• facilitate crowdfunding;
• permit companies to use general solicitation and general advertising to find investors for securities offerings traditionally limited as private placements;
• expand the use of Regulation A-type offerings; and
• increase the number of stockholders companies may have before they are required to begin SEC reporting.

It will be interesting to monitor the effects of the JOBS Act and see how many jobs are actually created and how much of the capital markets money comes back on shore.  Those who are good, securities law-abiding citizens should be able to take advantage of these provisions to provide funding to worthy companies on a rapid and, hopefully, reduced cost basis.  But buyer beware:  if it sounds too good to be true, it probably is. 

Chancellor Strine rebuked Goldman Sachs and El Paso CEO Doug Foshee on the record and agreed with disgruntled shareholders that the sale process was likely tainted by breaches of fiduciary duty, but in the end, the Chancellor declined to enjoin a stockholder vote on the proposed $31 billion acquisition of El Paso by Kinder Morgan.

The opinion, issued February 29, 2012 in the case of El Paso Corporation Shareholder Litigation in the Chancery Court of Delaware, has been widely cited and discussed for its criticism of Goldman Sachs and Foshee for maintaining conflicts of interest through the negotiation process with Kinder Morgan.  In that regard, the opinion is instructive to conscientious boards, management and professionals.

According to today’s Wall Street Journal, it appears that Congress will agree on a version of the Stop Trading on Congressional Knowledge Act of 2012 (the “STOCK Act”) in the next week.  So far, each of the House and the Senate has passed a version of the STOCK Act, with one of the most notable differences in the Senate and House versions centering around the treatment of “political intelligence firms,” which gather information about pending legislation for their clients, typically hedge funds and other market participants.  The Senate bill requires political intelligence firms to register and report on their activities in a manner similar to lobbyists but the House bill does not.  According to The Wall Street Journal article, the Senate intends to pass the House version of the bill, which means that the political intelligence firm registration provisions will not make it into the final bill.

As a follow-up to our post of February 7^th regarding increased stockholder interest in the disclosure by public companies of their political expenditures and activities, we note that in a speech to securities law practitioners on February 24, 2012, SEC Commissioner Luis A. Aguilar called for the SEC to adopt rules requiring public companies to provide uniform and consistent disclosure of their corporate political expenditures.  “Requiring transparency for corporate political expenditures cannot wait,” Commissioner Aguilar stated, citing the SEC’s responsibility to “ensure that investors are not left in the dark while their money is used without their knowledge or consent.”

Every public company evaluating a potential acquisition analyzes a multitude of variables to see if the transaction makes business sense.  One variable they sometimes miss, however, is the cost of stockholder litigation, and unfortunately it’s becoming routine for significant merger transactions to be targeted with class action lawsuits by plaintiffs’ attorneys.

Common sense might lead one to believe class action M&A lawsuits would be filed only in cases of a significant dispute over value, where the plaintiffs might hope-to develop additional information on valuation of the target, seek to negotiate a higher deal price and obtain additional consideration for selling stockholders, with the plaintiffs’ lawyers receiving their share of fees as a just reward for generating a higher price for the target stockholders.

Investors and shareholder activists have become increasingly focused on the oversight and disclosure of political expenditures by public companies since the Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission, which invalidated restrictions on certain corporate political spending.  Because the 2012 presidential election is expected to be a hotly contested race funded by record levels of political spending, the public’s interest in political and lobbying expenditures by public companies is intensifying and merits a careful review of recent trends in the policies and disclosure practices of public companies with respect to their political spending.

The New York Stock Exchange (NYSE) once again has limited the ability of a broker to vote on proposals at shareholder meetings for which the broker has not received voting instructions from its customers.  This narrowing follows recent rule amendments triggered by the Dodd-Frank Act prohibiting brokers from voting uninstructed shares in the election of directors and on proposals relating to executive compensation.

Citing recent congressional and public policy trends disfavoring broker voting of uninstructed shares, on January 25, 2012, the NYSE notified members that it no longer will allow brokers to vote on corporate governance proposals without customer instruction – even if the company's board and management support the proposal.  Previously, the NYSE considered management-supported corporate governance proposals "routine" matters for which brokers could exercise discretionary voting on behalf of their beneficial-owner customers.  The NYSE notice listed the following examples of corporate governance proposals for which brokers no longer can vote without instruction:

The Securities and Exchange Commission has just amended its rules to exclude the value of a person’s home from net worth calculations used to determine whether an individual qualifies as an “accredited investor” for purposes of investing in certain private securities offerings. Under certain circumstances, however, individuals who qualified as accredited investors under the pre-Dodd-Frank Act definition of net worth may be able to use that prior net worth standard for certain follow-on investments.

Under the amended rule, the value of an individual’s primary residence will not count as an asset when calculating net worth to determine “accredited investor." Likewise, debt secured by the an individual’s primary residence is not included as a liability, except to the extent that the indebtedness secured by the primary residence exceeds the estimated fair market value of the primary residence (that is, when the primary residence is underwater).

The changes were made to conform the SEC’s definition of an “accredited investor” to the requirements of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. See SEC press release.  

A recent Ninth Circuit opinion held that for federal securities fraud claims, the statute of limitations begins to run when a reasonably diligent plaintiff would have discovered the underlying violations, and not from when a reasonably diligent plaintiff should have begun investigating the potential violations.  Federal law provides that a securities fraud claim may be brought no later than the earlier of (1) two years after the discovery of the facts constituting the violation; or (2) five years after the violation.  In Strategic Diversity, the lawsuit had been filed within the five-year limitation period; the dispute was whether the May 2007 lawsuit was time-barred because it had been filed outside the two-year "discovery" limitation period. See Duane Morris Client Advisory.