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DEI for legal teams
Jeff Peterson

DEI for legal teams

January 11, 2022/in Corporate Transactional Law, News /by Jeff Peterson

DEI for Legal Teams

What legal responsibilities do business owners have to implement Diversity, Equity, and Inclusion into the workplace and how can a well-executed DEI strategy positively impact valuation? It is important for organizations to not only have strategies for implementing DEI and anti-harassment policies but also to implement them through effective training. Keeping employees safe and creating an inclusive workspace is not only smart from a culture and engagement perspective, it is always wise to reduce the risk of an employment lawsuit.

Training is not only for simply meeting compliance requirements, it can highlight different perspectives on the company culture and open the dialogue to create opportunities for team bonding, changes in HR policies, and increase productivity in the workplace by increasing the sense of ownership and agency employees have.

Training is no longer the sole purview of Human Resources, rather it is now a joint effort of leadership, HR, and the legal department of any mid-sized and larger organization.

DEI Training

When considering the costs of both diversity, equity and inclusion training and harassment prevention training, especially in a hybrid or remote world of work it can be easy to overlook the hidden risk-cost of not engaging in effective training.

Consider remote sessions with small teams as a way to keep the company running while creating “pods” of team members who are bonded through their experience and also able to disseminate their learning to other teams in the organization. (this is not a replacement for each person receiving training, of course).

Spending more money on an effective, motivating training program may, in fact, save money on time spent by employees, leadership and legal doing endless sessions to no positive impact. Starting with leadership and working your way down to those in middle management ensures that the message is consistent, that everyone is on board, and that the message doesn’t disappear after the training is over.

An Ounce of Prevention

From a risk management perspective, the cost of prevention is easily offset by not only the risk of harassment or discrimination action but also by the compliance requirements of each state.

Employment lawsuit damages and penalties can be significant if you lose, and legal fees in the hundreds of thousands even if you win. By adopting a comprehensive anti-harassment policy and providing effective training, employers can show that they have taken active steps to create a positive, inclusive and safe workspace.

Losing employees because of poor company culture, an unsafe workplace, or lack of diversity has costs to the employee in their pain and suffering and also costs to the organization in lower morale and therefore lower productivity, increased resignation rates, damage to brand reputation, and brand loyalty and increased insurance costs.

Weigh the cost of high-quality training against those of failing to promote a safe and inclusive workplace and company culture to truly understand the cost of DEI and harassment training.

How to Select a DEI Training Company

High-quality content, engaging activities, real-world experience, and well-presented experiences are essential to employee engagement. A “cheesy” or out-of-touch free-online course is likely to backfire causing employees to out the efforts on social media as ineffective and creating a hostile workplace environment to try another type of training program in the future.

By giving employees and management a high-quality experience the message is that leadership is invested in the DEI initiative, that tolerance for harassment or exclusion is very low and that the employees must take the program seriously.

Programs that include real-world experiences and immersive training in emotional intelligence and leadership strategies can change behaviors, not only of potential harassers but of bystanders and the company as a whole.

A well-executed DEI training program can create lasting and positive change. And that is priceless.

Disclaimer: The foregoing blog post does not constitute legal advice, but instead only addresses the general topic of DEI Training. Anyone seeking legal advice should consult with an attorney regarding its specific circumstances and needs.

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Closing a business in CA
Jeff Peterson

How to Close a Business in California

November 22, 2021/in Corporate Transactional Law /by Jeff Peterson

Closing a business in California, a brief overview

47% of new small businesses fail in the first 5 years — and 65% fail before they reach 10 years.  Sometimes they shutter because there are other ventures that are more pressing, sometimes because of market realities that prevent growth, and other times, the idea just didn’t have legs. No matter why you call it a day, there are steps every CA-based business owner must take to properly close their business.  Taking the proper steps will protect you from financial and legal trouble in the future. 

First and foremost, this article is not intended to be taken as legal advice.  As in any consequential business transaction, the counsel of a paid qualified California business attorney is the right choice to ensure no detail is left to chance.  This article is a cursory overview of some of the steps involved in closing a business in CA. 

