June 19, 2007

Course Materials: “The Latest Compensation Disclosures: A Proxy Season Post-Mortem”

On, tune in tomorrow for this webcast – “The Latest Compensation Disclosures: A Proxy Season Post-Mortem” – during which Dave Lynn, Mark Borges, Mike Andresino and Mike Kesner will analyze what was disclosed this proxy season. This 90-minute webcast is a “must” to get a handle on what the latest disclosure trends. Please print off these course materials before the webcast.

If you are not a member of, take advantage of our half-price for the rest of 2007 no-risk trial today!

[Recommendation for SEC Staffers: Don’t include an opening joke in your published speech; I like the idea of a joke to start a speech, but I don’t see the need to include it in your permanent record. Paris Hilton simply doesn’t need the publicity. Then again, VC Strine mentioned Paris in his “must-read” Topps decision (a case I blogged about yesterday in the Blog. Crikey, now I have given Paris more publicity by mentioning her in this blog…]

Analyzing Mutual Fund Voting on CEO Pay

In this podcast, Beth Young of The Corporate Library and Rich Ferlauto of AFSCME go over a new study – “Failed Fiduciaries: Mutual Fund Proxy Voting on CEO Compensation” – which was jointly conducted by AFSCME, The Corporate Library, Shareowner Education Group, including:

– Why have you done this study for two years?
– What were the major findings of the study?
– What were the biggest surprises of the findings?
– How hard is to find the N-PX filings for this study and decipher them?
– What do you think mutual funds that are “Pay Enablers” should do?

Underwriters Win Supreme Court “IPO Laddering” Antitrust Case

Yesterday, the US Supreme Court held – in Credit Suisse Securities (USA) LLC v. Billing, No. 05-1157 – that the securities laws preclude application of the antitrust laws. It establishes clearer guidelines for the application of the implied antitrust immunity doctrine in the securities field – and clarifies that private antitrust lawsuits should not be allowed to discourage IPO activity. We will be posting memos regarding this case in our “Underwriting Arrangements” Practice Area (and many blogs have already covered the decision, including: Scotus; Legal Pad; D&O Diary).

Below is a case summary from Mayer, Brown, Rowe & Maw (who represented the petitioners): Conduct is impliedly immune from suit under the antitrust laws if application of those laws would conflict with the operation of another statutory scheme. Yesterday the Supreme Court held, in the context of antitrust suits challenging underwriter conduct during IPOs, that there was a conflict between the federal securities laws and antitrust laws that prevented the antitrust suits from going forward.

Credit Suisse involved antitrust class actions in which investors brought suit against ten leading underwriters, alleging that they agreed to engage in anticompetitive tactics involving some 900 technology-related IPOs during the market “bubble” of the late 1990s. Plaintiffs claimed that the underwriters required investors, in order to obtain IPO allocations, to agree to purchase additional shares of the IPO stock in the aftermarket and to pay excessive commissions on other transactions.

The underwriters argued, and the district court held, that the antitrust claims were precluded by the securities laws. The Second Circuit reversed the dismissal of the plaintiffs’ complaints. The Court granted the underwriters’ petition for certiorari.

In a 7-1 decision authored by Justice Breyer, the Supreme Court reversed. The Court recognized that three “critical” factors for implied immunity were easily satisfied: the existence of SEC authority over the alleged IPO conduct, evidence that the “responsible regulatory entities exercise that authority,” and practices at issue that constitute “heartland securities activity.” The Court then held that there was a conflict between securities regulation and application of the antitrust laws that rises to the level of “incompatibility.”

Private antitrust litigation would require “dozens of different courts with different nonexpert judges and different nonexpert juries” to evaluate conduct in an area of the Nation’s economy in which the SEC has drawn fine and nuanced lines between activities that are essential to the operation of the capital markets and activities that are unlawful. The Court pointed out that if that were allowed to occur, courts and juries would inevitably reach decisions inconsistent with SEC regulation.

To avoid the risk of massive liability in a private antitrust treble damages suit, underwriters would have to “act in ways that will avoid not simply conduct that the securities law forbids . . . but also a wide range of joint conduct that the securities law permits or encourages.” That would interfere with “the effective functioning of capital markets” and “‘disrupt the full range of the [SEC’s] ability to exercise its regulatory authority.'” The Court rejected the Solicitor General’s suggestion that the case be remanded to determine whether alleged conduct prohibited by the SEC could be separated from conduct permitted by the SEC. The risk of inconsistent and incorrect results by judges and juries making such a determination would undermine the securities regulatory regime.

The holding in Credit Suisse is a resounding victory for the business community. It establishes clearer guidelines for the application of the implied antitrust immunity doctrine in the securities field, and clarifies that private antitrust lawsuits should not be allowed to discourage beneficial IPO activity.

– Broc Romanek