S&C Critical Insights

Recent Developments in Private Securities Litigation

In this episode of S&C’s Critical Insights, Steve Peikin, who leads S&C’s Securities & Commodities Investigations Practice, and Jeff Scott and Julia Malkina, co-leads of the Firm’s Securities Litigation Practice, review recent private securities litigation trends.

Steve, Jeff and Julia discuss numerical trends in private securities litigation. Although such litigation has slowed overall, certain types of lawsuits, including those with ESG and SPAC-related claims, have increased. The episode also explores recent court rulings from the Second Circuit, the Ninth Circuit and the California Court of Appeal with significant implications for securities litigation, as well as noteworthy developments in cryptocurrency-related filings.

For an in-depth discussion of these topics, read S&C’s Securities Enforcement and Litigation Update.

Review of 2022 U.S. Shareholder Activism and a Look Ahead

In this episode of S&C’s Critical Insights, Melissa Sawyer, Lauren Boehmke and Susan Lindsay analyze trends and developments in shareholder activism and activist settlement agreements over the past year. They also highlight a few factors that are likely to shape activism throughout 2023.

 

Among the topics discussed, the group examined the record-breaking activist campaign activity in the first quarter of 2022, which persisted despite the continued market volatility and macroeconomic uncertainty that dampened activity levels in 2020 and 2021. Additionally, they explored how the nature of campaigns shifted in 2022, with a greater focus on corporate strategies and operations and a reduced focus on capital allocation and M&A.

 

Companies have shown greater resistance to activist demands, they noted, by adopting shareholder rights plans and settling with activists more slowly. This led to decreased success in activists obtaining board seats compared to recent years.

 

They explained that shareholder activism activity in 2023 is expected to be impacted by a variety of factors, including new and proposed policies for institutional investors, new universal proxy rules, the DOJ’s enhanced scrutiny of interlocking directorates under Section 8 of the Clayton Act, upcoming implementation of the Inflation Reduction Act and the potential adoption of the SEC’s proposed rules on share buybacks and amendments to Schedule 13D.

For more information about this topic, read S&C’s review of 2022 U.S. Shareholder Activism and Activist Settlement Agreements.

Recent Developments in SEC Enforcement

In this episode of S&C’s Critical Insights, Steve Peikin, who leads S&C’s Securities & Commodities Investigations Practice, and Jeff Scott and Julia Malkina, co-leads of the Firm’s Securities Litigation Practice, discuss the priorities of the Securities and Exchange Commission’s Enforcement Division and enforcement trends.

 

Steve, Jeff and Julia discuss the SEC’s enforcement and regulatory activity relating to ESG disclosures, digital assets and SPACs. They also highlight the SEC’s focus on insider trading, market manipulation and recordkeeping. The episode concludes with a review of court challenges to the SEC’s enforcement powers.

 

For an in-depth discussion of these topics, read S&C’s Securities Enforcement and Litigation Update.

2022 Headwinds in M&A and Outlook for 2023

In this episode of S&C’s Critical Insights, Senior M&A Partner Frank Aquila and Global Head of M&A Melissa Sawyer discuss major takeaways from M&A in 2022 and potential developments for 2023.

 

Following a record-setting year in 2021, a numbers of factors at the beginning of 2022, including soaring inflation, rising interest rates and geopolitical events, such as Russia’s invasion of Ukraine and the deterioration of U.S.-China relations, led to some of the slowest quarters in M&A globally since the onset of the pandemic.

 

The regulatory landscape for mergers has also shifted, both in the United States and globally, with the Federal Trade Commission and U.S. Department of Justice under the Biden administration taking a more aggressive approach to antitrust enforcement, especially in the labor, agriculture, healthcare and tech sectors. Despite the agencies’ willingness to bring enforcement actions and litigation against proposed mergers, judges have frequently relied upon existing precedent to rule in favor of merging companies.

 

De-SPAC transactions have seen increased focus as well, both from regulators and litigants, resulting in the demise of SPACs throughout last year, which is expected to continue into 2023 and beyond.

 

Despite a general slowdown, several factors may lead to an uptick in activity in the first quarter of 2023, such as the strength of the U.S. dollar, a continued push for M&A activity by activists in the United States and abroad, the death of potential antitrust bills in Congress and the shift to more realistic projections from potential target companies, which make it more likely for buyers to make attractive offers.

U.S. Tax Outlook Post-Midterms

In this episode of S&C’s Critical Insights, Tax Group co-heads Isaac Wheeler and Davis Wang welcome the Firm’s Government Affairs Specialist, Tom Mullins, to discuss anticipated developments in U.S. tax policy following the midterm elections.

 

With Democrats and Republicans narrowly controlling the Senate and House, respectively, it is unlikely that the United States will see significant standalone tax policy passed in the next two years. However, progress is possible on a few fronts, including the Extenders Bill, which would extend expiring deadlines for a range of tax legislation, and the Secure 2.0 Act, which will give part-time workers better access to retirement benefits and increase the age when required minimum distributions must start. Some tax legislation could also become law by being included in a must-pass bill, such as the National Defense Authorization Act.