Why businesses close

Running a business is hard work, it requires emotional investment, financial investment, and, usually running at a loss for at least the first 1 – 3 years.  Not everyone can weather that level of personal and financial sacrifice. While the majority of businesses that close (as opposed to being sold) are losing money, financial insolvency is not the only reason to shut down a business. 

Sometimes a business has to be closed because of struggles between business partners, other times, business partners are in different lifecycle stages, for example with one ready to retire while the other lacks the funds to buy them out. Other times there are new opportunities that present themselves, new ideas or partnerships that make the current venture unappealing.  Serial entrepreneurs leave businesses in their wake all the time. 

Whatever the reason for closing your business, there are steps to take to protect yourself in the future from legal liability or hidden risks. 

To end business dealings properly, you must legally terminate the business with the California Franchise Tax Board and Secretary of State.  This is only true if your business was formed in the state of CA, if it was formed in another state, you will need to “legal surrender it” (or, in the case of an LLC, cancel it).

Here are the top three steps you must take to properly close your business in the state of California from a legal standpoint.  Note: these steps are in a specific oder, step 3 requires that step 2 is complete and all must be accomplished within 12 months.  

Step 1: Get buy-in for the decision

Unless you are a sole proprietor, you must have a majority agreement to terminate your business. Document this well, get legal signatures to a written document for the records.

Step 2: Pay Uncle Sam

The Internal Revenue Service (IRS) and California Franchise Tax Board (CTFB) need to know that you won’t be filing next year so mark your final payments “FINAL” clearly and be sure to follow up. All dissolved businesses are subject to a final audit followed by clearance or consent for your dissolution from the CFTB.

Step 3: File more papers (Secretary of State)

File dissolution, cancellation, or surrender forms here: https://www.sos.ca.gov/.  Do these 3 steps in the proper order so you can send the SOS your CFTB proof of consent to dissolve (you have 12 months).

From a legal standpoint, these are the 3 most important steps.

From a business relations standpoint you should address the following 5 steps: 

ONE: Tell your employees, suppliers, creditors, vendors, customers that you are going out of business

TWO: Close your bank accounts and credit lines linked to your business

THREE: Cancel all business licenses and permits that might auto-renew or trigger an audit for suspension

FOUR: Post your impending closure online and on social media. 

FIVE: Pay your creditors

You may be closing your business to pursue a lifelong dream of travel in the rainforest, or you may have given it your heart and soul and the process may feel like defeat.  In either case, failing to follow the correct procedures can leave you open to future tax bills, liability for unpaid debts, unfilled orders, and more.  Take the time to do it right and, to ensure you don’t miss anything, hire a qualified business attorney to help. 

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Law Offices of Jeff Peterson at work
Jeff Peterson

AN OVERVIEW OF SEC REVISIONS TO FORM ADV AND RECORD-KEEPING RULE

November 9, 2021/in Corporate Transactional Law /by Jeff Peterson

The SEC recently adopted revisions to Part 1A of the Form ADV that became effective on October 1, 2017. The SEC has also expanded the scope of Rule 204-2 of the Advisers Act regarding communications about performance results or rates of return. We will address the revisions to Form ADV reporting requirement first.

1. Increased Disclosure Requirements for Separately Managed Accounts. 

The chief focus of the SEC’s revisions is to increase amount of information the SEC will receive about SMA’s. Prior to the revision, there is only a minimal requirement to provide information on SMA’s in Item 5 of Part 1A. The SEC has not provided an express definition of SMA for the purposes of this new reporting, but the SEC has indicated that an SMA is any advisory account other than a pooled investment vehicle, including: (a) a registered investment company, (b) a business development company, or (c) a private fund. 

