Securities Law Related Blogs

FBI’s “Most Wanted” William Berg Arrested for Defrauding Investors Former Iowa financial advisor William Jack Berg, who was purportedly on the FBI’s “most wanted” list, has reportedly been arrested on charges of wire fraud and money laundering, according to an article in Think Advisor this week. Berg is accused of swindling over a dozen clients out of $1.5 million and using the money for personal benefit. He faces 14 counts of fraud and one money-laundering count.  He allegedly acted as a financial advisor and sold various financial products to clients, concealing his sole ownership of the investment firms he recommended. The purported investments included W holdings of Iowa and Excel Performance Management, according to the indictment. He was reportedly arrested in Kansas on April 4 following a tip to the FBI. Berg, last registered as an investment advisor with Royal Fund Management from 2018 until 2021, operated in central Iowa…

On 18 April 2024, the European Supervisory Authorities (ESAs) issued a consultation paper containing a draft regulatory technical standard (RTS) on the harmonisation of conditions enabling the conduct of the oversight activities under Article 41(1) point (c) of Regulation (EU) 2022/2554 on digital operational resilience for the financial sector (DORA). Specifically, the draft RTS is aimed at specifying the criteria for determining the composition of the joint examination team, their designation of tasks, and working arrangements. A consultation paper covering the RTS under Article 41(1) points (a), (b) and (d) was published on 8 December 2023 and closed for comment on 4 March 2024. These draft RTS cover the: Information to be provided by an ICT third–party service provider in the application for a voluntary request to be designated as critical under Article 31(11). Content, structure and format of the information to be submitted, disclosed or reported by the ICT…

On 18 April 2024, the European Parliament issued a press release stating that the Economic and Monetary Affairs Committee had adopted a report on the proposed Regulation establishing the European Deposit Insurance Scheme (EDIS). MEPs approved the report with 26 votes to 18 and 3 abstentions. The file will be followed up by the new European Parliament after the 6-9 June European elections. The EDIS proposal builds on the system of national deposit guarantee schemes (DGS) regulated by Deposit Guarantee Directive. The scheme will develop in different stages and the contributions of EDIS will progressively increase over time. At the final stage of the EDIS set up, the protection of bank deposits will be fully financed by EDIS, supported by close cooperation with national DGSs. The ECON report deals with the first stage of a EDIS whereby it would operate as liquidity scheme providing loans to participating DGSs.

On 18 April 2024, the European Parliament issued a press release stating that the Economic and Monetary Affairs Committee had adopted a report on the proposed Regulation on a framework for financial data access (FIDA). MEPs approved the report with 43 votes to 1 and 5 abstentions. The file will be followed up by the new European Parliament after the 6-9 June European elections. The FIDA proposal seeks to enable consumers and firms to control access more efficiently to their financial data beyond payments thereby allowing them to benefit from financial products and services that are tailored to meet their needs while keeping in check associated risks. This represents a shift from open banking with the revised Payment Services Directive towards open finance that should also promote digital transformation and speed up the adoption of data-driven business models in the EU financial sector.

By John Filar AtwoodCrypto and SPACs are recent examples of where intense interest in an emerging technology or product increased investor risk, sometimes with disastrous results, and should put companies and investors on notice about AI, according to SEC Enforcement Director Gurbir Grewal. In remarks at the corporate compliance and enforcement spring conference, he urged proactive compliance on the part of stakeholders in the form of education, engagement, and execution.Grewal is concerned that AI could be subject to the same “perfect storm of risk”—strong investor interest, noncompliance, weak controls, and under-empowered gatekeepers—that led to crypto market failures like FTX and Terraform. While many factors were at play, he said that a throughline is that elevated investor interest often leads to elevated investor risk.Read the rest of the story and other securities news from Wolters Kluwer on VitalLaw.com.

Last month, I blogged about the SEC’s recent focus on “AI Washing,” or the practice of making potentially false and misleading statements about artificial intelligence as the frenzy continues regarding the impact of the evolving technology. SEC Enforcement Director Gurbir Grewal has now weighed in on how companies can use “proactive compliance” to avoid AI washing problems, in a speech at the Program on Corporate Compliance and Enforcement Spring Conference 2024. Building on the concepts from a speech last year that articulated his concept of “proactive compliance,” Director Grewal noted that the practice requires three things: education, engagement, and execution. He explained: First, educate yourselves about emerging and heightened AI risk areas as they relate to your businesses. That means reading the AI-related enforcement actions I mentioned. It means reviewing any future enforcement actions that may follow in this space. It also…

