Tag Archives: Joseph A. Hall

Amid Storm of Controversy, SEC Adopts Final Climate Disclosure Rules

by Stephen A. Byeff, Ning Chiu, Joseph A. Hall, Margaret E. Tahyar, Ida Araya-Brumskine, Loyti Cheng, Michael Comstock, and David A. Zilberberg

photos of authors

Top from left to right: Stephen A. Byeff, Ning Chiu, Joseph A. Hall, Margaret E. Tahyar.
Bottom left to right: Ida Araya-Brumskine, Loyti Cheng, Michael Comstock, and David A. Zilberberg. (Photos courtesy of Davis Polk & Wardwell LLP).

Changes from the proposal include elimination of Scope 3 disclosures, scaled back attestation requirements, additional materiality qualifiers and narrower financial statement triggers. Given the lack of explicit congressional authorization for this new sweeping disclosure regime, its political sensitivity, complexity, cost and the substantial challenges already underway in federal courts, we anticipate rapid developments and possibly confusing stops and starts to unfold over the coming weeks.

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NY Attorney General Seeks Broad Authority Over Digital Assets

by Luigi L. De Ghenghi, Boaz B. Goldwater, Randall D. Guynn, Joseph A. Hall, Justin Levine, Daniel E. Newman, David L. Portilla, Gabriel D. Rosenberg, Margaret E. Tahyar, and Zachary J. Zweihorn

Photos of the authors

From top left to right: Luigi L. De Ghenghi, Boaz B. Goldwater, Randall D. Guynn, Joseph A. Hall, and Justin Levine.
From bottom left to right: Daniel E. Newman, David L. Portilla, Gabriel D. Rosenberg, Margaret E. Tahyar, and Zachary J. Zweihorn. (photos courtesy of Davis Polk & Wardwell LLP)

The NY Attorney General is seeking legislation that would significantly expand the state’s reach over digital assets and require wholesale changes to the operation of digital asset businesses that choose to remain in New York.

Letitia James, the Attorney General of the State of New York (NYAG), released a proposed bill that—if taken up by the state legislature and enacted—would create the most comprehensive and restrictive digital asset regulatory regime in the United States.

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NY DFS’ Virtual Currency Guidance for Banking Organizations

by Luigi L. De Ghenghi, Boaz B. Goldwater, Randall D. Guynn, Joseph A. Hall, Justin Levine, Eric McLaughlin, Daniel E. Newman, Gabriel D. Rosenberg, Margaret E. Tahyar, and Zachary J. Zweihorn

The New York Department of Financial Services (DFS) has released guidance that expands the scope of virtual currency activity for which New York banking organizations need prior approval.

The DFS has released guidance clarifying both the scope of and application process for virtual currency-related activities by NY banking organizations (the Guidance). The Guidance expresses the DFS’ expectation that all Covered Institutions[1]—New York-chartered banks and trust companies and foreign bank branches and agencies in New York—seek the DFS’ approval before engaging in any new or additional virtual currency-related activity.[2] The BitLicense regulations have always been clear that Covered Institutions that obtain approval from the DFS before engaging in virtual currency business activity[3] do not need to obtain a BitLicense from the DFS.[5] But the Guidance requires a Covered Institution to obtain approval before engaging in virtual currency-related activity, which includes but is not limited to virtual currency business activity. The Guidance, therefore, expands the scope of activities for which Covered Institutions must seek prior approval.

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California Enacts Law Requiring Public Company Boards to Include Members of Underrepresented Communities

by Alan F. Denenberg, Joseph A. Hall, Emily Roberts, Byron B. Rooney, Stephen Salmon, Ning Chiu, Betty Moy Huber, and Sarah Kirk

On September 30, 2020, California Governor Gavin Newsom signed Assembly Bill 979, which will require each NYSE and Nasdaq-listed public company with its principal executive offices in California to have at least one director from an “underrepresented community” on its board by December 31, 2021. On December 31, 2022, the minimum will be:

  • three directors from underrepresented communities, if the company has nine or more directors,
  • two directors from underrepresented communities, if the company has between five and eight directors, and
  • one director from an underrepresented community, if the company has four or fewer directors.

