Category: SEC Enforcement

Johnson & Johnson May Exclude Shareholder Proposal for Binding Arbitration on Securities Claims

Cam C. Hoang

On February 11, 2019, the Staff of the Division of Corporation Finance granted no-action relief permitting Johnson & Johnson to omit a shareholder proposal from its proxy statement.  The shareholder proposal requested mandatory arbitration of shareholder claims arising under the federal securities laws. The Staff relied on Rule 14a-8(i)(2), which permits exclusion of a proposal that, if implemented, would cause the company to violate any...

SEC Updates FAQs Regarding the Ongoing Government Shutdown

Whitney Holmes

On January 10, 2019, the Division of Corporation Finance of the Securities and Exchange Commission updated its Frequently Asked Questions (FAQs) about how to handle certain filing matters during the U.S. government shutdown, which is now entering its fourth week. (See, sec.gov/page/corpfin-section-landing.) The staff revised questions 4 and 5 and added new questions 6 and 9. Question 4 was revised to emphasize that Rule 430A is...

SEC Fines ADT Inc. $100k for Non-GAAP Disclosure in Earnings Releases

Brian Burke

On December 26, 2018, the SEC filed a cease-and-desist order and fined ADT Inc. (“ADT”) $100,000 for its use of non-GAAP financial measures without giving equal or greater prominence to the comparable GAAP financial measures. The order serves as a reminder of the importance of the SEC’s “equal or greater prominence” rule when disclosing non-GAAP financial measures, even when comparable GAAP financial measures are also...

U.S. Government Shutdown Impacts SEC Operations, EDGAR and Other Filings, Enforcement and Regulatory Activities

Whitney Holmes

In response to the U.S. government shutdown that began on December 22, 2018, the U.S. Securities and Exchange Commission and its Divisions of Corporation Finance and Investment Management published public guidance regarding the impacts on their operations. Although electronic filings will continue to be accepted in many cases, as described below, nearly all SEC operations, including the review and processing of filings and enforcement and...

Marijuana Investments and Fraud Featured in SEC Investor Alert

David Marx

The marijuana industry is attracting considerable interest from investors, and unfortunately, scam artists trying to take advantage of those investors. In response to these concerns, on September 5, 2018, the Securities and Exchange Commission’s Office of Investor Education and Advocacy (OIEA) and Retail Strategy Task Force issued an alert to investors warning them about investment schemes involving marijuana-related companies. According to the release, the OIEA...

SEC Issues $1.75 Million Penalty Over Perks Disclosures

Cam C. Hoang

A recent SEC consent order against The Dow Chemical Company reminds companies that when evaluating whether or not to disclose a payment or benefit to an executive as a perk in a proxy statement, the fact that the item has a tangential business purpose, or is convenient for the company, is insufficient grounds to exclude the item as a perk.  In order to be excluded as...

SEC Approves Series of Final and Proposed Rules in Line with Stated Priorities

Cam C. Hoang

The SEC held a very busy open meeting yesterday, voting on the following final and proposed rules: Adoption of amendments to modernize the definition of “smaller reporting company,” which was established in 2008.  See our previous discussion of the amendments.   Adoption of amendments to require the use of the Inline XBRL format in certain filings, which were proposed in 2017 and have been under...

SEC Guidance on Cybersecurity Disclosure and Policies – Recap of Dorsey Webinar Presentation

Gary L. Tygesson

Earlier this week, Dorsey hosted a webinar panel presentation on the SEC’s recent guidance on cybersecurity disclosures and policies. The webinar provided a detailed walk-through of the SEC’s guidance, including issues related to enhanced disclosure, insider trading, and Reg FD policies. The panel also discussed the impact of the SEC’s guidance within the changing landscape of cybersecurity and current developments in shareholder litigation, SEC enforcement actions,...

Ninth Circuit Rejects Decisions of Five Other Circuits: Exchange Act Section 14(e) Does Not Require Scienter

Thomas O. Gorman

Scienter has been a critical element of a claim based on Exchange Act Section 10(b) in an SEC enforcement action since the Supreme Court’s decision in Aaron v. SEC, 446 U.S. 680 (1980). It has also been a key element in private damage actions based on the cause of action implied under Section 10(b) and Rule 10b-5 since Ernst & Ernst v. Hochfelder, 425 U.S....

Failure to Disclose Leads to $35 Million Penalty in the Yahoo! Cybersecurity Breach

Cam C. Hoang

The Securities and Exchange Commission (the “SEC”) announced Tuesday that Altaba, the entity formerly known as Yahoo! Inc., has agreed to pay a $35 million penalty to settle charges that it misled investors by failing to disclose one of the world’s largest data breaches in which hackers stole personal data relating to hundreds of millions of user accounts. According to the SEC’s order, within days...