Court Gives Insider a Chance to Establish “Debt Previously Contracted” Defense

A California judge has denied a 16(b) plaintiff’s motion for summary judgment, holding that the plaintiff had not established that the insider’s “purchase” was ...

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Another Judge Holds that Issuer Has Standing to Bring 16(b) Action Based on “Statutory Violation” Alone

At least six district court decisions in the last few months have addressed whether, in light of the Supreme Court’s decision in TransUnion, an issuer has ...

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District Judge Confirms $12M+ Liability of High-Frequency Trader

I blogged last fall about a magistrate judge’s finding, in long-running Avalon Holdings v. Gentile, that a Bahamian broker-dealer (MintBroker) and its sole owner ...

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Judge Reaffirms that Issuer Repurchases are not Attributable to Insider

I blogged a few months ago about a Florida judge’s dismissal of a complaint filed by plaintiff’s attorney Glenn Ostrager alleging that an issuer’s repurchases of ...

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Proposal to Rescind Section 16 Exemption for Foreign Private Issuers Dies in Conference

I said in this earlier blog that I would try to get to the bottom of how a proposal to rescind the SEC’s Section 16 exemption for insiders of foreign private issuers ...

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Application of Rule 16b-3 to Issuer’s Transaction with 10% Owner Owned by Director

An appeal just decided by the Ninth Circuit raises some interesting Rule 16b-3 issues. The primary holding addressed an issue that I thought (and still think) is ...

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SEC Announces ‘Ongoing’ Enforcement Sweep

The SEC recently announced that it has entered cease and desist orders against five issuers and six individuals based on violations of Section 16(a), Section 13(d) and ...

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District Court Says ‘Cap’ in Rule 16b-6(c)(2) May Serve as a Measure of Recoverable Profits

A judge in the SDNY has denied a defendant’s motion to dismiss a complaint seeking to match the defendant’s sale of common stock with its purchase of a derivative ...

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Senate Approves Repeal of Section 16 Exemption for Foreign Private Issuers

The Senate-passed National Defense Authorization Act for Fiscal Year 2024 contains a provision (Section 6081) that would amend Section 16(a)(1) of the Exchange Act to ...

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Court Holds that IMA Failed to Divest Managed Fund of 13(d) Beneficial Ownership

A lingering uncertainty under Section 16 is when an investment fund will be deemed to have divested itself of beneficial ownership of its portfolio securities by ...

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Alleged Facts Support Allegation that Brothers Formed a 13(d) Group

It’s not often that a 16(b) action is initiated by the issuer rather than a member of the 16(b) plaintiffs’ bar, but in Safe & Green Holdings v. Shaw the issuer ...

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Staff Confirms that 10b5-1 Checkbox is for ‘New’ 10b5-1 Plans Only

The Staff issued a Compliance and Disclosure Interpretation (Q. 120.31 under “Exchange Act Rules”) confirming what the Staff had already said orally, that the Rule ...

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Court Rules Against 16(b) Defendant on Fraud Counterclaim

This is my fifth blog about Microbot Medical v. Mona. In a 2021 decision, the court struck Mona’s defense that the issuer had “unclean hands,” because equitable ...

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Another Court Holds That Issuer Has Constitutional Standing to Seek Short-Swing Profits From Ten Percent Owner

I blogged last month that a judge in the SDNY disagreed with an earlier ruling by an EDNY judge that the Supreme Court’s decision in TransUnion LLC v. Ramirez ...

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Issuer Has Constitutional Standing to Seek Short-Swing Profits from Ten Percent Owner

A judge in the SDNY has held that the Supreme Court’s decision in TransUnion LLC v. Ramirez, holding that a plaintiff has standing to assert a claim based on a ...

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Second Circuit Says Not So Fast in Applying Unorthodox Transaction Exception

I blogged last year about the SDNY’s grant of summary judgment to Leonard Tannenbaum, who was a ten percent owner of two closed-end investment companies that combined ...

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SEC Moves Rule 10b5-1 Checkbox to Upper Left Corner of Forms 4 and 5

When the SEC adopted the revisions to Forms 4 and 5 to add the Rule 10b5-1 disclosures, the release said the Rule 10b5-1 checkbox would appear in the upper left corner ...

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Plaintiffs’ Attorneys Lose Libel Action Against Section 16(b) Defendant’s Son

In an interesting sidebar to Section 16 practice, well-known plaintiffs’ attorneys David Lopez and Miriam Tauber just lost a libel action they brought on their own ...

