2017 Proposed Amendments to DGCL Released, SEC Sanctions Morgan Stanley for Failure to Implement Compliance Policies for Non-Traditional ETFs, and SEC Issues Reduced Whistleblower Award because of Culpability and Delay in Reporting

Coropate tunnel

by Nathan Jew and Jeanne Solomon

This week’s corporate law news roundup includes discussions of the 2017 proposed amendments to the Delaware General Corporation Law recently released by the Council of the Corporation Law Section of the Delaware State Bar Association, the SEC’s sanctioning of Morgan Stanley for failing to implement compliance policies and procedures for recommending single-inverse ETFs, and the SEC’s reduction of a whistleblower award due to the whistleblower’s culpability and delay in reporting

2017 AMENDMENTS PROPOSED TO DELAWARE GENERAL CORPORATION LAW

The Corporate Council of the Corporation Law Section of the Delaware State Bar Association has released proposed amendments to the Delaware General Corporation Law (DGCL). Among the more notable amendments are those that would authorize corporations to use blockchain and distributed ledgers to administer corporate records, eliminate the requirement that stockholder consents be individually dated, and clarify the DGCL provisions relating to mergers to make them more consistent across various sections. If approved by the Corporation Law Section, the DGCL amendments will be introduced to the Delaware General Assembly, and (if then enacted) will become effective on August 1, 2017. For more information, see http://www.rlf.com/files/14257_Council%202017%20Proposals%20in%20Bill%20Form%20(5).pdf

SEC SANCTIONS MORGAN STANLEY FOR FAILURE TO IMPLEMENT COMPLIANCE POLICIES FOR NON-TRADITIONAL ETFS

The SEC has instituted administrative and cease-and-desist proceedings against Morgan Stanley for violating Section 206(4) and Rule 206(4)-7 of the Investment Advisers Act of 1940 by failing to adequately implement its compliance policies and procedures designed to prevent unsuitable recommendations of single-inverse exchange-traded funds (ETFs) to non-discretionary advisory clients. Morgan Stanley admitted wrongdoing and submitted a settlement offer to pay an $8 million civil penalty, which the SEC accepted. For more information, see https://www.sec.gov/litigation/admin/2017/ia-4649.pdf.

SEC ISSUES REDUCED WHISTLEBLOWER AWARD BECAUSE OF CULPABILITY AND REPORTING DELAY

Whistleblowers who are culpable and unreasonably delay reporting wrongdoing may see their whistleblower awards reduced, following a recent SEC order. On February 28, 2017, the SEC issued a reduced award of 20 percent of the monetary sanctions collected in the covered action to a whistleblower because of the whistleblower’s culpability in connection with securities law violations at issue as well as the whistleblower’s unreasonable delay in reporting the wrongdoing to the SEC. The SEC’s order determining the award provided no details regarding the violations or the whistleblower’s culpability. For more information, see https://dlbjbjzgnk95t.cloudfront.net/0897000/897528/34-80115.pdf

Withers Corporate Group

Withers' Global Corporate group helps corporate clients, large and small, new and long-established, public and private, worldwide to achieve business success or minimize business risk, in virtually every aspect of their business activities, operations and challenges. Our team has represented hundreds of private companies and over 100 domestic and foreign public companies, including NYSE, NASDAQ and OTC companies and public debt voluntary filers, with market caps ranging up to $10 billion and more — and handled more than $50 billion in transactions. We have represented companies, their owners or their financing parties in manufacturing, IT, biotech, pharmaceutical, internet, medical device, telecom, consumer products, entertainment, software, hardware, retail, media, mining, oil, petrochemical, chemical and many other sectors.

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About Withers Corporate Group

Withers' Global Corporate group helps corporate clients, large and small, new and long-established, public and private, worldwide to achieve business success or minimize business risk, in virtually every aspect of their business activities, operations and challenges. Our team has represented hundreds of private companies and over 100 domestic and foreign public companies, including NYSE, NASDAQ and OTC companies and public debt voluntary filers, with market caps ranging up to $10 billion and more — and handled more than $50 billion in transactions. We have represented companies, their owners or their financing parties in manufacturing, IT, biotech, pharmaceutical, internet, medical device, telecom, consumer products, entertainment, software, hardware, retail, media, mining, oil, petrochemical, chemical and many other sectors.

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