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January 2014


From the editors of CCH Federal Securities Law Reporter, CCH Blue Sky Law Reporter and the securities publications of Aspen Publishers, this update describes important developments covered in these publications, as well as timely topics of interest generally to federal and state securities practitioners. This update includes a preview of IPO Vital Signs, an advanced IPO research analysis tool, for IPO professionals and pre-IPO companies and a preview of RBsource, a new all-in-one online securities law resource, powered by the Securities Redbook. Finally, please see the “Hot Topic of the Month,” for research tips and references to CCH and Aspen source material on point.

 To view past issues of the Securities Update, please visit

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Securities Regulation Daily

The law changes every day. The tools you use need to change with it. Introducing Wolters Kluwer Securities Regulation Daily — a daily news service created by attorneys for attorneys — providing same-day coverage of breaking news and developments for federal and state securities — including the latest securities-related rulemaking, no-action letters, SEC staff comment letters, updates on litigation, and a wealth of other SEC activity, plus a complete report of the daily securities law news that affects your world.

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Financial Reform Resources



Federal Securities Law Reporter

SEC revises rules and forms to remove references to credit ratings. The SEC has adopted amendments to remove references to credit ratings in certain rules and one form relating to broker-dealer financial responsibility and confirmations of securities transactions, and to a rule and three forms under the Investment Company Act (Act). The amendments implement a provision of the Dodd-Frank Act that required federal agencies to review their regulations, modify them to remove any references or requirements of reliance on credit ratings, and substitute other standards of creditworthiness, as each agency deems appropriate.

The SEC removed credit rating references from Rule 15c3-1, which requires broker-dealers to maintain more than a dollar of highly liquid assets for each dollar of liabilities to ensure that if a broker-dealer fails, it will have sufficient liquid assets to cover its liabilities. The SEC also removed credit rating references from Rule 15c3-3, which prohibits broker-dealers from using customer securities and cash to finance their own businesses. In addition, the SEC removed the references from Rule 10b-10, a confirmation rule that requires broker-dealers that effect transactions for customers in securities other than U.S. savings bonds or municipal securities to provide customers with a written notification of the terms of the transaction at the time of or before the transaction is completed. (Release No. 34-71194).

Under the Act, the SEC removed references to credit ratings from Rule 5b-3, a rule that permits funds to look through repurchase agreements to the underlying collateral securities for certain counterparty limitation and diversification purposes as long as the collateral meets certain credit quality standards. It also removed the references from Forms N-1A, N-2, and N-3 (Release No. 33-9506). Release No. 34-71194 will be reported at ¶80,449, and Release No. 33-9506 will be reported at ¶80,450.

SEC proposes Regulation A+ under the JOBS Act. The SEC commissioners unanimously approved a proposal that would implement a JOBS Act mandate by updating Regulation A. Currently, Regulation A permits unregistered offerings of up to $5 million of securities in a 12-month period with no more than $1.5 million of the securities offered by security holders. Regulation A is rarely used, which is largely attributed to the complexity and costs of complying with both state and federal securities laws. Congress directed the SEC to adopt rules to allow offerings of up to $50 million of securities within a 12-month period with certain conditions.

The SEC’s proposal contemplates the adoption of two tiers of Regulation A offerings. The first tier would mirror the current Regulation A. The second tier would consist of offerings of up to $50 million in a 12-month period, including $15 million for the account of selling security holders. The basic requirements for both tiers, such as issuer eligibility and disclosure, are drawn from the existing provisions of Regulation A.

The revised Regulation A offerings would be available to companies organized in and with their principal place of business in the U.S. or Canada, as with current Regulation A offerings. The exemption would not be available for companies that are already SEC reporting companies or certain investment companies. Release No. 9497 will be reported at ¶80,443.

