Corporate Finance & Securities

SEC Fails to Prove its Case; “Where’s Waldo?” Defense Prevails

The SEC failed to prove that Citigroup banker, Brian H. Stoker, had violated securities laws. A federal jury found that the SEC did not meet its burden of proving that Mr. Stoker knew or should have known that his statements were misleading in the documents prepared for the sale of a collateralized debt obligation based on subprime mortgages in 2007.

Citigroup settled with the SEC to resolve the civil charges, agreeing to pay $285 million in penalties.

The SEC did not bring any Rule 10b-5 claims—arguably its strongest securities fraud weapon—which requires showing intentional or reckless behavior. However, the claims it did bring under Section 17(a)(2) and (3)  of the Securities Act of 1933 only require showing negligence in making the misleading...

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Business Startup

iVLG News Roundup 2012 Week 30: Market Glitches, Insider Trading, Olympic Updates

U.S. Stock Market News

Glitches in System Cost Knight Capital Group $440 million Knight Capital Group, one of the largest trading firms in the U.S., stock plunged nearly 50% by midday Thursday, trading at its lowest price since 1998. The steady plunge resulted from faulty software forcing the company to buy a great number of stocks at an inflated value and then sell all those stocks at a lower price, which sent dozens of U.S. stocks swinging more than 10 percent.

The company is scrambling to secure a buyer or investor to facilitate a potential merger to save the company after the severe loss. Knight intends to continue trading and market-making while it considers its options.

U.S. Securities Regulation

Bristol-Meyers Executive Accused of Insider Trading In...

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Business Startup

iVLG News Roundup Week 27: Corporate Finance; Public Offerings; Contracts; Etc.

Securities Regulation & Corporate Finance

JOBS Act Deadline Comes & Goes without SEC Action Congress imposed upon the SEC a July 4th deadline to implement rules under Title II of the JOBS Act that would enable companies to engage in general solicitation under Rule 506 of Regulation D. But on June 29th SEC Chair(wo)man Mary Schapiro testified before Congress that the SEC would not be able to enact rules within the 90 period proscribed by Congress. Ms. Schapiro did state that the SEC anticipates having a vote on a draft rule later this summer:

“The Securities and Exchange Commission will miss its first rulemaking deadline to lift the general solicitation ban as mandated by the Jumpstart Our Business Startups Act, but a draft...

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Corporate Finance & Securities

SEC Approves Listing Standards for Compensation Committees and Advisers

On June 20, the SEC released a statement announcing that it has approved a rule (Rule 10C-1) that requires national securities exchanges to adopt listing standards for boards of directors and compensation advisers of public companies. You can view the Final Rule.

The new rule requires the listing standards to include:

The independence of the individual members of the compensation committee; The committee’s authority to retain compensation advisers; The committee’s consideration of the independence of any compensation advisers; and The committee’s responsibility for the appointment, compensation, and oversight of the work of any compensation adviser.

In order for a company to be listed on a particular securities exchange, the company must meet the new listing standards of that particular exchange in order for its shares to...

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Business Startup

iVLG News Roundup Week 25: Securities Regulation; Mergers and Acquisitions; Local News; Etc.

Securities Regulation

Congress Examining IPO Process in Wake of Facebook Offering A bipartisan group of congressional members are calling for an overhaul of the initial public offering process after Facebook’s stock dropped precipitously after it became listed on a public exchange. In a June 19, 2012 letter to Mary Schapiro chairman of the SEC, Rep Darrell Issa chairman of the Committee on Oversight and Government Reform, expressed concern that under existing securities laws:

“underwriters have discretion to determine the price of an IPO, while subject to conflicts of interest stemming from economic relationships with those institutional clients that ultimately will purchase the bulk of an issuance. In conjunction with this discretion, communications restrictions and legal liability enable underwriters to provide information to institutional...

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Business Startup

iVLG News Roundup Week 22: Marina Biotech Scaling Back, U.S. Job Growth Slows Down, Spike in Auto Sales

National News

Trustee in Madoff Case Cashing In A recent article posted by The New York Times pointed out that Irving Picard, the court-appointed trustee that is seeking to recover funds for the victims of the Madoff Ponzi scheme, is making around $850 an hour. Thought of initially as a modern-day Robin Hood, advocating for those poor individuals who were taken advantage of, Picard has obtained nearly $554 million in legal  and other fees.

Thus far, Picard has reached settlement deals worth nearly $9 billion, but the Madoff victims have only seen $330 million of that money because many of the settlement deals have been challenged in court. As far as Picard’s fees, the good news is that the fees do not come out of the Madoff...

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Business Startup

News Roundup 2012 Week 16: Securities Law, Corporate Governance, JOBS Act, Corporate Finance, Etc.

Securities Transactions & Corporate Governance

Google Stock Split Preserves Founder Control Google’s stock split that was announced last Friday created a new class of non-voting stock. Google’s stock structure provides for 66% of the voting power to be concentrated in the hands of three individuals: the company’s two co-founders, Larry Page and Sergey Brin, and the Executive Chairman, Eric Schmidt. By creating the class of non-voting stock, and distributing this stock in the stock split, the controlling shareholders will avoid having their voting rights diluted. Other web companies such as Zynga, Facebook, and Groupon have implemented a similar stock structure, which allows for visionary company leaders to maintain company control. The drawback is that others, including investors and employees, have relatively fewer votes....

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Corporate Finance & Securities

Crowdfunding: Critcisms and Defenses

With the recent discussion surrounding the JOBS Act and crowdfunding, we thought it was a good time to discuss some of the criticisms surrounding crowdfunding, as well as reasons why some of the criticism may be lacking legitimacy.

Loosening regulations opens the door to reckless investing and scam artists Much of the criticism over the passing of the JOBS Act stems from the fear that loosening investment regulations is an invitation for get-rich-quick scam artists to take advantage of a larger pool of investors via the Internet. Economist Robert Reich argues that crowdfunding is just a means by which people whose net worth is less than $100,000 can “gamble away” up to 5 percent of their annual incomes. Another critic, Jack Hernstein,...

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Business Startup

News Roundup Week 13: The JOBS Bill, Securities Law, Employment Law, Social Media Law, etc.

The JOBS Bill & Securities Laws

Senate and House Approve Major Overhauls of Federal Securities Law This week the house and senate JOBS bills were reconciled and H.R. 3606 was sent to the president to be signed into law. The White House has publicly supported the bill, and is expected to sign the bill soon. The 22 page bill has seven different titles, each of which is intended to make it easier for companies to raise money.

Title I “Reopening American Capital Markets to Emerging Growth Companies” creates reduced reporting obligations for “emerging growth companies,” a newly defined classification of businesses. These reduced filing and reporting obligations mean that only the largest companies will have to fully comply with the burdensome filing and...

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Business Startup

News Roundup 2012 Week Three: SOPA, Director Compensation, Federal Securities Law, Professional Responsibility, etc.

SOPA Update

We caught you up to date on all of the recent SOPA developments in yesterday’s post, but there’s more news today. A handful of websites including Wikipedia shutdown their services today in protest of SOPA. Others, like Google, took a milder approach in illustrating solidarity in opposition to SOPA. Google replaced the image of its name with a black box blocking out the image. It seems like the protests have been effective as SOPA is finally getting the national media attention it deserves, and many supporters have reversed position on the bills today including Senators (who supported SOPA’s sister bill in the Senate-PIPA) Rubio, Boozman, Hatch, Blunt, and Inhofe, and Representatives Quayle, and Holden. SOPA news was at a...

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