From The Sox Up

From The Sox Up

Cases. Trends. Personalities of Interest.

New Texas M&A Broker Exemption

Posted in Mergers & Acquisitions

Effective February 16, 2015, the Texas State Securities Board (the “Securities Board”) adopted  a new rule, Section 139.27 of Title 7 of the Texas Administrative Code (the “Rule”), that exempts certain mergers-and-acquisitions brokers from dealer registration under the Texas Securities Act.  An exempt mergers-and-acquisitions broker is defined in the Rule as an “M&A Dealer.”  The Rule was prompted by, and is based on, the no-action letter issued by the SEC Division of Trading and Markets issued on January 31, 2014 (and revised February 4, 2014) to permit certain mergers-and-acquisitions brokers to facilitate certain securities transactions without registering as a broker-dealer under the Section 15(b) of the Securities Exchange Act of 1934  (the “No-Action Letter”).[1]  The Securities Board has (and has had) a streamlined registration or licensing process, not involving the satisfaction of any examination requirement, for a dealer that is only acting as a “businessContinue Reading

Questions Regarding New Exemptive Rules for Texas Investment Advisers to Private Funds, Part 2

Posted in Private Funds, SEC Rules

In our previous post , we addressed a set of questions regarding the ability of an investment adviser to a private fund to remain exempt from investment-adviser registration in Texas by relying on the “grandfathering” provision of Texas State Securities Board Rule 109.6, as amended on March 31, 2014, if the private fund has not accepted “new beneficial owners” since March 31, 2014 (“New Rule 109.6″).  In this post, we address the following set of questions regarding such an adviser’s transition to being an “exempt reporting adviser” under new Texas State Securities Board Rule 139.23, also effective March 31, 2014 (“Rule 139.23″):

If an adviser to a hedge fund that is a “3(c)(1) Fund” (as defined in Rule 139.23) has been relying on the grandfathering provision of New Rule 109.6 and the fund receives investment from “new beneficial owners” after MarchContinue Reading

Questions Regarding New Exemptive Rules for Texas Investment Advisers to Private Funds, Part 1

Posted in Private Funds, Proposed Rules

We have received a number of questions over the last few months regarding the new Texas investment-adviser-registration exemptive rules that became effective on March 31, 2014.  These questions have concerned both (1) the “grandfathering” provision of new or amended Texas State Securities Board Rule 109.6, which allows an adviser to private funds to continue to rely on the exemption under Rule 109.6 as in effect before March 31, 2014 (“Former Rule 109.6”), and (2) the conditions required for an adviser to rely on the exemption for “exempt reporting advisers” under new Texas State Securities Board Rule 139.23.

For example, an investment adviser that sponsors and manages a hedge fund in Texas that was formed and operating before March 31, 2014 has expressed its desire to remain exempt from the investment-adviser-registration requirement under the Texas Securities Act.  Before the new rules became effective, the adviser wasContinue Reading

Court Clarifies “Personal Benefit” for Insider-Trading Liability

Posted in SEC Rules

The recent decision of the federal Second Circuit Court of Appeals in U.S. v. Newman et al. (December 10, 2014)  is noteworthy for a few reasons.  Among them is the Court’s analysis and discussion – and clarification – of what constitutes a “personal benefit” that must be received by a tipper for tipping insider-trading liability to be imposed on a tippee under SEC Rule 10b-5.

The Court acknowledged that “personal benefit” has been broadly construed by courts to “include not only pecuniary gain, but also… any reputational benefit that will translate into future earnings and the benefit one would obtain by simply making a gift of confidential information to a trading relative or friend.”  But the Court stated that “the mere fact of a friendship, particularly of a casual or social nature,” is not enough from which to deduce thatContinue Reading

A Reminder for Departing Officers and Directors

Posted in Director and Officer

Public companies occasionally must deal with officer or director departures, and when that occurs, the company would be well-served by reminding the departing insider of his or her obligations under applicable securities laws. At a minimum, the reminder should cover insider trading and, if applicable, compliance with Section 16 of the Securities Exchange Act of 1934. It might also cover the application of Rule 144 to public share resales, as well as other items specific to the company (such as directives from the human resources department), depending on the desired scope of coverage and the company’s prior guidance to insiders.

