Securities Mosaic® Blogwatch
September 2, 2014
The Tension between Conservative Corporate Law Theory and Citizens United
by Kobi Kastiel

Editor's Note: The following post is based on a recent article forthcoming in Cornell Law Review, earlier issued as a working paper of the Harvard Law School Program on Corporate Governance, by Leo Strine, Chief Justice of the Delaware Supreme Court and a Senior Fellow of the Program, and Nicholas Walter, law clerk at the U.S. Court of Appeals for the Ninth Circuit, and a former law clerk at Delaware Court of Chancery. The article, Conservative Collision Course?: the Tension Between Conservative Corporate Law Theory and Citizens United, is available here. Work from the Program on Corporate Governance about corporate political spending includes Shining Light on Corporate Political Spending by Lucian Bebchuk and Robert Jackson, discussed on the Forum here, and Corporate Political Speech: Who Decides? by Lucian Bebchuk and Robert Jackson, available here.

Leo Strine, Chief Justice of the Delaware Supreme Court Review and a Senior Fellow of the Harvard Law School Program on Corporate Governance, and Nicholas Walter recently issued an essay with that is forthcoming in Cornell Law Review. The essay, titled Conservative Collision Course?: the Tension Between Conservative Corporate Law Theory and Citizens United, is available here.

The abstract of Chief Justice Strine's and Walter's essay summarizes it briefly as follows:

One important aspect of Citizens United has been overlooked: the tension between the conservative majority's view of for-profit corporations, and the theory of for-profit corporations embraced by conservative thinkers. This article explores the tension between these conservative schools of thought and shows that Citizens United may unwittingly strengthen the arguments of conservative corporate theory's principal rival.

Citizens United posits that stockholders of for-profit corporations can constrain corporate political spending and that corporations can legitimately engage in political spending. Conservative corporate theory is premised on the contrary assumptions that stockholders are poorly-positioned to monitor corporate managers for even their fidelity to a profit maximization principle, and that corporate managers have no legitimate ability to reconcile stockholders' diverse political views. Because stockholders invest in for-profit corporations for financial gain, and not to express political or moral values, conservative corporate theory argues that corporate managers should focus solely on stockholder wealth maximization and non-stockholder constituencies and society should rely upon government regulation to protect against corporate overreaching. Conservative corporate theory's recognition that corporations lack legitimacy in this area has been strengthened by market developments that Citizens United slighted: that most humans invest in the equity markets through mutual funds under section 401(k) plans, cannot exit these investments as a practical matter, and lack any rational ability to influence how corporations spend in the political process.

Because Citizens United unleashes corporate wealth to influence who gets elected to regulate corporate conduct and because conservative corporate theory holds that such spending may only be motivated by a desire to increase corporate profits, the result is that corporations are likely to engage in political spending solely to elect or defeat candidates who favor industry-friendly regulatory policies, even though human investors have far broader concerns, including a desire to be protected from externalities generated by corporate profit-seeking. Citizens United thus undercuts conservative corporate theory's reliance upon regulation as an answer to corporate externality risk, and strengthens the argument of its rival theory that corporate managers must consider the best interests of employees, consumers, communities, the environment, and society - and not just stockholders - when making business decisions.

The full paper is available for download here.

September 2, 2014
The Social Reform of Banking: Innovating for Sustainable Financial Services
by John M. Conley

The following post comes to us from John M. Conley, William Rand Kenan Jr. Professor of Law at the University of North Carolina School of Law, and Cynthia A. Williams, Osler Chair in Business Law at Osgoode Hall Law School, York University. It is based on their recent paper, "The Social Reform of Banking," which was published in the Journal of Corporation Law and is available here.

The financial crisis of 2008 led to global demands for reforms that would put the financial services industry on a more sustainable ethical, economic, and legal footing. Thus far, the response to these demands has been largely regulatory, as illustrated by the passage of the Dodd-Frank Act in the U.S. Recent developments in the banking world, including high-profile prosecutions for illegal activities, portend even further regulatory interventions on both sides of the Atlantic.

However, given market participants' propensity to engage in regulatory arbitrage, one can feel pessimistic about the ability of regulation alone to wring excessive leverage, fragility or risk out of the system. For example, the New York Times has reported on a new fund - the Ovid Regulatory Capital Relief Fund - which is investing in "capital relief trades" or "regulatory capital trades" that allow banks to shift assets off their books by buying credit default swaps being sold by the Fund. Even without regulatory arbitrage, the risk-adjusted capital adequacy requirements at the core of Basel II and III allow banks to make good faith determinations of the kinds of risks to which their loans give rise. A concern is that these determinations can be, and in some cases have been, manipulated. Even if the banks do act in good faith, the leverage ratio of Basel III, requiring equity of at least three percent of total assets, will not come into effect until 2019, and has already been called "outrageously low" by prominent academic critics.

These developments suggest that, while traditional regulatory interventions may well be necessary, they are not likely to be sufficient. Because the structure of much banking regulation inevitably requires banks to make good faith determinations of the kinds of risks to which their loans and investments give rise, regulation can go only so far in insuring outcomes. At some point, almost all regulation must rely on the ethics of those within financial services organizations. Abundant empirical research has demonstrated that the culture of individual organizations is a vital factor influencing how crucial ethical decisions are made.

Against this background, in our recent paper, The Social Reform of Banking, we have examined the culture of financial institutions as a critical variable in predicting the success of regulatory regimes. We evaluate various specific regulatory interventions not simply from a normative legal perspective, but in terms of their capacity to affect and be affected by that culture. We give particular attention to the global entities that are explicitly or implicitly too-big-to-fail. Our analysis concentrates on the realities of banking practice as revealed by the perspectives of anthropology, organizational and social psychology, and new governance regulatory theory. We also draw on our own ethnographic and legal research on the Equator Principles, a voluntary initiative among global banks to implement social and environmental standards when lending for large infrastructure projects.

Our research has identified a number of influences within global, complex, "too big to fail" (TBTF) financial institutions that can normalize risky behavior. All are cultural in nature, or at least have a strong cultural component. First is the very notion of too big to fail, and the implicit and explicit government guarantees that notion implies. This can create a serious moral hazard: actors within TBTF entities may be encouraged to take on excessive risk, particularly by using high levels of leverage and relaxed credit standards, with the expectation of government bailouts. Second is the atmosphere of insecurity and market-driven churning among employees. As vividly chronicled by the anthropologist Karen Ho in Liquidated: An Ethnography of Wall Street, life within global TBTF financial institutions, particularly in investment banking and on trading floors, is characterized by employment volatility and the risk-taking that it can encourage. And third is the structure of compensation. There has been a shift in banking from an "originate-and-hold" approach to lending to an "originate-to-distribute" model that relies on securitization. In the latter approach, bank fees and bankers' performance-based compensation are increased by the volume of transactions. The shift to this approach has increased the cumulative risk in the global financial system, because the distribution of credit risk via securitization has undermined the banks' incentives to be as rigorous in credit evaluation as they would have been in the "boring" old world of originate-and-hold banking.

