by T. GormanPosted on Posted in SECActions

Filings for new Canadian securities class actions have been essentially flat over the last three years, according to a recent report by NERA Economic consulting (here). That trend is consistent with the one for the filing of U.S. class actions (here). Last year there were 11 securities class actions filed in Canada, the same as in the prior year and one more than in 2010. The largest number of these cases filed in a single year since 1997 was 15 in 2011.

Since 2006 when the first Bill 198 cases were filed (those based on then newly enacted provisions in Canada) the number of securities class actions filed in Canada has varied from year to year with the overall trend for the period being up. Indeed, since 2006 when only one Bill 198 case was filed, the largest number of filings occurred in the last two years with 10 being brought in each year.

About 36% of the Bill 198 cases filed last year involved cross-boarder claims. Three of the four cross-boarder Bill 198 cases involved shares listed on the TSX and the NYSE. The fourth cross-boarder case involved shares of SouthGobi Recourses which are listed on the TSX and the Hong Kong Stock Exchange. A related case was brought in 2013 involving the parent of SouthGobi whose shares are listed on the TSX and the NYSE. In addition, five other actions were filed in the U.S. involving Canadian domiciled issuers.

Last year six Canadian securities class actions were settled or tentatively settled. That matches the number for the prior year. The average settlement was $6.4 million as was t he median settlement. These values compare to the median settlement of $10.7 million over the period 1997 through 2014. The average for that period was $79.5 million which is skewed by two exceptionally large settlements involving Nortel Networks Corporations.

Five of the settled actions last year were Bill 198 cases. The average settlement in those cases last year was $5.7 million while the mean was $5.9 million. That compares to a median settlement of $7 million and an average of $8.7 million for those cases since 2006. In contrast, since 2006 about half of the settled Bill 198 cases were cross-boarder actions. The average settlement in those actions was $12.8 million while the median was $9.5 million.

Finally, since 1997 the number pending Canadian securities class actions has steadily increased. Presently, there are 60 cases pending. About 38 of these cases are Bill 198 actions.

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by T. GormanPosted on Posted in SECActions

A critical component of the SEC’s whistleblower program is the anti-retaliatory provisions of Exchange Act Section 21F, added to the statute by the Dodd-Frank Act. To implement that provision the Commission promulgated two rules. The first, Exchange Act Rule 21F-2(b)(2) provides that the agency has the authority to bring an enforcement action against employers who violate the anti-retaliation provisions. The second, Exchange Act rule 21F-2(b)(1) states that the protections of the anti-retaliation provisions extend to any employee who engages in any of the whistleblowing activities specified in the statute regardless of whether that person separately reports the information to the Commission.

An amicus brief filed by the SEC in Berman v. Neo@Ogivy LCC, No. 14-4626 (2nd Cir. Brief filed Feb. 6, 2015) addresses rule 21F-2(b)(1) and the scope of the anti-retaliation provisions. Specifically, the issue presented by the case is whether the “Commission’s rule [21F-2(b)(1)] interpreted the anti-retaliation protections to extend to any individual who engages in the whistleblowing activities described in Section 21F(h)(1)(A), irrespective of whether the individual makes a separate report to the Commission . . .” is entitled to deference under Chevron, U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Previously, the Fifth Circuit answered the question in the negative. Asadi v. G.E. Energy (U.S.A.) L.L.C., 720 F. 3d 620 (5th Cir. 2013)(holding that the SEC’s construction of the Dodd-Frank provisions is inconsistent with the language of the statute and would effectively render the SOX whistleblower provisions moot).

The Commission’s brief begins by noting that the securities laws recognize that internal company reporting is important for deterring unlawful conduct. Building on this theme, the SEC traces the history of the whistleblower provisions through the Sarbanes-Oxley Act and into Dodd-Frank along with its own rule writing activities. Those rules, under Section 21F were “carefully calibrated . . to ensure that individuals were not dis-incentivized from first reporting internally . . .” according to the Commission.

The brief then argues two key points in support of the Commission’s claim that its rule is entitled to deference. First, the agency acontends that in the language of the Section “Congress did not unambiguously limit the employment an anti-retaliation protections in Section 21F(h)(1) to only those individuals who provide the Commission with information relating to a securities law violation. Rather, there is ambiguity on this issue given the considerable tension between clause (iii) of Section 21F(h)(1)(A), which . . . lists a broad array of whistleblowing activities to entities and provisions other than just the Commission, and Section 21F(a)(6), which defines ‘whistleblower.’” Specifically, Section 21F(a)(6) prohibits the discharge of any whistleblower for (i) “providing information to the Commission . . . (ii) initiating, testifying in, or assisting in any investigation or judicial or administrative action of the Commission based upon or related to such information; or (iii) in making disclosure that are required or protected under the Sarbanes-Oxley Act . . . and any other law, rule, or regulation subject to the jurisdiction of the Commission.” The term whistleblower is defined as “any individual who provides . . .information relating to a violation of the securities laws to the Commission . . .” The broad range of activities inherent in subsections (i) to (iii) compared to the limited definition of the term whistleblower “demonstrates, at a minimum, considerable tension and inconsistency within the text, thus revealing that Congress did not unambiguously express an intent to limit the employment anti-retaliation protections . . .” to only those individuals who report securities law violations to the Commission the brief states.

Second, in view of the ambiguity here “Section 21F(1)(A) is best read as an implied exception to the definition of whistleblower in Section 21F(a)(6),” according to the SEC, citing a series of district court decisions. Not only is the adopted interpretation here reasonable, and consistent with the statutory scheme the agency told the Court, but it “enhances the Commission’s ability to bring enforcement actions when employers take adverse employment actions against employees for reporting securities law violations internally.” It also serves an important law enforcement function by protecting those who first report securities law violations to the U.S. Department of Justice or self-regulatory organizations. Accordingly, the Court should defer to the SEC’s interpretation of the statute the brief argues.

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