The US Court of Appeals for the Tenth Circuit recently upheld the grant of summary judgment for the receiver of a business that was alleged to have participated in a Ponzi scheme, finding that the clawback of funds was appropriate even from a recipient who was unaware of the fraud.
Continue Reading Tenth Circuit Affirms Clawback From Unsuspecting Recipient of Funds Under Uniform Fraudulent Transfer Act

In a letter dated June 2, 2015, Senator Elizabeth Warren described several “promises” that Mary Jo White, chair of the Securities and Exchange Commission, had allegedly broken. Senator Warren focused on (1) the SEC’s failure to finalize Dodd-Frank rules requiring disclosure of the ratio of CEO pay to that of the median worker; (2) settlement

The US Court of Appeals for the Ninth Circuit recently affirmed dismissal of a counterclaim for breach of fiduciary duty brought under Section 242 of the Alberta Business Corporations Act (ABCA), finding that only an Alberta court could provide the remedy provided by the ABCA, and thus the counterclaim failed to state a claim upon which relief could be granted.
Continue Reading Ninth Circuit Honors Canadian Business Law’s Exclusive Remedy Provision

The Delaware Court of Chancery recently held that a shareholder was not entitled to inspect records concerning alleged violations of the Foreign Corrupt Practices Act (FCPA) because the shareholder was barred from pursuing further derivative litigation, and the documents sought were unnecessary to make a demand on the board.
Continue Reading Delaware Chancery Court Addresses Proper Purpose for Inspection Demand

A recent academic paper found that whistleblower involvement in financial misrepresentation enforcement actions tends to increase (1) penalties against firms by an average of $77 million, (2) penalties against employees by an average of $39 million, (3) prison sentences by an average of 22 months, and (4) the duration of the enforcement action by roughly ten months.
Continue Reading Study Finds Whistleblowers Increase Penalties of Regulatory Enforcement Actions

Preet Bharara, United States Attorney for the Southern District of New York, has petitioned the United States Court of Appeals for the Second Circuit for a rehearing en banc of last month’s landmark decision vacating multiple insider trading convictions, arguing that the decision creates a new “deeply confounding” standard that splits from precedent in this and other circuits, and threatens the effective enforcement of the securities laws.
Continue Reading Bharara Appeals Second Circuit’s Decision Vacating Insider Trading Convictions

Academics in Hong Kong have found that companies that have adopted executive compensation clawback provisions tend to substitute one type of earnings manipulation for another, and that this trend is more pronounced in companies with high growth or transient institutional ownership.

In an article published in the American Accounting Association’s journal, the authors analyzed companies from the Russell 3000 that voluntarily adopted clawback provisions of the type required by Section 954 of the Dodd-Frank Act. Because the Securities and Exchange Commission has not yet finalized the rules to implement this section, only some companies have adopted these measures. Section 954 is intended to deter financial misstatements.
Continue Reading Study Finds Executive Compensation Clawback Provisions Do Not Eliminate Possible Earnings Manipulation

The US Court of Appeals for the Second Circuit recently held that, in order to convict a tippee for insider trading under Section 10(b) of the Securities Act of 1934 and Rule 10b-5, the government must prove beyond a reasonable doubt that the tippee had knowledge of the benefit received by the tipper who breached his or her duty of confidentiality.
Continue Reading Second Circuit Clarifies a Heightened Standard for Insider Trading Convictions