SEC penalty for failure to supervise not excessive. The 2nd Circuit has upheld an SEC failure-to-supervise penalty of $310,000 against a broker-dealer after dismissing his argument that the penalty was arbitrary and capricious and violated the Excessive Fines Clause of the Eighth Amendment. The court said the statute authorizing the fine, Exchange Act Section 21B(a)(1), "seems to demand that the Commission look beyond harm to victims or gains enjoyed by perpetrators," and consider the whole story.

The SEC found that the broker ignored an employee who lost his Florida license after repeatedly guaranteeing specific returns on variable annuities to elderly customers. The broker told defendant Matthew Collins that the action was a "mishap" and "no big deal." Collins failed to investigate and allowed the broker to continue the practice. The employee’s license was later restored on the condition that he not market annuities to individuals over the age of 65.

The court noted that Collins agreed with an assessment of his conduct by the company during an internal review that he showed a "complete lack of supervision." The SEC later levied a second-tier penalty under Exchange Act Section 21B(a)(1), finding that the conduct involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement.

The court first examined "the most serious strand" of Collins’s defense: the assertion that the penalty was over 100 times the disgorgement amount of $2,915, the amount of his commissions, and thus, the penalty was "arbitrary and capricious." The court found that Collins was responsible for more losses, and was excused disgorgement of more than $2000 because he contributed $25,000 to settle a NASD complaint. His firm had also paid $125,000 in the matter.

The ruling that the fine was proper under the Exchange Act essentially compelled rejection of the eighth amendment claim, the court said. Because the penalty was in line with similar cases and otherwise met the statutory objectives, it was "highly unlikely to qualify as excessive in constitutional terms." Collins v. SEC (2ndCir) is reported at ¶97,743.

No evidence that company covered up relabeling of Chinese furniture. A 3rd Circuit panel has affirmed the dismissal of a complaint for failure to plead scienter. Appellant Shah Rahman brought this Exchange Act fraud action against Kid Brands, Inc., an importer of furniture for infants, and three of its officers. The district court found that the complaint failed to meet the pleading requirements of the PSLRA.

Rahman claimed that Kid Brands artificially inflated its stock price through misleading statements in its financial reports and press releases dealing with the company's compliance with customs laws and overall financial performance. The second amended complaint alleged further that the defendants failed to disclose product recalls, safety violations, and illegal staffing practices affecting Kid Brands. The panel noted, however, that the appellate brief focused almost exclusively on the customs violations.

Specifically, the complaint alleged that Kid Brands repeatedly violated customs laws by obscuring the Chinese origin of its products in order to reduce import duties. In December 2010, U.S. Customs and Border Protection conducted a “Focused Assessment” of Kid Brands' import practices and procedures. In March 2011, Kid Brands revealed that a subsidiary had misidentified the manufacturer and shipper of certain products, and that it anticipated paying $7 million in fines to resolve issues arising from the Focused Assessment. In August 2011, Kid Brands revealed additional evasion of customs duties and that its total liabilities would be in excess of $10 million.

The district court found that the complaint failed to plead scienter with sufficient particularity and dismissed it with prejudice. The court explained that when viewing the allegations holistically, a reasonable person would not find the inference of scienter to be at least as strong as any opposing inference.

The panel concluded that Rahman's argument that a jury could find fault with Kid Brands' failure to disclose the Focused Assessment prior to March 2011 was strong. The district court referenced “practical considerations” for the delay, but gave no further details aside from the need for investigation. The panel stated that Kid Brands arguably should have released the information on a tentative basis before March 2011.

Ultimately, the panel concluded that the district court correctly found that the complaint failed to meet the PSLRA requirements for pleading scienter. Rahman relied on evidence from confidential witnesses who testified that furniture from China was re-labeled with stickers indicating a different country of origin and that this was done with management's approval. These witnesses, however, did not claim to have attended any management meetings, and one witness started with the company in June 2011 and had no personal knowledge of earlier violations. The panel also noted in a footnote that it was uncertain whether the new labels actually showed new countries of origin.

