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SEC Reporting & Enforcement Update

December 9, 2009

McGuireWoods' SEC practice held an informative meeting regarding updates on case law, proposals and other changes in the securities regulatory environment. The December meeting topics included:

  • Katherine DeLuca discussed an SEC settlement with a hedge fund manager accused of violating Section 13(d) of the Exchange Act while engaging in merger arbitrage and alleged vote buying. She also discussed Compliance and Disclosure Interpretations recently published by the SEC regarding Section 13.
  • Jessie Morrison discussed a recent Fourth Circuit decision (SEC v. Pirate Investor LLC) holding that an individual and a company violated federal securities laws when they sent an e-mail to thousands of investors falsely claiming to have inside information that a major corporate event was about to occur at a publicly traded company.
  • LaTisha Owens Chatman discussed the SEC's recent change in position on shareholder proposals related to risk evaluation and CEO succession planning, which companies have excluded historically from their proxy materials in reliance on Rule 14a-8(i)(7) as relating to ordinary business operations.
  • Jennifer Stone discussed the Dearlove case, the first litigated proceeding upholding the suspension of an accountant for audit work that the SEC found negligent under 102(B)(2)'s "repeated instances of unreasonable conduct” standard. The Dearlove court expressly upheld GAAS as the proper standard of review, rather than applying a reasonable person standard. Dearlove is significant because it narrows the grounds upon which challenges to SEC disqualification proceedings can be made, and gives the SEC great discretion in aggressively reprimanding accounting professionals.
  • Nova Harb discussed the SEC's proposed rule amendments regarding the disclosure of information related to credit ratings used by issuers in connection with registered offerings of securities.

David H. Pankey, SEC Practice Chair, served as moderator of the meeting.

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