Posted on Thursday, May 18 2017 at 11:03 am by

General Solicitations of Certain Regulation D “Private” Securities Offerings: SEC Affirms Zero-Tolerance Policy.

By Paul Foley and John I. Sanders

On March 29, 2017, the Securities and Exchange Commission (the “SEC”) issued a noteworthy opinion in In re KCD Financial Inc.,[1] a review of a FINRA disciplinary action.[2] While the opinion affirmed FINRA’s disciplinary action,[3] it also affirmed the SEC’s zero-tolerance policy regarding general solicitations made in the course of certain Regulation D offerings. Those relying on or contemplating relying on Regulation D exemptions from registration should review the SEC’s opinion.

Factual Background

KCD Financial, Inc. (“KCD”) is an independent broker-dealer.[4] In 2011, KCD signed an agreement with one of its affiliates (“Westmount”) under which it would solicit accredited investors for a particular private fund (the “Fund”) sponsored by Westmount.[5] Westmount did not plan to register the offering. Westmount instead planned to rely on a Rule 506(b) exemption from registration.[6]

Prior to KCD selling any interest in the Fund, Westmount issued a press release describing Fund.[7] Two Dallas newspapers published articles based on the press release and made the articles available on their respective public websites.[8] One of those newspaper articles was then posted on a public website belonging to a Westmount affiliate.[9] Westmount’s outside counsel informed Westmount that the newspaper articles constituted general solicitations, which are prohibited in Rule 506(b) offerings.[10]

After KCD and Westmount officers were told that the articles were general solicitations prohibited under Rule 506(b), they did not end the offering, register the securities, or seek to rely on an alternative exemption. Instead, KCD’s CCO and Westmount’s Vice President of Capital Markets instructed the representatives to sell interests in the Fund only to (i) those with an existing relationship to KCD or Westmount and (ii) accredited investors who had not learned of the offering through the general solicitations.[11] Under those guidelines, at least one person was refused an opportunity to purchases interests in the Fund.[12]

During a FINRA examination of KCD, the examiner found that the newspaper article about the offering had not been removed from Westmount-affiliated website.[13] Subsequently, FINRA filed a complaint against KCD alleging that the firm’s registered representatives sold securities that were unregistered and not qualified for an exemption from registration, thereby violating FINRA Rule 2010.[14] FINRA also alleged that KCD failed to reasonably supervise the offering, thereby violating FINRA Rule 3010.[15] FINRA’s Hearing Panel found that KCD violated those rules.[16] FINRA censured KCD and imposed a fine of $73,000.[17] The National Adjudicatory Counsel affirmed FINRA’s decision.[18] KCD then requested an SEC review.[19]

SEC Review

KCD admitted that the Fund interests it offered were not registered, but argued that offers were made pursuant to Rule 506(b).[20] The SEC rejected KCD’s contention,[21] finding that where a party relying on the Rule 506(b) exemption makes a general solicitation, the exemption then is unavailable “regardless of the number of accredited investors or the knowledge and experience of the purchasers who were not accredited investors.”[22] In this context, whether purchasers were accredited or had prior relationships with KCD and Westmount was “irrelevant to whether or not the newspaper articles constituted a general solicitation” and precluded reliance on Rule 506(b).[23]

KCD also argued, assuming the newspaper articles constituted general solicitations, it could still rely on a Rule 506(b) exemption because “KCD did not generally solicit any of the actual investors in the [Westmount] Fund.”[24] This argument confused the notion of what is prohibited under Rule 506(b). It is making an offer by general solicitation which precludes reliance on a Rule 506(b) exemption.[25] Whether a sale results directly from the general solicitation is irrelevant.[26]

Practical Implications

The SEC’s opinion affirms its view that exemptions from registration in securities offerings are narrowly construed and must be adhered to strictly.[27] Where, as here, the exemption prohibits a general solicitation, any general solicitation forever forfeits the issuer’s ability to rely on the exemption in making the offering (i.e., the toothpaste cannot go back into the tube).

Those making exempt offerings in reliance on Rule 504,[28] Rule 505,[29] and Rule 506(b)[30] should review their sales practices in light of the KCD opinion. In reviewing practices, issuers should look beyond the obvious means of making a general solicitation (e.g., a press release that is published by a widely-circulated newspaper). Websites and social media accounts of those participating in the offerings are equally capable of precluding use of a valuable registration exemption.

