SEC v. (NDTex 2009) Issue did Cuban have a duty to corp to keep info quiet? Can duty be created – by agreement? Holding No duty to keep the info quiet; can be created by agreement, but – Cuban didn’t have one. No reason why duty cannot arise by contract would prob form an even – stronger duty But req’s 2 agreements ; non-disclosure and non-use (otherwise no duty not to use/trade on the info) Reason by R10b-5-2 does not create the req’d duty deals only w/ – confidentiality (related to tipper/passer liability) No agreement was created here sell” statements only indicate a misbelief that he cannot trade, “Can’t not an agreement not to trade The expectation cannot be unilateral: no contention that CEO expected Cuban not to trade on the info Circuit Split 5th cir need non-disclosure AND non-use agreements – Other courts only need agreement to tell” – “not See HYPO in notes. TAKEOVER MOVEMENT Cash Tender Offer Buy shares of target company either on open mkt or by making offer to shareholders public invitation to shares to bidder, usually at 15-20% premium; usually – “tender” mailed or posted as ad Usually comes w/ conditions that not req’d to purchase unless necessary amount is tendered Signif modified by 1968 Williams Act Req’s disclosure by bidder if acquiring 5% or more, but need not be made in advance (no later than time announce tender offer Set bidding Must remain open for minimum of 20 business days Shareholder can w/draw during that windo All shareholders must receive highest price paid If oversubscribed, all shareholders have shares purchased pro-rata Target company cannot be passive: 3 options to shareholder on which offer to take Recommend option No opinion/remain neutral maybe a suggestion they’re all good – Unable to take a position (harsher than #2) Goals of Act Slow down process to give shareholder full info and target time to respond Assure all shareholders treated equally. Rule 14e-3 cannot purchase/sell if you have material, non-public info about a tender – offer No duty requirement
SEC v. (NDTex 2009) Issue – did Cuban have a duty to corp to keep info quiet? Can duty be created by agreement? Holding – No duty to keep the info quiet; can be created by agreement, but Cuban didn’t have one. No reason why duty cannot arise by contract – would prob form an even stronger duty But req’s 2 agreements ; non-disclosure and non-use (otherwise no duty not to use/trade on the info) Reason by R10b-5-2 does not create the req’d duty – deals only w/ confidentiality (related to tipper/passer liability) No agreement was created here “Can’t sell” statements only indicate a misbelief that he cannot trade, not an agreement not to trade The expectation cannot be unilateral: no contention that CEO expected Cuban not to trade on the info Circuit Split 5th cir – need non-disclosure AND non-use agreements Other courts – only need agreement “not to tell” See HYPO in notes. TAKEOVER MOVEMENT Cash Tender Offer Buy shares of target company either on open mkt or by making offer to shareholders – public invitation to “tender” shares to bidder, usually at 15-20% premium; usually mailed or posted as ad Usually comes w/ conditions that not req’d to purchase unless necessary amount is tendered Signif modified by 1968 Williams Act Req’s disclosure by bidder if acquiring 5% or more, but need not be made in advance (no later than time announce tender offer Set bidding Must remain open for minimum of 20 business days Shareholder can w/draw during that windo All shareholders must receive highest price paid If oversubscribed, all shareholders have shares purchased pro-rata Target company cannot be passive: 3 options to shareholder on which offer to take Recommend option No opinion/remain neutral – maybe a suggestion they’re all good Unable to take a position (harsher than #2) Goals of Act Slow down process to give shareholder full info and target time to respond Assure all shareholders treated equally. Rule 14e-3 – cannot purchase/sell if you have material, non-public info about a tender offer No duty requirement