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One of the striking features of the Second Circuit’s ruling in United States v. Newman, a landmark decision on insider trading rendered on December 10, 2014, was how quickly its effects were felt. As Proskauer lawyers Ralph Ferrara and Ann Ashton wrote in a recent issue of Securities Regulation Daily, it took barely over a week for Newman to be cited by a U.S. district court judge with reference to a pending case. Eight days after the Newman decision was entered, Judge Andrew Carter advised the U.S. Department of Justice that in United States v. Conradt, a case that involved four alleged remote tippees, he was inclined to vacate the defendants’ guilty pleas. His reason was that, in light of the clarification that Newman had brought to the requirements of personal benefit and tippee knowledge in cases of insider trading, the court was skeptical that the guilty pleas in question were sufficient. Although the Department of Justice was permitted to submit a brief supporting its position, which was that Newman did not apply to cases of insider trading prosecuted under a misappropriation theory, its argument was eventually rejected and the guilty pleas were vacated: the country's first official judicial reaction to the Newman decision. With reference to its decision, the court stated that, although the question of whether tipping liability requirements are consistent under both classical and misappropriation theories of insider trading had not been specifically resolved by Newman, the decision had made an unequivocal statement on the requirement issue. That statement, constituting a conscientious and meticulous effort on the part of the Second Circuit to clarify vital matters of insider-trading law, was ultimately what swayed the court in Conradt.

Proskauer lawyers Ralph Ferrara and Alexandra Skellet offer insight into the potential legal repercussions of financial restatement in the February 2015 edition of Insights: The Corporate & Securities Law Advisor. Introducing the variety of legal complications often faced by reporting companies and their executives, the lawyers offered an examination of recent trends in the area. Drawing on the research of Audit Analytics, they noted that the number of financial restatements submitted by public firms in America has declined in recent decades. While public companies reported 1,849 restatements in 2006, only 846 filed such documents in 2013. Despite these statistics, the frequency of financial restatement among companies valued at over $75 million has increased. These companies, known as accelerated filers, reported 157 restatements in 2010. By 2013, this number had risen to 290. However, the number of restatements made by smaller public firms continues to decline. In its research, Audit Analytics drew a distinction between revision restatements and reissuance restatements. While a revision restatement addresses quarterly errors that only impact the current period’s earnings, reissuance restatements seek to amend prior year errors that render previous annual financial statements unreliable. Audit Analytics discovered that 68.83 percent of all financial restatements in 2013 were revision restatements, a level not seen since 2005.                            

Proskauer lawyer Ralph Ferrara gave a presentation on real-world crisis management at the Practising Law Institute’s 46th Annual Securities Regulation Institute. Ferrara outlined several crucial considerations in corporate communications,summarized key aspects of effective public relations for companies in the midst of a crisis, and provided the crisis management “cram sheet” notes pre-crisis planning as an important element. By having a plan, companies can limit much of the stress and chaos associated with corporate crises. The plan should draw on the experiences of the company and other organizations and define the team members who will act as spokespeople during the incident. When a corporate crisis does occur, Ferrara advises firms to implement their plan right away rather than waiting to see if the problem will resolve itself. Corporate leaders and communications professionals should strive to remain calm and gather all relevant facts about the situation in order to control the messages received by the public. Ferrara notes that in seeking to craft an honest, unified public relations message, companies must ensure that they do not release false or unverified information. Additionally, companies should gauge the public response to corporate crises and ensuing communications via a variety of channels, including social media, while maintaining open lines of communication with their employees.                            

Benchmark Litigation, a leading legal guide providing rankings of law firms and lawyers across the United States, named 18 litigators from Proskauer to its 2015 ranking of “Stars” in the legal sector. In addition to giving the global firm national recognition for both its antitrust and insurance practices, Benchmark Litigation recognized the firm’s New York and Boston practices as “Highly Recommended.” Benchmark Litigation named five Proskauer lawyers from the intellectual property, bankruptcy, insurance and antitrust practices as 2015 National Litigation Stars. It also recognized 16 lawyers from California, Massachusetts, New York and Washington, DC, including the national litigation honorees, as 2015 Local Litigation Stars. This group included Ralph Ferrara, former General Counsel to the U.S. Securities and Exchange Commission, who practices in Proskauer’s Securities Litigation and White Collar Defense and Investigations practices. To create its annual list of noteworthy law firms and professionals, Benchmark Litigation conducts six months of extensive research comprising interviews with both lawyers and their clients. The publication considers the opinions of lawyers’ peers, as well as their recent cases, in selecting individuals for recognition, and chooses its featured law firms via recommendations from top private practice and in-house lawyers throughout the United States.