Paul Foley is a partner with Kilpatrick Townsend & Stockton’s New York and Winston-Salem, North Carolina offices.  John Sanders is an associate based in the firm’s Winston-Salem office.

[1] In re KCD Financial, Inc., SEC Release No. 34-80340 (March 29, 2017), available at www.sec.gov/litigation/opinions/2017/34-80340.pdf (hereinafter, SEC Opinion).

[2] In re KCD Financial, Inc., FINRA Complaint No. 2011025851501 (Aug. 3, 2016), available at http:www.finra.com (hereinafter, FINRA Opinion).

[3] SEC Opinion, supra note 1, at p. 1.

[4] Id., at p. 2.

[5] Id.

[6] Id.

[7] Id, at p. 3.

[8] Id.

[9] Id. at p. 4.

[10] Id.

[11] Id.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] FINRA Opinion, supra note 2, at p. 4.

[17] Id.

[18] Id.

[19] Id.

[20] SEC Opinion, supra note 1, at 2.

[21] Id.

[22] Id. at 7.

[23] Id. at 9.

[24] Id at 10.

[25] Id.

[26] Id. at 11

[27] Id. at 7.

[28] 17 CFR 230.504 (2017).

[29] 17 CFR 230.505 (2017).

[30] 17 CFR 230.506(b) (2017).

Posted on , May 18 2017 at 11:00 am by

SEC Amends Crowdfunding Rules

By Paul Foley and John I. Sanders

Under the Jumpstart our Business Startups Acts of 2012 (the “JOBS Act”), the Securities and Exchange Commission (the “SEC”) adopted rules allowing for securities-based crowdfunding in 2015.[1] The JOBS Act required the SEC to adjust dollar limits placed on the amount that could be invested or raised through securities-based crowdfunding at least every five years to account for inflation.[2] On April 5, 2017, the SEC issued a final rule adjusting those limits for the first time.[3] We encourage those interested in issuing securities through a securities-based crowdfunding offering to review the final rule and call us with any questions you may have.

Paul Foley is a partner with Kilpatrick Townsend & Stockton’s New York and Winston-Salem, North Carolina offices.  John Sanders is an associate based in the firm’s Winston-Salem office.

[1] SEC, Release No. 33-9974 (Oct. 9, 2015), available at https://www.sec.gov/rules/final/2015/33-9974.pdf.

[2] Id. at 15.

[3] SEC, Release No.33-10332 (April 5, 2017), available at https://www.sec.gov/rules/final/2017/33-10332.pdf.

Posted on Tuesday, May 16 2017 at 8:26 am by

The Sexennial Vote On Frequency of Say-on-Pay: Know When to Say When, or Risk Compromising S-3 Eligibility

By: Edward G. Olifer

We are in the bloom of annual meeting season for calendar year filers. Reporting companies are dutifully reporting annual meeting results under Item 5.07 of Form 8-K within four business days of their annual meetings. However, this year is a little different.

For the first time in six years, many SEC reporting companies are again required to place before shareholders a non-binding resolution on the frequency of their “say-on-pay” vote. The advisory vote seeks shareholder input as to when future say-on-pay proposals will be voted on by shareholders: every year, every two years or every three years. The reporting requirements for this one-every-six year proposal are different than those for other proposals. Companies heading home following their annual meetings should be careful to timely touch all of the proposal’s disclosure bases to avoid compromising their S-3 eligibility, as numerous companies did in the proposal’s inaugural reporting season six years ago.

Under Form 8-K Item 5.07(b), for votes on the frequency of say-on-pay proposals, companies must disclose the number of votes cast for each of the proposal’s options, as well as the number of abstentions.  In addition to the vote tally, Item 5.07(d) requires a company to report its decision, in light of the shareholders’ vote, as to how frequently the company will actually include a say-on-pay proposal in its future proxy materials. The decision must be reported either in the Form 8-K reporting the annual meeting results or in a later filed amendment to that Form 8-K. Alternatively, companies may report annual meeting results in a Form 10-Q or 10-K that is filed on or before the due date that an Item 5.07 Form 8-K would otherwise be due. If the 10-Q/10-K disclosure does not report the company’s decision as to how frequently it will include future say-on-pay proposals in its proxy materials, the company may file a new Item 5.07 Form 8-K, rather than an amended Form 10-Q or 10-K, to report that decision. See Form 8-K General instruction B.3 and question 121A.04 of the SEC’s Form 8-K Compliance and Disclosure Interpretations.

