Businesses of all types and sizes throughout the United States, Mexico and beyond bring their disputes to Gardere's litigation team and receive practical, responsive, boutique-style attention in return. Our clients have access to the firepower and value of a well-known and highly-regarded Firm's capabilities and interdisciplinary strengths.
Gardere has a national and international energy practice formed around our Energy Industry Team, which is a multidisciplinary group of approximately 80 attorneys with diverse backgrounds, experience and skills specific to the energy industry. Our team includes attorneys who have served as in-house counsel for major energy companies, providing a depth of insight into our clients' needs, issues and concerns. We understand and regularly practice in virtually every sector of the energy, and we represent a wide variety of industry participants from multinational corporations to individuals.
From our offices in the United States and Mexico, our International Practice helps clients operate in today’s global economy. We have more than 30 professionals operating as a boutique within an Am Law 200 law firm and are able to provide focused service with the resources of a large firm. We understand that clients who are engaged in the global marketplace need lawyers who can operate seamlessly across multiple jurisdictions. Our international experts are multi-lingual, are culturally fluent and intimately familiar with various legal systems across the world, especially those in Latin America. Whether you need help with commercial transactions, regulatory matters, customs and import regulations, immigration matters, M&A and joint ventures, international disputes, or international tax planning, Gardere’s international team is here to assist you.
We represent domestic and foreign private funds in all aspects of fund formation, fund operations, platform and add-on acquisitions, and portfolio company operations. Our team has a reputation for being the go-to-lawyers for private equity funds, hedge funds, venture capital funds and family offices. We are known for our vast deal experience, the efficient way we staff and manage our work, and the way we maintain our relationships. We get deals done with sophisticated, strategic, and practical advice tailored to the needs of our clients.
*Not admitted to practice law.
A person who is the record owner of less than 5% of the stock of a publicly held company, which is registered under Section 12 of the Securities Exchange Act of 1934, becomes a member of an existing group that beneficially owns over 20% of the stock. While a member of the group, the person participates in the joint filing of the group’s Schedule 13D and amendments to it and files a Form 3 and one or more Forms 4 to report the stock it owns (or in which it has a pecuniary interest) and transactions in the stock under Section 16 of the Exchange Act.
That person now wishes, without any sale or transfer of its stock, to cease being a member of the group. It appears that the person will not have to make any filing with the SEC to effect or reflect that exit. The remaining members of the group will sooner or later have to reflect the change in the group resulting from the exit in an amendment to their Schedule 13D. Because the person is not an executive officer or a director of the publicly held company, the SEC’s Rule 16a-2(c) appears to provide that the person does not have any obligation to report on Form 4 (or Form 5) any transaction in the stock after the person’s exit from the group. So it seems straightforward: The person should be able to exit the group and freely engage in trading without any taint from having been a member of the group, right?
Well, perhaps it’s not quite so simple. Rule 16a-2(c) does provide that Section 16 forms must be filed only while a non-insider is a 10% holder, and the SEC’s Compliance and Disclosure Interpretations, Exchange Act Section 16 and Related Rules and Forms, Question. 110.02 confirms that. The Rule and the CDI are consistent with the U.S. Supreme Court’s holding in Foremost-McKesson, Inc. v. Provident Securities Co., 423 U.S. 232 (1976). Nevertheless, a decision of the Second Circuit Court of Appeals in Roth v. Jennings, 489 F.3d 499 (2d Cir. 2007), may pose a concern or raise an issue to be considered.
In the Roth decision, the Court held that the federal District Court had improperly granted a motion to dismiss a Section 16 short-swing liability action against a former member of a group who sold shares of stock within six months after the last purchase of shares as part of, and while he was a member of, the group. The Court’s opinion expressed alternative rationales for that holding:
Although the second rationale may well have been correct, the first rationale is contrary to other statutory and case law and existing SEC interpretations, as described above. Regarding the first rationale, however, the Court’s view seems to have been prompted by a concern or suspicion that the former member of the group may have based his subsequent sales on material non-public information gained while a group member – so that (to put it another way) the former member should not really be considered as separated from the group.
While the Roth decision is apparently wrong regarding the application of Section 16 to a former group member, it is a reminder that the existence and duration of a “group” under Section 16 (based on Section 13 of and Rule 13d-3 under the Exchange Act) can be uncertain and that a former group member – no matter how clearly separated from the group – must be sensitive to the possession of material non-public information that the member may have, or may reasonably be attributed to him, from participation in the group.
OUR TAKE: Even if a non-insider exiting a group of beneficial owners is not required to file with the SEC any amendment to a Schedule 13D or any Form 4 to effect or reflect the exit from the group or in connection with any trades made after the exit, the person should carefully consider, before effecting any trade, whether any material non-public information may reasonably be attributed to it because of the person’s former membership in the group.
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