The new disclosures an adviser must make about an SMA are the following:

a. Disclosures re SMA Assets. Advisers must provide aggregated information about the approximate percent of SMA assets held in twelve different asset categories (e.g., various classes of equity and bond investments, derivatives, etc.) These categories are undefined as well, allowing for advisers to use their own methodology to determine what investments should fall into what categories. Lastly, note that advisers with regulatory assets under management of at least $10 billion have to report this information twice a year, while those under $10 billion need only report at year end.

b. Disclosure of Use of Derivatives and Borrowing with SMA’s. Advisers with at least $500 million in regulatory assets under management are required to report on the amount of assets under management attributable to the SMA’s and the amount of borrowings attributable to those assets, while advisers with at least $10 billion in regulatory assets under management must report that same information twice a year, as well as derivatives exposures within six types of derivatives categories. 

c. Disclosures re Custodian Accounts. Advisers will have to provide information about any custodian who holds more than 10% of the adviser’s regulatory assets under management attributable to SMA’s.

2. Umbrella Registration.

The revised Form ADV has codified existing SEC guidance on when umbrella registration is allowed, and has clarified the information required from each adviser in connection therewith. Umbrella registration is only available for advisers operating as a single advisory business and satisfying five conditions evidencing same. These revisions should standardize the qualification for umbrella registration and provide additional information pertaining to the subject. 

3. Other Revisions to Form ADV.

The revised Part 1A of Form ADV includes a number of additional changes, including:

a. Item 1.F.: An adviser will now be required to disclose its total number of offices, as well as the address and other information for its 25 largest offices based on number of employees (under the existing rule, only the principal place of business and five largest offices needed to be reported).

b. Item I.I.: The revisions require information about an adviser’s social media accounts, and expressly included Facebook, Twitter, and LinkedIn as examples of reportable accounts. An adviser is not required to disclose the social media accounts of its employees, however.

c. Item 1.J.: An adviser will have to disclose if its Chief Compliance Officer is employed or compensated by anyone other than the adviser and, if so, the name and other information of that party.

d. Item 5: In addition to reporting requirements for SMA’s subject to Item 5 as discussed above, an adviser will have to report the actual number of clients advised by the adviser for each client type and the amount of regulatory assets under management attributable to each category of client (currently, the disclosure in Form ADV is percentage ranges only).

e. Section 7 of Schedule D: Advisers to Section 3(c)(1) private funds will have to report if sales of interests in such funds are limited to “qualified clients”, as defined in the Advisers Act. For those advisers who are exempt reporting advisers with the SEC or otherwise not subject to the “qualified client rule” with respect to performance fees, such advisers may answer “No” to this question.

4. Rule 204-2 of the Advisers Act. 

The amendments to the record-keeping requirements under Rule 204-2 of the Advisers Act will apply to all communications circulated or distributed after October 1, 2017. SEC-registered investment advisers will be required to maintain those materials set forth in Rule 204-2(a)(16) (17 CFR 275.204-2(a)(16)) that “demonstrate the calculation of the performance or rate of return in any communication that the adviser circulates or distributes, directly or indirectly, to any person.” 

This is a significant change from current Rule 204-2, which only requires that SEC-registered investment advisers keep such supporting documentation if the communications are distributed to ten or more persons. Additionally, advisers will be required to retain original copies of all written communications relating to performance or rate of return with any third party.

Disclaimer: This post is not, and shall not be construed as, legal advice or a legal opinion on any specific facts or circumstances. Furthermore, this post is not intended to create, nor shall it be construed as creating, an attorney-client relationship. The post is for general informational purposes only, and you are urged to consult an attorney regarding any specific legal question you may have.

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INDEMNITY PROVISIONS
Jeff Peterson

MANHATTAN TAX ATTORNEY AND CPA INDICTED FOR TAX EVASION

October 29, 2020/in Corporate Transactional Law, News /by Jeff Peterson

The United States Attorney’s Office for the Southern District of New York announced that Manhattan tax attorney Harold Levine and Florida certified public account Ronald Katz were charged in Manhattan federal court in an eight-count Indictment with engaging in a multi-year tax evasion scheme involving the diversion of millions of dollars of fees from a Manhattan law firm, and the failure to report that fee income to the IRS.   