Only one confidential witness out of the six was in a position to have potentially damaging information, the panel wrote. However, this witness, who spent several years reviewing Kid Brands' internal financial information, offered little more than general allegations lacking in concrete support.

The 3rd Circuit has neither accepted nor rejected the doctrine of corporate scienter. The panel declined to do so in this case because the allegations did not support the existence of corporate or collective scienter. There was no credible evidence suggesting that the defendants covered up customs violations, the panel explained. On the contrary, when notified of the Focused Assessment, Kid Brands hired an outside law firm to conduct an internal investigation. After the firm issued its report, Kid Brands publicly disclosed the assessment and fines.

Rahman also cited the 3rd Circuit's application of the core operations doctrine in Institutional Investors Group v. Avaya, Inc. The panel found that Avaya had limited precedential value here because of factual differences and because that case noted that management's awareness of the general day-to-day operations of the company does not, without more, establish scienter. Moreover, the core operations doctrine was inapplicable because the alleged violations could not be regarded as “core” to a company having hundreds of millions of dollars in annual net sales.. Rahman v. Kid Brands, Inc. (3rdCir) is reported at ¶97,732.

Blue Sky Law Reporter  

Kansas adopts private fund adviser exemption. The Kansas Securities Commissioners Office adopted an exemption for private fund advisers, and amended investment adviser custody, financial reporting, minimum net worth and bonding requirements. ¶26,414H and ¶26,414J.

Massachusetts deems IA’s to have custody of their reps.’ family/friend trust fund accounts. The Massachusetts Securities Division issued a policy statement deeming Massachusetts-registered investment advisers to have custody of the funds or securities in their supervised persons’ family or friend accounts over which the supervised persons act as executors, conservators, trustees or co-trustees. The Division, remarking on the number of Massachusetts administrative actions where the victims were the perpetrators’ close acquaintances or family members, said that family member or personal relationship clients should have the same Massachusetts Uniform Securities Act protections afforded to other investors. ¶31,666.

Statutory Double Jeopardy Barred Prosecution for Fraud. In Smith v. State, the Indiana Court of Appeals held that statutory double jeopardy principles barred the defendant’s prosecution for securities fraud under the Indiana Blue Sky Law. Indiana law provides that a former prosecution in any other jurisdiction is a bar to a subsequent prosecution for the same conduct in Indiana if the former prosecution resulted a conviction of the defendant. The securities fraud charges required dismissal because the defendant’s convictions for mail and wire fraud conspiracy in an earlier federal proceeding involved the same overarching Ponzi scheme that formed the basis of the state’s prosecution. Charges that the defendant knowingly conducted business as an unregistered broker-dealer could proceed, however, because there was no overlap between the defendant’s conduct in failing to register and his devising and participating in a scheme to defraud investors. The decision is reported at ¶75,051.


Aspen Federal Securities Publications  

2014 Handbook for Preparing SEC Annual Reports and Proxy Statements, by Lawrence D. Levin, Adam R. Klein. The 2014 Edition is now available online. This excellent sourcebook is for all those who have responsibility for preparing and reviewing the following annual disclosure documents for public companies: the annual report on Form 10-K, the annual meeting proxy statement, and the annual report to shareholders. In addition to a comprehensive analysis of the various rules and forms that apply to these documents, this publication contains practical guidance based on the authors’ own experiences and those of their colleagues in representing various public companies over the years. Where appropriate, it references informal SEC guidance from its Interpretive Releases and its Division of Corporation Finance’s Compliance and Disclosure Interpretations. Various examples have been included to assist the user in complying with the complicated federal securities laws and preparing proper disclosure. The authors have also highlighted where relevant the interplay among the SEC rules and those of the national securities exchanges and state corporate law.