Weaving strands of prior research together, we propose several specific suggestions for reform. Our suggestions involve both culture-sensitive regulation and voluntary, "soft law" initiatives. In the first category, we emphasize structural reforms, accounting reforms (informed by ideas derived from both organizational psychology and transnational private regulation), and other regulatory approaches that might tap into the better elements of current banking cultures while simultaneously promoting a more ethical cultural environment. We argue that an innovative attention to culture can lead to reform that yields sustainable progress in the ethical, economic, and legal dimensions of banking practice.

In the latter category, our suggestions include closer examination of a project undertaken by the Australian Securities and Investments Commission (ASIC). In each of multiple industry sectors, ASIC employees work with the relevant professional organizations and self-regulatory bodies to develop regulatory standards of best practice. The professionals and their organizations are responsible for developing the standards initially, subject to ASIC's oversight so that there is public input and accountability - soft law with the potential of hard-law intervention. On paper, at least, such a structure has real potential to exploit the cultural power of industry self-regulation, with all its advantages (expertise, autonomy, engagement with the goals of standards ultimately developed), but with public oversight to ensure proper attention to broader societal interests.

Despite the promise of the cultural approach, we must acknowledge that we advocate for it with some trepidation. It is not clear at the outset how deeply firm cultures can be influenced by outside factors such as regulation. In addition, the commitment to change would have to be deep, going far beyond the currently fashionable corporate rhetoric about cultural reform.

September 2, 2014
While You Were Out
by Kevin LaCroix

I have no idea where summer went, but with the passage of Labor Day weekend there's no denying that summer is over and that it is time to get back to work. For those of you who were fortunate enough to take some time off this summer or who maybe just found it a little harder to keep up during the warmer months, here's a brief survey of what you missed while you were out.

The biggest development this summer was the U.S. Supreme Court's June 2014 decision in the Halliburton case, although it was not nearly as big of a deal as it would have been if the Supreme Court had dumped the "fraud on the market" theory. Because I suspect that at this point most readers are well aware of the Halliburton decision and because the Court's decision has been thoroughly reviewed and discussed (on this blog and elsewhere), I won't dwell on Halliburton here. Besides, there were a lot of other important things that also happened this summer. Here's a quick summary of the other important developments, in no particular order.

U.S Supreme Court Rejects "Presumption of Prudence" for ESOP Fiduciaries: The U.S Supreme Court's Halliburton decision may not have been the game changer that it might have been, but the Court did still stir things up quite a bit in its decision in another case. On June 25, 2014, the U.S. Supreme Court held in Fifth Third Bank v. Dudenhoeffer that ESOP fiduciaries are not entitled to a "presumption of prudence" in connection with their decision to invest in or maintain investments in employer stock. In a unanimous opinion written by Justice Stephen Breyer, the Court held that ESOP fiduciaries are subject to the same duty of prudence that applies to ERISA fiduciaries in general, other than the duty to diversify plan assets. The court's opinion can be found here.

In recent years, several of the Circuit courts had recognized the existence of a presumption of prudence for ESOP plan fiduciaries. Many ESOP plan fiduciaries had successfully relied on the presumption as the basis for a motion to dismiss claims filed against them under ERISA. The Supreme Court's opinion could make it more difficult for ESOP fiduciaries to obtain dismissal in ERISA stock drop cases. However, the Court did recognize the importance of motions to dismiss in helping to weed out meritless suits. The Court laid out several guidelines for the lower courts to use in considering motions to dismiss in ERISA stock drop suits. The net effect of the Court's opinion is that the environment for ERISA stock drop litigation has been substantially changed, as discussed here.

Delaware Legislature Tables Measure to Address Fee-Shifting ByLaws: The Delaware Supreme Court stirred up quite a bit of controversy earlier this year in the ATP Tours, Inc. v. Deutscher Tennis Bund case when it upheld the facial validity of a fee-shifting by law. The bylaw provided that an unsuccessful shareholder claimant in intra-corporate litigation would have to pay his or her adversaries' cost of litigation. The controversy seemed headed for a swift resolution when the Delaware General Assembly quickly moved to act on a measure that would have limited the Supreme Court's ruling to non-stock corporations (meaning that it wouldn't apply to Delaware stock corporations). However, in late June, the legislature tabled the measure and now it will not be acted upon until at least January 2015.

In the meantime, interested parties and observers are busy debating whether or not under Delaware law stock corporations should (or should not) be allowed to adopt fee-shifting bylaws. For example, an August 27, 2014 Wall Street Journal op-ed piece (here) argued that companies should be allowed to adopt "loser pays" bylaws as a way to try to control costly shareholder litigation. In addition, even though it remain unclear whether or not fee-the Delaware legislature will ultimately pass legislation barring fee-shifting bylaws for stock corporations, some companies are going ahead and revising their bylaws to incorporate a fee-shifting provision, as discussed here.

SEC Commissioner Aguilar Addresses Cybersecurity Oversight Responsibilities of Corporate Boards: At least one SEC commissioner has made it clear that as far as the SEC is concerned cybersecurity is an important issue on which corporate boards should be engaged. In a June 10, 2014 speech entitled "Boards of Directors, Corporate Governance and Cyber-Risks: Sharpening the Focus" delivered at the New York Stock Exchange, SEC Commissioner Luis A. Aguilar stressed that "ensuring the adequacy of a company's cybersecurity measures needs to be a part of a board of director's risk oversight responsibilities." He added the warning that "boards that choose to ignore, or minimize the importance of cybersecurity oversight responsibility, do so at their own peril." A copy of Aguilar's speech can be found here.

While Aguilar's speech referred only to the efforts of shareholders to hold board members accountable through litigation, the fact is that - as his speech itself underscores - cybersecurity is an increasingly important issue to the SEC itself. A message implicit in his speech is that the Commission may hold boards accountable for their responsibilities as well. At a minimum, Aguilar's speech underscores that cybersecurity is an issue on which the Commission is focused and about which the Commission is concerned.