In any case, Item 5.07(d) requires that companies must report their decision on the frequency of say-on-pay proposals by no later than 150 days after the shareholder meeting at which shareholders voted on the frequency of say-on-pay, but in no event later than 60 days prior to the deadline for submitting shareholder proposals as disclosed in the company’s most recent proxy statement for shareholder meeting at which shareholders voted on say-on-pay frequency. The enhanced reporting obligation was overlooked by numerous reporting companies in 2011. As Item 5.07 is not one of the enumerated items for which General Instruction I.A.3(b) of Form S-3 provides relief, the oversight caused some severe cases of S-3 eligibility anxiety. Transgressors seeking to make use of registration statements on Form S-3 scrambled to amend their original Item 5.07 Forms 8-K to report their boards’ decisions on say-on-pay frequency and to seek Form S-3 eligibility waivers (d/b/a “non-objections”) from the Office of Chief Counsel.

Companies seeking to avail themselves of the waiver process may contact the Chief Counsel’s Office at 202.551.3500.  Waiver requests must be submitted in writing using the following portal: https://www.sec.gov/forms/corp_fin_noaction. The contents of waiver requests are specific to each situation and the Office will counsel filers as to what should be included, but filers should expect to provide the Staff with the following information:

  • Description of the company and its reporting status (“large accelerated filer”, etc.);
  • Description of the untimely report;
  • Basis for the non-objection request;
  • Reason(s) why the non-objection request should be granted;
  • Confirmation that the company has timely satisfied all other Exchange Act filing requirements and otherwise meets the Form S-3 eligibility requirements;
  • Company’s prior filing history and whether it has previously filed late reports;
  • Controls and procedures adopted to ensure future reporting compliance; and
  • Explanation of timing of requested non-objection.

Staff determinations on these requests are delivered to the company telephonically, not in writing. Neither the request nor the determination is posted on EDGAR.

The bottom line is to stay focused on reporting the board’s decision on when shareholders should expect to see say-on-pay proposals in future proxy statements.  After that, see you in another six years.

Posted on Tuesday, May 9 2017 at 4:27 pm by

How to Register Additional Securities on Form S-3: Rule 413(b) or Rule 462(b)?

By: Isabelle A. Dinerman

The general rule (as set forth in Rule 413(a) under the Securities Act) is that a company cannot register additional securities on a registration statement that is already in effect; instead, a company must file a new registration statement to register any additional securities—even when the additional securities are of the same class as those already registered. While this is always the case for a registration statement on Form S-8, there are fortunately some exceptions for a registration statement on Form S-3. The exceptions, however, require that you start with an automatic shelf registration statement. Thus, using a post-effective amendment to register additional securities only becomes possible for a public company that qualifies as a “well-known seasoned issuer” or “WKSI” (a category of issuer established in 2005 under the SEC’s Securities Offering Reform (SEC Release No. 33-8591) for the most widely followed public companies in the U.S. marketplace).

A WKSI enjoys special benefits due to its issuer status—in particular, it is eligible to register certain offerings of securities on a Form S-3 registration statement that will be automatically effective upon filing with the SEC. If an issuer does not qualify for WKSI status, it is not eligible to file an automatic shelf registration statement. Pursuant to Rule 413(a), this would preclude it from registering additional securities of any class on a post-effective amendment. Further, even if an issuer does qualify for WKSI status as of the most recent eligibility determination date, it cannot amend an already effective shelf to convert it into an automatic shelf.

If a WKSI does have an automatic shelf in effect, it can utilize the exception in Rule 413(b) to register additional securities (or additional classes of securities) by filing a post-effective amendment to the automatic shelf, but only if the new securities are either (1) of a different class than those already registered on the automatic shelf or (2) of a majority-owned subsidiary and permitted to be included in an automatic shelf.

Although WKSIs have more flexibility than other categories of issuers and are not required to specify a maximum aggregate offering price or number of shares in the base prospectus of an automatic shelf, they may choose to do so.  However, Rule 413(b) noticeably omits any reference to adding securities of the same class as those already registered.

