Securities Regulation: Liabilities and Remedies

by Marc I. Steinberg

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Securities Regulation: Liabilities and Remedies provides you with the guidance you need to protect your clients' confidential information while facing disclosure and liability concerns under the securities laws. This comprehensive volume helps you deal successfully with such matters as: disclosure of self-dealing; protecting confidential information; insider trading; “soft information”; bad financial news; merger negotiations; a company's duty to update information; public and private offerings; the “fraud on the market” theory of reliance; shareholder remedies, including derivative suits; secondary liability; SEC enforcement; RICO; tender offer developments in the legislatures and the courts; going-private transactions; and more.

Throughout the book, you'll find analysis of the latest SEC regulations and releases, court decisions and federal and state legislation, including the Private Securities Litigation Reform Act and the Sarbanes-Oxley Act.

Book #00582; looseleaf, two volumes, 1,348 pages; published in 1984, updated as needed; no additional charge for updates during your subscription. Looseleaf print subscribers receive supplements. The online edition is updated automatically. ISBN: 978-1-58852-021-0.

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  • Brand: Law Journal Press
  • Product Type: Books
  • Edition: 0
  • Page Count: 1348
  • ISBN: 978-1-58852-021-0
  • Pub#/SKU#: 582
  • Volume(s): 2

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  • Marc I. Steinberg
Marc. I. Steinberg is the Rupert and Lillian Radford Professor of Law at Southern Methodist University Dedman School of Law. He is the Director of SMU’s Corporate Directors’ Institute and former Senior Associate Dean for Academics. Professor Steinberg also served as Visiting Professorial Fellow, Centre for Commercial Law Studies, at the University of London. His experience includes appointments as a Visiting Professor, Scholar and Fellow at law schools in Argentina, Australia, China, England, Finland, Germany, Japan, New Zealand, Scotland, South Africa, and Sweden.

Professor Steinberg was an enforcement attorney at the United States Securities and Exchange Commission and special projects counsel, directly assisting the SEC’s General Counsel in a wide variety of projects and cases. He is editor-in-chief of The International Lawyers as well as The Securities Regulation Law Journal, a member of the advisory board of Law and Business Review of the Americas and The Journal of Corporation Law. He is also the author of twenty-two books and more than 125 law review articles. Professor Steinberg received his undergraduate degree at The University of Michigan and his law degrees at the University of California, Los Angeles (J.D.) and Yale University (LL.M.). He is a member of the American Law Institute.

Also by Marc I. Steinberg:
Attorney Liability After Sarbanes-Oxley

Selected Disclosure Obligations

§ 1.01 Introduction
§ 1.02 Qualitative Disclosure—Generally
§ 1.03 Self-Dealing by Corporate Directors and Officers
[1] Commission Disclosure Items and Affirmative Misrepresentations
[2] Disclosure Not Based on Line Items
§ 1.04 The “True Purpose” Cases
[1] Rationale
[2] Application
[3] Limited Exceptions
[4] Viability of Limited Exceptions
[5] Disclosure of Effects
§ 1.05 Questionable and Illegal Payments
§ 1.06 Antisocial, Unlawful or Unethical Company Policies
§ 1.07 Adjudicated Illegal Activities by Officers and Directors
§ 1.08 Pending Lawsuits Against Officers and Directors
§ 1.09 Business Expertise and Reputation of Officers and Directors
§ 1.10 A Proposed Framework for Disclosure of Qualitatively Material Information
§ 1.11 Quantitative and Qualitative Disclosure: The Ramifications of Staff Accounting Bulletin 99 (“SAB 99”), Ganino, and Their Progeny
[1] Issues Regarding Determinations of Materiality
[2] SEC Staff’s Definition of Materiality
[3] Examples of Factors Specified by SAB 99
[4] The Manner of Analysis—Individual and Aggregate
[5] The Application of SAB 99—The Ganino Case
[6] A Continued Lack of Agreement as to Standards
[7] Effects of SAB 99
[8] Potential Negative Effects of SAB 99
[9] The Emergence of a New Era
§ 1.12 Conclusion

