TheCorporateCounsel.net

I blogged yesterday about an enforcement action in which the SEC brought charges under the negligence-based antifraud provision of Securities Act Section 17 (specifically, Section 17(a)(3)), based only on grants of restricted stock to directors under an equity incentive plan. I have usually not paid much attention to these charges in complaints because in many cases there is a larger population of award recipients, but this one jumped out at me.

A member reminded me that this is an easy charge for the Enforcement Division to tack on, because not only does it not require scienter, but it can be predicated on either an offer or a sale. Having a registration statement on file is considered an “offer” – and an S-8 is low-hanging fruit. Most public companies have an S-8 on file, so it’s common for Enforcement to add this to its list of charges in an action. (Even if the only people actually receiving awards were directors!)

Programming Note: In observance of Martin Luther King Jr. Day, we will not be publishing blogs on Monday. We’ll return Tuesday.

– Liz Dunshee