Capital Markets Handbook, Edited by John C. Burch, Jr. and Bruce S. Foerster. The 2014 Supplement is now available online. This supplement includes an expanded discussion of the financial crisis of 2008 and the resulting Dodd-Frank Wall Street Reform and Consumer Protection Act and its impact on new issue capital raising; enhanced coverage of the Jumpstart Our Business Startups Act of 2012 and the dramatic changes this legislation brings to capital raising for so-called “emerging growth companies”; revised and updated Capital Formation Alternatives chart; expanded treatment of due diligence; expanded Appendix L for pertinent Op-eds, articles, and open letters; and updated underwriting and pricing statistics.

Offerings of Asset-Backed Securities, Second Edition, by John Arnholz and Edward E. Gainor. The 2014 Supplement is now available online. The Second Edition helps practitioners understand and make sense of the many new regulatory and legislative initiatives that have profoundly changed the process of offering and structuring asset-backed securities (ABS). Practices that underwriters and issuers have followed for years have been scrapped; very little that had become commonplace has been retained in the new world. This content is for practitioners—the authors have provided advice on how to get deals done based on their experience. New and updated legislative, regulatory, and case law developments analyzed in the 2014 Supplement include: detailed analysis of the recently proposed credit risk retention rules, including new tables for additional guidance; a revised section on what qualifies as an “asset-backed security” under Regulation AB; a revised section analyzing new SEC regulations that eliminated the ban on general solicitations in Rule 506(d) offerings so long as the issuer had a reasonable belief that only accredited investors purchased the offered securities, and that the issuer had in fact taken steps to ensure that purchasers of the securities were accredited investors; a revised section on administrative exemptions that permit ERISA eligibility for ABS certificates, including the 2013 amendment to the underwriter exemptions; an updated section addressing the banking agencies’ risk-based capital guidelines applicable to asset securitizations as well as the adoption of the final 2013 Basel III Rules; an updated section on landmark Consumer Financial Protection Board (CFPB) rules that implemented various provisions of the Dodd-Frank Act that create a new, federal “ability-to-pay” standard for home loans, and define the characteristics of a “qualified mortgage”; a revised section on derivatives; and an updated section on the securities laws of foreign jurisdictions.

Investment Management Law and Regulation, Second Edition, by Harvey E. Bines and Steve Thel. The 2014 Cumulative Supplement is now available online. This definitive guide helps you to adapt profitably to today’s new and changing conditions and anticipate tomorrow’s regulatory response. Highlights include: a new subsection discussion the regulatory developments affecting undisplayed executions since adoption of Regulations ATS and NMS; further developments in the implementation of the Dodd-Frank Act; the Jumpstart Our Business Startups Act and the elimination of the general solicitation prohibition in Rule 506 offerings; new reporting requirements for large investment advisers; a new subsection discussing the new reporting requirements for municipal advisers; proposed changes requiring money market funds to adopt floating net asset values or liquidity fees; and proposed changes in the definition of “best execution” for advisers.

Securitization of Financial Assets, Edited by Jason H. P. Kravitt. The 2014 Supplement to the Third Edition is now available online. This work provides a series of portals through which the authors enable the user to enter any particular issue, acquaint the user with its general terms, and provide the user with the intellectual foundation and appropriate sources with which to pursue the issue, or related issues, on his or her own. Part One consists of a series of issue-spotting and structuring chapters designed to enable the user to enter the substantive law chapters in Part Two, fully oriented to the broad significance of any particular legal or accounting issue or groups of legal issues, as well as the relation of this issue or issues to other issues and to particular structures. Part Two contains more detailed discussions of substantive law issues. Highlights of the 2014 Supplement consists of revisions and additions to the following chapters and substantive areas: Chapter 5, Bankruptcy, analyzes one of the few published decisions addressing true sale and bankruptcy remoteness issues since the Great Recession of 2008; Chapter 17, Eligibility for Investment, includes an updated discussion of investments by pension funds, a revised section on investment by insurance companies, a revised section on investments by money market funds in asset-backed securities, and an expanded discussion of money market fund investments in ABSs, including liquidity requirements.