Issuer Affirmative and Timely Disclosure Obligations

§ 2.01 Introduction
§ 2.02 Duty to Update
§ 2.03 Affirmative Duty to Disclose
[1] Generally
[2] Rumors
[3] Duty to Correct
[4] Duty to Disclose “Soft” Information
[5] Duty to Disclose Merger Negotiations
[6] Duty to Disclose “Bad News”
[7] Summation
§ 2.04 SEC Statements and Rules
§ 2.05 SRO Rules
§ 2.06 Regulation FD
[1] The Perceived Problem of Selective Disclosure
[2] The Scope of Regulation FD
[3] Regulation FD’s Policy Implications
[4] Selective Issues Arising Under Regulation FD
[5] Implementing Regulation FD
[6] Relationship Between Regulation FD and Section 10(b)
[7]  Potential Significance of Regulation FD
§ 2.07 Conclusion

Insider Trading—The Duty Theory and Related Developments

§ 3.01 Introduction
§ 3.02 The Concept of Materiality
[1] The Definition of Materiality
[2] Factors Used to Determine Materiality
[3] The Probability/Magnitude Test—The Standard of Materiality With Respect to Uncertain Future Events
§ 3.03 Determining When Information Becomes Public
§ 3.04 A Look at Chiarella and Dirks
[1] The Decisions
[2] Criticism of the Court’s Approach
§ 3.05 Duty Owed by Whom?
§ 3.06 The Misappropriation Theory
[1] The “Deception” Requirement
[2] The “In Connection With” Requirement
[3] Rule 10b5-2: Family and Other Personal Relationships
[4] Misappropriating Tippers and the Personal Benefit Test
[5] The Test Applied to Tippees of Misappropriators
[6] Limitations to the Misappropriation Theory
[7] Possession vs. Use and SEC Rule 10b5-1
[8] Summation: Two Illustrations
[9] Conclusion
§ 3.07 Damages and SEC Disgorgement
[1] Damages
[2] SEC Disgorgement
[3] Congressional Legislation
§ 3.08 SEC Rule 14e-3
§ 3.09 Conclusion

“Insider Trading” Under Section 16 of the Securities Exchange Act

§ 4.01 Overview
[1] Reporting Requirements
[2] Statute of Limitations
[3] Standing to Sue
[4] Section 16(a) Right of Action
§ 4.02 Beneficial Ownership and the Concept of Attribution
[1] SEC 1991 Amendments
[2] Case Law
[3] Policy Analysis
§ 4.03 Directors
§ 4.04 Officers
§ 4.05 Period and Coverage of Liability
[1] Ten Percent Beneficial Owner
[2] Directors and Officers
§ 4.06 Purchase and Sale
[1] The Objective Approach
[2] The Pragmatic Approach
[3] The SEC’s Treatment of Derivative Securities
§ 4.07 Employee Benefit Plans
[1] Rule 16b-3(f) Discretionary Transactions
[2] Rule 16b-3(c) Exemption for Transactions Pursuant to Tax-Conditioned Plans
[3] Rule 16b-3(d) Exemption for Grants, Awards, and Other Acquisitions from the Issuer
[4] Rule 16b-3(e) Dispositions to the Issuer
§ 4.08 Blackout Periods Under the Sarbanes-Oxley Act
§ 4.09 Conclusion

The Supreme Court and the Definition of “Security”

§ 4A.01 Introduction
§ 4A.02 The Meaning of “Security”
[1] The Court’s Analytical Framework
[2] Marine Bank v. Weaver
[3] Reves v. Ernst & Young
[4] The Risk Capital Test
§ 4A.03 “Context” Analysis and Its Ramifications
[1] The “Context” Clause
[2] The CD Morass and Its Ramifications
§ 4A.04 Investment Contract Analysis
[1] The Meaning of “Investment Contract”
[2] Howey’s Continued Vitality
§ 4A.05 An Examination of Congressional Intent

SEC Integration, the Distribution Process and Related Issues

§ 5.01 Introduction
§ 5.02 Manor Nursing and Related Issues
§ 5.03 Selected SEC Limited Offering Rules
[1] Regulation D
[2] Regulation A
[3] Ban on General Solicitation
§ 5.04 SEC Integration
[1] Generally
[2] Effect on Section 18(a) Liability
[3] Director Signature Requirement for Form 10-K
[4] Due Diligence
[5] Shelf Registration
§ 5.05 CEO and CFO Certifications
§ 5.06 Conclusion

