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CALIFORNIA CORPORATE & SECURITIES LAW

Hacking EDGAR And Insider Trading

SEC Chairman Jay Clayton launched a sea of news stories last week when he included the following five sentence in a statement on cybersecurity: Notwithstanding our efforts to protect our systems and manage cybersecurity risk, in certain cases cyber threat actors have managed to access or misuse our systems.  In August 2017, the Commission learned…

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Scienter In The News Again

In May, I wrote about Judge Gonzolo P. Curiel’s  decision to grant the defendants’ motion to dismiss federal and state securities law claims in Mueller v. San Diego Entm’t Partners, LLC, 2017 U.S. Dist. LEXIS 77643 (S.D. Cal. May 22, 2017).  I pointed out that Judge Curiel had ruled that scienter is required under Corporations Code Section 25401 but…

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Did Joseph P. Kennedy Make Insider Trading Illegal?

The Patriarch: The Remarkable Life and Turbulent Times of Joseph P. Kennedy. (Penguin Press, 2012) by Professor David Nasaw is one of several books that I am currently reading.  As a securities lawyer, the following sentence gave me pause: “Trading on insider information was not illegal – and would not become illegal until [Joseph P.] Kennedy, as…

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Why Bassam Salman Should Not Have Been Convicted

A lot of ink has been spilt on the United States Supreme Court’s decision in Salman v. United States, 137 S. Ct. 420 (2016).  In that case, the Supreme Court upheld the criminal conviction of Mr. Bassam Salman who received lucrative trading tips from an in-law, who had received the information from his brother.  The legal issue in…

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Ninth Circuit Holds Attorney’s Statement Was “Made”, Not Attributed

Readers familiar with the Nicene Creed will instantly recognize the phrase “begotten, not made”.  I won’t wade into the theological meaning of this phrase, but I cite it as an example of the importance that can be attached to the seemingly simple concept of making.  Under Rule 10b-5, it is unlawful for “any person, directly or indirectly, .…

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Is Rule 10b-5 The “Mother Of All Litotes”?

Yesterday’s post addressed the use of litotes in California’s broker-dealer suitability rule.  Litotes can be an effective rhetorical device, but as Judge Frank H. Easterbrook observed, it is also ambiguous.  Associated Randall Bank v. Griffin, Kubik, Stephens & Thompson, Inc. 3 F.3d 208 (7th Cir. 1993) (“‘Not unlike’ can mean almost anything; although the listener may cancel…

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Section 10(b) Claim Receives a Do-Wacko-Do

So many Section 10(b) claims involve claims of misrepresentation that it easy to forget that the rule also makes it unlawful to use manipulative devices in connection with the purchase or sale of securities.  However, a recent ruling by Judge Margaret M. Morrow considered whether a plaintiff had adequately pled a claim of manipulative conduct in…

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When California Copied Rule 10b-5 Did It Shut The State Courthouse Door To Securities Fraud Suits?

Section 27 of the Securities Exchange Act of 1934 provides: “The district courts of the United States . . . shall have exclusive jurisdiction of violations of [the Exchange Act] or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by [the…

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The Securities Fraud Device That The Legislature Devised To Omit

Last year, Senator Jerry Hill authored a bill, SB 538, which rewrote Corporations Code Section 25401.  As I posted, the underlying premise was fanciful at best – that California’s statute “has failed to keep up with similar language in federal anti-fraud statutes”.   By metamorphosing Section 25401 from a statute based on Section 12(a)(2) of…

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Tender Of Inflated Price Under Right Of First Refusal Does, And Doesn’t, Confer Standing

In a short ruling, U.S. District Court Judge Jeffrey S. White recently tackled a claim by a former employer that its departed employee had committed securities fraud when he allegedly failed to disclose that the price offered by his new employer for his shares of the former employer were “inflated and fraudulent”.  The price mattered to…

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