U.S. Supreme Court Makes Life Very Difficult for Plaintiffs Suing Under Section 11 for Direct Listings

Slack

One question is: If you buy stock in a direct listing, and the stock drops and you have complaints about the company’s disclosure, do you get to sue under section 11 (because it’s basically an IPO), or do you have to sue under section 10 (because it is not actually an IPO)?

Slack Technologies Inc. went public through a direct listing in June 2019. It shot up to $38.62 on its first day of trading, and then fell to as low as $20.13 by November. (It was acquired by Salesforce Inc. for about $45 in cash and stock in July 2021.) People who bought early and saw the stock drop naturally sued, complaining that Slack’s disclosures were wrong. I don’t know what disclosures they had complaints about; that is rarely the point in these things. Instead, the important question was whether they get to sue under section 11 or not. An appeals court ruled that they did, but Slack appealed to the US Supreme Court, and today Slack won….

Elon Musk accused of insider trading by dogecoin investors

In a Wednesday night filing in Manhattan federal court, investors said Musk used Twitter posts, paid online influencers, his 2021 appearance on NBC’s “Saturday Night Live” and other “publicity stunts” to trade profitably at their expense through several dogecoin wallets that he or Tesla controls.

Investors said this included when Musk sold about $124 million of dogecoin in April after he replaced Twitter’s blue bird logo with dogecoin’s Shiba Inu dog logo, leading to a 30% jump in dogecoin’s price. Musk bought Twitter last October.

A “deliberate course of carnival barking, market manipulation and insider trading” enabled Musk to defraud investors, promote himself and his companies, the filing said.

Securities Enforcement Forum West 2023: SEC Stresses Cooperation, Self-Policing, and Self-Reporting

Senior Division of Enforcement officials from the U.S. Securities and Exchange Commission (SEC) shared the stage on May 23, 2023, with SEC alumni, private practitioners, and other professionals in the field at Securities Enforcement Forum West 2023 (the Forum). Forum panelists described recent trends in the SEC’s enforcement actions, its regulatory agenda, and upcoming priorities. Cooperation, self-policing, and self-reporting were recurring themes throughout the Forum, and SEC Staff made clear that such actions are of the utmost importance to the Commission.

SEC Division of Enforcement Director Gurbir Grewal reiterated the importance of cooperation, self-reporting, and self-policing for the SEC-regulated entities. In fact, Director Grewal emphasized that, in many investigations, the subject may avoid charges or receive reduced penalties as a result of their cooperation and self-reporting.

‘Nowhere to hide’, UK’s new FCA enforcement co-head warns finance industry

Companies in Britain that commit wrongdoing have “nowhere to hide” and will face “meaningful consequences”, a new enforcement co-head of Britain’s markets regulator warned on Thursday, as she started setting out her strategy for the first time.

Therese Chambers, joint executive director of enforcement and market oversight at the Financial Conduct Authority (FCA), warned firms and individuals against hiding behind their authorised status.

In her first speech since taking office in April, she told a mainly legal audience at the City & Financial FCA Investigations and Enforcement Summit in London to get their affairs in order and warned against “aggressive diversionary tactics”.

“There really is nowhere to hide … so I would advise everyone to get their ducks in a row now,” she said.

Richard Burger, a lawyer at WilmerHale’s UK investigations practice in London, said the FCA was sending a stern warning that more enforcement action would follow.

The ICO Era: What Went Right?

At Consensus 2023, a few CoinDesk staffers came together for a panel reflecting on major events in crypto history. When we were polled on the most important of these big moments, the plurality of votes went to what might seem an odd choice – the chaotic, fraud-filled period of “ICO mania” spanning from early 2017 to mid-2018.

That’s not an obvious choice, because these “initial coin offerings” (ICOs) were not unambiguously a Good Thing. Many of the downsides and threats they brought into crypto have remained big problems – problems like investment fraud and securities violations. One retrospective study found that 80% of all ICOs during the boom were outright scams.

The Gap beats shareholder lawsuit over commitment to diversity

The Gap Inc on Thursday beat a shareholder lawsuit claiming the company’s directors breached their duties by making misleading statements in securities filings about the retailer’s commitment to racial diversity in its leadership ranks.

An en banc panel of the 9th U.S. Circuit Court of Appeals in a 6-5 ruling said The Gap can enforce a corporate bylaw requiring shareholder derivative litigation to be filed in Delaware Chancery Court, even when it blocks federal securities claims that can only be heard in federal court.

Top Traders See $120 Million Paydays as Hedge Funds Fight for Talent

The hunt is no different from the bidding war for Premier League or NBA players, one executive said. Last year, a senior portfolio manager was lured by a major New York fund with more than $120 million in guaranteed payouts, according to a headhunter who said he’d done several deals paying north of $50 million. Contracts worth $10 million to $15 million are increasingly becoming common for traders, said another.

SEC’s Top CPA Laments Poor Selling Job to Recruit Accountants

How accountants support businesses and their unique role in financial reporting should be part of a much-needed pitch to sell their career to future recruits, the SEC’s top CPA said Thursday.

“A lot of times our conversations start out with what is it we are not responsible for. And I submit to you that is not the way to attract talent,” Paul Munter, chief accountant to the Securities and Exchange Commission, said in addressing a worsening shortage of accountants. “We need to be proactive. I think we have a terrific story to tell.”

When Markets Melt Down, These Traders Cash In

The strategy worked like this: Every day, Empirica would buy so-called put options that pay off when stocks decline. The bets weren’t on small declines—they were on huge crashes. Normally, the options expired worthless and Empirica took a small loss. But when the market did crash, the options became wildly valuable, providing massive gains while other investors’ portfolios went up in smoke.

The birth of their strategy, for both Taleb and Spitznagel, occurred in the 1980s. For Spitznagel, it emerged from the hard-charging trading pits in Chicago. For Taleb, it started with one of the biggest market blowups of modern times.