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Court Dismisses Complaint Alleging that Investors in Same Private Placement Were a Group

In a thorough and well-reasoned decision, a judge in the SDNY dismissed a 16(b) complaint alleging that investors in a private placement formed a 13(d) group and thereby ...

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Amendment to Floor and Cap Prices in Variable Prepaid Forward Contract Not a ‘Sale’

A district judge has granted the defendants’ motion for summary judgment in a case alleging that Jerry and Vicki Moyes, who are ten percent owners of Knight-Swift ...

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Adult Daughter’s Purchase May be Attributable to Insider

A California judge has denied a motion for summary judgment filed by O.C. Kim, the CEO of OTC-traded Franklin Wireless, in a 16(b) action alleging that Kim’s sale of ...

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District Judge Holds that Standing Under 16(b) Requires Showing of Concrete Harm

This is my fourth blog about Packer v. Raging Capital, which has been chugging its way through the courts for eight years now. In my most recent blog, I discussed the ...

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Form 144 Submission Deadline Extended to 10 p.m. Eastern Time

Yesterday the SEC adopted an amendment to Regulation S-T extending the filing “deadline” for Form 144 from 5:30 p.m. to 10 p.m. ET, similar to the deadline for Forms ...

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New York Judge Transfers Venue in Section 16(b) Action to California

A judge in the Southern District of New York granted two 16(b) defendants’ motions to transfer venue to the Central District of California, where the defendants ...

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Compliance Date Reminders

Apparently there is some confusion regarding when filers will become subject to the new Section 16 rules. Here is how the new rules will phase in (as confirmed with the ...

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Dueling Plaintiffs File Separate 16(b) Complaints

It’s common for multiple attorneys to submit demand letters when an insider reports a short-swing transaction, but I don’t recall ever seeing two or more attorneys ...

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Section 16 Rule Changes

As expected, the SEC has approved amendments to Rule 10b5-1 and related amendments to Forms 4 and 5 and Rule 16a-3. There is a lot to unpack in the adopting release, ...

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SEC Calendars Section 16 Rule Changes for December 14

As I discussed in an earlier blog, last December the SEC proposed amendments to Forms 4 and 5 to add checkboxes for use when reporting transactions pursuant to trading ...

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Staff Interpretation Addresses Disaggregation Analysis

Disaggregation analysis is a Section 13(d) beneficial ownership concept, but the 13(d) standards determine who is a ten-percent owner subject to Section 16, so a recent ...

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Court Denies Motion to Reconsider Ruling that Warrant Amendments Resulted in New Purchase

I blogged a few months ago about a judge’s denial of a motion to dismiss a complaint alleging that an amendment to two warrants held by an investment fund resulted in ...

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There Are Limits on Extrinsic Documents a Court Will Consider in Ruling on Motion to Dismiss

A judge has denied an insider’s motion to dismiss a 16(b) complaint alleging that the insider “purchased” issuer common stock within six months of a sale by ...

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Insider May Not Conduct Discovery Into Plaintiff’s Attorney’s ‘Business Model’ to Establish that Plaintiff Had ‘Unclean Hands’

It is no secret that most members of the plaintiffs’ bar become aware of short-swing trades through software programs that track Forms 4 and, when the program alerts ...

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Court Declines to Dismiss Complaint Alleging that Insider’s Reacquisitions of Stock from GRATs Were Purchases

A district judge has denied an insider’s motion to dismiss a complaint alleging that his reacquisitions of stock from GRATs he had established for the benefit of his ...

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Acquisition of Stock in Merger Exempt Under Unorthodox Transaction Exception

Last year, I blogged about a district judge’s denial of a ten percent owner’s motion to dismiss a complaint which alleged that the insider’s acquisition of stock ...

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Acquisition of 13(d) Beneficial Ownership Occurs on Trade Date

I blogged a couple of years ago about Avalon Holdings v. Gentile, in which the plaintiffs alleged that a Bahamian broker-dealer (MintBroker) and its sole owner (Guy ...

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Increasing the Cap in a Blocker Provision as Cancellation and Regrant

A judge in the SDNY has denied a 10% owner’s motion to dismiss a complaint alleging that an amendment to a warrant to increase the “cap” in its blocker provision ...

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Ninth Circuit Affirms that Rule 16b-3’s Board Approval Exemption Does Not Require Unanimous Vote

Last year, I blogged about a case in which shareholders of CytoDyn Inc. alleged that the board’s grant of options and warrants to CytoDyn’s CEO was not exempt under ...

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Family Trust May be a Director by Deputization

It is well-established that an entity may be deemed a director subject to Section 16 if the entity has “deputized” a person to serve as its representative on the ...