Corporate Legal Compliance Handbook, Second Edition, Edited by Theodore L. Banks, Frederick Z. Banks. The 2014-1 supplement is now available online. In this publication, leading experts on key compliance subjects share their expertise to enable attorneys—both in-house and outside the corporation—to develop an effective compliance programs for the companies they advise. The latest update includes discussion of a wide variety of subjects, such as: a trend to move compliance out of the law department; compliance rules that are perceived as fair are more likely to be followed; changes to compliance programs due to HIPAA, HITECH, and the Affordable Care Act; deferred prosecution agreements as an effective incentive to cooperate with a government investigation; how social media can be used for securities law purposes—sometimes; and new procedures to protect trademarks and domain names.

The Regulation of Corporate Disclosure, Third Edition, by J. Robert Brown, Jr. The latest release, 2014-1 Supplement, is available online. This handbook covers the impact of the federal securities laws on both informal communications and the process of communicating with shareholders. The 2014-1 Supplement includes: case law updates in Chapter 1; updates the Chapter 2 discussion on “loss causation” with new subsections on corrective disclosure, “non-typical” loss causation, and “negative” causation; further refines the Chapter 2B discussion of the use of disclosure by the SEC in the area of corporate social responsibility, including discussion of legal challenges to the conflict mineral rules and the resource extraction rules; discusses the recent SEC rule proposal on pay ratio disclosure requirements under Dodd-Frank; discusses a recent SEC proceeding involving an individual officer’s violation of the rules under Regulation FD; updates Chapter 9 including a new subsection on disclosure and social media; completely revises Chapter 10, Liability and Responsibility of Officers and Directors, with updates throughout the chapter; and includes miscellaneous case law updates throughout the treatise.

Derivatives Regulation, by Philip McBride Johnson, and Thomas Lee Hazen. The 2014 Cumulative Supplement is now available online. Derivatives Regulation comprehensively covers the Commodity Exchange Act along with all other relevant aspects of the regulation of securities that have an impact on the derivatives markets. It covers the full range of emerging regulatory, reporting, and legal issues surrounding derivatives and related instruments. The 2014 Cumulative Supplement includes, throughout the supplement, developments implementing the massive reforms introduced by the Dodd-Frank Wall Street Reform and Consumer Protection Act; new sections outlining the treatment of retail foreign exchange and retail commodity transactions, the margin requirements for uncleared and cleared swap transactions, the swap reporting regime for swap dealers and major swap participants, the recordkeeping requirements for swap dealers and major swap participants, the application of the CFTC’s swap regulatory regime to cross-border swap activities, and the CFTC’s disruptive trading authority; summary and analysis of new CFTC rules relating to registration of swap dealers and major swap participants, requirements for approval of contract markets, core principles for derivatives clearing organizations, external business conduct requirements for swap dealers, major swap participants, and futures commission merchants, internal business conduct requirements for swap dealers, major swap participants, and futures commission merchants, including designation of a chief compliance officer, and registration of and core principles for swap execution facilities; and coverage of new developments relating to the mandatory trading and clearing of swaps and exceptions or exemptions therefrom, the Treasury Secretary’s determination on foreign exchange swaps and forwards, the new cleared swaps segregation requirements, and commodity pool operator registration requirements and obligations.

Financial Reporting Handbook, by Michael Young. The latest release, Release 39, is available online. This reference provides quick access to critical aspects of financial reporting. In addition to covering the Sarbanes-Oxley Act, SEC rules and regulations, standards of the Independence Standards Board and the AICPA and requirements of the New York Stock Exchange, NASDAQ, and the American Stock Exchange,the Financial Reporting Handbook tackles important underlying themes such as the centrality of the audit committee, the individual responsibility of executives, and the integrity of the outside auditor.