Georgia Supreme Court Affirms, Elucidates Business Judgment Rule - and Its Limitations: A recurring issue in FDIC litigation against the former directors and officers of failed banks has been whether the business judgment rule insulates the defendants from claims of ordinary negligence. This question has been particularly important in Georgia, where there were more bank failures than any in other state and consequently more failed bank litigation. Several federal district courts, applying Georgia law, have ruled that individual defendants are entitled to have the FDIC's negligence claims against them dismissed based on the business judgment rule (as discussed, for example, here).

On July 11, 2014, the Georgia Supreme Court ruled in Federal Deposit Insurance Corporation v Loudermilk (here) that the common law of Georgia recognizes the business judgment rule and that the rule has not been superseded by Georgia statutory law. But while the Court found that the rule insulates directors ad officers from claims of negligence concerning the wisdom of their judgment, it does not foreclose negligence claims against them alleging that their decision making was made without deliberation or the requisite diligence, or in bad faith.

The Georgia Supreme Court's decision will have an immediate impact on the many FDIC lawsuits involving failed Georgia banks, as it will substantially affect the ability of the individual defendants to have the claims against them dismissed. The practical implication of the Georgia Supreme Court's ruling is that many - perhaps even most - of the FDIC negligence claims against former directors and officers of Georgia banks will survive motions to dismiss.

The precedential authority of the Georgia Supreme Court's decision is limited to cases to which the law of Georgia applies. However, the decision may have persuasive effect in cases to which other jurisdictions' law applies. It is rare for any state's Supreme Court to address these kinds of issues, and as the Georgia Supreme Court's opinion is both a scholarly, thoughtful ruling and the rare pronouncement by a court of highest authority, it undoubtedly will be invoked by parties in other courts and considered by courts in other jurisdictions, as discussed in greater detail here.

Inversion Transactions and Corporate Liability: Among the developments dominating the business headlines in recent weeks has been the rising wave of so-called "inversion" transactions in which U.S. companies acquire foreign firms to avoid U.S. tax laws As discussed in a July 15, 2014 Wall Street Journal article (here), the Obama administration is calling for Congress to pass legislation to restrict U.S. companies' ability to participate in inversion transactions. U.S. Treasury Secretary Jacob Lew sent a letter to Congressional leaders calling on them to "enact legislation immediately... to shut down this abuse of our tax system."

While it is hardly surprising that inversion transactions are controversial in Washington, it would seem given the tax benefits that they would be popular with shareholders, and that the last thing that would happen would be for a company announcing an inversion transaction to get hit with a shareholder suit. However, in this country's litigious environment, even a transaction seemingly as beneficial for a company as an inversion apparently can generate a shareholder suit.

According to a July 17, 2014 St. Paul Pioneer Press article (here), on July 2, 2014, a shareholder of Minnesota-based Medtronic has filed a class action lawsuit in Hennepin County District Court challenging the company's planned $42.9 billion acquisition of Ireland-based Covidien, which will result in a new company to be called Medtronic PLC. The shareholder plaintiff contends that the transaction, in which Medtronic shareholders will receive shares in the new company in exchange for their existing Medtronic shares, will result in a "substantial loss" for Medtronic shareholders. The plaintiff alleges that the shareholders will have to pay taxes on any gains on their shares, but the transaction will not generate cash out of which to pay the taxes. According to the article, the lawsuit alleges that "Medtronic shareholders will be forced to pay taxes on any gains in Medtronic stock."

India's Securities Regulator Imposes Massive Penalties on Satyam's Founder and Other Executives: As discussed here, Satyam was quickly dubbed the "Indian Enron" in early 2009 after the company's founder, Ramalinga Raju, sent an extraordinary letter to the company's board in which he admitted, among other things, that "the company's financial position had been massively inflated during the company's expansion" from a handful of employees into an outsourcing giant with 53,000 employees and operations in 66 countries.

On July 16, 2014, India's securities regulator, the Securities and Exchange Board of India (SEBI), entered an order (here) against the founder and former executives of Satyam Computer Services to disgorge over $306 million in allegedly ill-gotten gains from their role in the scheme to falsify the company's financial statements, as well as at least $201 million in interest.

The size of the penalty against the individuals is clearly meant to make a statement. According to the Wall Street Journal, SEBI "has faced criticism from investors for a perceived lack of vigor" but "lately has seemed more assertive." A commentator is quoted in the Journal article as stating that "this order by itself is driving a message that SEBI is going to be aggressive in dealing with fraud in the Indian Capital Markets."

Outside the U.S., the aggressiveness of U.S. regulators is a frequent source of complaint. As this SEBI order demonstrates, U.S. regulators are not the only ones primed to impose large fines. Regulators everywhere, under pressure from the recent global financial crisis as well as because of the periodic outbreak of massive scandals like Satyam, increasingly are taking a more aggressive approach and increasingly are seeking to use regulatory tools to enforce their own laws and to impose penalties. These regulatory initiatives, which are emerging in countries around the world, have significant implications for companies, their executives, and their insurers.

Dodd-Frank Anti-Retaliation Provisions Do Not Protect Overseas Whistleblowers: In the latest fiscal year report of the SEC Office of the Whistleblower, the agency reported that as of the end of the 2013 fiscal year it had received a total of 6,573 whistleblower reports since the Dodd-Frank whistleblower program's inception. These figures include not only domestic U.S. whistleblower reports but also reports from a total of sixty-eight different countries. During fiscal year 2013, there were 404 whistleblower reports from outside the U.S. representing nearly 12% of all reports during the year. Clearly, whistleblower reports from non-U.S. countries have represented a significant part of the whistleblower program, and foreign whistleblowers have been drawn to the program.

However, based on a recent Second Circuit decision, prospective foreign whistleblowers thinking about making a whistleblower report had better be prepared to watch out for themselves, as according to the appellate court's August 14, 2014 decision in Liu Meng-Lin v. Siemens AG (here), the Dodd-Frank Act's whistleblower anti-retaliation protections do not apply extraterritorially - that is, they do not protect whistleblowers outside the U.S. This ruling obviously could dampen the interest of prospective foreign tipsters from making whistleblower reports.

The Second Circuit's decision clearly will have an impact on prospective whistleblowers outside the United States. Many may hesitate to make reports out of fear of retaliation. Just the same, the Second Circuit's decision left many questions unanswered. The Second Circuit's ruling gives no indication of what the impact on its ruling might have been if the whistleblower were a U.S. citizen or if the whistleblower report had involved a U.S. company operating overseas, or if any of the alleged misconduct had taken place inside the U.S. These issues will have to be addressed in future cases. In the meantime, it seems probable that the seeming enthusiasm for whistleblower reports from outside the U.S. will be dampened.