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District Court Affirms ‘Lowest Price In, Highest Price Out’ Profit Calculation

Last summer, I blogged about the U.S. District Court for the Southern District of New York’s denial of a motion to dismiss the complaint in Chechele v. Standard ...

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Proposed Amendments to 13(d) Rules Increase Risk of Inadvertent Ten Percent Ownership

The SEC’s long-expected proposal to amend the Section 13(d) rules would expand the circumstances under which an investor could be deemed a ten percent owner. The ...

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Court Holds that Stock Convertible on One-for-One Basis Does Not Have a Fixed Price

A judge in the SDNY has held that an issuer’s voting common stock, which was convertible into non-voting common stock on a one-for-one basis, was not a “derivative ...

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SEC Proposes to Add Trading Plan Checkboxes to Forms 4 and 5 and Accelerate Reporting of Gifts

As part of its efforts to address perceived insider abuse of Rule 10b5-1 trading plans, the SEC has proposed to amend Forms 4 and 5 to add a checkbox that insiders would ...

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EDGAR Updates Coming Next Week: Make Sure Your Filing Software is Up to Date

The SEC announced last week that it is implementing security-enhancing changes to its three EDGAR filing websites (including the “Ownership Forms” website for filing ...

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Insider’s Decisive Vote in Favor of Merger May Impact Unorthodox Transaction Exception

A district judge is poised to decide whether a ten percent owner’s receipt of issuer stock in a merger of two public companies was outside the scope of Section 16(b) ...

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SEC Exempts PG&E Fire Victims Trust from Section 16

The staff doesn’t issue many Section 16 no-action letters these days, but a sympathetic requestor has gotten both a staff no-action letter and an SEC exemptive order ...

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Court Reaffirms that Increase in Exercise Price of Repo Agreement not a Purchase

Last fall, I blogged about a case (Rubenstein v. Knight-Swift) in which a district judge held that an amendment to the exercise price of a repurchase agreement did not ...

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Judge Holds That Board’s Failure to Designate Terminated Employee as Section 16 Officer is Not Conclusive

Most public companies designate their Section 16 officers annually, by board resolution, and it is rare for either the SEC staff or the Section 16(b) plaintiffs’ bar ...

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Disgorgement of Profits from Rule 10b5-1 Sales?

Among all the calls for reform of Rule 10b5-1, a Section 16 issue may be lurking. In the letter Elizabeth Warren and two other senators sent to then Acting SEC Chair ...

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Ten Percent Owners Beware — You May Still “Beneficially Own” Shares You Sold

A judge in the SDNY had denied a motion to dismiss a complaint alleging that an investment fund, Standard General Master Fund L.P., remained the beneficial owner of ...

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Chair Gensler Puts Spotlight on Security-Based Swaps

In a speech last week addressing the SEC’s “reform agenda,” SEC Chair Gary Gensler said the Commission may consider updating “various rules relating to ...

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Court Denies Plaintiffs’ Motion to Reconsider Dismissal of Claim for Attorneys’ Fees

Late last year, I blogged about a judge’s dismissal of a Section 16(b) complaint filed by David Lopez and Miriam Tauber on the ground that the claim was moot because ...

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Conditional Exercise of In-the-Money Option is Exempt Whether or Not Option is Still In-the-Money When Condition is Satisfied

The Second Circuit has affirmed the district court’s holding in Chechele v. Dundon that an insider’s exercise of an in-the-money option, subject to regulatory ...

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District Judge Enters Judgment for Plaintiff in Microbot 16(b) Action

I blogged last month about a magistrate judge’s report in Microbot Medical v. Alliance Investment Management recommending that the district judge grant judgment on the ...

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Judge Considers Referring Insider to SEC for Potentially False Information in Form 4

A judge’s recent denial of an insider’s motion to dismiss a 16(b) complaint may offer more of a lesson about completing Forms 4 than about avoiding 16(b) ...

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Rule 16b-3’s Board Approval Exemption Does Not Require the Affirmative Vote of Every Director

A district judge in the W.D. of Washington has dismissed a complaint filed against the CEO of CytoDyn, Inc. alleging that the CEO’s receipt of an employee stock option ...

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District Court Upholds Private Settlement of 16(b) Claim

A few weeks ago I blogged about a magistrate judge’s recommendation, in a 16(b) action filed by plaintiff’s attorney Daniel Doherty, that the district judge grant ...

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Stock Sold in Bundled Asset Sale Deemed Sold at Market Price

A district judge has dismissed a complaint alleging that Roivant Sciences Ltd., while a ten percent owner of Myovant Sciences Ltd., realized a short-swing profit by ...

