Posts from May 2015.
The Sixth Circuit this week rejected the "definitively and specifically" standard that had required a Sarbanes-Oxley whistleblower's "reasonable belief" to closely track each element of the legal cause of action for the fraud she reports has occurred. The Circuit instead aligned with more recent authority requiring only a subjective belief that is objectively reasonable, given the whistleblower's training and experience. Sarbanes-Oxley makes it illegal for a public company to retaliate against an employee who reports fraud or assists in investigations or enforcement ...

In an opinion Thursday, the Delaware Supreme Court held that independent directors should be dismissed from shareholder derivative litigation - even over transactions presumptively subject to "entire fairness" review - unless plaintiffs adequately plead non-exculpated claims against them. Prior precedent suggested, and the lower courts in these consolidated appeals adopted, a transactional approach to the issue: If the transaction was subject to entire-fairness review, then all the directors presumptively remained in the case through discovery to summary judgment at ...

Posted in: Supreme Court

The Financial Industry Regulatory Authority's disciplinary appellate body (the National Adjudicatory Council or NAC) has revised the Sanction Guidelines used to determine penalties in enforcement cases. The revisions increase the severity of some Guidelines and generally index monetary fines to the Consumer Price Index. Key among the changes, the NAC:

  • Urges "strong consideration" of individual bars or firm expulsion for intentional fraud or cases in which aggravating circumstances predominate
  • Emphasizes more severe sanctions for recidivists;
  • Increases the upper ...
Posted in: FINRA

The SEC confirmed Friday that it may choose to be prosecutor, judge and jury in novel cases where it thinks it knows best and can urge Chevron deference when others seek judicial review.

The Commission dressed up the language a bit, of course:

If a contested matter is likely to raise unsettled and complex legal issues under the federal securities laws, or interpretation of the Commission's rules, consideration should be given to whether, in light of the Commission's expertise concerning those matters, obtaining a Commission decision on such issues, subject to appellate review in the ...

Posted in: SEC

The Eleventh Circuit Court of Appeals recently issued an opinion in Bank of Brewton v. The Travelers Companies, Inc., 777 F.3d 1339 (11th Cir. February 9, 2015), addressing whether, under Alabama law, a duly authorized stock certificate procured under false pretenses constituted a "counterfeit" document triggering coverage under a financial institution bond. The Court found that it did not. The case arose out of several loans made by the Bank of Brewton to a customer named Hines. As collateral, Hines had assigned to the bank certain shares of stock in a company named The Securance ...

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