This begs the question— if a WKSI has specified a number of shares in the base prospectus, can it use a post-effective amendment to register additional securities of the same class as those already registered on its automatic shelf? The SEC Staff eventually addressed this very question in question 210.03 of the Compliance and Disclosure Interpretations on the Securities Act Rules. The Staff confirmed that the answer is yes, “an issuer may add to the automatic shelf registration statement on Form S-3, by post-effective amendment, more securities of the same class already registered.” A couple of examples include a post-effective amendment to an automatic shelf filed by Tesla, Inc. (formerly known as Tesla Motors, Inc.) on September 28, 2012 and, more recently, a post-effective amendment to an automatic shelf filed by Delta Air Lines, Inc. on March 30, 2017. Pursuant to Rule 462(e) under the Securities Act, just like the automatic shelf itself, a post-effective amendment to an automatic shelf would automatically become effective upon filing with the SEC.

If an issuer cannot utilize Rule 413(b) (because it either does not qualify as a WKSI or the applicable registration statement is not an automatic shelf) and must file a new registration statement to register additional securities, there may still be some welcome relief available under Rule 462(b) under the Securities Act.  The timeframe for its utilization is limited, however, and thus it is not the functional equivalent of the Rule 413(b) exception.

Rule 462(b) provides for immediate effectiveness, upon filing with the SEC for a new registration statement, if (1) the new registration statement registers additional securities of the same class as were included in an earlier registration statement for the same offering and was declared effective by the SEC, (2) the new registration statement is filed prior to the time confirmations are sent or given, and (3) the new registration statement registers additional securities in an amount and at a price that together represent no more than 20% of the maximum aggregate offering price included in the earlier registration statement. Thus, Rule 462(b) allows a non-WKSI to react quickly and upsize an offering by up to 20% if desired.

Another benefit of Rule 462(b) is that an issuer utilizing the rule can file a short-form registration statement. As set forth in General Instruction IV.A to Form S-3, a new registration statement filed pursuant to Rule 462(b) may consist of only (1) the facing page, (2) a statement that the contents of the earlier registration statement, identified by file number, are incorporated by reference, (3) required opinions and consents, (4) the signature page, and (5) any price-related information omitted from the earlier registration statement pursuant to Rule 430A that the registrant decides to include in the new registration statement.

Accordingly, while only WKSIs can register additional securities by post-effective amendment to an automatic shelf, non-WKSIs may still be able to take advantage of Rule 462(b) to expeditiously register additional securities in certain circumstances.

Posted on Wednesday, April 26 2017 at 2:36 pm by

Your SEC Filing Cover Page is (Probably) Wrong!

By: David M. Eaton

If you blinked, you may have missed this one—in a release deceptively titled “Inflation Adjustments and Other Technical Amendments Under Titles I and III of the JOBS Act,” the SEC amended the cover pages of a slew of its forms, including Securities Exchange Act Forms 10-K, 10-Q and 8-K, and Securities Act Forms S-1, S-3 and S-8.  These amendments were effective April 12, 2017, so most forms public companies would have filed since then should have had a slightly different cover page than comparable forms filed before that date.

The amendments facilitate an SEC registrant identifying itself as an “emerging growth company” (a new-ish category of recently public registrants established by the 2012 JOBS Act that are eligible for various disclosure/reporting and corporate governance breaks). An emerging growth company (“EGC”) must also indicate by check box whether or not it is relying on a particular benefit extended to EGCs—delaying complying with new or revised accounting standards until the time non-public companies are required to adopt them.  See our prior legal alert on the JOBS Act for more on EGCs.

Even though the changes are currently effective, the SEC may not have updated all of the affected forms on its forms list by the time you read this (look at the “Last Updated” column for a date of April 2017 or later to confirm). In light of this, please confer with us if you want to make sure your cover page is compliant.

Posted on Tuesday, April 25 2017 at 12:54 pm by

Disclosing Election of a New Director: Remember Item 5.02(d) of Form 8-K When Doing a Merger

By: W. Randy Eaddy and David A. Stockton

All competent securities lawyers know that Item 5.02(d) of Form 8‑K requires a filing, on Form 8‑K, whenever a public company elects a new director other than pursuant to a shareholder vote at an annual meeting or a special meeting that was convened for that purpose. That requirement typically does not present any compliance problems. The information required to be disclosed is fairly straight forward, and most companies usually obtain and prepare the relevant information for purposes of a press release or other public disclosure as part of the transaction or other corporate event leading to the election of the new director.