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Issuer’s “Fraud” Inducing Insider to Trade is not a Defense to 16(b) Liability

A few months ago I blogged about a case, Microbot Medical v. Alliance Investment Management, in which an investment adviser mistakenly filed a Form 3 reporting that it ...

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Magistrate Judge Upholds Private Settlement Challenged by Latecomer Plaintiff

A magistrate judge in the SDNY has issued a report in a Section 16(b) action recommending that the court grant summary judgment to the insider on the ground that, more ...

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Proposed Amendments to Form 4 and Form 5

Last week the SEC proposed amendments to Rule 144 which would, among other things, mandate electronic filing of Form 144 and change the filing deadline to coincide with ...

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Number of Section 16(a) Filings Continues to Decline

The SEC has published its annual report showing the number of reports filed with the SEC, by type, during the fiscal year ended September 30, 2020. The report shows a ...

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Second Circuit Remands Packer v. Raging Capital

The Second Circuit has remanded the long-running case of Packer v. Raging Capital, which presents the question whether an investment fund beneficially owns, for purposes ...

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Complaint Dismissed as Moot After Issuer Files 8-K Disclosing Recovery of Profit

A federal district judge has dismissed a complaint filed by David Lopez and Miriam Tauber seeking to recover a short-swing profit, holding that the action was rendered ...

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Amendment of Derivative Security May (or May Not) Constitute a Purchase and Sale

A judge in the SDNY has granted in part and denied in part a motion to dismiss a complaint asserting two separate 16(b) claims against a husband and wife, one based on ...

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A Costly Escape from a Reporting Error

A recent decision by the SDNY absolved a Section 16 filer of liability under Section 16(b), but it was the filer’s own oversight that led to the litigation in the ...

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Satisfaction of Condition to Exercise of Derivative Security Is Not a “Purchase”

A judge in the SDNY has issued an opinion in Chechele v. Dundon which appears to hold that an insider’s exercise of an option, subject to regulatory approval of the ...

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State Court Declines to Dismiss Complaint Alleging Legal Malpractice in Giving Section 16 (and Other) Advice

In a one-page order, a Pennsylvania trial court has declined to dismiss a complaint filed by an issuer and two of its insiders alleging that a lawyer and his firm ...

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Purchase Rescinded 604 Days Later Remains Subject to Section 16(b)

It has been decades since a rescinded transaction was the subject of Section 16(b) litigation, but last week, in Rubenstein v. Cosmos Holdings, Inc., the SDNY denied an ...

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Battle Lines Forming in Plaintiffs’ Attorneys’ Fee Fight

The dispute within the plaintiffs’ bar regarding who gets the fee when multiple attorneys submit demand letters relating to a short-swing profit that the company ...

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District Court Says “Busted Trade” Isn’t Subject to Section 16(b)

A judge in the SDNY held this week (in Connell v. Johnson) that a trade canceled before it settles is not subject to Section 16(b). The case involves a director of ...

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Investment Adviser’s Deputization of Director Does Not Make Adviser’s Clients Directors by Deputization

Last week, I wrote about the Second Circuit’s decision upholding the district court’s dismissal of the complaint filed in Rubenstein v. International Value Advisers. ...

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Second Circuit Holds that Investor’s Delegation of Investment Discretion to Investment Adviser Does Not Create a 13(d) Group

Recently, the Second Circuit affirmed the district court’s holding in Rubenstein v. International Value Advisers that an investor does not form a 13(d) group with an ...

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Gloves Off in Plaintiffs’ Attorneys’ Fee Dispute

A 16(b) plaintiff filed a complaint in the SDNY last week seeking to compel an issuer to pay her attorney’s fees for bringing a 16(b) claim to the issuer’s attention ...

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Compliance with Amended Item 405

Over the last couple of months, I’ve looked at proxy statements as they crossed my desk to determine how companies are responding to the amendments to Item 405 adopted ...

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Staff Eases Burden of Obtaining Manually Signed Reports

In case you missed it, the SEC staff issued a statement earlier this month allowing compliance personnel to file Section 16(a) reports without having a “manually ...

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Insiders Consent to Section 16(a) Sanctions

Insiders in two separate SEC enforcement actions settled by consenting to injunctions against further violations of various provisions of the federal securities laws, ...

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Court Holds that “Consultant” was a Section 16 Officer

It isn’t often that the SEC challenges a company’s determination that a particular person is not a Section 16 “officer” of the company, but it does happen ...

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SEC and EDGAR Will Be Closed on December 24

President Trump has signed an executive order closing all federal agencies on Tuesday, December 24, to give federal employees an extra day off before the Christmas Day ...

