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CALIFORNIA CORPORATE & SECURITIES LAW

False Statements By Money Managers Support California Commodity Law Convictions

In 1990, California enacted the California Commodity Law, Stats. 1990, Ch. 969, Corp. Code § 29500 et seq.  Although this law hasn’t attracted the attention of legal writers, it has some very sharp teeth, as illustrated by the recent case of People v. Martinez, 2017 Cal. App. LEXIS 314 (Cal. Ct. App. 2017).  The CCL, among other…

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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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Court Decides Demurrer To Derivative Suit – What About California Law?

Yesterday, the California Court of Appeal affirmed California Superior Court Judge James P. Kleinberg’s judgment sustaining a demurrer in a shareholder derivative action against the officers and directors of Yahoo! Inc.  Leyte-Vidal v. Semel, 2013 Cal. App. LEXIS 849 (Cal. Ct. App. 2013).  The Court of Appeal’s opinion contains a clear and cogent explanation of demand…

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California Creates Complete Chaos By Rewriting Anti-Fraud Statute, But “We Are Against Fraud Aren’t We?”

In my very limited encounters with the late Harold Marsh Jr., I recall that he didn’t readily embrace proposed “fixes” to the Corporations Code.  As I too get older, I’ve come to appreciate his perspective.  For example, Governor Brown just signed SB 538 (Hill), a bill that fundamentally changes California’s securities fraud statute. Among other…

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Emptores Caveant! Buyer Liability In Securities Offerings

Much of the focus of securities litigation is on the liability of sellers, but what about buyers?  Can buyers prevaricate with impunity? Corporations Code Section 25401 prohibits misstatements and omissions of material facts.  Section 25401 explicitly covers persons who “buy” or who “offer to buy” a security.  California’s insider trading statute, Section 25402, also reaches purchases. …

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California Bill Would Expand Liability For Securities Fraud, Impose New Fees, Expand Commissioner’s Powers

In late February, Senator Jerry Hill introduced a bill, SB 538, to substantially amend the Franchise Investment Law.  A few days later, the bill was read for the first time and set for hearing by the Senate Banking and Financial Institutions Committee on April 3.  Then something very fishy happened.   Two days before the hearing, Senator…

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California And Rule 10b5-1

In October of 2000, the Securities and Exchange Commission adopted Rule 10b5-1, which among other things, created an “affirmative defense” for pre-planned trading provided that specified conditions were met.   At the time, I pointed out that California has its own insider trading prohibition, Corporations Code Section 25402 and urged the adoption of a conforming state rule.  In…

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Not Just Anyone Can Violate California’s Insider Trading Ban

Yesterday, I discussed California’s approach to insider trading.  The offense is defined in Section 25402 of the California Corporations Code while the remedy (in the case of certain corporations) can be found in Section 25502.5. Unlike the judicially developed, federal law of insider trading, Section 25402 is quite specific about who may be an offender.…

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