Below, we highlight some of our latest thought leadership articles on important legal topics and trends.
Corporate Governance
California Trial Court Strikes Down Women on Boards Law
On May 13, 2022, a California court ruled in Crest v. Padilla that a state law requiring California-based public companies to have one to three women directors on their boards violated the equal protection clause of the state constitution. The secretary of state has stated she will appeal the decision, which follows another recent case decided in the Los Angeles County Superior Court that struck down a similar law requiring companies to include at least one member of an “underrepresented community” on their boards. That case is on appeal.
Digital Assets
Senate Bill Would Create Comprehensive Regulatory Structure for Cryptocurrencies and Other Digital Assets
On June 7, 2022, the Responsible Financial Innovation Act was proposed to create an encompassing regulatory structure for digital assets. It would help determine whether a digital asset should be treated as an investment contract for purposes of applying U.S. securities law.
NY Department of Financial Services Outlines How Blockchain Analytics Should Be Used for Compliance
Recent guidance from the New York’s financial regulator may signal a broader shift in regulatory expectations beyond the state, where virtual currency businesses are expected to employ blockchain analytics to support their compliance functions. It may serve as a useful guide for the industry more generally. The guidance signals that regulators may have moved beyond debating the legal permissibility of digital assets activities and are now more keenly focused on the supervision of these activities to ensure they are conducted in a safe and sound manner.
UK Government Details Plans To Foster a Cryptocurrency and Fintech Hub
The U.K. government has unveiled its proposals to make the country an attractive venue for fintech and cryptocurrency innovation, creating legal frameworks for stablecoins and decentralized autonomous organizations, and resolving tax issues, among other measures.
Texas, Alabama Regulators Order Halt to Virtual Casino NFT Sales, Alleging They Constituted an Offering of Securities and Misled Buyers
In the NFT space, many have focused their attention on how the SEC may view these digital assets. However, state laws have impact as well, as evidenced by recent actions by Texas and Alabama securities regulators to shut down an NFT project that the regulators concluded violated their respective state’s securities laws. These developments highlight how the manner in which NFTs are sold and promoted can render them securities.
Executive Compensation and Benefits
2022 Compensation Committee Handbook
This year’s Compensation Committee Handbook reflects updates in applicable law and practices, including the SEC’s proposed clawback rule in connection with the Dodd-Frank Act; compensation design considerations in the continuing era of COVID-19 and other uncertainties; the now-widespread focus on gender pay gap and environmental, social and governance considerations; and the evolving role of compensation committees in light of these and other developments. The Handbook aims to help compensation committee members understand and comply with the duties imposed upon them and to serve as a useful resource for those who advise compensation committees.
Intellectual Property
FTC Addresses Social Media, Influencers, Consumer Reviews in Proposed Endorsement Guides Amendments
The FTC has proposed amendments to its guidance on endorsements in advertising that account for the new ways advertisers use technology to reach consumers, including through social media and product reviews. The amendments include a number of significant changes that will impact both advertisers and those they hire if they are enacted.
Litigation
California Bill Would Prohibit Settlement Agreements Keeping Certain Information Secret
California’s Public Right To Know Act of 2022 proposes prohibiting both settlement agreements that restrict the disclosure of factual information and court orders that do not allow public disclosure of the covered information.
National Security
Congress Reportedly Advances Broad Proposal for Outbound Screening of US Investments in Identified Countries of Concern, Including China
Proposed legislation released on June 13, 2022, would create a groundbreaking mandatory outbound investment screening regime to review U.S. investments in countries identified by Congress as countries of concern to the United States. The proposed regime aims to protect U.S. supply chains, technology and capital in key industries and business sectors by creating an interagency federal committee to review certain overseas investments, information sharing, partnering and offshoring. If enacted, the legislation will center national security considerations as a focus for a range of U.S. investment firms and companies.
Securities Enforcement
Fifth Circuit Holds SEC Proceeding Brought in Agency’s In-House Court Unconstitutional
On May 18, 2022, in Jarkesy v. SEC, a split panel of the Fifth Circuit identified three independent constitutional flaws in the SEC’s administrative adjudication system. The case arose from the SEC’s enforcement action brought against the manager of two hedge funds and the funds’ unregistered investment adviser before the agency’s in-house administrative law judge. The Fifth Circuit’s conclusions may significantly constrain the SEC’s — and perhaps other agencies’ — future ability to litigate certain enforcement actions before administrative tribunals.
Securities Litigation
In the Name of the Company: When Stockholders Interfere in the Boardroom
Because stockholders have unique and numerous ways to assert rights belonging to corporations, companies can find themselves defending essentially the same claims in multiple guises and jurisdictions. This article, from our spring issue of The Informed Board, identifies some ways to manage the proliferation.
Ninth Circuit Enforces Exclusive Forum Bylaw in Derivative Suit Asserting a Section 14(a) Claim, Creating Split With Seventh Circuit
A corporate bylaw requiring derivative actions to be filed in the Delaware Court of Chancery was applied by the Ninth Circuit even though the stockholder alleged a federal securities law claim, contrary to a recent Seventh Circuit ruling.
Tax
GILTI Conscience – The Issue Behind ‘Almost All’ Transfer Pricing Cases: Ex Ante or Ex Post Basis
In episode seven of “GILTI Conscience,” hosts Nate Carden and David Farhat talk with Keystone Strategy’s Bram Isgur about the issue underlying most major transfer pricing cases: whether to look forward to see what pricing should be for events that have not yet happened or to wait and look back at what has already occurred. As Mr. Isgur acknowledges, there is no perfect solution: Transfer pricing theories are ex ante, transfer pricing audits are ex post and OECD guidelines and U.S. transfer pricing rules are a mix of the two.