SEC Releases Framework for “Investment Contract” Analysis for Cryptocurrencies

The Strategic Hub for Innovation and Financial Technology (“FinHub”) of the Securities and Exchange Commission (“SEC”) released a framework for analyzing whether a contemplated sale of cryptocurrency, or tokens, is an “investment contract.” (FinHub Staff, SEC). The Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”) both include investment contracts in their definition of securities. (15 U.S.C. §§ 77b(a)(1); 78c(a)(10)). If a cryptocurrency meets the requirements of an investment contract, it is a security subject to registration and regulation under the Securities Act and Exchange Act. The framework released by the SEC applies existing legal precedent to the cryptocurrency context. (FinHub Staff, SEC).

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BlackRock Calls for Greater Gender Diversity on Director Boards

BlackRock, Inc. (“BlackRock”), the world’s largest asset manager, has called for its portfolio companies to increase their gender diversity on director boards. (Vanessa Fuhrmans, The Wall Street Journal). In a set of proxy voting guidelines posted in February of last year, the global investment company stated that they would “normally expect to see at least two women directors on every board.” Id.Blackstone’s public call-to-arms represents a significant shift in investment firms that, in the past, have only privately urged corporations to expand the role of women on boards of directors. While companies in the U.S. have been slow to respond, many European nations have introduced legislation that mandates gender diversity on corporate boards. This post will highlight Blackrock’s commitment to gender diversity, the emergence of EU legislation establishing gender quotas for director boards and scientific studies that support the increase of women on companies’ director boards. 

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California Becomes the First State in the U.S. to Mandate Gender Diversity on the Board of Directors of Public Companies

In September of 2018, California was the first state in the U.S. to sign into law mandatory gender diversity on boards of public companies listed on a major U.S. stock exchange. (Richard Vernon Smith, Forbes). The California law went into effect at the close of 2019 calendar year. It requires any corporation with shares listed on a major U.S. stock exchange that is incorporated in or with a principal executive office in the state of California to have a minimum of one female on its board of directors. (SB No. 826, California Legislative Information). By the end of 2021, the law will increase the required minimum number of directors to two female directors if the corporation has five or three if the corporation has six or more directors.

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Shareholder Activism: The Success of Few for the Few

In 2018, activist shareholder campaigns increased to a record high, with about 250 campaigns initiated over the year (up from about 210 campaigns initiated in 2017). (Gail Weinstein et al., Harvard LawSchool). Institutional investors – such as pension funds, insurance companies, endowments, banks, and hedge funds – have initiated public campaigns to attempt to influence companies and management. (Yuliya Ponomareva, Forbes). These institutional players typically own a greater percentage of companies relative to individual minority shareholders and have more leverage, capital, and incentive to pressure management to take certain actions. Such investors tend to focus on issues related to corporate governance, such as replacing management, dividend payouts, new board of director appointments and executive compensation; however, unlike previous cycles of shareholder activism, environmental and other social issues are also becoming common platforms. 

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Uber v. Lyft’s Quest for Investors: No Sharing on this Ride

After their founding in 2007 and 2008, respectively, rideshare market leaders Lyft, Inc. and Uber Technologies, Inc. have both decided to go public in 2019 (Lyft, Bloomberg; Uber, Bloomberg). With Lyft filing their S-1 on March 1stand Uber as recently as April 11th, the race for investors is hastily underway (Lyft S-1Uber S-1). While Initial Public Offerings (“IPOs”) are one of many ways for companies to sell to investors, they allow for sales of stock to a much broader audience and mark the first time that company shares can be listed on an exchange.

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Lorenzo v. SEC: A shift towards broadening the scope of the securities fraud doctrine under Rule 10b-5.

“Don’t shoot the messenger.” This phrase was at the heart of the defense in Lorenzo v. SEC, one of the most recent Supreme court cases to consider whether an individual can be held liable under Rule 10b-5 for knowingly disseminating fraudulent statements in connection with the purchase or sale of securities. Lorenzo, the director of investment banking at an SEC-registered brokerage firm, sent two emails to investors that described a potential investment in a company with “confirmed assets” of $10 million.

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