is available here. Listen to the new episode here.

By Anne Sherry, J.D.A pair of provisions inspired by Enron’s document destruction have applicability beyond the securities context. The D.C. Circuit recently held that the provisions apply to election fraud and to an obstruction charge in the prosecution of a January 6 participant. In oral argument in the appeal of the latter case, the Supreme Court grappled with how broadly to construe Sarbanes-Oxley’s prohibition on “otherwise obstruct[ing]” an official proceeding (U.S. v. Benton, April 19, 2024, Henderson, K.).The criminal law provisions. Sarbanes-Oxley added several provisions to title 18 of the U.S. Code in the wake of Enron and other accounting scandals. Section 1512(c) sets forth the punishment for a person who “corruptly (1) alters, destroys, mutilates, or conceals a record, document, or other object, or attempts to do so, with the intent to impair the object’s integrity or availability for use in an official proceeding; or (2)…

Despite a bit of a checkered reputation, non-SPAC reverse mergers are still a thing, and this excerpt from a recent WilmerHale memo (p. 14) says that there’s been an uptick in these deals and that, for some companies, they are an attractive alternative to an IPO: The trend of declining public company valuations (including a […]

On 22 April 2024, a statutory instrument – the Financial Services and Markets Act 2000 (Disapplication or Modification of Financial Regulator Rules in Individual Cases) Regulations 2024 (the SI) – was published. The Financial Services and Markets Act 2023 (FSMA 2023) introduced several new legislative powers which work together as a set of tools as the Government repeals assimilated law to deliver a Smarter Regulatory Framework (SRF) for financial services. One of the tools introduced by FSMA 2023 is new section 138BA of the Financial Services and Markets Act 2000 (FSMA) which provides a power for HM Treasury to make regulations to grant the financial services regulators the ability to disapply or modify rules made by the regulators under FSMA. As such, the SI, which is made under section 138BA of FSMA, grants the Prudential Regulation Authority (PRA) the ability to disapply or modify the application of any of its rules made under FSMA, where appropriate, to take…

On 22 April 2024, a draft statutory instrument, the Securitisation (Amendment) Regulations 2024 (the draft SI), which makes amends to the Securitisation Regulations 2024, was published alongside a draft Explanatory Memorandum.  The draft SI forms part of HM Treasury’s programme to deliver a Smarter Regulatory Framework for financial services. The Securitisation Regulations 2024 establish the new legislative framework under which financial services regulators will make rules on general requirements for securitisation that apply to firms. The draft SI makes textual amendments to the Securitisation Regulations 2024, so that the resulting law will be contained in a single set of Regulations. The draft SI: Restates due diligence requirements for Occupational Pension Schemes, currently dealt with by the Securitisation Regulation. This is because The Pensions Regulator (which supervises Occupational Pension Schemes) does not have statutory rule-making powers, unlike the…

On 21 April 2024, the House of Commons Treasury Committee published a press release and related correspondence highlighting a ‘surge’ in the number of complaints received by the Financial Ombudsman Service (FOS) in relation to debanking. The Committee flags that data provided in a letter from Abby Thomas, Chief Executive of the FOS, shows an increase in the proportion of complaints which were upheld by the FOS: 36% ruled in the complainant’s favour in the most recent year, compared with 27% or below in each of the previous three years. The letter from the FOS also included data on the number of complaints it has received in relation to ‘restricted account closures’, i.e. cases which involve financial crime concerns, money laundering concerns or where the complaint involves a politically exposed person. Since 2020/21, the volume of complaints related to restricted account closures has almost trebled. The Committee had previously (in February 2024)…

On 22 April 2024, there was published in the Official Journal of the European Union (OJ) Directive (EU) 2024/1174 amending the Bank Recovery and Resolution Directive and the Resolution establishing the Single Resolution Mechanism as regards certain aspects of the minimum requirement for own funds and eligible liabilities. The Directive is sometimes known as the ‘daisy-chain proposal’. On 13 March 2024, the Council of the EU published the draft Directive, with provisional political agreement being reached last December. Furthermore, the European Parliament adopted the text of the draft Directive in February 2024. Next steps The Directive enters into force on the twentieth day following its publication in the OJ. Member States will then adopt and publish measures implementing the Directive six months from the date of entry into force and apply those measures the following day.

