23 March 2018
- This week's Corporate news includes information on the SECs 2016 examination priorities, the US Supreme Court's new decision on remote tippee liability, and information on what has caused the number of public benefit corporations to grow.** SUPREME COURT TO DECIDE ON REMOTE TIPPEE LIABILITY IN INSIDER TRADING CASES In January 2016, the U.S. Supreme Court granted certiorari in Salman v. United States, which will revisit the scope of “remote tippee” (or sub-tippee) liability for the first time since the landmark 1983 Dirks v. SEC decision. The Supreme Court will address a circuit court split as to how the prosecution can establish that a tipper received a personal benefit in exchange for the tip of inside information, and whether the government must prove that a remote tippee knew of the personal benefit that the tipper would receive in exchange for the tip. The Ninth Circuit Salman court had held that the government need only establish that the tipper had made a gift of confidential information to a relative or friend. The Second Circuit in United States v. Newman had required a remote tippee to know of the personal benefit received by the tipper in exchange for the tip. For more information on the pending Supreme Court case, read here. SEC RELEASES 2016 EXAMINATION PRIORITIES The SEC's Office of Compliance Inspections and Examinations (OCIE) recently released its 2016 priorities for examinations of investment advisers, broker-dealers and other market participants. Focal points of OCIE examinations will include reasonable bases for investment advisers' recommendations to investors, advisers' cybersecurity compliance and controls, and compliance oversight of firms that employ individuals who have been disciplined or otherwise have a misconduct record. The OCIE also expects to examine private fund advisers (focusing on their fees and expenses), investment advisers and investment companies that have not been examined previously, and private placements (including Regulation D exempt offerings) for compliance with due diligence, disclosure and suitability requirements. For more information, read here. GROWTH OF PUBLIC BENEFIT CORPORATIONS A total of 31 U.S. states now allow corporations to be formed as public benefit corporations, and an additional 5 states are considering such legislation. Historically, corporate directors have acted in the best interests of the corporation and its stockholders in connection with their fiduciary duty of care. Benefit corporations voluntarily meet higher standards of corporate purpose, accountability and transparency, and issue reports assessing their social and environmental performance, with directors considering the interests of workers, society and the environment as well as stockholders. States allowing PBCs include California (2012), Connecticut (2014), Delaware (2013), Florida (2014), Illinois (2013), Maryland (2010), Massachusetts (2012), Minnesota (2015), New Jersey (2015), New York (2012), Oregon (2014), Pennsylvania (2013), Vermont (2011) and Virginia (2011). The states considering the legislation are Alaska, Kentucky, New Mexico, North Dakota and Oklahoma. States that do not have current or pending legislation include Maine, Michigan, North Carolina, Texas and Washington. For more information on nationwide trends, read here.