From The Sox Up

From The Sox Up

Cases. Trends. Personalities of Interest.

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

SEC Brings First Whistleblower Retaliation Action Against Hedge Fund Manager.

Posted in SEC, SEC Rules

On Monday of this week, the SEC charged hedge fund manager Paradigm Capital Management of Albany, New York with making improper principal trades and retaliating against the firm’s head trader who reported the alleged misconduct to the SEC.  This was the first anti-retaliation enforcement action the SEC has brought under the Dodd-Frank Whistleblower statute.  In anticipation of the proceedings, Paradigm, and its owner Candace King Weir agreed to pay $2.2 million to settle the charges without admitting or denying wrongdoing. It is unclear at this point how much, if any, of this amount will be awarded to the whistleblower.

According to the SEC’s order, Paradigm made trades between the hedge fund it manages and the broker-dealer its principal owns.  The SEC alleged that these principal transactions violated Section 206(3) of the Investment Advisers Act of 1940, which prohibits an investmentContinue Reading

Adoption of a Rule 10b5-1 Plan – To Disclose or Not to Disclose, Part 3

Posted in Proposed Rules, SEC, SEC Forms, SEC Rules

The two preceding posts in this series (1) began to address the question whether a CEO’s adoption of a Rule 10b5-1 trading Plan should be publicly disclosed by the CEO or the company, such as through a press release or a Form 8-K, before any trading begins under the Plan, and (2) described reasons for not so disclosing the adoption of a Plan , which appears to be the prevailing practice notwithstanding recommendations to disclose in a number of articles by knowledgeable securities lawyers.

So what are some of the reasons that the CEO or the company should disclose the adoption of the Plan?  Assuming (as is typical) that the Plan contemplates sales of shares by theContinue Reading

Adoption of a Rule 10b5-1 Plan – To Disclose or Not to Disclose, Part 2

Posted in SEC Forms, SEC Rules

The preceding post in this series began to address the question whether a CEO’s adoption of a Rule 10b5-1 trading Plan should be publicly disclosed by the CEO or the company, such as through a press release or a Form 8-K, before any trading begins under the Plan.  It was noted that, interestingly, a number of articles written by knowledgeable securities lawyers recommend such disclosure (though without disclosing any details of the Plan), while the prevailing practice appears to be not disclosing the adoption of a Plan.

So what are some of the reasons that the CEO and the company might give for not disclosing?  Assuming (as is typical) that the Plan contemplates sales of shares by the CEO, I believe they include the following:

Why disclose if there is no requirement to disclose?  The CEO’s potential tradingContinue Reading

Adoption of a Rule 10b5-1 Plan – To Disclose or Not to Disclose, Part 1

Posted in SEC Forms, SEC Rules

The CEO of a publicly held company determines to enter into a personal Rule 10b5-1 trading plan (“Plan”).  Among other questions that arise in this circumstance is the question for this series of posts (the “Question”):  Should the CEO or the Company disclose, through a separate public announcement, the adoption of the Plan before any trading begins under the Plan?  Although it is easy to respond that no such disclosure is required by Rule 10b5-1, that does not necessarily answer the question.

In a number of articles, written since the beginning of 2013, that generally address Plans and their use and related practices (“Articles”),[1] knowledgeable lawyers at various top-tier securities-law firms have almost uniformly recommended disclosure, by a press release or the filing of a Form 8-K, of the adoption of a Plan.  Yet surveys and other anecdotal evidence suggest that such disclosure of an executive’s adoption of aContinue Reading

Shareholder Internal Insider-Trading Policies

Posted in SEC, SEC Rules, Shareholders

Certain organizations that hold or invest in publicly traded securities may gain material nonpublic information regarding an issuer of those securities by virtue of the terms of the investment in the issuer, such as through a contractual right to receive certain information or to designate a director of the issuer, or by virtue of a business relationship with the issuer, such as providing services to the issuer.  Such an organization (an “insider-shareholder”) is justifiably concerned with the risk of improper trading of the securities it owns while in possession of material nonpublic information regarding the issuer of those securities, and the insider-shareholder may address that risk by adhering to the issuer’s insider-trading policy or adopting a Rule 10b5-1 plan for trading in the securities.  The insider-shareholder should also be concerned, however, about the risk of improper personal trading of securities of the issuer by, or resulting from the individual actionsContinue Reading