Zach Barlow recently noted in the PracticalESG.com blog that the U.S. Chamber of Commerce has moved to intervene in The Sierra Club’s challenge to the SEC’s climate disclosures rules. Zach notes: If the intervention is allowed by the court, this would mean that the Chamber of Commerce is both challenging the rule and defending it in the consolidated litigation. Cooley explains the confusion stating: “The Chamber of Commerce has moved for leave to intervene in the cases brought by the Sierra Club and the NRDC ‘to defend those portions of the final rule that refrained from imposing the additional disclosure requirements the environmental groups would have this Court require the SEC to impose. ‘The Sierra Club, the motion contends, ‘intends to argue that the SEC should have required public companies to disclose not only their own greenhouse-gas emissions, but also the emissions from the ‘use of [their] products’ and across their…

I was in San Francisco this week, and that got me thinking about our upcoming 2024 Proxy Disclosure & 21st Annual Executive Compensation Conferences, which are coming up on October 14-15. While October seems like a long time from now, it will be here before you know it and you will definitely want to be part of our big return to in-person conferences! If you act now, you can take advantage of our early bird pricing. You can register now by one of two methods: by visiting our online store or by calling us at 800-737-1271. – Dave Lynn

Shortly after the Inflation Reduction Act was signed into law, a number of tricky interpretive issues regarding the stock repurchase excise tax were identified, and the IRS published temporary interim guidance in Notice 2023-2. John blogged about the application of that interim guidance to SPACs in early 2023. Earlier this month, the Treasury Department and […]

The recent Federal Court decision in ASIC v Auto & General Insurance Company Limited [2024] FCA 272 is the first decision to apply the unfair contract terms (UCT) regime in the context of insurance since its expansion to insurance policies on 5 April 2021. On 22 March 2024, Jackman J delivered a judgment in favour of Auto & General Insurance Company Ltd (Auto & General), holding that a term requiring policyholders to disclose any changes to their home and contents is not unfair. The judgment also considers the interaction between the UCT regime and the Insurance Contracts Act 1984 (Cth) (ICA). ASIC’s claim: a first of its kind ASIC commenced its first ever action against an insurer in relation to an unfair contract term when it filed proceedings against Auto & General on 4 April 2023 in respect of a term within its standard form home and contents insurance policies. Between 5 April 2021 and 4 May 2023, Auto & General entered into approximately…

In recent years, there has been a significant increase in common ownership, where large institutional investors hold substantial shares in several companies within the same sector. Theoretically, common ownership may result in higher product prices, as common owners might favor anticompetitive strategies that enhance their portfolio’s overall value rather than optimizing the performance of individual companies. Critics contend that common ownership weakens market competition and harms consumers, calling for laws and regulations to curtail common ownership. Yet, this viewpoint neglects the potential positive externalities that can emerge from institutional investors owning shares in rival companies. The anticompetitive effects of common ownership need to be closely compared with the possible procompetitive benefits stemming from knowledge sharing and synergies among rival firms with common owners, as overlooking either side could result in flawed policies. In competitive…

On April 12, 2024, the Supreme Court unanimously reversed and vacated the Second Circuit’s decision in Macquarie Infrastructure Corporation v. Moab Partners, L.P. Justice Sonia Sotomayor delivered the opinion for the Court. The issue presented was whether the failure to make a disclosure pursuant to Item 303 of Regulation S-K can serve as the basis for a securities fraud claim under Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), “even in the absence of an otherwise-misleading statement.” The Second Circuit had previously held that a failure to make an Item 303 disclosure constituted an actionable omission that can serve as the basis for a claim under Section 10(b). The Second Circuit’s decision created a circuit split with the Third, Ninth and Eleventh Circuits, which had held that Item 303 does not create a duty to disclose under Section 10(b), and therefore Item 303 disclosure violations do not necessarily or…

In 2023, the threat of cyberattacks continued to escalate. (Kim Nash, Wall Street Journal). Reports of cyberattacks, such as the cyberattack on Cisco IOS XE devices, dominated the news cycle. (Kyle Alspach, CRN). In response, the Securities and Exchange Commission (“SEC”) implemented new regulations which heightened disclosure requirements for corporate cybercrime risk management. (James Rundle, Wall Street Journal). As of December 15, 2023, the SEC is requiring companies to disclose management of cyber risk in their annual reports, also known as 10-Ks. Id. Additionally, companies must report significant cyberattacks to the SEC in a Form 8-K within four calendar days of discovering a “material” cyberattack. (James Rundle, Wall Street Journal). Federal case law has defined “material” as any potential harm that has a “substantial likelihood” that an investor thinks would have “significantly altered” the information made…

The Securities and Exchange Commission’s Division of Investment Management (IM) today announced it will host the second annual Conference on Emerging Trends in Asset Management on Thursday, May 16, 2024. The conference will bring together a variety of…Read the Full Press Release Have a securities law question? Call New York Securities Lawyers at 212-509-6544.