U.S. Attorney for the Southern District of New York Preet Bharara said in the release: “As tax professionals and partners at professional firms, both Harold Levine and Ronald Katz knew better.  But as alleged, they engaged in a multi-year scheme to divert and evade taxes on millions of dollars of fee income.”

The Indictment alleged that Levine, a tax attorney and former head of the tax department at a Manhattan law firm, participated in a scheme with Katz to divert from the law firm over $3 million in fee income from tax shelter and related transactions that Levine worked on while at the firm.  In addition, per the Indictment Levine failed to report that fee income to the IRS on his personal tax returns, and Katz received and failed to report to the IRS over $1.2 million in fee income.     

The Indictment alleged that as part of the fee diversion scheme, Levine caused tax shelter fees paid by a firm client to be routed to a partnership entity he co-owned with Katz and thereafter used approximately $500,000 to purchase a home in Levittown, New York, then took improper tax deductions on the home as rental property. 

The Indictment also alleged that Levine made false statements about the purported rental property when questioned by IRS agents concerning his involvement in certain tax shelter transactions and the fees received for those transactions, and urged a third party to make false statements to the IRS about that property. 

Levine and Katz are scheduled to be arraigned on October 31st.

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of regulatory matters. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.

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A letter of intent
Jeff Peterson

ADDRESSING IMPORTANT DEAL POINTS IN YOUR LETTER OF INTENT

October 17, 2020/in Corporate Transactional Law, News /by Jeff Peterson

A letter of intent for the purchase of a business sets forth the major deal points for that transaction, including the purchase price, the structure of the deal (asset purchase, stock purchase, etc.), whether an earnout will be utilized, and so forth. The letter of intent is almost always non-binding, meaning that deal points may be modified as the parties mutually agree during the course of due diligence and drafting final documents.

The fact that the letter of intent is non-binding and chiefly addresses business points of the deal sometimes lulls business owners into a sense of complacency on the legal aspects of the deal, with the mindset being that the lawyers can hash out the legal terms later. This mindset can be bolstered by the boilerplate language used in letters of intent on legal items such as indemnification, where the letter of intent may just generally state that the parties will indemnify one another pursuant to standard indemnity terms.

Why Boiler-Plate Shouldn’t Be Ignored

Business owners would be well served, however, by taking the time and using counsel to put some concrete terms around the important legal aspects of the deal. Although the letter of intent will be non-binding, having these terms addressed will set the expectations for both sides of the deal, and without a major issue arising during due diligence, it will be difficult for a buyer to justify making significant changes on these legal items. On the contrary, if important items are not addressed, a seller is left to try to negotiate mid-deal, where the buyer has an exclusive period of 90 days or so where the seller is unable to sell to anyone else (generally one of the only binding terms in a letter of intent), and seller is incurring significant costs like attorney and other adviser fees. This circumstance gives a seller less leverage to negotiate important legal terms.

So what are these important legal points a business owner will want to address in that letter of intent? Indemnification is one major item. Rather than say indemnity will be provided pursuant to “standard terms”, the letter of intent should address several things, including: (1) an indemnity basket or cap for the seller, as well as the survival period for indemnity claims; (2) the exceptions to the basket, cap, or standard survival period; and (3) the use of any escrow or setoff for indemnity purposes.

The Indemnity Basket

An indemnity basket functions like a deductible, where generally the business owner is not liable to indemnify buyer until losses exceed a set threshold amount. Then, once that amount is met, the seller is liable for indemnification for the entire amount of any loss. An indemnity cap is a limitation on the amount seller will owe for indemnity, generally an amount in the range of 10-20% of the purchase price. One can see that having an indemnity cap limiting the amount of the indemnity obligation would be crucial for a seller. Lastly, it is important to address the survival period for representations and warranties, which governs for how long a buyer may make an indemnity claim for breach of representation and warranty. Generally speaking, this survival period is between 12 and 18 months.

