Last month, we previewed what looked to be a momentous term for the Supreme Court, highlighting three cases in particular. Recently, the Court granted permission for the Solicitor General to participate in oral argument in two of those cases: the whistleblower case Digital Realty Trust, Inc. v. Somers, and the Securities Act of 1933 (“Securities Act”) case Cyan, Inc. v. Beaver County Employees’ Retirement Fund.
Massive corporate scandals have become all too familiar in America’s finance industry. Wells Fargo and Equifax offer two prominent examples that are still seared in our collective memories.
The kids are back in school and the Supreme Court is back in session. When Justice Ginsburg described the fall term as momentous, she was most likely referring to the blockbuster cases that will shape American life from the ballot box to the bake shop. The Court will hear argument on political gerrymandering, workers’ rights, digital privacy, and whether a cakemaker can legally refuse to serve gay couples in the name of religious freedom.
You can take the kid out of the Bronx, but you can’t take the Bronx out of the kid. Supreme Court Justice Sonia Sotomayor made headlines recently when she attended a Red Sox/Yankees game to support her beloved Yankees and their breakout star, Aaron Judge.
Silicon Valley is known for disrupting industries, and some of its most storied residents seem ready to upend the IPO world–not with technology, but with moxie. Snap, Inc. made headlines* this past spring with its novel initial public offering (IPO) selling “Class A” common shares without voting rights. Rather than the standard practice of taking an investor’s capital in exchange for the right to hold the company’s management accountable for its use, Snap sold over 200 million shares at $17 apiece without giving those investors any voting rights. Instead, Snap’s two co-founders retained 88.5 percent of the company’s voting power.
Much has been made, since the Trump administration took office backed by a Republican-controlled Congress, about the potential repeal of The Dodd Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Many interested in Wall Street regulation and reform expressed concern over this prospect, given that Dodd-Frank was passed in the wake of the Financial Crisis in an effort to prevent some of the more egregious financial excesses that led to the market collapse.
The U.S. Supreme Court has issued its much-anticipated decision on class action tolling, deciding that the filing of a class action under the Securities Act of 1933 does not toll the statute of repose for an individual to bring the same claim or claims as the class action. The 5-4 decision in California Public Employees’ Retirement System v. ANZ Securities, Inc., No. 16-373, upends the current practice of opting out of securities class actions with significant implications for investors, effectively killing reliance on class action tolling in federal securities class actions. Justice Kennedy wrote the Court’s opinion, with Justices Roberts, Thomas, Alito, and Gorsuch joining; Justice Ginsburg wrote the dissent, with Justices Breyer, Kagan, and Sotomayor joining.
Since 2010, when the U.S. Supreme Court ruled in Morrison v. Australia National Bank Ltd., 561 U.S. 247 (2010) that purchasers of securities that were traded on a non-U.S. exchange could not bring claims under U.S. federal securities laws, we have observed two key trends. First, there has been a significant increase in securities litigation brought on a group basis in Europe, Canada, Australia, Japan and other non-U.S. jurisdictions. Second, and relatedly, third-party litigation funding has greatly expanded in various countries …
On March 1, 2017, Snap Inc. made history by becoming the first U.S. company to go public by selling only non-voting shares. Of the 200 million shares offered in the IPO for the company behind the popular mobile messaging app Snapchat, absolutely none have any right to vote on directors, executive compensation, a corporate sale or other key corporate matters. Rather, those rights rest exclusively in the hands of Snap insiders. Many institutional investors and shareholder advocates are alarmed about Snap’s dual-class structure that deprives shareholders of a voice. Many want to avoid owning such shares, but worry that if Snap is added to an established index, then ownership may become inevitable. To avoid such a scenario, several investor groups are advocating that index providers exclude Snap from major stock indices.
The U.S. Supreme Court recently accepted an appeal to resolve a circuit split over whether companies have an actionable duty to disclose known trends or uncertainties that could affect their business. The case–Leidos, Inc. v. Indiana Public Retirement System, No. 16-581 (U.S.)–may significantly impact the ability of investors to hold companies liable for omitting information from their financial reporting.
The Acting Chair of the U.S. Securities and Exchange Commission recently moved to limit who at the SEC can authorize the issuance of subpoenas. The abrupt change, which the SEC did not announce publicly, removes the ability to issue subpoenas from approximately 20 senior officials in the SEC’s Enforcement Division–limiting that power to just the Director of that division.
Last week, the House of Representatives passed sweeping legislation that would upend the class action landscape. If the Senate passes the “Fairness in Class Action Litigation Act,” injured investors and consumers could potentially run into colossal difficulties, if not outright dead-ends, in seeking efficient relief through class actions or the legal system itself.