Securities Exchange Act Rule 13a-14 includes an implied truthfulness requirement. The SEC brought an enforcement action against corporate officers of Basin Water, contending that they participated in a scheme to defraud investors by reporting millions of dollars in revenue that was never realized. The district court ruled in defendants’ favor, finding that Exchange Act Rule 13a-14 does not create causes of action against CEOs or CFOs who certify false statements. The Ninth Circuit vacated and remanded for further proceedings, holding that 13a-14 does, in fact, provide the SEC with causes of action against CEOs and CFOs who certify false or misleading statements, as well as against those who do not file the required certifications. (8/31/2016) SEC.
Suit Contending That Employee Stock Plan Fiduciary Violated ERISA Survives.Home healthcare employees sued the trustee for their stock ownership plan after the plan purchased shares in the company with a loan from the company itself and the shares turned out to be worth much less than the plan paid. This left the plan with no valuable assets and heavily indebted to the company’s principal shareholders. In addition, the plan’s participants wound up being on the hook for interest payments on the loan. The Seventh Circuit reversed dismissal of the complaint, holding that plaintiffs plausibly alleged both a prohibited transaction and a breach of fiduciary duty under ERISA. (8/25/2016) GreatBanc.
Plaintiffs fail to allege that BlackBerry executives knowingly made incorrect public statements on release of new smartphone. Plaintiffs contended that BlackBerry defendants made material misstatements and omitted material information related to the release of the BlackBerry Z10 smartphone. The Second Circuit affirmed dismissal, determining that plaintiffs failed to establish scienter by simply asserting that individual defendants were high-ranking executives at BlackBerry and had a reason for it to succeed. The panel added that plaintiffs failed to show that defendants actually possessed information opposing their public statements about the release of the Z10. The panel remanded on plaintiffs’ motion to amend. (8/24/2016) BlackBerry.