Articles Tagged with sec

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In the finance world, Special Purpose Acquisition Companies (SPACs) are proliferating like Dutch tulips. This year alone, they’ve exploded in popularity, with multitudes of celebrities, politicians, and influencers sponsoring SPACs of their own. The list includes the likes of Colin Kaepernick, Shaquille O’Neal, Alex Rodriguez and Tony Hawk. Even amidst new concerns from the SEC, which reportedly opened an inquiry into the investment risks of SPACs and issued a bulletin warning prospective investors to exercise caution investing in celebrity-sponsored SPACs, SPACs have raised staggering amounts of capital.

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GettyImages-470318916-liu-disgorgement-300x200Late in June, the U.S. Supreme Court issued a decision in Liu v. SEC, a closely watched case in which the Court in an 8-1 opinion curtailed the authority of the Securities and Exchange Commission (SEC) to seek disgorgement of profits from private parties in judicial enforcement proceedings. The Court articulated restrictions on the SEC’s disgorgement power, including (1) limiting disgorgement amounts to the net profits from wrongdoing, (2) limiting the SEC’s ability to seek disgorgement of profits on a joint and several basis, and (3) directing the SEC to return disgorged monies to aggrieved investors rather than depositing them in the U.S. Treasury. Although it does not address insurance issues directly, the Court’s analysis of the disgorgement remedy is bound to revive discussion of the issue of insurability of losses suffered as a result of settlements or judgments characterized as disgorgement.

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Seal_of_the_United_States_Court_of_Appeals_for_the_Second_Circuit_svg-300x300When adding new or additional layers to an insurance program, policyholders are often asked to sign a “warranty letter” providing comfort to the prospective insurer that the policyholder is not aware of impending claims. Typical warranty letters include both subjective and objective representations, indicating that the policyholder has both no actual (or subjective) knowledge of any impending claims and no reasonable (or objective) expectation that such a claim will arise. If a claim later arises, these warranties may provide a basis for full rescission of a policy or create an exclusion for claims that the policyholder knew or should have known would be filed. And when a warranty is poorly worded or overly broad, it may give rise to a morass of coverage litigation.

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