 

Most likely, changes to tax policy will occur at the Treasury- or IRS-level rather than through Congressional action, although political dynamics and other factors could slow policymaking in those arenas as well.

 

They also discuss how the new balance of power in Congress could make it more difficult for the United States to align with global tax initiatives, such as the Organisation for Economic Co-operation and Development’s Pillar II proposals for a global minimum corporate tax.

Impact of Macro-Economic Environment on Cross-Border M&A

In this episode of S&C’s Critical Insights, Melissa Sawyer, the Global Head of S&C’s M&A practice, is joined by Carsten Berrar, the Managing Partner of the Firm’s Frankfurt office, and Olivier de Vilmorin, the Head of the Firm’s European M&A practice, to discuss cross-border M&A transactions in the current economic environment.

 

Carsten and Olivier discuss some of the macro-economic trends impacting the European market, including the energy supply crisis, inflation, recession as well as transformational issues, such as the mobility car industry. Additionally, heightened Antitrust scrutiny and an increased relevance of Foreign Direct Investment (FDI) Screening add to deal complexity and have reduced the pace of M&A transactions significantly. Despite these factors, a significant number of deals have been struck in the energy, infrastructure and cybersecurity sectors in Europe.  Cautiously optimistic, Carsten and Olivier expect a significant number of P2P, carve-out and distressed M&A transactions in the coming months. Moreover, China’s softening of pandemic restrictions and the slowdown of inflation in the United States have had a positive impact on the European markets and could provide a boost for M&A deals.

 

Melissa provides a U.S. perspective of the market for cross-border transactions into Europe. She points out that this is a great time for U.S. acquirers to be thinking about making investments in Europe as the market is less competitive than in recent years.

Developing a Robust Multi-National Compliance Program

In this episode of S&C’s Critical Insights, Litigation partners Brendan Cullen and Tony Lewis provide an update and some key takeaways for building and sustaining an effective compliance program in light of recent remarks from Department of Justice officials, including September comments by Deputy Attorney General Lisa Monaco.

 

Brendan and Tony build on their previous podcasts from 2020 and 2021 and discuss the agency’s enforcement priorities and its newest compliance expectations. These developments come at a time when U.S. enforcement agencies appear to be increasingly focused on corporate compliance. 

 

Topics include the DOJ’s focus on data analytics in testing the effectiveness of a company’s compliance function and culture, using compensation systems to provide incentives or disciplinary measures to improve compliance, and on companies’ use of electronic messages on personal devices.

 

For more information about compliance programs, read Brendan and Tony’s chapter in the Latin Lawyer Guide to Corporate Compliance, “Developing a Robust Compliance Programme in Latin America.”

An Overview of Section 8 of the Clayton Act

In this episode of S&C’s Critical Insights, S&C Partners Rita-Anne O’Neill and Joe Matelis provide an overview of Section 8 of the Clayton Act and discuss how the Department of Justice’s recent enforcement actions may affect private equity firms.

SEC v. Cochran Supreme Court Argument Preview

In this episode of S&C’s Critical Insights, Julia Malkina, the co-lead of S&C’s Securities Litigation practice, is joined by Judd Littleton, the co-head of the Firm’s Supreme Court and Appellate practice, to discuss the upcoming Supreme Court oral argument in SEC v. Cochran and the case’s potential implications for SEC enforcement actions.

 

In SEC v. Cochran, the Court will decide whether federal district courts have jurisdiction to consider structural constitutional claims that challenge ongoing SEC administrative proceedings.  

 

Julia and Judd discuss the background of SEC v. Cochran, the key issues and arguments before the Supreme Court, and how the Court’s decision may affect SEC enforcement actions going forward.

A Discussion of In Re Grand Jury

In this episode of S&C’s Critical Insights, Isaac Wheeler and Davis Wang, Co-Heads of S&C’s Tax Group, are joined by Morgan Ratner from the Firm’s Supreme Court and Appellate practice, to discuss In Re Grand Jury, a case in which the U.S. Supreme Court recently granted certiorari to address when “dual purpose” communications are afforded attorney-client privilege.

 

In In re Grand Jury, an unnamed law firm that specializes in international tax issues was asked to turn over documents that the firm argued are protected by the attorney-client privilege. The dual purpose communications at issue were made with the purpose of obtaining legal advice, which is generally privileged, and discussing the preparation of the client’s tax returns, which is not generally protected. A federal district court held the firm in contempt for its failure to produce the documents, and the U.S. Court of Appeals for the Ninth Circuit upheld that ruling.

 

Morgan, Davis and Isaac also explore hypothetical scenarios to showcase the challenges of distinguishing legal advice from what has been determined to be non-legal advice, especially in the tax field.