United States: 2017 Proposed Amendments To DGCL Released, SEC Sanctions Morgan Stanley For Failure To Implement Compliance Policies For Non-Traditional ETFs, And SEC Issues Reduced Whistleblower Award Because Of Culpability And Delay In Reporting
This week's corporate law news roundup includes discussions
of the 2017 proposed amendments to the Delaware General Corporation
Law recently released by the Council of the Corporation Law Section
of the Delaware State Bar Association, the SEC's sanctioning of
Morgan Stanley for failing to implement compliance policies and
procedures for recommending single-inverse ETFs, and the SEC's
reduction of a whistleblower award due to the whistleblower's
culpability and delay in reporting
2017 AMENDMENTS PROPOSED TO DELAWARE GENERAL CORPORATION
The Corporate Council of the Corporation Law Section of the
Delaware State Bar Association has released proposed amendments to
the Delaware General Corporation Law (DGCL). Among the more notable
amendments are those that would authorize corporations to use
blockchain and distributed ledgers to administer corporate records,
eliminate the requirement that stockholder consents be individually
dated, and clarify the DGCL provisions relating to mergers to make
them more consistent across various sections. If approved by the
Corporation Law Section, the DGCL amendments will be introduced to
the Delaware General Assembly, and (if then enacted) will become
effective on August 1, 2017. For more information, see
SEC SANCTIONS MORGAN STANLEY FOR FAILURE TO IMPLEMENT
COMPLIANCE POLICIES FOR NON-TRADITIONAL ETFS
The SEC has instituted administrative and cease-and-desist
proceedings against Morgan Stanley for violating Section 206(4) and
Rule 206(4)-7 of the Investment Advisers Act of 1940 by failing to
adequately implement its compliance policies and procedures
designed to prevent unsuitable recommendations of single-inverse
exchange-traded funds (ETFs) to non-discretionary advisory clients.
Morgan Stanley admitted wrongdoing and submitted a settlement offer
to pay an $8 million civil penalty, which the SEC accepted. For
more information, see https://www.sec.gov/litigation/admin/2017/ia-4649.pdf.
SEC ISSUES REDUCED WHISTLEBLOWER AWARD BECAUSE OF CULPABILITY
AND REPORTING DELAY
Whistleblowers who are culpable and unreasonably delay reporting
wrongdoing may see their whistleblower awards reduced, following a
recent SEC order. On February 28, 2017, the SEC issued a reduced
award of 20 percent of the monetary sanctions collected in the
covered action to a whistleblower because of the
whistleblower's culpability in connection with securities law
violations at issue as well as the whistleblower's unreasonable
delay in reporting the wrongdoing to the SEC. The SEC's order
determining the award provided no details regarding the violations
or the whistleblower's culpability. For more information, see
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