The form of the reminder will depend on the company’s preference, but many companies typically deliver a simple exit memorandum to the departing insider.

In respect of insider trading, the deliverable should remind the departing insider that he orContinue Reading

Making Your List and Checking it Twice: 2014 Year-End Benefit Plan – Related Actions

Posted in Employee Benefits

As we enter into the last two months of 2014, there are several year-end employee benefit-related matters that should be reviewed and checked off an employer’s list of compliance items. Also, time is running out for scheduling agenda items regarding actions relating to employee benefit matters, to the extent necessary or appropriate, during 2014 for consideration by a sponsoring entity’s board of directors, compensation committee or other governing body.

Check out the full list of employee benefit-related matters that should be reviewed before the end of the year!

Continue Reading

New Texas Crowdfunding Rules – Ten Factors to Consider

Posted in Crowdfunding, SEC Rules

So you’d like to take advantage of the new Texas intrastate crowdfunding rules, when they’re effective in late November, to raise money for your business.  That’s great, but here are ten important factors (in no particular order) for you to consider:

You must have a Texas entity that is conducting business primarily in Texas.  It must have its principal office and at least 80% of its assets in Texas.  At least 80% of the gross revenues of its operating business must be from Texas.  Also, at least 80% of the net offering proceeds must be used to operate the business in Texas. You can’t offer the securities yourself, through your website or otherwise.  You can offer the securities only through the internet website of either a “Texas crowdfunding portal” or a registered securities dealer in Texas.  It appears that there will be portals available, but anyContinue Reading

NASDAQ Listed? Only 24 Hours Left to File Compensation Committee Certification!

Posted in Compensation Committees

Just a friendly reminder that issuers listed on the NASDAQ Stock Market (“NASDAQ”) must file a one-time certification certifying compliance with the amended compensation committee listing rules provided in Rule 5605(d) and IM-5605-6 by the earlier of 30 days after their 2014 annual meeting or October 31, 2014.  NASDAQ’s Rule 5605(d) requires that companies certify they have complied with (i) the NASDAQ compensation committee independence standards and (ii) and the requirement for a formal written charter that specifies the committee’s responsibilities, including structure, operations, and membership requirements. If an issuer’s annual meeting is held in the last quarter of 2014, the deadline to file the certification is tomorrow (October 31, 2014). This certification can be completed by logging in to the NASDAQ Listing Center and following the prompts.

A list of frequently asked questions regarding the certification is also available.

Continue Reading

The SEC’s Investor Advisory Committee Ponders Change to Accredited Investor Definition

Posted in SEC

On Thursday, October 9, the Investor Advisory Committee of the Securities and Exchange Commission will meet to discuss whether to recommend a change to the definition of “accredited investor.” This definition has historically played a central role in determining whether an offering of securities qualifies for the private offering exemption established by SEC regulation. Any potential changes to this definition could affect a company’s ability to raise capital in the private markets.

The Securities Act of 1933 provides an exemption from the registration and disclosure requirements for securities offerings not involving any public offering. SEC regulations over the last 50 years have clarified the means by which companies can offer securities without triggering these registration and disclosure requirements. The vast majority of private offerings today are conducted inContinue Reading

The Supreme Court Decision in Halliburton Allows Defendants to Rebut Fraud-on-the-Market Presumption at Earlier Stages of the Case

Posted in SEC

On July 21, 2014, Gardere Partner Orin H. Lewis issued a client alert discussing the impact of the Supreme Court’s decision in Halliburton Co. v. Erica John Fund, Inc., 573 U.S. ___, slip. op. at 1 (June 23, 2014).

“Investors can recover damages in a private securities fraud action only if they prove that they relied on the defendant’s misrepresentation in deciding to buy or sell a company’s stock.” Halliburton Co. v. Erica John Fund, Inc., 573 U.S. ___, slip. op. at 1 (June 23, 2014) (“Halliburton II”).  Basic v. Levinson, 485 U.S. 224 (1988), held that investors could satisfy this requirement by invoking the presumption that the price of stock traded in an efficient market reflects all public material information—including material misstatements—and that anyone who buys or sells the stock at market price may be considered to have relied on those misstatements. Id. On June 23, 2014, the CourtContinue Reading