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How the SEC Enforcement Division Responds to a Crisis

by Martine M. Beamon, Robert A. Cohen, Joseph A. Hall, Gary Lynch, Neil H. MacBride, Stefani Johnson Myrick, Paul J. Nathanson, Annette L. Nazareth, Linda Chatman Thomsen, and Kenneth L. Wainstein

As markets react to the spread of the coronavirus (COVID-19), the SEC has expressed its intent to respond proactively to the impact the crisis has had on capital formation, secondary trading, and investors.  Risks can become heightened during a market downturn, and we expect that the Enforcement Division will concentrate resources on certain types of investigations, including potential:  (1) material misrepresentations and omissions about the impact of the coronavirus on public companies and investment products; (2) trading based on material nonpublic information about changes in the financial performance of public companies; (3) errors in the operation of trading platforms being stressed by high trading volume and volatility; (4) misuse of investor assets, and (5) frauds seeking to take advantage of investor anxiety.  In the coming weeks and months, public companies should be vigilant regarding their disclosure practices and management of material, nonpublic information, and industry professionals similarly should be cautious when describing the impact of the pandemic on their investment services and products. Continue reading →

SEC Debuts Roadmap for Resolving Illegal ICOs

by Joseph A. Hall, Michael Kaplan, Edmund Polubinski III, Byron B. Rooney, and Ryan Johansen 

In a pair of settled enforcement actions announced on November 16 in which it concluded that initial coin offerings conducted by Paragon Coin, Inc. (PDF: 232 KB) and AirFox (PDF: 223 KB) were illegal unregistered securities offerings, the SEC imposed an agreed-upon remedy that it will likely seek to use as the template for resolving its backlog of investigations into recent ICOs. Significantly, both ICOs took place after the SEC issued its July 2017 Section 21(a) report (PDF: 168 KB) addressing a crypto-token offering by The DAO, where the SEC warned the market (PDF: 169 KB) that some ICOs may violate the federal securities laws.

Neither Paragon nor AirFox agreed to conduct a “rescission offer” whereby the company would offer to repurchase the illegally offered tokens and any investor who declined the offer would retain freely tradable tokens (a remedy that Google undertook shortly after its IPO in order to resolve claims that certain pre-IPO compensatory equity grants were made in violation of the registration provisions of the Securities Act of 1933). Instead, each company agreed to distribute a “claim form” to all token purchasers offering return of the consideration paid, plus interest, in exchange for tender of the tokens, or offering damages to token purchasers who no longer hold their tokens. Purchasers of tokens located outside the United States are apparently not excluded from participation. Each company was also fined $250,000 and required to register its token as a security and become an SEC-reporting company for at least one year. Continue reading →

Two Recent Cases Highlight the Insider Trading Risks Associated with Cyber Breaches

by Avi Gesser, James H.R. Windels, Joseph A. Hall, Laura Turano, and Zachary Shapiro

The recent convictions of two traders for using hacked press releases and the settlement of SEC insider trading charges against a former Equifax manager highlight the significant insider trading risks companies face when dealing with a cyber event.  These risks come in two forms.

First, there is the risk that someone (either inside or outside the company) has gained unauthorized electronic access to material nonpublic information (“MNPI”) about the company or one of its business or transaction partners, and will use that information for illegal securities trading purposes.  On July 6, a jury in Brooklyn convicted two traders for securities fraud, money laundering and computer intrusion for using hacked press releases to trade on MNPI.  To reduce that risk, companies can adopt various cybersecurity measures such as two-factor authentication, access controls, encryption, phishing training, network segmentation, and system monitoring.  Davis Polk’s Cyber Portal 2.0, which is now available to our clients, provides detailed checklists and other resources to help companies reduce cybersecurity risks. Continue reading →

Securities Fraud Class Action Suits following Cyber Breaches: The Trickle Before the Wave

by Michael S. Flynn, Avi Gesser, Joseph A. Hall, Edmund Polubinski III, Neal A. Potischman, Brian S. Weinstein, Peter Starr and Jessica L. Turner

Overview

Large-scale data breaches can give rise to a host of legal problems for the breached entity, ranging from consumer class action litigation to congressional inquiries and state attorneys general investigations.  Increasingly, issuers are also facing the specter of federal securities fraud litigation.[1]

The existence of securities fraud litigation following a cyber breach is, to some extent, not surprising.  Lawyer-driven securities litigation often follows stock price declines, even declines that are ostensibly unrelated to any prior public disclosure by an issuer.  Until recently, significant declines in stock price following disclosures of cyber breaches were rare.  But that is changing.  The recent securities fraud class actions brought against Yahoo! and Equifax demonstrate this point; in both of those cases, significant stock price declines followed the disclosure of the breach.  Similar cases can be expected whenever stock price declines follow cyber breach disclosures.  Continue reading →