Securities Suits Hit Firms Allegedly Using Stock Promoters to Boost Share Price: On July 30, 2014, when a plaintiff shareholder filed a securities class action lawsuit against the firm and certain of its directors and officers, Galectin Therapeutics became the latest company to be hit with a securities suit following press reports that the company had used a stock promotion firm to try to boost its share price. There have already been several other companies against whom securities lawsuit have been filed this year that are similarly alleged to have used stock promotion firms.

As discussed here, the lawsuit against Galectin is merely the latest in series of suits that have been filed so far this year against companies alleged to have used stock promotion firms to try to boost their share price. Several of the firms that have been sued are alleged to have used a stock promotion firm known as The DreamTeam Group. Lawsuits involving allegations that the defendant companies have been filed earlier this year against Galena Biopharama (here); CytRx Corporation (here); InterCloud Systems (here); and Provectus Biopharmaceuticals (here).

Whatever companies' thought process is for using these kinds of services to promote their companies, it is clear that news about the companies' use of the firms can have a negative impact on the company's stock (which obviously is counter to the idea of using the promotional firms in the first place). As the lawsuits above underscore, the alleged use of these firms can also result in securities class action litigation.

The Pre-IPO Company and "Failure to Launch" Claims: Due to a combination of favorable circumstances, the number of companies completing initial public offerings is currently at the highest level in years. According to a recent study from Cornerstone Research (here), with the 112 IPOs in the first half of 2014, IPO activity is on pace to increase for the third consecutive year. IPO activity just in the first six months of 2014 equaled 71 percent of total IPO activity in 2013 and exceeded the full years 2009, 2010, 2011 and 2012. The favorable IPO environment has encouraged even more companies move toward an IPO. However, for a company starting down the road toward an IPO, there are a number of risks. Among other things, pre-IPO companies face increased risks of liability and claims, particularly when the planed IPO fails to launch.

A recent case filed in New York (New York County) Supreme Court illustrates the kinds of "failure to launch" claims that pre-IPO companies can face. According to the plaintiff's August 1, 2014 complaint (which can be found here), defendant Westergaard.com is a Delaware corporation with its principal place of business in Fujian, China. In 2011, Westergaard completed a private placement that provided for "automatic redemption" of the units sold in the placement if the company failed to complete an IPO at an offering price of $3.00 or greater within two years of the private offering's closing date. The redemption amount was specified as $3.00 per share. The complaint alleges that private placement transaction closed on October 24, 2011, but that the company did not complete an IPO within two years of that date nor has it yet completed an IPO. The plaintiff is assignee of investors who had purchased units in the private placement. The plaintiff filed the action as assignee to enforce the redemption provisions in the private placement agreement, as well as to recover its costs of collection.

While the particulars of this claim may reflect the specific circumstances of the company involved, the situation nevertheless does illustrate how a pre-IPO company's failure to launch can lead to claims from disappointed investors. This case shows how pre-IPO activities can give rise to claims, and therefore underscores the importance of taking these kinds of risks into account when structuring the D&O insurance coverage for a Pre-IPO company. If IPO activity continues to pick up, that will not only increase the possibility of IPO-related claims, but it also increases the possibility of pre-IPO claims as well.

Second Circuit Says Domestic Securities Transaction Necessary But Not Sufficient to Invoke U.S. Securities Laws: In its 2010 decision in Morrison v National Australia Bank, the U.S. Supreme Court had, based on its determination Congress had not intended for the U.S. securities laws to apply extraterritorially, attempted to establish a bright line test to determine the applicability of U.S. securities laws. The Supreme Court said that the U.S. securities laws apply only to shares traded on the domestic securities exchanges and to "domestic transactions in other securities."

On August 16, 2014, in a long-awaited decision that could fuel disputes in future cases, the Second Circuit affirmed the dismissal of the securities suits swap agreement purchasers had filed against Porsche and its executives. In an unsigned per curiam opinion (which can be found here), the Second Circuit - concerned the application of Morrison as the plaintiffs urged would result in the very kind of extraterritorial extension of U.S. securities laws Morrison had sought to avoid - said that while it is necessary for the U.S. securities laws to apply that a domestic transaction is involved, it is not sufficient. The court went on to say that the claims in this case are so "predominately foreign as to be impermissibly extraterritorial," even though the swap transactions at issue allegedly had been completed in the U.S.

The difficulty with the Second Circuit's extension is that it invites further disputes, particularly given the lengths to which the Court went to avoid any suggestion that it was laying down a bright-line rule. The Second Circuit provided little guidance about what may be "sufficient," except to say that the U.S. securities laws are implicated when a domestic transaction is involved and the defendants "are alleged to have sufficiently subjected themselves to the statute." The groundwork seems to be set for future disputes about whether a plaintiff's allegations have established the elements that are both "necessary" and "sufficient" to warrant the application of the U.S. securities laws.

Foreign Affairs: I hope interested readers will take the time to read the summaries I recently published of my August visits to Singapore (here) and Mumbai (here).

Coming Attractions: If all goes according to plan, tomorrow, September 3, 2014, I will be publishing my annual "What to Watch in the World of D&O" post, in which I survey the hottest topics affecting the world of directors' and officers' liability.

September 2, 2014
New in Print
by Eric C. Chaffee

The following law review articles relating to securities regulation are now available in paper format:

Bob Bernstein, The CFTC's Attempt to Impose Speculative Position Limits on Off-Exchange Swap Contracts Likely to Face Continued Legal Challenge, 30 Touro L. Rev. 561 (2014).

Jennifer G. Chawla, Comment, Criminal Accountability and Wall Street Executives: Why the Criminal Provisions of the Dodd-Frank Act Fall Short, 44 Seton Hall L. Rev. 937 (2014).

Lee D. Cooper, Note, Value-Add: An Empirical Study of Idiosyncratic Value in the 2013 Biotech IPO Market, 2014 Colum. Bus. L. Rev. 512-547.

Stanislav Dolgopolov, High-Frequency Trading, Order Types, and the Evolution of the Securities Market Structure: One Whistleblower's Consequences for Securities Regulation, 2014 U. Ill. J.L. Tech. & Pol'y 145.

Jeffrey N. Gordon &Christopher M. Gandia, Money Market Funds Run Risk: Will Floating Net Asset Value Fix the Problem?, 2014 Colum. Bus. L. Rev. 313.