The most common exception to the application of the basket or cap, or to the survival period, is for fraud perpetrated by the seller. For example, if a seller has willfully concealed a problem with the business resulting in a loss, it is fair and reasonable to say that loss should not be excused or capped, and that if the loss arises after say a one-year survival period, the defrauding seller should not be able to avoid liability for the loss.

Escrow Equal to Cap on Indemnity

Finally, buyers generally like to set up an escrow where a portion of the purchase price will sit for the survival period to ensure payment of any indemnity obligation that may arise. Typically, the escrow amount will equal the cap on indemnity. If an earnout is contemplated, buyers may also demand the ability to “set off” any amounts owing on an indemnity claim against any earnout payments owing to a seller. Say, for instance, that seller claims $200,000 in damages for an indemnifiable claim and has an upcoming $500,000 earnout payment to a seller. The buyer in this case would unilaterally deduct the $200,000 from the payment owing and remit only $300,000 to the seller.

With all the possible permutations in the indemnity provision, one can see that it’s helpful at the outset to nail down items like the amount of the indemnity cap, the use of an escrow, etc. Doing so will also reveal whether the buyer is contemplating inserting exceptions to the cap or survival period that are outside commercial norms. Finding this out sooner, and addressing it before a buyer is in the thick of the deal process, will provide a better negotiating position.

What About Earnout

Another important item to flesh out in the letter of intent is how the earnout will be treated. Generally speaking, an earnout will be tied to EBITDA or some other measure of financial performance, i.e., the seller will receive X amount of money based on company performance. Defining clearly in the letter of intent how that benchmark is measured is crucial. Will certain revenues be excluded, how is the time period for such benchmark calculated and will any adjustment be made for deals booked prior to the cutoff where revenues have not been collected yet? Each particular scenario will raise its own questions, but much better to address those specific questions upfront.

Lastly, on the earnout, a seller has the ability to categorize a portion of any earnout as deferred purchase price rather than income, which results in preferred capital gains tax treatment on that portion of earnout as opposed to an ordinary income tax rate. The resulting difference in proceeds can be substantial, so it is well worth putting in the letter of intent what the amount of fair compensation for services provided will be, with any earnout monies over that amount to be treated as deferred purchase price.

Selling a business is a complex and time-consuming process in the best of circumstances. Given that, it makes good sense to address the important issues at the initial stage in detail to provide a clear forward path. Whoever said an ounce of prevention is worth a pound of cure may not have worked in the M&A space, but they were right on the money when they said it.

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Technology Industry
Jeff Peterson

BNP PARIBAS TO USE BLOCKCHAIN PLATFORM TO ISSUE MINIBONDS

September 21, 2020/in Corporate Transactional Law, Personal /by Jeff Peterson

First it was bitcoin, then it was stocks and now minibonds are becoming more and more part of the Blockchain technology sphere.

What Is Blockchain?

Blockchain technology is a way to structure data – here, the pertinent details of securities transactions – as a digital ledger of sorts across a network of computers. Pursuant to the French government’s initiative to allow private companies to issue minibonds with the use of crowdfunding platforms, BNP Paribas Securities Services has just announced it will expand its blockchain program for private stocks to allow private companies to issue minibonds via such platforms. 

What Is The Use of Blockchain?

BNP Paribas is also working on a distributed ledger to register all minibonds issued over the platform and record all related transactions and changes of ownership. The hope is that this will create a more standardized, efficient process. 

BNP Paribas’s press release on the new program is at the below link:

https://group.bnpparibas/en/press-release/bnp-paribas-securities-services-expands-blockchain-platform-private-stocks

Jeff Petersen is an attorney licensed in California and Illinois helping clients with regard to a broad range of securities matters. He can be reached in California at 858.792.3666 and in Illinois at 312.450.4584.

