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A Look At Recent DOC Enforcement Activity

The California Department of Corporations administers and enforces numerous state laws, including the Commodity Law, Corporate Securities Law of 1968, Deferred Deposit Law, Escrow Law, Franchise Law, Finance Lenders Law, and Residential Mortgage Lending Act. Recently, I took a look at the Department’s enforcement activity for the first seven months of this year.  By my…

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S.D.N.Y. Holds No Section 25400 Liability If Securities Aren’t The Same

The 2008 collapse of Lehman Brothers Holdings, Inc. resulted in seven California public entities and a California-based insurance company suing Lehman’s former directors, officers, and auditors for, among other things, violations of the California Corporate Securities Law of 1968. These cases were consolidated before U.S. District Court Judge Lewis A. Kaplan in the Southern District…

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Offering Securities By General Announcement Without Registration

Yesterday, the Securities and Exchange Commission issued this announcement regarding its settlement with two advertising executives who launched a campaign to buy a beer company through a solicitation of investors on Facebook and Twitter without first registering with securities regulators and making the necessary disclosures. It must be the week for beer offerings because just…

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California’s Phantom Stock Plan Exemption

Some issuers prefer not to issue actual shares to their employees but want their employees to share in any appreciation in the value of their shares.  A phantom stock plan is one way to achieve this result.  Of course, their are tax (including IRC § 409A), accounting, cash flow and other issues to be addressed before…

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Supreme Court Weighs Opening The Janus Gate of Secondary Liability

The Supreme Court heard oral arguments in Janus Capital Group, Inc. v. First Derivatives Traders on Tuesday.  You can read the transcript here.  The SCOTUSblog posts transcripts of oral arguments.  If you are not up to reading the entire transcript, Jim Hamilton’s World of Securities Regulation posted this summary.  Mark Perry, on behalf of the…

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The Dodd-Frank Act’s Exclusion of the “Chief School of Human Virtues”

As has been discussed in earlier posts, Section 413(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the exclusion of the value of an investor’s primary residence for purposes of the net worth determination under Securities Act Rules 215 and 501(a)(5).  The Securities and Exchange Commission has provided the public with an opportunity to comment on rule…

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Supreme Court Set To Decide Arian Controversy In Janus

The U.S. Supreme Court has scheduled oral arguments in Janus Capital Group, Inc.v. First Derivative Traders for December 7, 2010.  The case concerns whether: (1) a service provider can be held primarily liable for participating in an issuer’s misstatements; and (2) whether a service provide can be held primarily liable for statements not directly and…

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“Cooked Dividends” Leads to Bloody Massacre

Cooking dividends is the practice of declaring a false or “cooked” dividend for the purpose of raising the value of a company’s shares.   Apparently, this was a serious problem in the early days of both California and Nevada.  The practice is still illegal under the California General Corporation Law.  Section 2254, among other things, makes…

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Dodd-Frank Act Preempts CSL Qualification of Certain Securities

Most securities lawyers are familiar with federal preemption of state qualification requirements pursuant to Section 18 of the Securities Act of 1933 (“Securities Act”).  See, e.g., my post regarding preemption and Rule 506 offerings.  I expect that fewer lawyers are familiar with preemption pursuant to Section 28(a) of the Securities Exchange Act of 1934 (“Exchange Act”).  In…

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