Section 10(b) of the Securities Exchange Act of 1934 prohibits use of “any manipulative or deceptive device” in connection with purchases or sales of securities. Since its adoption, this provision has provided SEC with an important enforcement tool. Beginning in 1975, the US Supreme Court also empowered aggrieved shareholders to use this Section to support private lawsuits against alleged violators (Blue Chip Stamps v. Manor Drug Stores). The substantive and procedural contours of this private right have continued to evolve in the subsequent four decades, as courts address arguments by plaintiffs and defendants. In 1988, the Supreme Court ruled that plaintiffs who buy or sell shares through an “efficient market” are entitled to a presumption that they relied on that market’s price, not knowing that the market was tainted by manipulative or deceptive information (Basic, Inc. v. Levinson).
Audit, Compliance and Risk Blog
Corporate directors and chief executive officers (CEOs) benefit from variety of legal rights, set forth in state corporation codes, company articles of incorporation and bylaws, and in their individual employment contracts. In addition, they may be able to access additional “equitable rights” to fair dealing, based on common law principals. But as a dethroned CEO just learned from the Delaware Supreme Court, these equitable rights can be limited by the equitable rights of other parties.
News from The Bureau of Safety and Environmental Enforcement (BSEE) Press Release Issued April 3, 2014
News from SEC Press Release Issued April 4, 2014
Although the federal Securities Acts do not expressly outlaw stock trading that exploits preferential access to “insider” information, the Securities and Exchange Commission (SEC) and courts have applied general language in those Acts to cover these situations. A very recent decision by the federal Court of Appeals for the Second Circuit marks the latest such expansion, in a case holding the “tippee” of insider information liable for profits he helped third parties create by trading on that information (SEC v. Contorinis).
Prosecutors rely on informants from time to time to identify wrongdoing and “make their cases.” But corporate fraud whistleblowers can face bleak futures: at best they may be ostracized from future promotions, at worst they may be terminated with no favorable recommendation. Section 806 of the Sarbanes-Oxley Act of 2002 (SOA) adds important protections for whistleblowers
For the second year running, SEC activities during 2013 were dominated by its efforts to issue rules required by two major pieces of recent legislation:
Dealers and brokers seeking hedging exposures to the Overnight Index Swap rate (OIS) are in luck. The Financial Accounting Standards Board (FASB) recently issued final guidance that allows dealer-brokers to designate the US OIS, the Fed Funds Effective Swap Rate, as a benchmark interest rate for hedge accounting purposes.
The SEC voted (3-2), on September 18, 2013, to propose pay ratio disclosure rules as required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. It has issued for public comment until December 2, 2013, its proposed rule, Pay Ratio Disclosure, requiring companies to disclose ratio of the chief executive officer’s (CEO’s) compensation to the median compensation of their employees. According to the SEC staff, registrants are given flexibility in calculating the median employee and total compensation for disclosure purposes based on their size, structure, and how they compensate their employees. Stakeholders who would like to have their views considered should act quickly to meet the December 2, 2013, deadline.