March 3, 2014

SCOTUS Interprets SLUSA Narrowly: Rare Win for Plaintiffs Securities Bar

Here’s an excerpt from this Gibson Dunn memo (other memos are posted in our “Blue Sky” Practice Area):

On February 26, 2014, the Supreme Court decided Chadbourne & Parke LLP v. Troice, 571 U.S. ___ (2014), ruling by a 7-2 vote that the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) does not bar state-law securities class actions in which the plaintiffs allege that they purchased uncovered securities that the defendants misrepresented were backed by covered securities.

The decision is the first in which the Court has held that a state-law suit pertaining to securities fraud is not precluded by SLUSA, suggesting that there are limits to the broad interpretation of SLUSA’s preclusion provision that the Court has recognized in previous cases. While Chadbourne leaves many questions unanswered concerning the precise contours of SLUSA preclusion, and could encourage plaintiffs to pursue securities-fraud claims under state-law theories, the unusual facts in Chadbourne could limit the reach of the holding and provide defendants with avenues for distinguishing more typical state-law claims in other cases.

DC’s Big Snow Storm: Will the SEC Still Declare Your Filings Effective?

In DC, all federal government agencies are closed due to yet another snowstorm. I’ve blogged numerous times over the years about the impact of a closed government on the operations of the SEC and Corp Fin specifically. Even though there is no weather-related information posted on the SEC’s site so far today, we can assume that the information in this blog holds true today. The main points are:

EDGAR Still Operational – Federal government closings due to weather doesn’t shut down EDGAR – so filings can continue to be made despite the snow storm (so yes, any forms due today are still due today – many 10-Ks are due today).

Critical Registration Statements Can Still Be Declared Effective – Corp Fin has procedures in place to help as Staffers are available to assist with filings even though the government is shut down by the storm. When OPM shuts down the government in DC, emergency personnel (ie. “essential”) still must show up for work – and as a result there will be Corp Fin staffers available to ensure that essential operations continue.

The most important thing when faced with this situation is getting in touch with someone at the SEC – leaving a message with the examiner assigned to your filing probably isn’t going to be sufficient. Rather, you will need to work the phones to get in touch with (or leave a message for) the Assistant Director of the group that is handling your filing, or call the Corp Fin Front Office. These numbers are available in our constantly-updated “Corp Fin Staff Organization Chart.” To play it safe, you should attempt to make contact with the Staff as soon as possible if you anticipate a need to go effective this week so that any last minute issues can be resolved.

Non-Critical Registration Statements Not Going Anywhere Today – If you are expecting comments from Corp Fin and there is no urgent need to go effective, you may experience some delay in the processing of your filing thanks to the snow. There is no need to contact the limited Staff available to ask about the status of your comments, because they probably won’t be able to step in and move the process along, particularly right now. The Staffers that are available during the government shutdown are really there to deal with the most urgent situations, so bogging them down with less urgent matters is not the best idea…

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– Broc Romanek