So, no big deal, unless one forgets that no such press release or other public disclosure ─ including, for example, a merger proxy statement ─ satisfies the Item 5.02(d) filing requirement. And, there is at least one significant adverse consequence of a missed Form 8‑K ─ i.e., Form S‑3 eligibility.

For most companies with even a modestly sophisticated capital structure, eligibility to use Form S‑3 to register securities is an important element of its ongoing securities issuance compliance regime. And, a baseline eligibility requirement for use of Form S‑3 is that a company be current with all filings under the Securities Exchange Act of 1934, as amended, for the past 12 months. Missing even a seemingly innocuous Form 8‑K filing will fail that test.

A disarming context that has led to more than a few instances of unwitting Item 5.02(d) non‑compliance is where a public company acquires a privately held business and elects as a new director a person who was involved with the privately held acquisition target. In that context, the company typically files a Form S‑4 registration statement that includes a proxy statement (if the acquisition consideration includes issuing stock to the target’s owners), or a proxy statement otherwise if the acquiror’s shareholders must approve the acquisition transaction.  (For convenience, we assume the acquisition is structured as a merger, and we refer to the transaction‑related disclosure document as a “merger proxy statement”.  The same issues discussed here are present regardless of that deal structure.)

Good and customary disclosure by the company in its merger proxy statement will include that the person associated with the target is being elected as a new director as part of consummating the merger, and that person’s background information will be included in the merger proxy statement. Also, as a part of typical corporate governance and disclosure hygiene, the planned election of such a new director will likely be included as part of the company’s press release to announce the upcoming merger and/or the meeting being held to approve it. In any case, the information provided to the public about the new director is likely to cover everything required, as a matter of substance, by Item 5.02(d).

Even more disarming is where a Form 8‑K is required and has been filed, pursuant to Item 1.01, to disclose the anticipated merger, with information about the planned election of the new director expressly included as part of that disclosure.  And, the merger is thereafter approved and consummated as so disclosed.

Ah, but there’s the rub. Unless a Form 8‑K is timely filed after consummation of the merger, and the election of the new director is disclosed in that Form 8‑K, the Item 5.02(d) requirement has not been met. Not even a Form 8‑K filing pursuant to Item 2.01 (to disclose completion of the merger) will be sufficient for Item 5.02(d) compliance purposes, if the loop is not closed by referring expressly to the new director’s actual election as previously anticipated.  After all, there can be last minute changes in the deal.

In that context, compliance with the Item 5.02(d) requirement is ripe for being overlooked. After all, the public has been informed, conspicuously and, probably, on multiple occasions, that the subject person would be elected as a new director of the company if and when the merger is completed, and the public has been informed by the Item 2.01 filing that the merger is effective. What could possibly have been missed? Well, the prescribed Item 5.02(d) filing, that’s what.

We have no empirical data, but we have great confidence, that there are many missed Form 8‑K filings in such an acquisition context.  We believe that many go unrecognized, and that they won’t be recognized, unless there is a later, specific occasion – such as the due diligence process for a future, unrelated transaction – to test for Form S‑3 eligibility. That is not a good time to make the discovery. So, make sure the Item 5.02(d) filing is a specific, post‑consummation item on the comprehensive checklist for managing the transaction.

That said, in a pinch, it might be possible to obtain a de facto waiver from the Staff of the SEC. We are aware that the Staff of the Division of Corporation Finance has taken a verbal “no objection” position with respect to a company’s use of Form S‑3 notwithstanding a missed Item 5.02(d) filing in a situation analogous to that described above. We believe the Staff’s position was based on a compelling demonstration by the company of “no harm, no foul” because the company had otherwise provided a conspicuous, substantially equivalent, timely disclosure of the same information.  But, don’t plan on such an outcome; remember the Item 5.02(d) filing.

Posted on , April 25 2017 at 12:51 pm by

Supreme Court to Consider Fundamental Issues in Omissions-Based Fraud Cases

By: David A. Stockton and W. Randy Eaddy

The Supreme Court recently agreed to review a case which has split the circuit courts and has potentially huge implications for disclosure liabilities of public companies. The case, Leidos Inc. v Indiana Retirement System, centers on the failure to disclose in SEC periodic reports the existence of a governmental investigation, which ultimately proved to be a very material development. The issue in the case is whether such failure to comply with a Regulation S‑K line item disclosure is actionable only by the SEC or raises a private cause of action for investors in the company’s stock under Rule 10b‑5. The particular line item at issue is Regulation S‑K Item 303, which requires disclosure of known trends or uncertainties reasonably likely to have a material impact.

