Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Saturday, February 17, 2007

Possible GM-Chrysler Merger?

All the papers are reporting on a possible Chrysler-GM merger, although analysts say it's unlikely to happen.  Investors view it as good news for Daimler Chrysler, not so much for GM.  See WPost,  GM Reportedly in Talks With Daimler to Buy Chrysler Unit, NYTimes, Analysts Are Skeptical of G.M.-Chrysler Merger and WSJ, GM and DaimlerChrysler Cozy Up, But a Merger Would Be Tricky

February 17, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Friday, February 16, 2007

Amendments to BrokerCheck

NASD, in Notice to Members 07-10, discussed recent amendments to Interpretive Material 8310-2 (IM-8310-2), governing the release of information through NASD BrokerCheck.  NASD Says that "These amendments expand the information NASD makes available through BrokerCheck and reflect NASD’s commitment to strike a fair balance between investor protection and the privacy interests of member firms and their associated persons. Additionally, NASD is making BrokerCheck more user-friendly and improving its security and integrity by replacing the current method for the electronic delivery of BrokerCheck reports and by introducing a redesigned BrokerCheck Web site. NASD is also introducing an educational component of the BrokerCheck report and Web site that it believes will enable the reader to view disclosure events in the appropriate context and give appropriate weight to all disclosure events when evaluating a particular firm or broker. Upon request, subject to terms and conditions established by NASD and after execution of a licensing agreement prepared by NASD, NASD will also provide a compilation of selected data of NASD members."

February 16, 2007 in Other Regulatory Action | Permalink | Comments (0) | TrackBack (0)

Former i2 CEO Settles SEC Fraud Case

On February 15, the Commission settled civil charges  against  Gregory A. Brady, the  former  chief  executive  officer  of  Dallas-based  i2 Technologies, Inc. and a  defendant  in  the  Commission's  July  2005 enforcement action. The Commission's complaint had alleged that,  over the four years ended Dec. 31, 2001, and the first  three  quarters  of  2002, i2  misstated  approximately  $1  billion  of  software  license revenue, including over $125 million of revenue it never  should  have recognized. The complaint further alleged that Brady participated  and assisted others in misstating these amounts.

February 16, 2007 in SEC Action | Permalink | Comments (0) | TrackBack (0)

SEC Fees Cut

SEC Chair Christopher Cox announced that, starting next week, the agency will sharply cut the fees charged to public companies and other issuers for securities transactions and registrations.  The SEC sets registration and transaction fees according to the Investor and Capital Markets Fee Relief Act. The fee cuts that will go into effect next week are significant: fees to register securities with the Commission will be reduced by 71.3 percent, and fees on securities transactions will be reduced by 50.2 percent.

February 16, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

NASD Charges Brokers with Aiding Hedge Fund's Market Timing

NASD announced that it has charged two Utah brokers, Jeffrey Doerr and David Corn, with facilitating a hedge fund manager's deceptive practices to market time through variable annuities offered by three different life insurance companies. Both Doerr and Corn were registered with Prudential Securities, Inc. (PSI) - now known as Prudential Equity Group - but have since left the firm. NASD also charged the brokers' branch manager, Darrel Trost, with failing to supervise their activities.  See NASD Charges Two Former Prudential Brokers with Facilitating Hedge Fund Manager's Deceptive Market Timing in Variable Annuities.

February 16, 2007 in Other Regulatory Action | Permalink | Comments (0) | TrackBack (0)

Mills Accepts Bid from Simon-Farallon

Mills Corp., a shopping mall REIT, agreed to be acquired by Simon Property, the largest mall operator, and Farallon, a private equity firm.  The price is $25.25.  This is higher than previous bids by Simon-Farallon and also Brookfield.  See WSJ, Simon Property and Farallon To Buy Mills for $1.64 Billion.

