Securities Law Prof Blog

Murdoch and Bancroft Family Members Have a "Constructive" Meeting

Published reports say the meeting between members of the Bancroft family and Rupert Murdoch yesterday was cordial, and, indeed, make it sound as if Murdoch's acquisition of Dow Jones is on course to becoming a done deal.  Much of the four-to-five hour meeting was spent discussing counterproposals to maintain the journalistic independence of the Wall St. Journal.  Murdoch reportedly rejected the family's proposal to set up an independent board of overseers with the initial members selected by the Bancroft family, who would then choose their successors in perpetuity.  Afterwards, Murdoch called the meeting "constructive."  It is expected that the parties will meet again soon to continue discussions.  See WSJ, Murdoch Calls Dow Jones Meeting 'Constructive'; NYTimes, 2 Sides Meet Face to Face on Dow Jones.

SEC Settles Market Timing Charges Against Two Former Putnam Managers

The SEC announced today that a final judgment  by  consent  was entered against Justin Scott and Omid Kamshad, two former  Managing  Directors and portfolio managers at  Putnam  Investments.  The  final  judgments against Scott and  Kamshad permanently  enjoin  them  from  violating antifraud provisions of the Investment Advisers Act, require  them  to disgorge their ill-gotten gain, plus prejudgment interest,  and  order them each to pay a $400,000 civil penalty. The Commission's complaint alleged that  Scott and Kamshad engaged in inappropriate trading of  Putnam  mutual  funds shares, including in mutual  funds  over  which  they  had  investment authority. The Commission charged that Scott and Kamshad's  short-term trades,  which  were  made  in  their   Putnam-administered   deferred compensation and retirement accounts, violated their  responsibilities to other fund shareholders, that Scott and Kamshad failed to  disclose their trading and that, by  their  trading,  they  potentially  harmed other fund shareholders.

SEC Emergency Action Against High Yield Investment Program

On June 1, 2007, the SEC filed an emergency action against Harold S. Longs (Longs) and Your Money Worth, Inc. (YMW), alleging that the defendants have raised at least $755,000 and defrauded over 60 investors by promising annual returns of up to 96% in connection with the unregistered offer and sale of YMW securities.  In its complaint, the SEC alleges that from at least January 2006 to the present, the defendants solicited investors nationwide by selling memberships into a "private community of invested believers sharing a new trend of higher finance." The complaint further alleges that, after paying a membership fee, investors are allowed to invest in any of at least eight investment programs or "opportunities" that claim to guarantee principal and provide investors with annual returns from 36% to 96% through investments in "high growth investment products on all major markets of the world." In actuality, the complaint alleges, the defendants used investor funds to pay the returns in a classic ponzi scheme. The court granted, among other relief, a temporary restraining order that included an asset freeze. In its enforcement action, the SEC is seeking additional relief, including permanent injunctions, disgorgement, and civil penalties against Longs and YMW.

Hot Market, Unprofitable IPOs Again

Nearly half of the 84 companies that have done IPOs thus far in 2007 were unprofitable at the time of the offering, the biggest percentage since 2000.  Unlike in the dotcom era, these companies are not just in the tech industry, but other sectors as well, including health care and energy.  See WSJ, In the Red,Selling Stock.

Perspective on The Past Week's Stories

This past week the SEC announced two long-awaited settlements in stock options backdating cases, Mercury Interactive and Brocade Communications.  Practitioners and scholars alike wanted to learn what the new SEC policy on corporate penalties would be.  We have learned that the SEC will impose penalties on the entity, but the two settlements do not offer much insight into why Mercury is paying $28 million and Brocade is paying $7 million.

Two stories that have been on the back burner for a few weeks attracted a lot of attention at the end of the week.  (1)  The Bancroft family did an about face and announced that it would meet with Rupert Murdoch and consider a sale of Dow Jones; (2) speculation about developments in the Milberg Weiss indictment were in the news, as newspapers reported that one of the Milberg Weiss partners might plead guilty and William Lerach's law firm (neither Lerach nor his firm has been indicted) announced that Lerach might resign.