JOBS Act Symposium: What IPO problems did the JOBS Act set out to solve?

By Will Schildknecht, J.D. Candidate 2015 | Posted on

This morning’s first panel features Robert Bartlett, Reza Dibadj, and Martin Zwilling, discussing the JOBS Act’s Title I provisions for initial public offerings.

The panelists were asked to discuss the problems with IPOs antecedent to the passage of the JOBS Act and the problems that the Act set out to solve.

Reza Dibadj provided statistical evidence to support the fact that IPOs have significantly declined in the 2000’s. There was a significant fear on the part of policy makers that IPOs were declining or going overseas costing jobs here. But what wasn’t clear was the causation of the IPO decline. Statistics do not confidently show the cause of the demise of the IPO market and whether entrepreneurs are just preferring mergers and acquisitions instead.

(more…)

JOBS Act Symposium: The IPO On-Ramp

By Christopher Hammond, J.D. Candidate 2015 | Posted on

This morning’s first panel features Robert Bartlett, Reza Dibadj, and Martin Zwilling, discussing the JOBS Act’s Title I provisions for initial public offerings.

Professor Bartlett began with the political economy surrounding the legislation.  He noted the interaction between initial public offerings (“IPO”) and a well-functioning venture capital (“VC”) ecosystem.  Without accessible IPO requirements or other sources of secondary financing, many VCs may be unable to recover their invested capital or exit the market.  But when companies can sell equity to the public, VCs can recycle the capital—the VC ecosystem can then support more growing companies and, in turn, job creation.

Title I of the JOBS Act emerged out of an industry task force’s white paper, entitled “Rebuilding the IPO On-Ramp.”  It recommended an on-ramp for emerging growth companies (“EGCs”) using existing principles of scaled regulation.  The central principle was to lessen the regulatory and disclosure requirements for new companies – encouraging them to go public – by creating a new EGC category.  The transitional category that emerged applied generally to companies with less than $1 billion in annual revenue, for as long as five years.

Congress acted quickly, adopting most of the white paper’s recommendations.

EGCs are subjected to less cumbersome regulation while on the ‘on-ramp.’  For example, they need only include two years’ of audited financials in their regulatory statements (instead of three to five years).  Also, Title I allows EGCs and underwriters to communicate with qualified institutional buyers prior to filing regulatory statements; and companies considering an IPO can file a confidential registration statement, to protect sensitive information if they decide not to go public at that time.

Liveblogging from the 2013 BCLBE and BBLJ Symposium

By Christopher Hammond, J.D. Candidate 2015 | Posted on

The Berkeley Business Law Journal will be covering today’s symposium, The JOBS Act: Initiatives and Challenges of the New Legislation, hosted with the Berkeley Center for Law, Business and the Economy.

The event is taking place at Boalt Hall from 8:45a – 2:00p and will include two panel sessions:  First up, “The IPO On-Ramp” featuring discussion and insight from Robert Bartlett, Reza Dibadj, and Martin Zwilling.  Our second panel, beginning at 11:00a, will critique the “Crowdfunding exception” for IPOs.  Earlier panelists will be joined by Eric Brooks and Mary Dent.

Visit The Network often to follow the event.  Our writers will be frequently posting throughout the morning.

Supreme Court Refuses to Extend Statute of Limitations for SEC Fraud Actions

By Luke Burton, J.D. Candidate 2015 | Posted on

On February 27, 2013 the Supreme Court handed down a unanimous decision holding that the Securities and Exchange Commission (“SEC”) may not invoke the “discovery rule” when bringing fraud charges under the Investment Advisors Act.  15 U.S.C. §§ 80b-6(1), (2).  The “discovery rule,” so often extended to plaintiffs in private actions, triggers the statute of limitations at the time fraud is discovered by the plaintiff.  The “standard rule,” on the other hand, triggers the statute of limitations when the alleged illegal acts occurred.

