Securities Litigation & Regulation
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Westlaw Journal SECURITIES LITIGATION & REGULATION Litigation News and Analysis • Legislation • Regulation • Expert Commentary VOLUME 18, ISSUE 21 / FEBRUARY 19, 2013 CREDIT RATINGS WHAT’S INSIDE SECURITIES FRAUD 7 Chesapeake Energy suit is Justice Department sues S&P over rating failures specific enough to move forward, investors say The Justice Department has sued Weinstein v. McClendon McGraw-Hill and subsidiary Standard & (W.D. Okla.) Poor’s Rating Services, alleging the 8 Oil company says investors claiming ‘fraud by hindsight’ companies’ credit ratings during the In re Houston Am. Energy housing bubble misled and defrauded Corp. Sec. Litig. (S.D. Tex.) investors. 9 News of AIG’s $10 billion suit caused stock drop, BofA United States v. McGraw-Hill Cos., No. CV-13- investors say 00779, complaint filed (C.D. Cal. Feb. 4, 2013). In re Bank of Am. AIG The Justice Department’s complaint, filed in REUTERS/Brendan McDermid Disclosure Sec. Litig. (S.D.N.Y.) the U.S. District Court for the Central District of The claims in this case arise from S&P’s credit California, seeks damages in excess of $5 billion SETTLEMENT ratings of mortgage backed securities and under the Financial Institutions Reform, Recovery 10 BofA shareholders hold out, collateralized debt obligations leading up to and Enforcement Act of 1989, Pub. L. No. 101-73. win $62.5 million pact over the recent global financial crisis purchased by Merrill merger FIRREA permits the government to recover financial institutions, including federally insured In re Bank of Am. Corp. Sec., large civil penalties for fraud perpetrated upon financial institutions. Derivative & ERISA Litig. federally insured financial institutions. CONTINUED ON PAGE 14 (S.D.N.Y.) BREACH OF DUTY 11 Derivative lawsuit against tech company put on hold COMMENTARY COMMENTARY Spagnola v. Bhalla (N.D. Ga.) 12 Investor wants Transocean execs to pay for Deepwater SEC approves NYSE and Expanded use of FIRREA Horizon spill Nasdaq rules on means new challenges Richardson v. Newman compensation committees for financial institutions (Tex. Dist Ct.) and advisers Stephen Topetzes and Michael Ricciuti EXECUTIVE COMPENSATION of K&L Gates discuss the reach of the 13 No liability for gas firm Craig Miller and Rory Donald of Manatt, directors who passed Phelps & Phillips discuss the new rules Financial Institutions Reform, Recov- on tax-bonus savings plan approved by the Securities and Exchange ery and Enforcement Act and how it is Freedman v. Adams (Del.) Commission mandating independent being applied to civil actions against compensation committees for companies financial institutions over mortgages traded on the New York Stock Exchange sold to Fannie Mae and Freddie Mac. and Nasdaq. SEE PAGE 3 SEE PAGE 5 41392242 TABLE OF CONTENTS Westlaw Journal Securities Litigation & Regulation Credit Ratings: United States v. McGraw-Hill Cos. Published since September 1995 Justice Department sues S&P over rating failures (C.D. Cal.) ...........................................................................1 Publisher: Mary Ellen Fox Commentary: By Craig D. Miller, Esq., and Rory Donald, Esq., Manatt, Phelps & Phillips Executive Editor: Donna M. Higgins SEC approves NYSE and Nasdaq rules on compensation committees and advisers ..................................... 3 Managing Editor: Phyllis Lipka Skupien, Esq. [email protected] Commentary: By Stephen Topetzes, Esq., and Michael Ricciuti, Esq., K&L Gates Expanded use of FIRREA means new challenges for financial institutions ....................................................5 Managing Desk Editor: Robert W. McSherry Senior Desk Editor: Jennifer McCreary Securities Fraud: Weinstein v. McClendon Chesapeake Energy suit is specific enough to move forward, investors say (W.D. Okla.) .............................. 7 Desk Editor: Sydney Pendleton Securities Fraud: In re Houston Am. Energy Corp. Sec. Litig. Westlaw Journal Securities Litigation & Oil company says investors claiming ‘fraud by hindsight’ (S.D. Tex.) ..............................................................8 Regulation (ISSN 2155-0042) is published biweekly by Thomson Reuters. Securities Fraud: In re Bank of Am. AIG Disclosure Sec. Litig. Thomson Reuters News of AIG’s $10 billion suit caused stock drop, BofA investors say (S.D.N.Y.) .............................................9 175 Strafford Avenue Building 4, Suite 140 Settlement/Merger-Related Issues: In re Bank of Am. Corp. Sec., Derivative & ERISA Litig. Wayne, PA 19087 BofA shareholders hold out, win $62.5 million pact over Merrill merger (S.D.N.Y.) ..................................... 