February 16, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Bankruptcy Court Says Bear Stearns Has to Pay Hedge Fund Investors

A bankruptcy court in New York ordered Bear Stearns to pay $160 million to investors in a failed hedge fund, Manhattan Investment Fund, headed by Michael Berger.  According to the court, Bear Stearns, one of the prime brokers for the fund, had suspicions of fraudulent activity, asked questions of Mr. Berger, but failed to verify the explanations provided.  Bear Stearn's failure to act diligently allowed the fraud to continue, says the court.   Bear Stearns says it plans to appeal.  See NYTimes, Bear Stearns Told to Pay $160 Million to Investors and WSJ, Bear Stearns Is Told to Return
$125.1 Million in Hedge Case.

February 16, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Broadcom Backdating Investigation May Lead to Criminal Charges

The investigation into backdating charges at Broadcom is heating up and prosecutors are considering criminal charges, as incriminating emails from the CFO have surfaced.  The WSJ article also highlights some other backdating investigations.  See WSJ, Probes of Backdating Move to Faster Track.

February 16, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Former Monsters GC Pleads Guilty in Backdating Case

Former General Counsel at pleaded guilty to intentionally backdating stock options and promised to cooperate in the ongoing investigation.  Incriminating e-mails did him in.  The SEC has also brought civil charges against him.  See NYTimes, Ex-Official at Jobs Web Site Admits Backdating Options and WSJ, Former Monster General Counsel Pleads Guilty in Options Case.

February 16, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Stock Options Tables Still Confusing under New SEC Rules

A Washington Post article looks at the tables disclosing the value of stock options under the SEC's new  executive compensation rules and finds that they don't tell the full story, thanks to an accounting loophole on acceleration of vesting dates and the SEC's change of position last December.  See WPost, Executive-Pay Summaries Conceal as They Reveal.

February 16, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Thursday, February 15, 2007

SEC Charges Former Monster GC with Backdating

The SEC charged Myron F. Olesnyckyj, the former General Counsel of Monster Worldwide, Inc. with securities fraud for participating in a multi-year scheme to secretly backdate stock options granted to thousands of Monster officers, directors and employees, including himself. Linda Thomsen, Director of the Commission's Division of Enforcement, said, "By backdating the vast majority of the stock options it granted, Monster, one of the premier Internet companies of the last decade, used the lure of instant 'paper profits' to attract and retain its employees without booking the appropriate employee compensation charges. This scheme defrauded Monster's investors. The SEC will continue to work tirelessly to uncover and to stop such conduct."

Mark Schonfeld, Director of the Commission's Northeast Regional Office, said, "Olesnyckyj knew that backdating was wrong but nonetheless went along with the scheme. Any lawyer who works at a public company should do everything possible to thwart fraud — not participate in it."  See SEC Charges Former General Counsel of Monster Worldwide, Inc. for Backdating Options.

February 15, 2007 in SEC Action | Permalink | Comments (0) | TrackBack (0)

NYSE-Euronext Merger Approved

The SEC approved the NYSE-Euronext merger.  See NYTimes, Euronext Deal Is Approved
and WSJ, NYSE Merger Draws Closer On SEC Ruling.

February 15, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

SEC Considers New Version of Independent Fund Chair Rule

SEC Chair Cox has said many times he wants to operate by consensus.  The SEC is discussing a compromise to the mutual fund independent chair rule.  Under this proposal, mutual funds would be required to have an independent chair, but could opt out if they met several tests, including a super-majority of independent directors and an independent lead directors.  See WSJ, SEC Considers Fund-Board Compromise.

February 15, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

SEC Investigation into Research Firm Closed

Gradient Analytics, a research firm, announced that the SEC had completed its investigation into the firm without taking any action.  The investigation was instigated by accusations from that Gradient wrote negative research reports in exchange for payments from a hedge fund.  The investigation caused concern when the SEC subpoenaed records from three journalists.  See NYTimes, S.E.C. Won’t Act in Research Firm Case and WSJ, SEC Declines to Bring Charges After Probe of Gradient Analytics.

February 15, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

The Survival of KPMG

The challenges facing accounting firm KPMG after its "near-death experience" of almost being indicted for illegal tax shelters is a front page story at WSJ, NARROW ESCAPE.

