District court improperly dismissed securities fraud complaint. A divided panel of the US Court of Appeals for the Fourth Circuit vacated the dismissal of a class action securities fraud lawsuit, finding that the district court erred in considering SEC documents which defendant had appended to its motion to dismiss in an effort to establish that none of defendants’ officers sold the issuer’s stock during the period at issue and therefore lacked scienter. The Court of Appeals found that the documents were not integral to the complaint since plaintiffs made no allegations concerning executive stock sales. Moreover, the submitted documents did not establish that no stock sales occurred. Because the district court found that the lack of stock sales “tipped the balance” in defendants’ favor, its reliance on the documents was not harmless. The Court of Appeals found further that plaintiffs’ allegations, when considered as a whole, permit a strong inference that defendants either knowingly or recklessly misled investors by failing to disclose critical information from the FDA while releasing less damaging information that they knew was incomplete. (3/16/2015) Zak v. Chelsea Therapeutics International, Ltd. 

Shareholder proposal notice procedure. Plaintiffs submitted to Southern Michigan Bancorp a shareholder proposal concerning compensation clawbacks for inclusion on Bancorp’s annual proxy ballot. Michigan law requires annual meeting notices to include notice of shareholder proposals. While Bancorp’s notice advised that a shareholder proposal had been submitted, it did not include the proposal’s subject matter. The US Court of Appeals for the Sixth Circuit held that Bancorp’s notice was insufficient. Michigan’s “purpose-notice” requirement is designed to help shareholders study a proposal, arrive at a position, and either oppose it or support it. (3/13/2015) Gwyn R. Hartman Revocable Living Trust v. Southern Michigan Bancorp, Inc. 

SEC whistleblower rules entitled to deference. Petitioner Larry Stryker petitioned for review of an SEC order which denied his claim for a whistleblower award. Stryker sought the award under the Dodd-Frank Act (DFA) based on information he supplied to the SEC, which the agency used to obtain a successful enforcement result. The SEC denied the award because the information was submitted prior to the adoption of the DFA and, under its DFA whistleblower rules, such information is ineligible for an award. On appeal, the US Court of Appeals for the Second Circuit concluded that the SEC’s interpretation of the DFA was within the SEC’s authority and consistent with the legislation. It therefore affirmed the SEC’s order denying the award. (3/11/2015) Stryker v. SEC.