The United States Supreme Court clarified the duty of prudence that employee stock ownership plan fiduciaries owe to plan participants in its June 25, 2014 decision Fifth Third Bancorp v. Dudenhoeffer 134 S.Ct. 2459 (U.S. 2014). The "presumption of prudence" no longer exists and employee stock ownership plan fiduciaries are subject to the same standard of prudence and liability as any ERISA fiduciary, aside from the duty to diversify. The United States Supreme Court addressed the "presumption of prudence" for employee stock ownership plan ("ESOP") fiduciaries. ESOPs are a type of ...
The MSRB proposed a Revised Draft of Rule G-42 ("Duties of Non-Solicitor Municipal Advisors") by Reg. Not. 2014-12 issued July 23, 2014. We addressed the original proposal in our January 23 blog post, here. The Revised Draft Rule G-42 contains the same basic structure and objectives as originally proposed. It establishes (a) DUTIES owed by Municipal Advisors ("MA's") to Municipal Entity ("ME") clients and to Obligated Person ("OP's"); (b) An engagement-letter-type disclosure regime with certain required DISCLOSURES; (c) A suitability requirement MA's must follow ...
On July 22, the SEC approved amendments to FINRA Rule 2081 that prohibit member firms from conditioning arbitration settlements (or seeking to) upon a customer's assent to CRD expungement relief. The Rule amendments prohibit paying any consideration or compensation for expungement relief and apply even if a customer suggests such a bargain. SEC Rel. No. 34-72649 (July 22, 2014). In cases that may warrant expungement relief under the conditions specified in Rule 2081, SIFMA's comment letter suggested, and FINRA responded approvingly to, using settlement-agreement language ...
On June 30, 2014, the Financial Industry Regulatory Authority ("FINRA") sent its proposed rules to limit the definition of "public arbitrators" to those without any experience in the securities industry. Previously, an arbitrator who had in the past worked in the securities industry but did not currently work in the industry could qualify as a "public" rather than a "non-public" or "industry" arbitrator. See FINRA Rules 12100 and 13100. According to FINRA, people "who represent investors or the financial industry as a significant part of their business would also be classified as ...
Almost every proposed corporate merger is met with a shareholder suit against the acquiring company, merger target and the target's board of directors in which the shareholders assert that the board breached its fiduciary duties by failing to maximize the value of the company and disseminated proxy statements that contained inadequate disclosures. In a recent case - Dent v. Ramtron International Corp., CIV.A. 7950-VCP, 2014 WL 2931180 (Del. Ch. June 30, 2014) - the Delaware Court of Chancery dismissed such a shareholder suit, and in doing so provided a detailed explanation of the ...
The SEC recently made the unusual move of asking the Eleventh Circuit to publish its previously-unpublished per curiam decision in SEC v. Monterosso, 2014 WL 2922670 (11th Cir. June 30, 2014). The decision was not merely a win for the Staff, who presumably sought publication due to the Court's unwarranted language purporting to limit the Supreme Court's Janus precedent only to cases explicitly charged solely under Rule 10b-5(b). In Monterosso, the Commission's Enforcement Staff pursued civil prosecution of three individuals who - in their roles as the issuer's COOs and officers of ...
It is obvious that broker-dealers and their registered representatives, as well as investment advisors, must be careful in making recommendations to their clients. But the rise of claims related to inaction in a client account should also give members of the securities industry cause for concern. In particular, the U.S. Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and other critics have begun to focus their attention on "reverse churning," a claim arising from an allegation that a registered representative or investment ...