Late last week – for the first time in 40 years – the SEC announced a settlement of an internal controls case against an issuer arising from its repurchase of its own shares. The SEC found that Andeavor bought back $250 million of stock without first engaging in an adequate process to ensure that the

On September 3, 2020, the Antitrust Division of the DOJ issued a revised Policy Guide to Merger Remedies, following shortly after it announced a reorganization of its civil enforcement to create an Office of Decree Enforcement and Compliance.

The Policy Guide to Merger Remedies largely codifies a trend towards strengthening of the Division’s preference

Following completion of a review by the Committee on Foreign Investment in the United States (“CFIUS”), President Trump recently issued an Executive Order requiring ByteDance to, among other things, divest itself of assets and property that enable or support operation of the TikTok application in the United States within 90 days (the “CFIUS Order”).  This was not an unexpected outcome.  We previously reported on the unusual nature of CFIUS’s review here.  The week before, President Trump issued a different Executive Order authorizing the Commerce Department to prohibit transactions involving a U.S. person or within the jurisdiction of the United States with ByteDance (the “Commerce Order”), with details of the restrictions to come in 45 days.  We previously reported on the Commerce Order here.  According to press reports, negotiations for a possible acquisition of TikTok continue, and it remains to be seen whether those restrictions will come to fruition and on what timetable.
Continue Reading President Trump Orders TikTok Divestment; Sweeping Order Appears to Indicate a Broadening of CFIUS’s Jurisdiction

On June 1, 2020, the Criminal Division of the U.S. Department of Justice (the “Department”) released revisions to its guidance regarding the Evaluation of Corporate Compliance Programs, which the Department uses in assessing the “adequacy and effectiveness” of a company’s compliance program in connection with any decision to charge or resolve a criminal investigation, including

On March 20, 2020, news outlets reported that four U.S. Senators sold millions of dollars in stock following classified briefings to the Senate on the threat of a COVID-19 outbreak.  Three days later, the Co-Directors of the Securities and Exchange Commission’s (“SEC”) Division of Enforcement, Stephanie Avakian and Steven Peikin, issued a statement reminding market participants of their obligations with respect to material non-public information (“MNPI”) and of the SEC’s commitment to protecting investors from fraud and ensuring market integrity.[1]
Continue Reading Insider Trading Risk During the COVID-19 Outbreak

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2020”.

Enforcement of anti-bribery, sanctions and money laundering laws remains a top priority for US authorities. In 2019, the US Department of Justice and civil regulators issued new or updated policies aimed at

The SEC is taking renewed aim at earnings management, and this time it’s not just improper revenue recognition.

Both in its recent enforcement order against Marvell Technology Group – imposing s $5.5 million fine and a cease-and-desist order – and in its on-going action against Under Armour,[1] the SEC has focused on what, anecdotally, is not a terribly uncommon practice – accelerating (or “pulling in”) sales from a future quarter to the present in order to “close the gap between actual and forecasted revenue.”[2]  In both cases, the schemes consisted of offering various incentives, such as “price rebates, discounted prices, free products, and extended payment terms”[3] to entice customers to accept products in the current quarter that they would not need until the next.  In an environment of declining sales, these inorganic efforts to meet earnings numbers allegedly misled the market about the direction of the business.
Continue Reading SEC Cracks Down on Earnings Management

In late July 2019, U.S. federal and state regulators announced three headline‑grabbing data privacy and cybersecurity enforcement actions against Equifax and Facebook.  Although coverage of these cases has focused largely on their striking financial penalties, as important are the terms the settlements imposed on the companies’ operations as well as their officers, directors, and compliance professionals—and what they signal about potential future enforcement activity to come.
Continue Reading July 2019 Privacy and Cybersecurity Enforcement: Lessons for Management and Directors

In late March 2019, the Hertz Corporation and Hertz Global Holdings, Inc. (collectively, “Hertz”), filed two complaints (the “Damages Proceedings”) against its former CEO, CFO, General Counsel and a group president seeking recovery of $70 million in incentive payments and $200 million in consequential damages resulting from Hertz’s 2015 decision to restate its financial statements and an ensuing SEC settlement against Hertz and federal class action lawsuit (which was dismissed).  At the same time, the defendants in those actions each filed separate complaints (which have been consolidated in the Delaware Chancery Court) demanding advancement of their legal fees in the Damages Proceedings (the “Advancement Proceedings”).  The litigation between Hertz and its former executives raises novel questions about whether executives have a legally cognizable duty to set the right “tone at the top” and the consequences if they fail to do so.  The litigation also raises important and interesting questions regarding clawbacks and indemnification.[1]    
Continue Reading Hertz Pursues Novel Theory to Hold Former Management Team Personally Liable for Restatement and Ensuing Legal Proceedings

In the wake of the Securities and Exchange Commission’s proposed clawback rules under the Dodd-Frank Wall Street Protection and Consumer Reform Act of 2010, many US public companies began implementing clawback policies.[1]  Although the proposal was originally issued in 2015 and the SEC has yet to adopt final clawback rules, instances of alleged executive misconduct in recent years has begun leading to claims under the clawback policies.  Increased scrutiny from legislators, institutional investors, shareholders and the general public has put significant pressure on boards of directors and compensation committees to exercise their rights to claw back compensation in the event of a corporate scandal.[2]

This post discusses two recent developments related to the exercise of compensation clawbacks.  The first confirms that boards should have broad discretion in deciding when to exercise a clawback, and the second discusses important indemnification and advancement issues that can arise in connection with a claim for the enforcement of a clawback policy.
Continue Reading Courts Considering Clawback Claims