SEC Proposes Sweeping Changes to Beneficial Ownership Reporting Requirements
On February 10, 2022, the Securities and Exchange Commission proposed amendments to Regulation 13D-G and Regulation S-T governing the reporting requirements of greater than 5% beneficial owners of shares of public companies. The proposed amendments include shortening the time periods within which statements on Schedule 13D and Schedule 13G, as well as amendments to such statements, are required to be filed. The proposed amendments also treat the holder of certain cash-settled derivative securities as the beneficial owner of the reference securities of such derivatives. In addition, the amendments dramatically alter the criteria for determining whether a "group" has been formed for Schedule 13D or Schedule 13G reporting purposes and provide new exemptions for specified group activity.
Spotlight on Christopher O'Brien – A Dealmaker Bringing Order to the NFT Wild West
Recently recognized in Variety's Dealmakers Impact Report 2021, Christopher O'Brien, a corporate and entertainment transactions partner and co-chair of Venable's Blockchain and Digital Currencies Group, has been practicing at the intersection of crypto, entertainment, and the explosion of interest in NFTs. In this recent conversation, Chris discusses his involvement in the evolution of blockchain technology, some of the wild west aspects of the NFT trade, and how his team is protecting clients in this emerging marketplace.
Proposed Regulations Change PFIC Elections for Partnerships
On January 24, 2022, the IRS issued proposed regulations that impact certain elections available to U.S. taxpayers with respect to their indirect interests in passive foreign investment companies (PFICs).
Pursuant to the proposed regulations, to the extent an interest in a PFIC is owned by a domestic partnership, the U.S. partners will be considered the shareholders of the PFIC rather than the domestic partnership. Thus, any qualified electing fund (QEF) or mark to market (MTM) elections with respect to the PFIC will be made at the U.S. partner level. This is a departure from the existing rules, which treat the domestic partnership as the U.S. shareholder for purposes of making such PFIC elections. The proposed regulations similarly apply to U.S. shareholders of S corporations that own an interest in a PFIC.
Novel SEC "Shadow Trading" Theory Expands Insider Trading Liability
The SEC recently unveiled a novel "Shadow Trading" theory that expands insider trading liability. "Shadow Trading" describes when an insider with material, non-public information regarding their own company uses that information to trade in the security of another, peer company. On January 14, 2022, U.S. District Judge William Orrick denied a motion to dismiss what appears to be the first case that the SEC has brought asserting this novel theory, permitting the SEC to proceed with its shadow trading theory of liability.
Proxy Materials and Annual Meetings under Maryland Law – 2022
As we enter the 2022 proxy season, we are sending our annual memo to call your attention to certain matters of Maryland law, some new and some continuing, relating to proxy materials and annual meetings about which we often receive questions. Because the same principles generally apply to both corporations formed under the Maryland General Corporation Law and to real estate investment trusts formed under the Maryland REIT Law, we refer hereafter, unless otherwise noted, only to corporations (or sometimes companies). As in prior years, we are available to review draft proxy materials for Maryland law compliance.