In a recently published article, Professors Samantha J. Prince & Joshua P. Fershée focus on the propensity to conflate corporations with limited liability companies: There are nearly nine thousand references to the phrase “limited liability corporation” in court cases. . . .  Most recently, Justice Samuel Alito scribed an op-ed that was published in The Wall Street Journal where he misused theterm. . . . An LLC by Any Other Name Is Still Not a Corporation, 54 Seton Hall L. Rev. 1105 (2024).  The article points out that it is not just courts making this mistake.   For example, the game show Jeopardy! accepted “What is a limited liability corporation?” as the correct answer.    The authors also take issue with the name of the California Corporations Code: Partnerships and LLCs are not corporations and are “unincorporated.”  It is misleading to have this section of the codecalled…

We’re exactly 8 months out from Festivus 2024 (for those who celebrate) – but it is never too early for the Airing of Grievances. Yesterday, the Interfaith Center on Corporate Responsibility filed a notice of exempt solicitation in response to the “scorching diatribe” (John’s words) against shareholder proposals & proponents that Exxon included in its proxy statement earlier this month. ICCR’s statement is also strongly worded. It concludes: Shareholder proponents fully recognize the challenges an authentic commitment to decarbonization presents for the oil and gas sector, and are eager to work with companies like Exxon Mobil to help make the inevitable transition a smoother one for everyone involved. What is not helpful, however, is the company’s adoption of an aggressive stance towards its investors through litigation and disparaging remarks in its proxy statement to silence dissent. Given the existential stakes for both the…

John observed that for Exxon’s lawyers, telling off shareholder proponents in the proxy statement may have been a cathartic exercise. Some people are wondering whether this “all guns blazing” approach also will work to reduce the number of shareholder proposals that the company receives. Please participate in this unscientific, anonymous poll to share your guess: online polls – Liz Dunshee

Last fall, the SEC proposed changes to Edgar with the laudable goal of improving security & reliability for filings. Given all of the other new SEC rules and other things on their plates, corporate secretaries probably haven’t had a lot of time to focus on this proposal. The comment file reflects fewer than 30 comments received to-date. The official comment period has closed, but since the proposal would affect the process for D&O and company codes, it might be worth your while to skim through and contact your filing agent if you see any problems. Or, you can watch this 58-minute demo. Here’s one insightful observation (full disclosure, it is from our wonderful CCRcorp team): Noting page 51 of the proposed rule where it is stated: “A user API token would remain valid for up to one year provided that the user associated with the token logged into the dashboard or one of the EDGAR filing websites at least every 30 days. If the user did not log in at…

Following a lengthy and contentious standard setting process, the Public Company Accounting Oversight Board (PCAOB), the U.S. regulator overseeing the auditors of publicly traded companies, implemented Rule 3211 in 2017. This rule requires audit firms to disclose the name of the engagement partner responsible for each of their public company audits on a public filing with the PCAOB known as Form AP. The rule’s advocates argued that public disclosure of the audit partner’s identity would make the partner more accountable and allow investors to more easily judge the partner’s track record for providing quality audits. Opponents, though, contended that the additional disclosure would not affect audit quality, noting that audit partners were already subject to robust internal quality control and external oversight. Soon after the rule’s implementation, academics cast doubt on the effectiveness and informativeness of these disclosures in the United States, as…

Scholars who study activism have researched the value of a shareholder vote for decades. A very small number of activists have attempted to apply that research to actual proxy contests and other AGM matters. The subject was confined to academics and a couple of creative activists until the Shareholder Vote Exchange (SVE) showed up. SVE now came and went. What remains is the interesting and potentially compelling idea that activists can compensate shareholders in a portfolio company for their votes. At what appears to be less cost than you’d expect, an activist could acquire enough votes to make a difference in a BoD election, deal vote, or other similar matter. SVE Promoted a Clever Idea For a moment in time, SVE created a marketplace where shareholders can sell their votes in a company without selling the underlying shares. Activists that need extra votes for an AGM could post bids for shares. Institutional and individual shareholders that were indifferent to the outcome…

In Macquarie Infrastructure Corp. v. Moab Partners, No. 22-1165, 2024 WL 1588706 (U.S. Apr. 12, 2024) (“MIC”), the United States Supreme Court (Sotomayor, J.) held unanimously that “pure omissions” in a Securities and Exchange Commission (“SEC”) filing do not support liability under SEC Rule 10b-5(b). The Court ruled that the failure to make a required disclosure can give rise to a Rule 10b-5(b) claim only if the non-disclosure renders affirmative “statements made” misleading. Put differently, if a company elects to speak, it must tell the whole truth (or at least “information necessary to ensure that the [affirmative] statements made are clear and complete”); but a company’s silence on an issue is not securities fraud under Rule 10b-5(b), even if the company is otherwise duty-bound to disclose. The facts in this case are straightforward. According to the plaintiff-shareholders’ complaint:…