Alexandra Leavy, Note, Necessity is the Mother of Invention: A Renewed Call to Engage the SEC on Social Disclosure, 2014 Colum. Bus. L. Rev. 463.

Sung Hui Kim, Insider Trading as Private Corruption, 61 UCLA L. Rev. 928 (2014).

Sherief Morsy, Note, The JOBS Act and Crowdfunding: How Narrowing the Secondary Market Handicaps Fraud Plaintiffs, 79 Brook. L. Rev. 1373 (2014).

Stephen O'Connor, Note, The Securities Act of 1933: A Jurisdictional Puzzle, 79 Brook. L. Rev. 1233 (2014).

Spencer P. Patton, Note, Archangel Problems: The SEC and Corporate Liability, 92 Tex. L. Rev. 1717 (2014).

John H. Runne, Note, The Confluence of Sullivan v. Harnisch & Dodd-Frank: Adapting New York's Common Law to Fill a Compliance Hole, 79 Brook. L. Rev. 1265 (2014).

Alyssa Wanser, Comment, The Facebook Status that Sparked an SEC Investigation: Regulation Fair Disclosure and the Growth of Social media,30 Touro L. Rev. 723 (2014).

September 2, 2014
CEO, CFO CHARGED IN SEC FINANCIAL FRAUD ACTION
by Tom Gorman

Since the formation of the financial task force, and its related data group, there has been speculation regarding the focus of the new program and the impact of big data techniques. One indication of how the program could unfold may be in the approach used in the financial fraud action against Lynn Blodget, the president and CEO of Affiliated Computer Services, Inc., and Kevin Kyser, the CFO of that firm. In the Matter of Lynn R. Blodgett, Adm. Proc. File No. 3-16045 (August 28, 2014). In that proceeding the SEC brought an action centered on the efforts of the firm to meet a company financial metric followed by analysts. Stated differently the firm cooked the books to meet street expectations - the same approach typically employed in many Commission financial fraud actions.

Affiliated Computer Services, which was acquired by Xerox Corporation in 2010, provided business process outsourcing and information technology services through two reportable operating segments, the Commercial Services Group and the Government Services Group. About 85% of its revenues came from recurring, long-term contracts. Resale transactions originated in the Commercial Services Group. The revenue from those transactions was classified as non-recurring.

ACS established a goal of increasing its internal revenue growth as announced in its Form 10-K for fiscal 2009. In August 2008 an analyst following the firm stated that it was well positioned to meet its internal revenue growth goals. Yet by the end of the first quarter of fiscal 2009 ACS learned that it would fall short of guidance and consensus analyst expectations on this metric.

To increase revenue ACS arranged for an equipment manufacture to re-direct about $20 million of pre-existing orders that a manufacturer had already received from another reseller through the firm. Company transaction documents gave the appearance that ACS was involved in the transaction despite the fact that it was not. Indeed, the equipment continued to be shipped directly from the manufacturer to the reseller’s customers at the same prices – ACS never had possession of the equipment. The reseller’s customers were unaware of ACS’ claimed involvement.

At the end of each of the next three quarters ACS entered into similar transactions. The firm reported revenue totaling $124.5 million from these transactions. That revenue enabled the firm to meet its disclosed targets for internal revenue for three of the four quarters during the fiscal year. Those transactions were the most significant contributors to the firm’s internal revenue growth.

The resale transactions were not recorded in accord with GAAP nor were they properly disclosed. In addition, Messrs. Blodgett and Kyser each were paid a bonus which was tied, in part, to the reported revenue growth of the firm.

The Order alleges violations of Exchange Act Section 13(a), 13(b)(2)(A) and 13(b)((2)(B) and the related Rules by each Respondent.

To resolve the proceeding each Respondent consented to the entry of a cease and desist order based on the Sections cited in the Order. In addition, Mr. Blodgett agreed to pay disgorgement of $351,050 along with prejudgment interest and a civil money penalty of $52,000. Mr. Kyser agreed to pay disgorgement of $133,192, prejudgment interest and a penalty of $52,000.

September 2, 2014
SEC's Filing Fees Going Down 10% for Fiscal Year 2015
by Broc Romanek

On Friday, the SEC issued its 1st fee advisory for 2015 (along with this methodology). Right now, the filing fee rate for Securities Act registration statements is $128.80 per million (the same rate applies under Sections 13(e) and 14(g)). Under the fee advisory, this rate will dip to $116.20 per million, a 10% drop. Nice to see another reduction after last year's 6% drop (which combined, almost offset a hefty price hike two years ago).

As noted in the SEC order, the new fees will go into effect on October 1st like the last three years (as mandated by Dodd-Frank) - which is a departure from years before that when the new rate didn't become effective until five days after the date of enactment of the SEC's appropriation for the new year - which often was delayed well beyond the October 1st start of the government's fiscal year as Congress and the President battled over the government's budget.

Jim Schnurr Tapped as SEC Chief Accountant

Last week, SEC Chair White hired Jim Schnurr as SEC Chief Accountant starting in October. Jim recently retired from Deloitte, where he was Vice Chair and a senior professional practice director. As noted in this Reuters article and FEI Daily, this is an important job as always...

Our September Eminders is Posted!

We have posted the September issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!

- Broc Romanek

September 2, 2014
The SEC and Administrative Proceedings (Part 5)
by J Robert Brown Jr.

We are discussing some of the issues raised by Peter Henning in his DealBook column, The S.E.C.'s Use of the 'Rocket Docket' Is Challenged. The article examines concerns that have been raised about the use of administrative proceedings by the SEC.  

As the DealBook article notes, the challenges to the use of administrative proceedings ("APs") have continued.

The SEC charged George Jarkesy with violations of the securities laws back in 2013 and issued an order instituting administrative proceedings. Sometime before the AP, the SEC entered into a settlement with some of the parties involved in the alleged wrongdoing. See In re John Thomas Capital, Exchange Act Release No. 70989 (admin proc Dec. 5, 2013).  

Shortly before the administrative proceeding was set to begin in February 2014, Jarkesy (the "Plaintiff") filed suit in federal district court seeking emergency injunctive and declaratory relief to prevent the SEC from going forward with the AP.  

Plaintiffs alleged that they were "denied their fundamental rights of due process, jury trial, equal protection." The complaint also asserted that the SEC had prejudged the case and could not, therefore, act as a neutral decision maker. According to the complaint:  

  • The fundamental precept of due process - fully applicable to agency adjudications - is a fair hearing before an objective and fair tribunal. By numerous of its actions, the SEC has stripped the AP process of minimum standards of fairness, thereby eliminating all possibility of a fair hearing. Then by publishing its extensive findings and conclusions against Plaintiffs, finding them guilty - in advance of the adjudication and without permitting plaintiffs to present any evidence or defenses - the SEC has removed all doubt about its ability to serve as a fair tribunal.