A legal principle applicable to a corporation’s executives or board members, the business-judgment rule allows business leaders to conduct corporate transactions, such as acquisitions, expansions or stock issuance, without fear of liability for unsuccessful business activities. Even if a corporate transaction results in a financial loss, the business-judgment rule protects executives from prosecution so long as they behaved rationally, in good faith and within the company’s code of conduct. In this way, the judicial system acknowledges that risk is inherent to business operations and protects corporate leaders from legal ramifications of business transactions that were unprofitable but not illegal. In some instances, the “entire fairness test” can take precedent over the allowances of the business-judgment rule. The entire fairness test applies to situations in which a corporation’s leadership did not act independently. The company’s financial representative must then prove that the decision-making process was fair, demonstrating that the transaction’s timing, structure and negotiations did not unfairly benefit its proponents while negatively impacting the company. The firm’s fiduciary must also prove that all involved parties, including shareholders and directors, received adequate information regarding the details of the transaction. In 2014, a decision by the New York Appellate Division, First Department clarified the role of the business-judgment rule and entire fairness test in going-private transactions. The court ruled that only the business-judgment rule applies to such transactions, indicating that a lack of participation by the majority shareholder in a merger vote does not imply allegations of self-interest for the remaining directors.                            

In October 2014, Proskauer announced that Ralph Ferrara was named a “Local Litigation Star” by Benchmark Litigation for his work in the firm’s Washington, DC office. Ferrara joins 17 other Proskauer litigation team members who received local and national “Star” designations in the publication’s 2015 guide to the most effective lawyers and litigation firms in the country. Ferrara and his colleagues at Proskauer handle a wide variety of litigation areas, including securities, corporate governance and investigation, contested mergers and acquisitions, shareholder derivative matters, and other complex financial cases. Ferrara's experience includes service as General Counsel to the United States Securities and Exchange Commission. Benchmark Litigation is the only guidebook to prominent lawyers and law firms that concentrates entirely on litigation in the United States. Since 2008, the publication has used experienced interviewers to conduct in-depth conversations with litigation professionals and their clients in order to determine the names of the leading individual lawyers and firms. This research and review process takes half a year to complete, with the resulting guide serving as an objective, comprehensive overview of the most prominent members of the profession.

A recent article written by Ralph Ferrara, a litigator in Proskauer’s Washington, DC office and former General Counsel to the United States Securities and Exchange Commission, summarized and analyzed key points in a recent Supreme Court decision that clarified the extent to which investors may sue companies over statements of opinion made in registration documents. Writing about the 2015 high court decision in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, Ferrara summarized the findings and implications of the case. Section 11 of the Securities Act of 1933 allows a buyer of securities to file suit against the issuer if a registration statement contains an untrue statement of material fact, or omits certain material facts that would influence a buyer's decision. Ferrara outlined the court's nuanced opinion in the class action case. The court articulated limitations on investors’ ability to bring action against issuers’ good-faith statements of opinion, while emphasizing that it was not establishing a wide-ranging means of avoiding omissions-related liability. The decision held that issuers’ opinion statements must be evaluated in context, and in light of the conclusions a reasonable investor would draw from them, and that issuers could better protect themselves by stating the basis for an opinion and by including relevant arguments that might contradict that opinion, though they are not required to do so. Ralph Ferrara and other Proskauer lawyers frequently post articles analyzing matters of interest to their clients and the general public on the firm’s website at www.proskauer.com.

An experienced lawyer, Ralph Ferrara serves within the securities litigation practice of Proskauer. The international legal publication The Best Lawyers in America named him a leading U.S. lawyer in nine categories. In addition, he is among the inaugural honorees of the Securities Docket’s Enforcement Hall of Fame. Mr. Ferrara has also appeared in numerous legal journals. He has written extensively on topics related to securities litigation and regulation. Recently, Mr. Ferrara published a client alert regarding a new precedent in insider trading litigation. The Second Circuit recently overruled the insider trading convictions of Todd Newman and Anthony Chiasson, presenting significant implications for future insider trading cases and clarifying multiple elements of tippee liability. The Court for the Southern District of New York previously convicted the two hedge fund managers of insider trading following government allegations that they had received inside corporate tips from investment analysts. The Second Circuit reversed this ruling, citing insufficient evidence to prove that the defendants knew that insiders had disclosed confidential information and personally benefitted. Based on the appellate decision in United States v. Newman, the tippee, or person receiving the information, must know that the initial tipper violated a fiduciary duty by disclosing nonpublic information in order to be held liable. The tippee must also know that the tipper received a personal benefit for sharing said information. This “personal benefit” must be objective and consequential, and must present a monetary or similar gain. Additionally, the simple fact of a casual or social friendship does not qualify as a “personal benefit.”                            

In November 2014, Ralph Ferrara, of global law firm Proskauer, served as a speaker at the 46th Annual Institute on Securities Regulation. Sponsored by the Practising Law Institute and held at the New York Hilton & Towers, the event provides a yearly review of recent developments in corporate and securities law. Mr. Ferrara addressed attendees about real-world crisis management. His Proskauer colleague, Julie Allen, also spoke at the event on the topic of ethics in negotiation. Guided by industry-leading professionals from fields such as government, accounting and investment banking, the Institute presented a valuable professional development opportunity for lawyers practicing in New York, who were eligible to earn up to 22.5 continuing legal education credits. The institute provides a forum for legal and regulatory professionals to update their knowledge of relevant topics such as the JOBS and Dodd-Frank acts. It also included panels on process changes related to IPOs, mergers and acquisitions, and capital formation. In addition, the institute’s agenda featured events dedicated to noteworthy enforcement efforts, shareholder communication, and accounting and disclosure news.

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