On 17 April 2024, the Payment Systems Regulator (PSR) published Consultation Paper CP24/3 on the Faster Payments System (FPS) authorised push payments (APP) scams reimbursement requirement: compliance and monitoring. Background The PSR published Policy Statement PS23/3 and PS23/4 in 2023, setting the detailed parameters for the FPS APP scams reimbursement requirement. The PSR has also published three legal instruments which give effect to the policy. The reimbursement requirement policy is intended to: Incentivise the payment industry to invest further in end-to-end fraud prevention by requiring every payment service provider (PSP) in-scope to meet the cost of reimbursement. Increase customer protections so most victims of APP fraud are swiftly reimbursed, boosting confidence in the UK payment ecosystem. Support the PSR to pursue its long-term ambition for Pay.UK to take on a broader role and actively improve the rules governing the FPS to tackle fraud in its role as the…

The Securities and Exchange Commission today announced that, starting on May 22, 2024, the fee rates applicable to most securities transactions will be set at $27.80 per million dollars. Consequently, each self-regulatory organization will continue to…Read the Full Press Release Have a securities law question? Call New York Securities Lawyers at 212-509-6544.

In our latest podcast, Partner Matthew Gregory is joined by Senior Associate Joe Bamford, both of whom specialise in retail conduct, to discuss the FCA’s consultation (CP23/24) on changes to the capital requirements for personal investment firms, with particular focus on how firms must calculate their potential redress liabilities for these purposes. The podcast also touches on how these changes may be seen as part of the FCA’s wider proposals and recent regulatory programmes – such as the Consumer Duty. The podcast aims to assist personal investment firms, and key internal stakeholders such as in house legal counsel and compliance officers, in understanding the FCA’s proposed changes under the consultation. Listen to the episode here.

By Lene Powell, J.D.In its April 12 decision in Macquarie Infrastructure Corp. v. Moab Partners, L.P., the Supreme Court clarified that private securities fraud actions may not use “pure omissions” as the basis for certain securities fraud claims without a misleading statement.The decision narrows potential liability for private securities fraud claims under Exchange Act Rule 10b-5(b) or Item 303 of Regulation S-K.While consumer advocates argued that limiting claims in this way will keep important information from investors, business groups said that allowing “pure omissions” claims would flood the courts with meritless litigation second-guessing management decisions.A new Vital Briefing by Wolters Kluwer senior legal analyst Lene Powell explains the decision and impact. Click here to access the briefing and other securities news from Wolters Kluwer on VitalLaw.com.

On 17 April 2024, the Financial Stability Board (FSB) published a consultation report that sets out policy recommendations to enhance the liquidity preparedness of non-bank market participants for margin and collateral calls in centrally and non-centrally cleared derivatives and securities markets (including securities financing such as repo). The FSB has published these recommendations as it believes that policy adjustments need to be made to deal with liquidity strains in the non-bank financial intermediation sector following spikes in margin and collateral calls during times of market stress such as the commodities markets turmoil and stress in liability-driven investment funds in 2022. Market participants in scope of the recommendations cover a broad range of non-bank financial entities that may face margin and collateral calls, including insurance companies, pension funds, hedge funds, other investment funds and family offices. Commercial banks and financial market…

It has been four months since new Item 1.05 of Form 8-K went into effect, requiring current disclosure of material cybersecurity incidents. Item 1.05 of Form 8-K specifies that, if a company experiences a cybersecurity incident that is determined by the company to be material, the company must describe the material aspects of the nature, scope, and timing of the incident, and the material impact or reasonably likely material impact on the issuer, including its financial condition and results of operations. An Item 1.05 Form 8-K must be filed within four business days of determining that an incident is material, subject to limited exceptions. The experience with Item 1.05 of Form 8-K in its very short life has been somewhat confusing. As this very helpful Debevoise memo notes, a few clear takeaways have emerged in the first 100 days of current reporting of material cybersecurity incidents: – On December 18, 2023, the SEC’s rule requiring disclosure of material…