In the Supreme Court’s decision in Gabelli v. SEC, the Court chose not to extend the plaintiff-friendly discovery rule to the SEC.  The reasoning was based on the asymmetries between the discovery powers of private plaintiffs and the nation’s securities regulation agency.  The Court specified that the federal government had powerful discovery tools, such as the power to “subpoena data, use whistleblowers and force settlements” and that this should ensure “timely action.”  Moreover, the Court noted, “[T]he SEC’s very purpose is to root [fraud] out.”  The Court rested the distinction on the equitable nature of the discovery rule:  the SEC’s mission of discovering and prosecuting fraud, coupled with its powerful enforcement tools, “[are] a far cry from the defrauded victim the discovery rule evolved to protect.”  In the Court’s view, the SEC did not need the discovery rule.

The Supreme Court’s decision led to mixed reactions.  The result in Gabelli came with the approval of the Cato institute, which filed an amicus brief for the defendants.  In contrast, many investors were disappointed, concluding that those who contributed to the financial crisis will continue to go without sanction.  Members of the “Occupy the SEC” movement (whose amicus brief can be found here) called the decision a “boon for fraudsters.”

The Network first covered this story the day after the Court handed down its decision.  See the archived “Week in Review” post here.

The Week in Review: SEC Nomination, Symposium, DOJ and FDIC

By Christopher Hammond, J.D. Candidate 2015 | Posted on

Mary Jo White, President Obama’s pick to be the next S.E.C. chairwoman, took a tough stance on Wall Street regulation yesterday, testifying before the Senate Banking Committee.  Ms. White is a former federal prosecutor, although she has also worked as a corporate Wall Street defense attorney.  She appears likely to win confirmation (as early as next week).  If and when she does, banks should expect rigorous oversight from the government’s top securities regulation agency.  During her testimony, Ms. White said:  “I don’t think there’s anything more important than vigorous and credible enforcement of the securities laws.”  For more, see the NYTimes.  On a related note, Senator Warren (D-MA) has continued to push for increasing bank oversight and regulation.

The Berkeley Center for Law, Business and the Economy and the Berkeley Business Law Journal will be hosting their 2013 symposium on the JOBS Act this Friday, March 15.  Registration is required.  See a previous post for a complete description of this year’s symposium lineup.

Federal prosecutors recently caught a break in an ongoing offshore tax evasion investigation, centered around Swiss financial advisor Beda Singenberger.  In a letter mailed to the United States, Singenberger unintentionally included a list of approximately 60 U.S. ‘clients.’  “The government has mined that list to great effect and prosecuted a number of people who were on that list,” according an assistant U.S. Attorney working the case.  The government continues its crack-down on unreported foreign accounts, which included a $780 million settlement with UBS, Switzerland’s largest bank.  For more, see Bloomberg. 

A recent Los Angeles Times report shows that the FDIC has been quietly settling actions against banks involved in unsound mortgage loans—including “no press release” terms that have kept the matters quiet unless and until it received a “specific inquiry.”  The newspaper claims that this practice constitutes “a major policy shift from previous crises, when the FDIC trumpeted punitive actions against banks as a deterrent to others.”  Under a Freedom of Information Act request, the Times recovered more than 1,600 pages of FDIC settlement documents “catalog[ing ] fraud and negligence.”  Yesterday, Forbes picked up on the story, asking, “Is the FDIC Protecting Banks from Bad Press?”  For more, see the LATimes and Forbes.

 

FRB Governor Raskin Urges Banks to Take Proactive Role in Dealing with Reputational Risk

By Eric R. Fischer, Jackson Galloway, and Elizabeth Shea Fries, Goodwin Proctor, LLP | Posted on

[Editor’s Note:  The following post is from Goodwin Proctor’s recent Financial Services Alert by Eric R. Fischer, Jackson B. R. Galloway, and Elizabeth Shea Fries.  This and other updates from Goodwin Proctor are available here.] 