The district court, however, declined to issue the relief sought and ultimately dismissed the action. The court found that, as a district court, it lacked jurisdiction. As the opinion reasoned: 

  • The statutory and regulatory regime under which the SEC's Enforcement Division brought the instant matter against the plaintiffs precludes this Court from exercising subject matter jurisdiction to hear the plaintiffs' claims. The Exchange Act, which the plaintiffs are accused of violating, provides that "[a] person aggrieved by a final order of the [SEC]... may obtain review of the order in the United States Court of Appeals." 15 U.S.C. § 78y(a)(1). This statute presents two insurmountable obstacles for the plaintiffs' case in this Court: first, no final order has yet been entered by the SEC, which raises substantial questions about the ripeness of this action for review; and, second, even were this action ripe, federal court review must take place in one of the courts of appeals. 

After discussing the absence of a final agency action (and the relevant exceptions), the court noted that, in general, trial courts lacked jurisdiction to hear cases where the statute vested jurisdiction in the court of appeals. See Id. ("Courts interpreting Free Enterprise have similarly found that where a statute provides an agency the first opportunity to review a claim before appeal to a Court of Appeals, the statute deprives the District Court of jurisdiction.").  

Thus, the claim of prejudgment had to be raised at the court of appeals. Id. ("In sum, the statutory regime embodied in the Securities Act sets forth an exclusive mechanism for the plaintiffs to pursue their claims: first, before an ALJ, then before the SEC's Commissioners, and finally, if necessary, before a Court of Appeals. To the extent that the plaintiffs believe their cause has been prejudged by the SEC's Commissioners, they may seek review, if necessary, before the Court of Appeals, but the statute leaves no room for this Court to provide them the relief they seek.").   

As for the precedent set by the Gupta decision, the court had this to say: 

  • As the Court indicated at the TRO hearing, the plaintiffs' reliance on Gupta is questionable in the wake of Altman v. SEC, 687 F.3d 44, 45 (2d Cir. 2012), which applied Thunder Basin in affirming a District Court's decision that it did not have subject matter jurisdiction over a constitutional challenge to an ongoing SEC administrative proceeding. In any event, the Court finds the controlling precedent in this Circuit to support only one outcome in this case: namely, dismissal. 

The AP with respect to Jarkesy did take place. The ALJ hearing the case has requested additional time to issue the opinion. See ORDER EXTENDING DEADLINE FOR FILING INITIAL DECISION, In re John Thomas Capital Management, Exchange Act Release No. 72841 (admin proc. August 13, 2014). Jarkesy, in the meantime, has lodged an appeal.  

The appeal has the potential to provide very strong guidance in this area. To the extent that the court of appeals reverses, the SEC will likely be challenged more frequently for the choice of forum. On the other hand, to the extent the D.C. Circuit affirms the district court opinion it will likely dampen the incentive to file these actions.  

August 31, 2014
2014 Amendments Affecting Delaware Alternative Entities and the Contractual Statute of Limitations
by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation

Editor's Note: The following post comes to us from Scott E. Waxman, founding partner in the Delaware office of K&L Gates LLP, and is based on a K&L Gates alert authored by Mr. Waxman, Eric N. Feldman, Nicholas I. Froio, Andrew Skouvakis, and Zachary L. Sager. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

On August 1, 2014, amendments to Delaware's alternative business entity statutes, [1] as well as the statute of limitations applicable to Delaware contracts, [2] became effective. These amendments (the "2014 Amendments") represent a continuing effort by Delaware to create a flexible statutory framework for alternative business organizations and transactions involving business entities generally. This post briefly summarizes the more significant 2014 Amendments.

Statute of Limitations for Contract Based Claims Under Delaware Law

Delaware law currently permits parties to a Delaware contract to opt into a 20-year statute of limitations for contractual claims by executing the contract "under seal." If the contract is not executed under seal, however, the statute of limitations for a breach of contract claim is generally 3 years (or 4 years in the case of contracts governed by Article 2 of the Delaware Uniform Commercial Code). An amendment to the Contractual Limitations Statute (the "Limitations Amendment") gives contracting parties the ability to extend the statute of limitations for a period of up to 20 years for claims arising out of Delaware contracts without needing to execute the contract under seal, as long as the contract involves at least $100,000 and is in writing. [3] The "period" that may be specified in the written document include a specific period of time, a period of time determined by the occurrence of a particular event or an indefinite period of time (in each case, which would nonetheless be limited to 20 years).

The Limitations Amendment is an important one for business entities, including corporations and non-Delaware entities, engaged in all types of transactions. Merger agreements, acquisition and sale agreements, subscription agreements and other business contracts are often governed by Delaware law. In those agreements, the parties often intend, and such agreements provide, for certain contractual provisions to survive longer than Delaware's 3-year statute of limitations. For example, representations, warranties and other covenants often state that they survive indefinitely. Similarly, indemnification obligations are often intended to survive for a period longer than 3 years. Prior to the Limitations Amendment, notwithstanding the language of the contract, a claim for breach of any such representation, warranty or other covenant or for indemnification would be limited by the 3-year statute of limitations. This required courts to determine when the action giving rise to the breach or the right to indemnification arose, from which time the limitations period would begin to run. In many cases, this would be at the time of the closing of a transaction, and, therefore, there was only a 3-year window in which a party could exercise its rights, even though the parties clearly intended otherwise in the contact. Consistent with Delaware's general policy of freedom of contract, the Limitations Amendment ensures that such extensions, and the intention of the contracting parties, are enforceable, notwithstanding the failure to have executed the contract under seal.

The Limitations Amendment provides parties great flexibility in extending the statute of limitations. However, care must be taken in drafting the relevant contractual language when seeking to extend the statute of limitations. For example, it is unclear if language that simply provides for the "applicable statute of limitations period" or that certain matters "survive closing" will result in the application of anything other than the 3-year contractual statute of limitations.

With the enactment of the Limitations Amendment, the statute of limitations applicable to contracts governed by Delaware law can be made longer than in any other state. As a result, parties that might have otherwise governed their contracts by non-Delaware law should now give serious consideration to governing such contracts by Delaware law. In this regard, Delaware has a very favorable choice of law statute that, if properly complied with, ensures that the choice of Delaware law to govern a contract will be respected by a Delaware court.