10 877-595-0449 Fax: 800-220-1640 Breach of Duty: Spagnola v. Bhalla www.westlaw.com Derivative lawsuit against tech company put on hold (N.D. Ga.) ....................................................................11 Customer service: 800-328-4880 Breach of Duty: Richardson v. Newman For more information, or to subscribe, Investor wants Transocean execs to pay for Deepwater Horizon spill (Tex. Dist Ct.) .....................................12 please call 800-328-9352 or visit west.thomson.com. Executive Compensation: Freedman v. Adams No liability for gas firm directors who passed on tax-bonus savings plan (Del.) ...........................................13 Reproduction Authorization Authorization to photocopy items for internal News in Brief .....................................................................................................................................................15 or personal use, or the internal or personal use by specific clients, is granted by Thomson Case and Document Index ...............................................................................................................................16 Reuters for libraries or other users regis- tered with the Copyright Clearance Center (CCC) for a fee to be paid directly to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923; 978-750-8400; www.copyright.com. How to Find Documents on Westlaw The Westlaw number of any opinion or trial filing is listed at the bottom of each article available. The numbers are configured like this: 2013 WL 000000. Sign in to Westlaw and on the “Welcome to Westlaw” page, type the Westlaw number into the box at the top left that says “Find this document by citation” and click on “Go.” 2 | WESTLAW JOURNAL n SECURITIES LITIGATION & REGULATION © 2013 Thomson Reuters COMMENTARY SEC approves NYSE and Nasdaq rules on compensation committees and advisers By Craig D. Miller, Esq., and Rory Donald, Esq. Manatt, Phelps & Phillips The Securities and Exchange Commission members meeting the appropriate With respect to the source of compensation, has approved new listing requirements independence requirements after review the company’s board should consider promulgated by the New York Stock of any conflicts of interest. whether the director receives compensation Exchange and the Nasdaq Stock Market from any person or entity that would impair relating to the composition of and oversight STANDARDS FOR COMPENSATION the director’s ability to make independent by compensation committees. The listing COMMITTEE INDEPENDENCE judgments about executive compensation at requirements, as required by the Dodd- Under the new NYSE and Nasdaq the company. In considering the director’s Frank Wall Street Reform and Consumer listing standards, companies must have affiliations with the company, boards must Protection Act, impose new obligations for compensation committees composed consider whether any relationships with compensation committees in connection with entirely of independent directors. The the company place the director under the retention and oversight of compensation NYSE and Nasdaq use both the general the direct or indirect control of the listed committee advisers. The rules also revise independence criteria already included in company or its senior management. If there the independence criteria for compensation the exchanges’ listing standards for boards is a direct relationship between the director committee members themselves. of directors, as well as new criteria specific to and members of senior management, it Public companies must focus on two compensation committees. may impair the director’s ability to make specific compliance dates in connection with evaluation of the new rules: Under the new NYSE and Nasdaq listing standards, • July 1, 2013 — the date for compliance with the new rules relating to companies must have compensation committees compensation, committee adviser composed entirely of independent directors. independence and adoption of any required compensation committee The new NYSE standards require that in independent judgments regarding executive charter amendments; and determining the eligibility of compensation compensation at the company. Notably, • The date of the first annual meeting committee members, the issuer’s board affiliate status due to stock ownership is not after Jan. 15, 2014, or Oct.31, 2014 — the of directors should consider the sources of an automatic bar on membership on the date for compliance with the new rules compensation of the director and whether compensation committee. relating to compensation committee the director is affiliated with the company. The Nasdaq standards now require all listed companies to have a standing compensation committee with at least two members, a significant change from previous rules. Nasdaq formerly allowed compensation decisions to be made by the independent directors of a