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Market Analysis
Jeff Peterson

BIG DATA IN LAW: FINDING THE RIGHT HORSE TO BACK IN COURT

September 16, 2020/in Corporate Transactional Law /by Jeff Peterson

Evolution of Data in Law

Data analysis has become commonplace in our society. Even the most analog of us have been exposed to it in popular culture, from books/movies like “Moneyball” to apps like Pandora that can present a playlist of different groups based on a single artist you’ve chosen. The thrust of this number crunching is always the same: to do what we’ve always done, but do it better. 

Now it appears that data analysis is finding its way into an offshoot of the legal industry that has been steadily growing over the past fifteen years: lawsuit funding. An article in the National Law Review (link below) details the startup Legalist, which uses an algorithm to identify promising civil lawsuits to finance in exchange for a portion of the settlement or judgment. 

The Changing Attorney-Client Dynamic

These lawsuit funding companies are looked down upon by many in the legal industry as scavengers trying to make a buck off injured plaintiffs by inserting themselves into a case and throwing off the typical dynamic in an attorney-client relationship. Detractors also contend that such companies make cases more difficult to settle, by providing monies that may give a plaintiff a false sense of confidence. The contrary points are that such companies can provide an efficient allocation of capital to an arena which rarely sees it, and allow a plaintiff to get a just result when dire financial straits would dictate otherwise. 

Navigating These Changing Landscapes

Whatever your feelings about the practice, after fifteen years it appears it’s here to stay. And if companies are applying the latest in technology to provide funding for cases with potential big payouts, the typical defendants in high-target litigation areas should prepare themselves for a changing landscape in the next couple years. The big question to ponder for the future, though, is this: when will Big Data funding companies begin to provide financing to actually initiate lawsuits, and are there any future defendants who will someday see a significant expansion of litigation against them? 

Link: http://www.natlawreview.com/article/lawsuit-algorithm-latest-big-data-rage

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Delaware Chancery
Jeff Peterson

DELAWARE CHANCERY CASE HAS SIGNIFICANT IMPLICATIONS ON USE OF SUPERMAJORITY PROVISIONS WITH DELAWARE CORPORATIONS

February 13, 2017/in Corporate Transactional Law, News /by Jeff Peterson

A recent case from the Delaware Chancery Court has cast doubt on the validity of bylaws containing supermajority voting requirements on items where Delaware’s General Corporation Law (“DGCL”) contains a specific voting threshold.

Frechter v. Zier, C.A. No. 12038-VCG (Del. Ch. Ct. Jan. 24, 2017)

In Frechter v. Zier, C.A. No. 12038-VCG (Del. Ch. Ct. Jan. 24, 2017), a shareholder of Nutrisystem, Inc. sued the company and its directors for declaratory judgment to invalidate a provision in Nutrisystem’s bylaws requiring a vote of two-thirds of the company’s shares before a director could be removed from the board.

The plaintiff relied on Section 141(k) of the DGCL, which provides that “[a]ny director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors” (with certain exceptions that were not applicable). Defendants argued that the board was empowered to adopt the bylaw pursuant to DGCL Sections 109(b) and 216 of the DGCL —which provide for, respectively, the adoption of bylaws not inconsistent with law or the certificate of incorporation, or bylaws specifying the required vote for a transaction subject to other provisions of the DGCL.

Chancery Court Chancellor & Plaintiff Agree

The Chancery Court Chancellor agreed with plaintiff, concluding that Section 141(k) prohibits any bylaw requiring a supermajority vote for director removal because any such requirement would be inconsistent with “the plain language of the statute.”  The Chancellor added that any contrary interpretation would render Section 141(k) “an effective nullity.”

This opinion has significant implications for any bylaw provision requiring supermajority shareholder votes for any item for which the DGCL provides a specific voting threshold. Corporations should consider removing any such supermajority voting requirements from their bylaws and instead placing them in the certificate of incorporation.

Placement of supermajority provisions in the certificate of incorporation is preferable because Section 102(b)(4) of the DGCL permits a corporation to include in its certificate of incorporation “

Provisions requiring for any corporate action, the vote of a larger portion of the stock or of any class or series thereof, or of any other securities having voting power . . . than is required by this chapter.” The DGCL has no similar provision with respect to bylaws.