Selected Remedies and Liabilities Under the Securities Act of 1933

§ 6.01 Introduction
§ 6.02 Section 11-Overview
[1] Reliance Not Generally Required Under Section 11
[2] Tracing Under Section 11
[3] Heightened Pleading Requirements for Section 11 Claims That Sound in Fraud
[4] Applicable Statute of Limitations When a Section 11 Claim Sounds in Fraud
[5] Summation
§ 6.03 Section 12(a)(1)(Overview
§ 6.04 Section 12(a)(2)
[1] Limited to “Public” Offerings
[2] Persons Liable
[3] Defense of “Reasonable Care”
[4] Availability of Contribution and Indemnification
§ 6.05 Section 17(a)
[1] Naftalin—An Overview
[2] Private Right of Action
[3] Offeree Standing
[4] Government Enforcement
§ 6.06 Conclusion

Selected Developments in Section 10(b) Private Litigation

§ 7.01 Overview
§ 7.02 State of Mind and Pleading Requirements
[1] The Scienter Requirement
[2] Reckless Conduct
[3] Pleading Requirements
§ 7.03 Plaintiff’s Due Diligence
§ 7.04 Standard of Proof
§ 7.05 Reliance
§ 7.06 Damages
§ 7.07 In Pari Delicto Defense
[1] Cases Prior to Bateman Eichler
[2] Bateman Eichler
[3] Pinter v. Dahl
[4] Cases After Bateman Eichler
§ 7.08 Statute of Limitations
[1] The Sarbanes-Oxley Act
[2] Case Law Prior to the Lampf Decision
[3] The Lampf Decision
[4] State Law Ramifications
§ 7.09 Contribution and Proportionate Liability
[1] Introduction
[2] Title II of the Litigation Reform Act (PSLRA)
[3] Allocation of Liability Under PSLRA
[4] Effect of PSLRA’s Limitations on Joint and Several Liability Under the 1933 and 1934 Acts
[5] Contribution Provisions for Jointly and Severally Liable “Covered” Persons
[6] Proportionate Liability Under PSLRA
[7] Issuance of Settlement Bar Orders in Partial Settlement Under PSLRA
[8] Partial Settlements and Judgment Reduction
[9] Special Rules for Reallocation of Liability for Uncollectible Shares
[10] Conclusion
§ 7.10 Conclusion

The Corporate Mismanagement-Nondisclosure Cases

§ 8.01 Introduction
§ 8.02 “The Race for the Bottom”
§ 8.03 Santa Fe—An Overview
§ 8.04 Post-Santa Fe Decisions in the State Courts
§ 8.05 Post-Santa Fe Decisions in the Federal Courts
[1] The Goldberg Rationale
[2] Caveats to the Goldberg Rationale
[3] Causation and Virginia Bankshares
§ 8.06 Reflections on Santa Fe and Its Progeny
§ 8.07 Conclusion

Alternative Remedies Under Federal and State Law

§ 9.01 Introduction
§ 9.02 Implied Rights of Action
§ 9.03 Particular Provisions
[1] Exchange Liability Under Section 6
[2] Violation of Stock Exchange and NASD Rules
[3] Section 7
[4] Rule 10b-16
[5] Section 13(d)
[6] Section 14(a)
[7] Section 14(e)
[8] Section 29(b)
[9] Section 18(a)
[10] Investment Advisers and Company Acts
[11] Trust Indenture Act
§ 9.04 Cumulative Remedies
§ 9.05 The Racketeer Influenced and Corrupt Organizations Act (RICO)
§ 9.06 State Securities and Common Law
§ 9.07 Securities Arbitration
[1] In General
[2] Arbitration Today
[3] Investors Fare Better in Arbitration?
§ 9.08 Pleading Standards for Fraud and Non-Fraud Claims
[1] Introduction
[2] Three Evolving Pleading Standards: Plausibility, Particularity, and Cogency
[3] Blurring the Lines Between Pleading Doctrines
[4] Judicial Activism May Plausibly Result in Harsher Treatment of Plaintiffs Pleading Non-Fraudulent Claims
[5] Conclusion