Historically, the failure to address line item disclosures required by Form 10‑K and 10‑Q under the Exchange Act of 1934 does not, standing alone, provide investors with a private cause of action to sue. Instead, the SEC has the right to remedy such omissions through comment letters submitted directly to the issuer and, in more egregious circumstances, enforcement actions against the company. The primary tool for aggrieved investors to recover losses directly from an issuer has been Rule 10b‑5. However, by its express terms, a Rule 10b‑5 action based on an issuer’s failure to disclose can only be maintained if such omission causes affirmative statements made by the issuer to be misleading. So, while not disclosing a big, problematic governmental investigation may violate the Regulation S‑K line item disclosure, it is not a violation of Rule 10b‑5 if the issuer had never made any affirmative statement suggesting the absence of such an investigation. This is because there must be an underlying affirmative statement that is rendered false or misleading by the later omission.

The Supreme Court affirmed this fundamental principle in the seminal case of Basic v. Levinson, stating “silence, absent a duty to disclose, is not misleading under Rule 10b-5.”  Periodic disclosure requirements have not been considered by courts or practitioners to raise such a duty to disclose under 10b‑5, until now, when the Second Circuit Court of Appeals took a different view in the Leidos case. The Second Circuit held that the failure to make a disclosure required by Regulation S‑K can form the basis for a 10b‑5 omission claim by investors, even if the omitted material facts do not render an affirmative statement misleading. This is contrary to holdings by the Ninth Circuit that a duty of an issuer to disclose information under SEC regulations does not necessarily create a duty for purposes of a 10b‑5 claim. This split in the circuits caused the Supreme Court to grant certiorari to resolve the split.

Both sides of this debate – issuers and investors – see great significance in the outcome of the Leidos case. The investor community contends that investors expect to see disclosure of information that the SEC requires by regulation and, if a public company fails to comply with those regulations, it is only fair that investors harmed by such failure be able to bring an action directly against the company.

Public companies facing lawsuits from investors view the Second Circuit’s ruling as threatening to open the floodgates of vexatious 10b‑5 litigation. They are particularly alarmed because the Regulation S‑K Item 303 mandatory disclosure involved in the Leidos case is one of the most difficult disclosure requirements found in Regulation S‑K, as it calls for a subjective determination as to what constitutes a “known trend or uncertainty” and then a prediction as to whether the uncertainty is likely to have a “material impact” in the future.

The issue is joined on a recurring, quarterly basis in drafting a company’s MD&A. Issuers often conclude that the best course is to be silent about a particular circumstance because it is not clear that the circumstance is likely to have a material impact, and drafting full and fair disclosure can be problematic in a fluid situation where the facts have not yet fully played out. Issuers contend that the appropriate forum within which to regulate those difficult disclosures is before the SEC Staff who have expertise in such matters, as opposed to in expensive and disruptive shareholder litigation. But, the Second Circuit’s position in Leidos would make a non-disclosure decision the basis for shareholder class actions anytime the omitted speculative matter later turns out to have been materially adverse, as was the case in Leidos.

The Leidos approach would substantially increase the exposure of public companies to shareholder lawsuits under Rule 10b‑5. Further, potential liability to investors would not necessarily be limited to the required Regulation S-K disclosures that are at issue in the Leidos case. The Second Circuit theory that a 10b‑5 claim may be based on a duty to disclose mandated by federal regulations could also be held to apply to any other statutes or regulations containing specific disclosure requirements.

Handicapping the outcome of a Supreme Court case is always difficult, but we read the tea leaves as pointing toward the court agreeing with the issuer that the basis of a private Rule 10b‑5 claim should not be expanded to include omissions of required Regulation S‑K disclosures. This view is based largely on the Supreme Court recent trend to limit private rights of action under Rule 10b‑5.

That trend may be advanced by the recent addition of Justice Neil Gorsuch to the Court. Justice Gorsuch published an article some years ago that suggested he would take a hardline on shareholder litigation, noting that securities class actions have “brought with them vast social costs.” Public company issuers and those responsible for drafting  their periodic disclosure documents, particularly those charged with addressing the requirement to discuss the future impact of known trends and uncertainties, will be anxiously awaiting the result.

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