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OIL & GAS WIDESPREAD SECURITIES FRAUD
Jeff Peterson

SEC RESPONDS TO SAN DIEGO INVESTMENT ADVISER RAYMOND LUCIA’S PETITION FOR REHEARING ON CLAIM SEC IN-HOUSE COURTS ARE UNCONSTITUTIONAL

October 26, 2016/in Corporate Transactional Law, News /by Jeff Peterson

San Diego-based investment adviser Raymond Lucia’s request that the court consider his challenge to the constitutionality of the SEC’s use of in-house courts was recently rejected by a panel of the U.S. Court of Appeals for the District of Columbia Circuit.

Misleading Claims

Lucia, a well-known investment adviser with a long career, was charged by the SEC with conducting misleading investment seminars that promoted a “buckets of money” investing strategy that was purportedly supported by empirical testing, when no such reliable testing had been done. The SEC proceeding resulted in what Lucia’s own attorneys described as a “career-ending lifetime industry bar”.

Lucia petitioned the Circuit Court for rehearing, contending the SEC’s selection of administrative law judges violated the Appointments Clause of the Constitution, and that the Circuit panel erred in finding that the Appointments Clause did not apply because SEC ALJ’s are not “inferior officers” under the Constitution. The SEC has now responded to the petition.

Decision of the SEC Stands

In its response, the SEC stressed that the panel correctly found that ALJ’s are not inferior officers because those ALJ’s cannot exercise final decision-making authority under the pertinent regulatory scheme. Specifically, the SEC addressed Lucia’s reliance on Freytag v. Commissioner, 501 U.S. 868 (1991), with the SEC arguing that Lucia misconstrues the import of that decision. The SEC asserted that, because the tax court judge in the Freytag case had final decision-making authority, the commentary by the Supreme Court in the case Lucia’s counsel relied on in the petition was immaterial; the decisive point of difference is that the tax court judge was an inferior officer due to its final decision-making authority, and an ALJ, without any such authority, is not.

We will update this matter when the D.C. Circuit Court rules.

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of SEC investigations and SEC enforcement matters. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.

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SECURITIES REGULATOR
Jeff Peterson

CHINESE SECURITIES REGULATOR ANNOUNCES IPO INVESTIGATIONS ON SIX COMPANIES

October 24, 2016/in Corporate Transactional Law, News /by Jeff Peterson

The China Securities Regulatory Commission (“CSRC”) released a statement Friday on its investigation into six companies over alleged securities violations pertaining to initial public offerings and disclosures.

CSRC Cracks Down on Fraud

The six companies are Guangdong Guangzhou Daily Media Co., Ingenious Ene-Carbon New Materials Co., Infotmic Co., P2P Financial Information Service Co. and Shenzhen Ecobeauty Co and Longbao Ginseng & Antler Co. (which has applied for a listing and is not yet public). These six are the first cases announced following the start of a CSRC crackdown on IPO fraud.

The alleged violations in the six cases include false representations in IPO prospectuses and misrepresentations regarding revenue and net income. The CSRC also announced it was pursuing certain third parties involved in the transactions, including underwriters, auditors and lawyers.

The CSRC has assembled an investigative team to look into potential securities violations, and it appears this is only the first round in a push for greater compliance with securities laws.

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of SEC investigations and SEC enforcement actions. He can be reached in California at 858.792.3666 and in Illinois at 312.450.4584.

https://lawofficesjtp.com/wp-content/uploads/2016/10/iStock-1271384332-scaled.jpg 1707 2560 Jeff Peterson https://lawofficesjtp.com/wp-content/uploads/2021/11/JTPlogo-01.png Jeff Peterson2016-10-24 14:59:002022-02-10 10:44:03CHINESE SECURITIES REGULATOR ANNOUNCES IPO INVESTIGATIONS ON SIX COMPANIES
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