December 20, 2005

Does Delaware Law Trump the Federal Securities Laws?

Some analysis from Keith Bishop: “Here is an opinion – from Newcastle Partners v. Vesta – from Vice Chancellor Lamb last month that is interesting for two reasons. First, there is an interesting historical discussion of Section 14(c) under the Exchange Act.

Second, he reaches the conclusion that state law, specifically Section 211 of the Delaware General Corporation Law, trumps the federal proxy rules. He reaches this conclusion based on the internal affairs doctrine (citing VantagePoint v. Examen, the subject of several recent blogs). Despite what the Vice Chancellor states in the opinion, I do think that there is a clear conflict between the proxy rules and Section 211.

As an aside, I wonder how Corp Fin feels about there telephone responses making it into the record (see page 4 of the opinion)?” I have posted a copy of the opinion in our new “Internal Affairs Doctrine” Practice Area.

SEC Chairman Roundtable

Today, the SEC is hosting another interesting roundtable, this one featuring a slew of former chairmen.

Recently, the SEC Historical Society has added some cool content to its site, including information regarding the first chairman, Joseph Kennedy.

What’s Doing Under the New SEC Chair

Yesterday’s WSJ ran an article about the new SEC Chair’s course of action so far, with a particular focus on Chairman Cox’s attention to detail and the numerous vacancies of top staffer jobs. Here is a snippet from the article:

“One result of his approach is longer meetings. Private commission meetings where enforcement staff present cases last for several hours, with Mr. Cox peppering lawyers with questions, debating the merits of each case and asking for detailed descriptions — rather than summations — of each case.

While some viewed Mr. Donaldson as too detached, there are concerns that Mr. Cox’s desire to be involved in every decision is grinding the agency to a halt. Perhaps the biggest complaint centers on Mr. Cox’s failure to select directors for either the investment-management or market-regulation divisions. SEC lawyers said the two offices are essentially paralyzed, since there is no liaison to the chairman’s office and no one to float staff ideas upstairs or transmit marching orders from above.”

Celebrities and the SEC

Nothing works better for the SEC’s Enforcement mission than cases that attract a lot of media attention. That is because the SEC’s limited resources can only do so much against the high volume of fraud out there.

So there should be some real bang for the buck from yesterday’s announcement that former Sirius Satellite Radio executives engaged in insider trading before the news of Howard Stern’s hiring became public. [Driving back from a speaking gig in Philly last Friday, I came across Howard’s last show on FM radio. Maybe I am too sensitive a guy, but Howard just doesn’t do anything for me. In fact, I do eat quiche.]

And the poker world is riled because it has been disclosed that the SEC is investigating poker legend, Doyle Brunson, over his $700 million takeover bid for the World Poker Tournament (run by WPT Enterprises). The SEC said the formal investigation is focusing on the legalities of Brunson’s offer and the subsequent decision to publicize it. Learn more about this development from this poker blog.