Secondary Liability

§ 10.01 Introduction
§ 10.02 Aiding and Abetting Liability
§ 10.03 Secondary Actors Subject to Primary Liability
[1] Introduction
[2] Analysis Prior to Stoneridge and Janus Capital
[3] Analysis After to Stoneridge and Janus Capital
[4] Conclusion
§ 10.04 Controlling Person Liability
§ 10.05 Respondeat Superior Liability
§ 10.06 Failure to Supervise
§ 10.07 Conclusion

Contests for Corporate Control

§ 11.01 Proxy Contests
§ 11.02 Fiduciary Responsibilities of Financial and Other Intermediaries
§ 11.03 Going Private Transactions
§ 11.04 General Duty to Disclose
§ 11.05 Anti-Takeover Provisions
[1] Types of Poison Pills
[2] SEC Action
[3] State Law Developments
§ 11.06 Impact of Santa Fe
§ 11.07 SEC Tender Offer Rules
§ 11.08 Legitimacy of Defensive Tactics
[1] Fiduciary Duty Obligations
[2] State Law Standards
[3] Federal Law Standards
[4] Proposals for Reform
[5] Views of Commentators
§ 11.09 Conclusion

SEC Enforcement

§ 12.01 Overview
§ 12.02 Injunctions—Standards for Imposition
§ 12.03 Ancillary or Other Equitable Relief
§ 12.04 Modification or Dissolution of SEC Injunctions
§ 12.05 Administrative Proceedings—Selected Issues
[1] Undertakings
[2] State of Mind
[3] Standard of Proof
[4] Judicial Review
§ 12.06 Selected Enforcement Developments
[1] Foreign Corrupt Practices Act
[2] Regulation of Professionals
§ 12.07 Conclusion

Municipal Issuer Liability

§ 13.01 Introduction
§ 13.02 Antifraud Liability
[1] Section 17(a)
[2] Section 10(b)
[3] State of Mind
[4] Statements by Public Officials
[5] Remedies
§ 13.03 Legitimacy of SEC Disclosure Requirements
§ 13.04 Constitutional Limitations
[1] The Tenth Amendment
[2] The Eleventh Amendment
§ 13.05 Conclusion

Shareholder Derivative Actions

§ 14.01 Introduction
§ 14.02 The Business Judgment Rule and Burks v. Lasker
§ 14.03 Shareholder Derivative Litigation in the Federal and State Courts
[1] Federal Court Decisions
[2] State Court Decisions
§ 14.04 A Recommended Approach
§ 14.05 Conclusion

The Law of Squeeze-Out Mergers

§ 15.01 Introduction
§ 15.02 Prior Delaware Case Law
[1] Singer and Its Progeny
[2] Reaction of Other States
§ 15.03 Weinberger v. UOP, Inc. —An Overview
[1] Background
[2] The Delaware Supreme Court’s Decision
[3] Reaction of Other States
§ 15.04 Fair Dealing Under Weinberger and Its Progeny
[1] Presence of Independent Negotiating Committee
[2] Use of Majority of Minority Vote
[3] Relation of Procedural Safeguards to Substantive Fairness
§ 15.05 “Fair Value” Under the Appraisal Statute
[1] Elements of Future Value
[2] Availability of Equitable Relief
[3] Two-Tier Offers
[4] The Stock Exchange Exception
§ 15.06 Effect of Weinberger on State Breach of Fiduciary Duty Suits
§ 15.07 The Duty Owed to Minority Shareholders by an Investment Banker in Rendering a Fairness Opinion
[1] Investment Banker’s Role in Weinberger
[2] Duties Owed by Investment Bankers
[3] Application to Weinberger
[4] Propriety of Implying a Fiduciary Duty
§ 15.08 Implications Under Federal Law
[1] SEC Rule 13e-3 and Related Issues
[2] Effect on Rule 10b-5
§ 15.09 Short-Form Mergers in Delaware
[1] Exclusivity of Appraisal Remedy
[2] Increased Use of Tender Offers
[3] Importance of Adequate Disclosure
[4] Determination of Fair Value
[5] Federal Actions—Lost State Remedy Theory
[6] Impact of Glassman
§ 15.10 Conclusion