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New Exemptive Rule for Exchange-Traded Funds Doesn’t Extend to Section 16

The SEC’s new exemptive rule for exchange-traded funds exempts ETFs from many of the requirements of the Investment Company Act of 1940, but it doesn’t exempt ETF ...

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High-Frequency Traders: Beware of Section 16(b)

A decision by the SDNY earlier this week demonstrates that actual awareness of inside information is irrelevant to whether an insider’s open market transactions are ...

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Investment Fund is 10% Owner Despite Delegation of Voting and Investment Power to Affiliated Adviser

I wrote about Packer v. Raging Capital last year, when the district court denied the defendants’ motion to dismiss. The judge has now granted the plaintiff’s motion ...

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Rule 16b-3 Exempts Acquisition of Issuer Stock in Merger of Target with Issuer’s Subsidiary

A judge in the Northern District of California has dismissed a complaint filed against Elon Musk and other Tesla insiders which alleged that their acquisition of Tesla ...

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Is a Board Observer a Section 16 “Director”?

A person who has a contractual right to attend board meetings as an observer generally isn’t considered to be a director for purposes of Section 16, at least not by ...

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SEC Revises Procedure for Authenticating Form ID

The SEC has announced enhancements to the EDGAR system, one of which affects the submission of Form ID. New filers will now complete an updated online version of Form ...

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New Name, Slightly New Look, Same Quality Products!

If you subscribe to the Romeo & Dye print publications or have ever dug around a little on this website, you know that all of our Section 16 materials are published ...

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SEC Proposes to Exempt Employees’ Securities Company from Section 30(h) of 1940 Act

The SEC has proposed to exempt an investment adviser and its affiliated “employees’ securities company” from certain provisions of the Investment Company Act of ...

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Staff Says Zero Cost Collar on UP-C Stock Underlying OP Units Doesn’t Violate Short Sale Rule

Yesterday Corp Fin issued an interpretive letter expressing the view that insiders of UPREITs and similar tax-structured UP-C’s who own units in the operating ...

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Shareholder Group Finds Counsel to Pursue Tax Withholding Claims

The shareholders whose many pro se lawsuits challenging the applicability of Rule 16b-3(e) to “discretionary” tax withholding transactions ground to a halt after ...

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Second Circuit Agrees that Investment Fund Ceased to be Ten Percent Owner Before Call Option Expired

I’ve blogged about Olagues v. Perceptive Advisers LLC twice before, most recently a year ago when the SDNY dismissed the complaint. As explained in my ...

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Challenge to Rule 16b-3(e) Exemption Dismissed as Time-Barred

A judge in the Southern District of Florida has dismissed one of John Olagues’ complaints challenging the availability of Rule 16b-3(e) to exempt an insider’s ...

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Second Circuit Holds that Issuer May be Substituted as Plaintiff in Pending 16(b) Action Following Acquisition of Issuer in Cash Merger

In a 2 to 1 vote, a Second Circuit panel has reversed a SDNY decision holding that, when an issuer is acquired in a cash merger while a shareholder-initiated 16(b) ...

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Sixth Circuit Affirms Dismissal of Pro Se Complaint in Tax Withholding Case

The Sixth Circuit Court of Appeals had affirmed the district court’s dismissal of the complaint filed in Olagues v. Timken, which I discussed in an earlier blog, on ...

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Tenth Circuit Affirms Dismissal of Challenge to Tax Withholding Exemption

Last year, I noted that a district judge in Oklahoma had dismissed a Section 16(b) complaint filed against two officers of WPX Energy challenging the application of Rule ...

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Delegation of Investment Discretion to Investment Adviser Does Not Create 13(d) Group with Adviser or its Other Advisees

A judge in the SDNY has issued a potentially significant decision regarding the circumstances under which a person who delegates investment discretion to an investment ...

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SEC Streamlines Item 405 Disclosure and Due Diligence Requirements

Last week, as part of its “FAST Act Modernization and Simplification of Regulation S-K” project, the SEC adopted amendments to the Section 16(a) compliance rules. ...

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Ninth Circuit Affirms Exemption for Conversion of Convertible Note

As noted in an earlier blog, a judge in the Northern District of California dismissed a pro se complaint filed by J.D. Jordan, one of the plaintiffs in the recent tax ...

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Agreement to Give Investment Adviser Control Over Managed Account Does Not Create a Group

I previously blogged about a SNDY judge’s dismissal of a complaint alleging that the managed accounts of an investment adviser that sought to influence control of ...

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