On February 28, 2013, FRB Governor Sarah Bloom Raskin made a presentation entitled “Reflections on Reputation and its Consequences” to the 2013 Banking Outlook Conference at the Federal Reserve Bank of Atlanta.  Governor Raskin noted that, in the aftermath of the 2007-2009 financial crisis, financial institutions of all sizes have seen a decline in the public’s perception of their reputation and trustworthiness (and she added that the quality of their reputation is of particular importance to financial institutions).  Governor Raskin stated that the decline in public trust of, and confidence in, financial institutions has been increased recently by, among other things, “the Occupy Wall Street movement, payday loans, overdraft fees, rate-rigging settlements in London Interbank Offered Rate [LIBOR] cases, executive compensation and bonuses that seem to bear no relationship to performance or risk, failures in the foreclosure process, and a drumbeat of civil litigation.”

Please click here to read the rest of this entry.

BCLBE and BBLJ 2013 Symposium — The JOBS ACT: Initiatives and Challenges of the New Legislation

By Will Schildknecht, J.D. Candidate 2015 | Posted on

A new frontier in securities law, but how will people use it?

The Jumpstart Our Business Startups Act (JOBS Act) offers new avenues for investors and small companies to participate in the market.  Leaders in business and law will be gathering at the University of California, Berkeley, School of Law on March 15, 2013, to discuss the Act’s opportunities and risks.  The Berkeley Business Law Journal and Berkeley Center for Law, Business, and the Economy are proud to present their 2013 symposium—The JOBS Act: Initiatives and Challenges of the New Legislation from 8:45a – 2:00p at Boalt Hall.  Registration is required.  The symposium will bring together prominent speakers from the fields of law, securities regulation, and venture capitalism to discuss two critical areas of the Act.

The first panel session will explore “The IPO ON-Ramp.”  In response to the decrease in companies applying for initial public offerings, the JOBS Act incentivizes companies to make an offering and introduces a gradual five-year plan to scale up to full public status.  Panelists including Robert Bartlett and Reza Dibadj from UC Berkeley, School of Law, as well as Martin Zwilling from Startup Professionals, will discuss the reason for the decline in IPOs and whether the steps taken in the JOBS Act will arrest and reverse this decline.  The IPO ON-Ramp panel runs from 9:00 – 10:45a.  Further readings about the IPO panel discussion are available on the BCLBE website.

The second panel will discuss the widely-publicized “Crowdfunding” public offering exception.  The panelists will demystify the types of small money investments that are permitted under the crowdfunding exception.  Having discussed the newly permitted activities, the panel will engage in a cost-benefit discussion of the opportunity for new investment avenues weighed against the potential for fraud inherent in this up-tempo investment frontier.  Panelists from the first session will be joined by Eric Brooks from the SEC and Mary Dent from Silicon Valley Bank.  The “Crowdfunding” panel will present their thoughts from 11:00a – 12:45p.  More information on the Crowdfunding panel discussion is available on BCLBE’s website.

(more…)

AT&T Mobility LLC v. AU Optronics Corp.: Out-of-State Price Fixing Still Actionable Under California’s Cartwright Act

By Valerie Ramos, J.D. Candidate 2015 | Posted on

The Ninth Circuit recently held that the Cartwright Act, California’s antitrust law, applies not only to “the indirect purchase of price-fixed goods,” but also where “the conspiratorial conduct that led to the sale of those goods” occurs in California.  AT&T Mobility v. AU Optronics Corp.  The civil action follows on the heels of a DOJ criminal investigation that resulted in more than $890 million in fines.  In 2001, AU Optronics Corporation and other Asian manufacturers of liquid crystal display (LCD) panels had met secretly and agreed to exchange information regarding shipping, production, supply, and demand.  The complaint alleges the result was fixed prices of LCDs in the U.S. and other regions.

Unlike federal antitrust law, California’s Cartwright Act provides a private cause of action for damages caused by indirect purchasers of price-fixed goods.  The Cartwright Act thus reaches beyond the Sherman Act in the sense that its focus has always been on “the punishment of violators for the larger purpose of promoting free competition.”