IPO Vital Signs

IPO Vital Signs, an advanced IPO research analysis tool, assists IPO professionals and pre-IPO companies satisfy their most challenging research needs and answers hundreds of mission critical questions for all the players in the IPO process. IPO Vital Signs’ tabular data analyses focus on issues surrounding client advisement, deal negotiation, and prospectus disclosure.

IPO Week in Review, a weekly e-newsletter to keep professionals up to date with recent filing and going public activity, is an important element of the IPO Vital Signs system or is available by separate subscription. Coverage includes a monthly feature article on recent trends in going public in the U.S.

To see how an IPO Vital Sign works click on the Vital Sign title below:



#160 – IPO Counsel (IPO Issuer’s Representations plus IPO Underwriters’ Mandates)
Review 2013 IPO law firms by...

  • IPO Law Firm 
  • Combined IPOs
    • Count 
    • Percentage of Total 
  • Combined IPO Offering Amount 
    • Aggregate 
    • Percentage of Total 
  • Issuer's Law Firm 
    • Number of IPOs
    • Aggregate IPO Offering Amount
  • Underwriters’ Law Firm
    • Number of IPOs
    • Aggregate IPO Offering Amount

Tip! Click on blue numbers to drill down for more information. Click Column headings to re-sort the table’s data. 


A new research tool powered by the Securities Redbook (Securities Act Handbook), RBsource offers you securities laws, rules, regulations and forms together with related SEC guidance and interpretations. With RBsource, you will have SEC guidance related to a specific law, regulation or rule at your fingertips without the need of further searching or browsing. RBsource uniquely associates related content, going beyond the limits of standard searching making research more streamlined and productive. This intuitive research tool will drastically reduce your research time and provide the unparalleled confidence expected from the trusted Securities Act Handbook.

SEC Rulemaking Activity

  • BHCA-1—Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds (December 10, 2013).

This release implements the Dodd-Frank Act-mandated Volcker rule. The rule bars banks from engaging in proprietary trading and limits their ownership and investments in hedge funds. The rule, however, permits some market-making activities.

The Volcker rule is effective April 1, 2014, but compliance dates vary. Reporting requirements are phased-in between June 30, 2014 and December 31, 2016 depending on the size of a bank’s consolidated trading assets and liabilities. Meanwhile, the Fed has extended the conformance period to July 21, 2015.

  • 34-71194—Removal of Certain References to Credit Ratings Under the Securities Exchange Act of 1934 (December 27, 2013).

The SEC continues to meet its Dodd-Frank Act mandate to remove certain existing references to credit ratings. The specific changes affect provisions within the Exchange Act rules.

  • 33-9506—Removal of Certain References to Credit Ratings Under the Investment Company Act (December 27, 2013).

As part of its Dodd-Frank Act mandate to remove references to credit ratings, the SEC has replaced certain passages in the Investment Company Act rules and forms.

  • 33-9503—Securities Exempted; Distribution of Shares by Registered Open-End Management Investment Company; Applications Regarding Joint Enterprises or Arrangements and Certain Profit-Sharing Plans (December 24, 2013).

The release updates outdated language in the Securities Act and the Investment Company Act.

  • 34-71142—Order Granting a Limited Exemption from Rule 102(a) of Regulation M to Certain Business Development Companies Pursuant to Rule 102(e) of Regulation M (December 19, 2013).

The SEC has granted a conditional exemption from Regulation M to unlisted companies that have opted for treatment as business development companies to engage in share repurchases during the restricted period.

  • 34-71018—Order Granting a Temporary Exemption Pursuant to Section 36(a)(1) of the Securities Exchange Act of 1934 from the Filing Deadline Specified in Rule 613(a)(1) of the Exchange Act (December 6, 2013).

This release exempts self-regulatory organizations until September 30, 2014 from the deadline to submit a national market plan for a consolidated audit trail and central repository.

  • 33-9497—Proposed Rule Amendments for Small and Additional Issues Exemptions Under Section 3(b) of the Securities Act (December 18, 2013).

he SEC has proposed to implement JOBS Act Title IV by creating a tiered approach to Regulation A offerings.