February 15, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Aflac To Give Shareholders Nonbinding Vote on Exec Pay

Aflac will be the first major U.S. company to give shareholders an advisory vote on executive compensation packages, illustrating the growing power of activist shareholders.  Executive compensation continues to be a hot topic on other fronts.  Barney Frank, Chair of the House Financial Services Committee, announced hearings on March 8 on executive compensation.  See WPost, Score One for Dissent.

February 15, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

NexCen to buy Ice Cream

The new buyout firm, NexCen Brands, is highlighted in a New York Times story about its acquisition of the No. 2 and No. 3 luxury ice cream brands, Maggie Moo's and Marble Slab.  It previously purchased Bill Blass and Athlete's Foot and uses to hope synergies to create values across brands.  See NYTimes, Buyout Firm Said to Be in Deal to Unite No. 2 and No. 3 Chains in Premium Ice Cream

February 15, 2007 in News Stories | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 14, 2007

Amicus Briefs in Tellabs

To date, amicus briefs in Tellabs Inc. v. Makor Issues & Rights, Ltd.  have been filed by the following, all in favor of the Defendant issuer's position, and contrary to plaintiff's position and the holding of the 7th Circuit:


The Washington Legal Foundation

The American Institute of Certified Public Accountants

SIFMA and the Chamber of Commerce

Northeastern Legal Foundation

Technet, The Information Technology Association of America

Joseph A. Grundfest, et al.

February 14, 2007 in Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

SEC Approves NYSE-Euronext Alliance

The SEC approved rule changes by New York Stock Exchange LLC and NYSE Arca, Inc. related to the proposed business combination between NYSE Group, Inc., the publicly-traded company that owns the New York Stock Exchange and NYSE Arca, and Euronext N.V. Euronext N.V. is a company organized under the laws of the Netherlands and is the owner of five European exchanges.

The Commission-approved rule changes will enable the businesses of NYSE Group and Euronext to be wholly-owned subsidiaries of a new publicly-traded holding company, NYSE Euronext. NYSE Group and Euronext would each be a separate subsidiary of NYSE Euronext, and their respective businesses and assets will continue to be held as they are currently held.

The business combination would be a cross-border transaction that fits within the framework the Commission has developed in connection with other transactions involving self-regulatory organizations. It would maintain the New York Stock Exchange's and NYSE Arca's ability to each meet obligations as self-regulatory organizations and continue to provide the Commission with tools necessary to effectively oversee these self-regulatory organizations.

SEC Chairman Christopher Cox said, "Our capital markets and our trading markets have long been global, but this pending combination is a sign that the trend is accelerating. The SEC and the Euronext College of Regulators, based on extensive collaboration and consultation, are well prepared to undertake the cross-border regulatory responsibilities to which this combination will give rise."

February 14, 2007 in SEC Action | Permalink | Comments (0) | TrackBack (0)

Former Take-Two CEO Settles Back-Dating Charges

The SEC simultaneously filed and settled civil charges against Ryan Ashley Brant, formerly the Chief Executive Officer and Chairman of the Board of video and computer game publisher and distributor Take-Two Interactive Software, Inc. (Take-Two), alleging that during a seven year period, Brant enriched himself and others by granting undisclosed, "in the money" stock options to himself and to other Take-Two officers and employees.
Without admitting or denying the allegations of the Commission's complaint, Brant consented to the entry of an order permanently enjoining him from violating or aiding and abetting violations of the antifraud, reporting, record-keeping, internal controls, and securities ownership reporting provisions of the federal securities laws and permanently barring him from serving as an officer or director of a public company. Brant has consented to disgorge ill-gotten gains of $4,118,093 with $1,143,513 in prejudgment interest, and to pay a $1,000,000 civil penalty, for a total of $6,261,606. The settlement is subject to the approval of the United States District Court for the Southern District of New York.

February 14, 2007 in SEC Action | Permalink | Comments (0) | TrackBack (0)