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On July 13, 2021, the Securities and Exchange Commission (“SEC”) announced a major enforcement action related to a proposed merger between a special purpose acquisition company (“SPAC”) and a privately held target company (“Target”).  This followed numerous warnings by the SEC staff over several months of enhanced scrutiny of such transactions under the federal securities laws.[1]  The respondents, except for the Target’s CEO, settled the action by collectively agreeing to civil penalties of approximately $8 million and to certain equitable relief described below. [2] …
Continue Reading SEC Brings SPAC Enforcement Action and Signals More to Come

On May 12, 2021, Telefonaktiebolaget LM Ericsson (“Ericsson”) announced that it had reached an agreement to settle a claim by a competitor, Nokia Corporation, for €80 million (approximately $97 million).[1]  Although Nokia’s complaint against Ericsson was not filed publicly, and therefore the details of the claim are not known, Ericsson’s announcement stated that “[t]he settlement relates to events that were the subject of a 2019 resolution with the U.S. Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC) of investigations into Ericsson’s violations of the U.S. Foreign Corrupt Practices Act (FCPA).”[2]  This appears to be a rare instance in which a company that allegedly paid bribes to obtain business from a government entity agreed to compensate a competitor that lost out on the business opportunity as a result of the corrupt conduct, and demonstrates a further, significant risk of follow-on litigation relating to FCPA violations.
Continue Reading Recent Settlement Highlights Risk of Follow-On Litigation Related to FCPA Investigations

On April 29, 2021, the Securities and Exchange Commission (the “SEC”) announced settled charges against eight public companies that filed notifications of late filings on Form 12b-25 (more commonly known as “Form NT”) without disclosing in those filings a pending restatement or correction of financial statements.

These settlements are a reminder that filing a Form…

On March 5, 2021, the Securities and Exchange Commission (“SEC”) filed a lawsuit in federal court against AT&T, Inc. (“AT&T”) for violating Regulation FD, and also charged three of AT&T’s Investor Relations executives with aiding and abetting this violation.[1]  Reg FD (which stands for “Fair Disclosure”) prohibits companies from selectively disclosing material nonpublic information to certain categories of individuals, including analysts and investors, and is intended to promote full and fair disclosure of such information in order to ensure that all investors have equal access to potential market-moving information.[2]
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Continue Reading SEC Brings Rare Litigated Enforcement Action for Violation of Regulation FD

On September 30, 2020, amidst a blizzard of cases filed at the end of the Securities and Exchange Commission’s fiscal year, the SEC announced a settlement with BGC Partners, Inc. (“BGC”) involving allegedly misleading disclosures concerning how it calculated a key non-GAAP financial measure (“NGFM”).[1]   This settlement is the latest in a string of enforcement actions relating to what the SEC views as improper uses of NGFMs.  In advance of year-end reporting, this action is a useful reminder to companies to carefully consider the SEC guidance and recent enforcement actions related to NGFMs.  At least 95% of all Fortune 500 companies publish NGFMs, and the SEC has indicated that it will be reviewing NGFMs with particular scrutiny this year-end in light of the challenges of reporting on performance during the COVID-19 pandemic. …
Continue Reading SEC Brings Enforcement Action Against Global Brokerage Company, Finding False and Misleading Statements In Connection With Non-GAAP Financial Measures

On the eve of the U.S. presidential election last week, the SEC Enforcement Division released its annual report for fiscal year 2020 (the “Report”), providing an overview of the Division’s enforcement figures, developments, and areas of focus in what Director Stephanie Avakian described as “the most challenging year in recent memory.”[1]  This past year has marked, together with the longest shutdown in government history the year prior, a challenging but reasonably productive time for the SEC’s enforcement program.  Just as last year’s report highlighted the Division’s struggles during the fiscal shutdown, the final annual report of the Clayton-led SEC focuses on the significant disruption the COVID-19 pandemic has caused to the Division’s operations, investigations, and priorities, including the suspension of testimony for several months, establishment of a Coronavirus Steering Committee, and redirection of resources toward COVID-related fraud.  This time around, however, the Division could not avoid a drop-off in the number of enforcement cases, which seems attributable at least in part to the pandemic and its profound impact on the SEC’s operations.
Continue Reading From Government Shutdown to COVID-19: SEC Enforcement Division Releases Final Chapter of Jay Clayton-led SEC

Late last week – for the first time in 40 years – the SEC announced a settlement of an internal controls case against an issuer arising from its repurchase of its own shares. The SEC found that Andeavor bought back $250 million of stock without first engaging in an adequate process to ensure that the…

On June 22, 2020, the Supreme Court held in Liu v. SEC that the Securities and Exchange Commission (“SEC”) may seek, and courts have the power to grant, disgorgement as an equitable remedy for violations of the securities laws. However, the Court also placed potentially important limitations on disgorgement, holding that—to qualify as an equitable…

On March 20, 2020, news outlets reported that four U.S. Senators sold millions of dollars in stock following classified briefings to the Senate on the threat of a COVID-19 outbreak.  Three days later, the Co-Directors of the Securities and Exchange Commission’s (“SEC”) Division of Enforcement, Stephanie Avakian and Steven Peikin, issued a statement reminding market participants of their obligations with respect to material non-public information (“MNPI”) and of the SEC’s commitment to protecting investors from fraud and ensuring market integrity.[1] …
Continue Reading Insider Trading Risk During the COVID-19 Outbreak

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2020”.

SEC Disclosure and Reporting Developments

Recently, the US Securities and Exchange Commission continued to move forward with a number of disclosure effectiveness and simplification initiatives, the details of which are available in…