Consents with Future Effective Times

In merger and acquisition transactions, the buyer generally replaces management of the target simultaneously with the closing. As a result, the outgoing management of the target typically will not want to authorize any actions of the target to be effective at or after the closing, when such management is being replaced, and the parties prefer that the incoming management authorize such actions. In order to pre-position such authorizations prior to the closing, however, the incoming management needs to do so at a time before it is actually managing the target, although such authorizations are not intended to take effect until the closing, at which time it becomes the management of the target. For example, often acquisition transactions include a financing component, whereby the buyer will need the target entity to obtain a loan at the closing with some or all of the loan amounts to be used by the buyer to purchase the target. In such instance, the incoming management typically negotiates the loan and the related loan terms and documents with the lender, and then authorizes such matters, prior to the closing, with such authorization only to be effective at the time of the closing and when it is actually managing the entity.

Similarly, in the equity investment context, the incoming limited partners of a limited partnership or members of a limited liability company often will enter into a subscription agreement in connection with their investment in the entity. Such subscription agreement is entered into prior to the closing of the investment, and before the investors are actually admitted to the entity as limited partners or members, as the case may be. However, the subscription agreement can include provisions relating to matters (e.g., consents, waivers and powers of attorney) that are being given in the investor's capacity as a limited partner or member and are only intended to take effect upon the closing and their admission to the entity in such capacity.

In response to a 1999 case, [4] which recently resurfaced as a concern primarily in the context of mergers and acquisitions, the Alternative Entity Statutes have been amended to clarify that, unless otherwise provided in the entity's governing agreement, a person, whether or not then a partner (in the case of a general or limited partnership), a member or manager (in the case of a limited liability company), or a beneficial owner or trustee (in the case of a statutory trust) may consent in such capacity to any matter, with such consent to be effective at a future time (including a time determined upon the happening of an event), provided that such person is a general partner, limited partner, member, manager, beneficial owner, or trustee, as the case may be, upon the effectiveness of the consent at such future time. [5]

This amendment will enable the customary prior approvals often used in transactions, including such acquisition financing transactions and equity investments, so that a person that will become a general partner, limited partner, member, manager, beneficial owner, or trustee, as the case may be, upon the closing of the transaction may execute in advance a consent in such capacity to authorize an action or other matter and effectively "escrow" such consent until such closing, at which time it becomes effective. The amendment will also give comfort to attorneys relying on such consents in providing due authorization and execution legal opinions under Delaware law.

Revocation of Dissolution

In certain circumstances, a limited partnership or limited liability company can unintentionally dissolve or dissolve at a time when some or all of the partners or members prefer that the entity continue without dissolution. In such circumstances, if the dissolution of the entity is not revoked, DRULPA and DLLCA mandate that such dissolved entity commence winding-up its affairs and limit its activities only to those things that are in furtherance of its winding-up.

Before the 2014 Amendments took effect, the dissolution of a limited partnership or a limited liability company (other than a judicial dissolution) could be revoked before the filing of a certificate of cancellation with the Secretary of State of the State of Delaware (the "Secretary of State") only (1) with the consent of all of the remaining partners (and/or the personal representative of the last remaining limited partner if there was no remaining general partner and/or limited partner) or all of the remaining members (or the personal representative of the last remaining member), as well as any other person whose approval was required under the governing agreement to revoke a dissolution, or (2) if the dissolution was caused by a vote of the partners or members, with the consent of all partners or members that voted for the dissolution.

Pursuant to the 2014 Amendments, DRULPA and DLLCA now provide for less stringent consent requirements as well as additional mechanisms for revoking a dissolution, subject to the terms of the governing agreement. DRULPA and DLLCA both now expressly state that if a governing agreement provides the manner in which a dissolution may be revoked, it may be revoked in that manner. More importantly, DRULPA and DLLCA provide that, unless a governing agreement prohibits revocation of dissolution, a dissolution (other than a judicial dissolution) can be revoked prior to the filing of a certificate of cancellation with the Secretary of State in the following situations (and in each case effective as of the occurrence of the event specified below):

  • 1. When the dissolution is caused by the affirmative vote or written consent of the requisite number or percentage interest of partners, members, or other persons, as applicable, by that same vote or written consent (without regard to whether it comes from the identical partners or members that caused such dissolution, but still subject to obtaining the approval of any other person whose approval is required under the governing agreement to revoke a dissolution contemplated by this clause).
  • 2. When the dissolution is caused by the occurrence of a particular event or at a time prescribed in the governing agreement, by the affirmative vote or written consent of the persons needed to amend such provision in the governing agreement (and any other person whose approval is required under the governing agreement to revoke a dissolution contemplated by this clause).
  • 3. When the dissolution of a limited partnership is caused by an event of withdrawal of a general partner (including the last remaining general partner) or the occurrence of an event that causes the last remaining limited partner to cease to be a limited partner, by the affirmative vote or written consent of (a) all remaining general partners, if any, and (b) the limited partners (or if there is more than one class or group of limited partners, then by each class or group of limited partners) who own more than two-thirds of the then-current percentage or other interest in the profits of the limited partnership, or if there is no remaining limited partner, the personal representative of the last remaining limited partner or the assignee of all of the limited partners' partnership interests in the limited partnership (and any other person whose approval is required under the partnership agreement to revoke a dissolution contemplated by this clause). The person(s) electing to revoke a dissolution pursuant to this clause must also admit to the entity a general and/or limited partner, as the case may be.
  • 4. When the dissolution of a limited liability company occurs because its last remaining member ceases to be a member, by the affirmative vote or written consent of the personal representative of the last remaining member or the assignee of all of the limited liability company interests in the limited liability company (and any other person whose approval is required under the limited liability company agreement to revoke a dissolution contemplated by this clause). The person(s) electing to revoke a dissolution pursuant to this clause must also admit to the entity a member.

The additional flexibility afforded by the 2014 Amendments can be illustrated by the following fairly common situations. In a single member limited liability company, the loss of that single member, including a transfer of all of its limited liability company interest without the transferee being actually "admitted" as a substituted member, is an event of dissolution of the entity. Such dissolution is typically not the intent of the parties, and often this is not discovered until years after the transfer (which may also include several intervening transfers). Prior to the 2014 Amendments, the dissolution of the entity could only be revoked by the personal representative of the originally transferring member. Under the 2014 Amendments, however, the ultimate assignee (and current owner) of such limited liability company interest is now permitted to revoke the dissolution even though such assignee has not been admitted as a member.

