Private Fund Association's Key Weapon in Challenging SEC: A Texas Address

Hedge Funds Fighting Gary Gensler and SEC’s Policies Have Secret Weapon in Texas

The National Association of Private Fund Managers, a little-known group whose main focus appears to be challenging SEC rules, has sat tucked in a Fort Worth law office since its founding in 2022. Its home is 1,500 miles from many hedge fund campuses in leafy Connecticut, and even further from London or Singapore, where its impact is being felt.

But the group’s address at 301 Commerce Street in Texas’s fifth-biggest city is serving a greater purpose. NAPFM, the clunky acronym the association goes by, is giving hedge fund and private equity titans access to what’s quickly become one of the financial world’s most important venues: The 5th US Circuit Court of Appeals in New Orleans.

SEC Obtains Final Judgment Against Synchronoss CFO for Role in Accounting Misconduct

On June 14, 2024, the U.S. District Court for the Southern District of New York entered a final judgment against Karen Rosenberger, imposing an injunction and officer and director bar, and also ordering her to pay civil monetary penalties and reimburse Synchronoss Technologies, Inc. (“Synchronoss”) for certain compensation.

According to the SEC’s complaint, Rosenberger engaged in accounting misconduct which resulted in the overstatement of revenue by Synchronoss. The SEC alleged that Rosenberger aided and abetted Synchronoss’s public filing of materially false financial statements with respect to five transactions. Synchronoss later restated and allegedly engaged in fraud with respect to three of them—two transactions with one of Synchronoss’s largest customers and one transaction in which Synchronoss acquired another business. The SEC further alleged that Rosenberger sought to cover up her and Synchronoss’s misconduct by lying to Synchronoss’s auditor in connection with those transactions, falsifying books and records, and by failing to implement or maintain, and circumventing, Synchronoss’s system of accounting controls. The Complaint alleged that the impact of the improper accounting was material, and in certain instances, allowed Synchronoss to meet revenue expectations it otherwise would not have met.

Elon Musk and the SEC Are on a Collision Course Again

The Securities and Exchange Commission has been investigating Musk’s late disclosure of his purchases of Twitter stock before he took over the company. Excerpts of Musk’s testimony provided to the SEC, which came to light last month through a separate lawsuit, suggest Musk and his adviser brushed off compliance with a rule that required him to reveal his ownership once it passed 5% of Twitter’s shares.

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The SEC hasn’t filed any enforcement action so far against Musk over his Twitter trading. If the SEC makes a formal complaint against Musk for fraud, regulators are likely to again ask a court to bar him from serving as an officer or director of a public company, former officials said, exposing him to the possibility of removal from Tesla.

Opioids Lawyers Offer Investors Piece of $100 Million-Plus Win

A law firm set to earn more than $100 million for its work on opioids cases is packaging its fees and selling it to investors as a security.

Napoli Shkolnik PLLC is pooling its portion of approximately $1.3 billion in settlements with major opioid manufacturers and pharmacies, including McKesson, Janssen, CVS and Walgreens, according to a Securities and Exchange Commission filing. The firm declined to comment.

The move is the latest sign of the growing intermingling of law firms and investors….

The Big Loser in Tesla’s Shareholder Vote Is Delaware

Tesla’s reincorporation in Texas is about much more than saving the electric-car juggernaut $250,000 a year in state fees. It is an attempt by Elon Musk to loosen Delaware’s grip on American corporations.

About two-thirds of S&P 500 companies—regardless of where they are actually based—are incorporated in Delaware, largely because the tiny state has specialized courts that handle business matters and stacks of legal precedents for addressing such disputes.

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By voting to leave the First State, shareholders could be ratifying the view among some that Delaware’s shareholder protections have gone too far, some legal experts said. An alternative, however, is that Musk is simply so important that investors are willing to take a chance on Texas.

What Elon Musk’s Convincing Win Means for Tesla

One other question we have: What does the vote mean for the multibillion-dollar fee that the lawyers who have successfully challenged the pay plan in Delaware are seeking? If the presiding judge says the package remains nullified, they’re likely to still get lots of money. If she reverses course, they could be awarded far less — but they would then probably appeal.

“We believe that the ratification vote that Elon demanded and coerced is deeply flawed as a matter of law, legally ineffective and does not impact our case,” Greg Varallo, a lawyer for the Tesla shareholders who challenged Musk’s pay, told DealBook.

Remembering Founding Dean William H. Donaldson, 1931-2024

William H. Donaldson, the founding dean of the Yale School of Management and a leader of several major institutions of American business, died on Wednesday, June 12, 2024. His decades at the heights of business, government, and academia included tenures as chair of the Securities and Exchange Commission, chairman, president and CEO of Aetna, Inc., and chairman and chief executive of the New York Stock Exchange. He also co-founded the influential investment bank Donaldson, Lufkin & Jenrette.