These are a few of the compliance-related stories that recently caught my attention.
The Jumpstart Our Business Startups Act (JOBS Act) is a very modest 9,000+ words. In comparison, the Dodd-Frank Act is a hefty 360,000+ words. Thus, I find the number of technical errors in the JOBS Act to be surprising. One such error is likely to cause some consternation.
Did Facebook’s Zuckerberg just have a Van Gorkom moment? by Professor Bainbridge
In other words, a board is not excused from exercising its fiduciary duties just because there is a controlling shareholder. To the contrary, judges will be especially skeptical of transactions railroaded through the decision-making process by “an imperial CEO or controlling shareholder with a supine or passive board.”
In other words, if I had been his legal counsel, I would have advised Zuckerberg to be a lot more respectful of his board and the legal niceties.
Condo Rental Programs Are Not Investment Contracts by Ernest E. Badway in Fox Rothschild’s Securities Compliance Sentinel
The court believed that the purchases of these condos with rental options did not rise to the level of an investment contract requiring adherence to the securities laws. In particular, the court considered if the transaction qualified as an investment contract, analyzing if there was an investment of money, common enterprise, and the reasonable expectation of profits to be derived from the efforts of others, among others things. The court focused on the uncertainties of both vertical and horizontal commonality required under the common enterprise element test. In determining that there was a lack of horizontal commonality, the court found that the plaintiffs were not sold securities. The court also noted that there was no requirement to participate in the rental program as well.
SEC Promises Better Rulemaking Efforts in Compliance Week
Speaking at a hearing of the House Government Oversight Committee (which the committee had tartly titled, “SEC’s Aversion to Cost-Benefit Analysis”), SEC Chairman Mary Schapiro admitted that her office has heard an earful of criticism lately, including a stinging federal appeals court decision in 2011 that invalidated a rule for shareholder access to the proxy statement that specific cited poor cost-benefit analysis as part of its reasoning.