The Road Ahead

Upcoming rulemaking activity will continue to reshape the securities regulation landscape. The items below are a selection of expected near-term regulatory actions. The SEC’s schedule is subject to change at any time. RBsource includes daily updates to securities regulations affected by final Commission action.

The SEC’s 2013 rulemaking year ended with the adoption of the long-awaited final Volcker rule. Next year’s SEC rulemaking agenda may be just as significant. In addition to remaining Dodd-Frank Act and JOBS Act items, money market mutual fund reforms still loom as do proposals for more Regulation D changes.

Among the SEC’s JOBS Act proposals, crowdfunding and modified Regulation A may bring new options to the small offering space. The SEC’s crowdfunding proposal, for example, would allow lighter regulation of offerings for no more than $1,000,000 of securities while modified Regulation A would divide somewhat larger offerings into two tiers: one mostly adhering to existing Regulation A, and another for offerings of up to $50 million. Proposed Regulation A also would reduce Blue Sky compliance burdens for some offerings.

Significantly, the Regulation A proposal would follow the crowdfunding proposal in key areas, including by not requiring integration of exempt offerings if each exempt offering meets its specific requirements. Issuers must nevertheless be mindful of which offerings permit or deny the use of general solicitation.


Hot Topic of the Month

This month's hot topic is class certification. Class actions have proven to be a popular method for investors to bring claims under the federal securities laws to vindicate the rights of small securities holders located throughout the country. The use of the class action device in situations where it is claimed that fraud was perpetrated on numerous persons by the use of similar misrepresentations has been favored by the courts as a way of combining small claims and avoiding a multiplicity of actions.

Under Rule 23 of the Federal Rules of Civil Procedure, members of a class may sue as representative parties on behalf of all if: 1) the class is so numerous that joinder of all members is impracticable, 2) there are questions law or fact common to the class, 3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and 4) the representative parties will fairly and adequately protect the interests of the class. A class action may be maintained if all of the above prerequisites are met and the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting individual members, and that a class action is superior to other methods for the fair and efficient adjudication of the controversy.

Courts have recently begun to examine class certification in light of the Supreme Court's 2013 ruling in Comcast Corp. v. Behrend. For example, a Texas district court denied a motion for class certification based on Comcast after finding that the plaintiffs failed to establish that damages could be calculated on a class-wide basis consistent with their theories of liability. In that case, the plaintiffs proposed to perform an event study, but failed to provide the specifics of their proposed methodology.

A California district court granted certification after finding that an event study was sufficient to show that damages were capable of measurement on a class-wide basis. Comcast, the court explained, addressed whether class certification had been properly granted where the proffered damages model did not measure damages resulting specifically from the theory of liability that the district court determined as appropriate for class treatment. This court declined to decide whether Comcast "requires that certification be denied absent affirmative evidence that ‘damages are susceptible of measurement across the entire class.’" Here, the court noted the Supreme Court's holding in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds that Rule 23(b)(3) requires a showing that questions common to the class predominate, not that those questions will be answered on the merits. In this case, both parties’ experts agreed that "recoverable damages in a securities fraud case such as this one should be assessed based on determining the price the security would have been, absent the fraud."

We publish related information in a wide range of resources (e.g., Federal Securities Law Reporter, SEC Today, Insights – Amy L. Goodman, Securities Regulation – Loss, Seligman & Paredes, etc.), and document types (laws, regulations, releases, newsletter articles, treatise discussion). For example:

  • Federal Securities Law Reporter
    • Amgen Inc. v. Connecticut Retirement Plans and Trust Funds (US Sup Ct) at ¶97,300
    • In re Diamond Foods, Inc. Securities Litigation (ND Cal) at ¶97,414
    • In re BP p.l.c. Securities Litigation (SD Tex) at ¶97,754
    • CCH Explanations (e.g., ¶22,788.020)