The plaintiffs, all of which are companies that provide voice and data communication services and sell mobile wireless handsets, sued a collective of manufacturers and distributers of LCD panels.  Plaintiffs alleged that from 1996 to 2006, “they purchased billions of dollars worth of mobile handsets containing Defendants’ LCD panels” at artificially inflated prices due to a global conspiracy to fix the LCD panel prices.  The sale of these LCD panels did not occur in California.

(more…)

Supreme Court Holds Proof of Materiality Is Not Necessary to Win Class Certification

By Arnold & Porter LLP Partners Michael Trager, Veronica Rendon, and Scott B. Schreiber | Posted on

[Editor’s note: The following post from Arnold & Porter’s recent Client Advisory on the implications of the recent Supreme Court decision in Amgen Inc. v. Connecticut Retirement Plans & Trust Funds.  The authors include: Michael D. Trager, Veronica E. Rendon, and Scott B. Schreiber.]

In a February 27, 2013 ruling in Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, the Supreme Court addressed the question of whether a plaintiff invoking the fraud-on-the market presumption to satisfy the reliance element of a securities fraud claim must prove, as a prerequisite to class certification, the materiality of the alleged misrepresentations.  In a six-to-three decision, the Court held that proof of materiality is not necessary at the class certification stage because the applicable provision of Federal Rule of Civil Procedure 23(b)(3) “requires a showing that questions common to the class predominate, not that those questions will be answered, on the merits, in favor of the class.”  The Court explained that materiality is an objective issue, the resolution of which necessarily applies in common to all members of a class.  Because materiality is an issue for which the class “is entirely cohesive” and will “prevail or fail in unison,” the Court concluded that proof of materiality is not a prerequisite to class certification.

Fraud on the Market

In Basic Inc. v. Levinson, 485 U.S. 224 (1988), the Supreme Court first endorsed the “fraud-on-the-market” theory, which allows certain securities-fraud plaintiffs to invoke a rebuttable presumption of reliance on public, material misrepresentations.  The premise of the fraud-on-the-market theory is that, in an efficient market, the price of a security reflects all publicly available information about a company; therefore, a court may presume that a purchaser of the security has indirectly relied on that information at the class certification stage, although reliance could be challenged later in the proceedings.  The rebuttable presumption reflects the Court’s recognition of the evidentiary difficulties posed by requiring direct proof of reliance, which is an essential element of a securities fraud claim under Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder.

The fraud-on-the-market presumption is of vital importance to plaintiffs seeking to certify a class action under Rule 23(b)(3).  As the Court explained in Amgen, without the presumption, questions of individual reliance would ordinarily predominate over questions common to the class, precluding class certification. 

To read the rest of this post, please click here.

New Regulations Announced: Foreign Account Tax Compliance Act

By Constance Descout, L.L.M. Candidate 2013 | Posted on

The U.S. Department of the Treasury and the Internal Revenue Service have released long-awaited final regulations implementing the Foreign Account Tax Compliance Act (“FATCA”).

Congress enacted FATCA in 2010 as part of the Hiring Incentives to Restore Employment Act (the “HIRE Act”), and it is housed in Sections 1471 through 1474 of the Code.  FATCA creates a new tax information reporting and withholding regime for payments made to certain foreign financial institutions and other foreign persons.  FATCA requires certain U.S. taxpayers holding foreign financial assets with an aggregate value exceeding $50,000 to report information about those assets on a new form (Form 8938) that must be attached to the taxpayer’s annual tax return.

This Form 8938 is required when the total value of specified foreign assets exceeds certain thresholds.  For instance, a married couple living in the U.S. and filing a joint tax return would not file Form 8938 unless their total specified foreign assets exceed $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.  The thresholds for taxpayers who reside abroad are higher.  For instance, a married couple residing abroad and filing a joint return would not file a Form 8938 unless the value of the specified foreign assets they hold exceeds $400,000 on the last day of the tax year or more than $600,000 at any time during the year.  Instructions for Form 8938 provide further information, including details on the thresholds for reporting, what constitutes a specified foreign financial asset and how to determine the total value of relevant assets.

(more…)