Similarly, the partnership agreement of a limited partnership fund often provides for a specific term for the fund (typically subject to certain rights of extension), at the expiration of which the fund dissolves. At times, following the expiration of the term, many or all of the partners desire for a successful fund to continue rather than commence winding-up its affairs. The 2014 Amendments enable such continuation by providing that the partners can revoke the dissolution by the same vote necessary to amend the provisions of the partnership agreement that provide for the term and the dissolution of the fund upon its expiration. It is important to note, however, that often such partnership agreements provide that no amendment can be made which adversely affects some or all of the limited partners without the consent of such limited partners, and the specific wording of such a provision can greatly impact the vote that is required to revoke the dissolution of a fund caused by the expiration of its term. In fact, Delaware case law suggests that, based on the particular language used, such a provision could potentially require as much as a 100% vote of the partners.

It is worth stressing that a governing agreement may provide other means to revoke a dissolution and that the foregoing revocation mechanisms provided by the 2014 Amendments are intended to be in addition to any such means set forth in the governing agreement, unless the governing agreement specifically provides otherwise. Consequently, to the extent that the parties do not want a dissolution of the entity that is caused as a result of particular actions or events to be revoked, the governing agreement should be carefully drafted to clearly provide that there is no right to revoke a dissolution caused by such actions or events. Otherwise, depending on the cause of dissolution, there may still be a right to revoke such dissolution under DRULPA or DLLCA, as applicable.

Books and Records Demands Through Attorneys and Agents

DRUPA, DRULPA and DLLCA have been amended to provide that a partner of a general partnership, a limited partner of a limited partnership and a member of a limited liability company may make a books and records demand either in person or through an attorney or other agent. When an attorney or other agent makes a books and records demand, such demand must be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to act on behalf of the partner, limited partner or member, as the case may be.

Maintenance of and Access to Records

DRULPA and DLLCA have been amended to confirm that limited partnerships and limited liability companies must maintain a current record that identifies the name and last known business, residence, or mailing address of each partner, in the case of a limited partnership, or member and manager, in the case of a limited liability company. In addition, upon written request by the communications contact of such entity (note that under current law, every Delaware limited partnership and limited liability company is already required to maintain a "communications contact" who is authorized to receive communications from its registered agent), the limited partnership or the limited liability company, as the case may be, must provide such communications contact the name, business address, and business telephone number of a natural person who has access to such records.

Usury Defense Unavailable Among Beneficial Owners and Trustees

DSTA has been amended to clarify that a defense of usury does not apply to obligations of a beneficial owner or trustee of a statutory trust owed to a beneficial owner or trustee of a statutory trust when the obligations arise under the governing instrument of the statutory trust or a separate agreement in writing. This amendment is consistent with amendments previously made to the other Alternative Entity Statutes.

Prescribing Trustee Approval Requirements in a Governing Instrument

DSTA has been amended to confirm that a statutory trust's governing instrument may designate specific trustees, a certain number of trustees, or a threshold percentage of trustees whose vote is required to approve any action on behalf of a statutory trust. If the governing instrument is silent on this matter, then, unless otherwise provided in DSTA, the vote of a majority of the trustees (or, in the event that such action requires the approval of a particular class, group, or series of trustees, then a majority of such class, group, or series) will be sufficient to approve such action.

Use of Word "Bank" Restricted in Names of Statutory Trusts

DSTA has been amended to prohibit, with limited exceptions, the use of the word "bank," and any variation thereof, in name of a statutory trust. This amendment is consistent with amendments previously made to the other Alternative Entity Statutes.

Survival of Rights and Interests in Merging, Consolidating, Converting, Transferring or Domesticating Statutory Trusts

DSTA has been amended to confirm that in the event of a merger, consolidation, conversion, or transfer to another jurisdiction of a statutory trust or a conversion or domestication of another entity to a statutory trust, the rights or securities of, or interests in, such statutory trust or other entity may remain outstanding. These amendments are consistent with amendments previously made to the other Alternative Entity Statutes.

Conclusion

By clarifying existing law where clarifications were deemed beneficial and creating more flexibility where additional contractual freedoms were viewed as advantageous, the 2014 Amendments continue Delaware's leadership as the jurisdiction of choice for the formation and utilization of all types of business entities.

Endnotes:

[1] The Delaware Revised Uniform Partnership Act, 6 Del. C. § 15-101, et seq. ("DRUPA"), the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-101, et seq. ("DRULPA"), the Delaware Limited Liability Company Act, 6 Del. C. § 18-101, et seq. ("DLLCA"), and the Delaware Statutory Trust Act, 12 Del. C. § 3801, et seq. ("DSTA" and, collectively with DRUPA, DRULPA, and DLLCA, the "Alternative Entity Statutes").

[2] 10 Del. C. § 8106 (the "Contractual Limitations Statute").

[3] Specifically, the Limitations Amendment provides: "[A]n action based on a written contract, agreement or undertaking involving at least $100,000 may be brought within a period specified in such written contract, agreement or undertaking provided it is brought prior to the expiration of 20 years from the accruing of the cause of such action."

[4] AGR Halifax Fund, Inc. v. Fiscina, C.A. No. 17226 (Del. Ch. Aug. 3, 1999).

[5] A similar amendment relating to consents by directors of Delaware corporation has been made to Section 141(f) of the Delaware General Corporation Law.

August 31, 2014
Exploring Koehler's Scholarship on the FCPA
by Eric C. Chaffee

Mike Koehler of the FCPA Professor Blog has posted a useful and interesting reading list of his scholarship on the Foreign Corrupt Practices Act. Although this is obvious, he is one of the leading experts on corruption and his scholarship is well worth reading.

9/2/2014 posts

HLS Forum on Corporate Governance and Financial Regulation: The Tension between Conservative Corporate Law Theory and Citizens United
CLS Blue Sky Blog: The Social Reform of Banking: Innovating for Sustainable Financial Services
The D&O Diary: While You Were Out
Securities Law Prof Blog: New in Print
SEC Actions Blog: CEO, CFO CHARGED IN SEC FINANCIAL FRAUD ACTION
CorporateCounsel.net Blog: SEC's Filing Fees Going Down 10% for Fiscal Year 2015
Race to the Bottom: The SEC and Administrative Proceedings (Part 5)
HLS Forum on Corporate Governance and Financial Regulation: 2014 Amendments Affecting Delaware Alternative Entities and the Contractual Statute of Limitations
Securities Law Prof Blog: Exploring Koehler's Scholarship on the FCPA

Blog posts are subject to copyrights held by the authors and are republished here with permission. Views expressed are those of the authors alone. Infringement Notification.