SEC Says Panuwat Case is "Insider Trading, Pure and Simple" -- Is It?

Trial Court Blesses Shadow Insider Trading

The Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, put it plainly in responding to the jury verdict in the Panuwat case on Friday:

“As we’ve said all along, there was nothing novel about this matter, and the jury agreed: this was insider trading, pure and simple….”

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Yet, many assert that the SEC’s theory in Panuwat broadens the potential for SEC insider trading violations and enforcement. See, e.g., here, here, and here. They include:

— wide class of nonpublic information that may be determined to be material and give rise to an insider trading claim;

— the expansive scope of insider trading’s requisite duty of trust and confidence (and the potential importance of language in an insider trading compliance policy or confidentiality agreement in defining that duty); and

— the potentially large number of circumstances in which employees may be exposed to confidential information about their employer that represents a value proposition in another firm’s securities.

US Supreme Court case marks debut for Stanford prof’s circuit split test

The justices and their clerks are obviously quite experienced when it comes to qualitatively assessing purported circuit splits. But in a new amicus brief urging the Supreme Court to grant a petition by chipmaker Nvidia, Stanford Law School professor Joseph Grundfest told the justices about a new methodology he has devised to quantify the significance of circuit splits, based on what Grundfest calls the “market share” of the appellate courts on opposite sides of the split.

The new Grundfest test, which the professor laid out in more detail in a working paper, opens new tab titled Quantifying the Significance of Circuit Splits in Petitions for Certiorari: The Case of Securities Fraud Litigation, relies on two key metrics. The first, called “aggregate circuit split share,” estimates the economic consequences of the split, or, as Grundfest’s lawyers at Quinn Emanuel Urquhart & Sullivan explained in the Nvidia brief, “the aggregate share of the overall market implicated by the conflict.”

The Importance of Board Minutes

From time to time, I am asked to speak directly to corporate boards of directors. I find these opportunities endlessly fascinating. Among other things, I learn so much from the directors’ questions. One frequently recurring question I get is: what can directors do to avoid litigation or to be in a position better defend themselves if they are sued. The first thing I always talk about when asked these kinds of question is the importance of board minutes. Because this is one of my go-to talking points when I meet with boards, I was particularly pleased to see the recent post on the Harvard Law School Forum on Corporate Governance blog written by Leo E. Strine, Jr., the former Delaware Supreme Court Chief Justice and Chancellor, in which Strine highlights the importance of board minutes in corporate litigation. Strine’s comments are essential reading for anyone concerned with the liabilities of corporate directors. Strine’s April 4, 2024 article can be found here.

What doesn’t the SEC want Volkswagen shareholders to know?

As with all enforcement cases it settles, the SEC demanded, as a non-negotiable condition of the deal, a gag order stating that Volkswagen must never “make or permit to be made any public statement denying, directly or indirectly, any allegation in the [SEC] complaint or creating the impression that the [SEC] complaint is without factual basis.”

Like every other company that seeks peace with the SEC, the agency effectively told Volkswagen to clam up, or the deal’s off.

These routine SEC gag orders profoundly violate the free speech rights of companies and individuals who settle with the agency. Equally troubling, they deny company shareholders and the public their First Amendment right to hear both sides of the story.

Alleged Crypto Scheme Operator Loses Appeal Over Asset Freeze

A cryptocurrency mining company’s indicted CEO isn’t entitled to get access to funds, luxury cars, and boats that were frozen in an SEC enforcement case alleging a multimillion-dollar pyramid scheme, the Eleventh Circuit ruled Monday.

Luiz Carlos Capuci Jr., who fled to Brazil after the Securities and Exchange Commission began investigating him, didn’t need to be served with lawsuit papers before the district court could issue the asset freeze order, the appeals court said in an unsigned, unpublished opinion….

SEC v. Crypto

In some sense, the Terra result was obvious once the judge allowed the case to go forward: If you think that Terra’s tokens were securities, then of course you are going to find that Terra did securities fraud. This is in part because there is a lot of evidence that Kwon and Terraform were lying to investors about important facts of the Terra ecosystem, but there is also the more straightforward fact that Terra crashed and incinerated a lot of investor money. If (1) you call a thing a “stablecoin,” (2) its value drops to $0.026 and (3) it is a security, then (4) you’re going to get sued for securities fraud and (5) you are going to lose.

West Virginia treasurer adds four finance firms to ESG blacklist

West Virginia added four financial firms on Monday to a list of institutions that may be barred from some state business because the state’s treasurer deems they are boycotting the fossil fuel industry.

It was the latest move in a bubbling dispute between Republican officials and Wall Street firms over use of environmental, social and governance (ESG) factors in banking and business.

West Virginia, a major energy-producing state, created the list in 2002, placing five firms on it at the time.

On Monday state Treasurer Riley Moore, said that Citigroup (C.N), HSBC Holdings (HSBA.L), TD Bank (TD.TO), and the Northern Trust Co (NTRS.O) had been added to the list.

SEC’s Climate Reporting Freeze Is No Time for Corporate Inaction

Because there isn’t yet a schedule for the challenge, it’s hard to predict whether the court will have reached a final ruling—or if parties will appeal that ruling—before the compliance dates for initial reporting would have come into effect. For example, large accelerated filers would have initial reports due by 2026 for fiscal year 2025 information.

Groups and states seeking to defend the rule or make it more stringent may seek to overturn the SEC’s stay in court. If the rule is ultimately upheld, in whole or in part, and the compliance dates aren’t adjusted following the adjudication process, registrants could find themselves in a time crunch if the SEC immediately lifts the stay at the conclusion of the case.

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While it may be imprudent to begin this work in earnest while the rule is in flux, initial preparations may be warranted. Companies also should consider the extent they may have to do similar work for other reporting measures—such as the EU’s Corporate Sustainability Reporting Directive or California’s climate disclosure laws.