I am pleased to announce that I will be making a presentation to the Corporate Counsel Section of the Tarrant County Bar Association on December 4, 2013. The presentation is titled "E-Corporate Law" and tackles issues related to electronic contracting and taking corporate actions by electronic means. This will be an updated version of a similar presentation I made in 2011 to the UT-CLE Annual Conference on Securities Regulation and Business Law.
Jamie Bryan will be co-presenting with a discussion of Protecting Communications.
Tuesday, November 26, 2013
Tuesday, November 12, 2013
BrokerCheck: Researching Your Investment Professional
"I had a very strong work ethic. The problem was my ethics in work."
- Giovanni Ribisi as Seth Davis in "Boiler Room"
How can you find out if your securities broker or other investment professional is a straight shooter or an extra from the movie "Boiler Room"? There is no substitute for thorough due diligence, and a great place to start such research is FINRA's BrokerCheck. FINRA stands for the Financial Industry Regulatory Authority, an independent organization that regulates the securities industry.
FINRA's website homepage (www.FINRA.org) includes the BrokerCheck feature. BrokerCheck is a terrific (and free!) online tool which allows users to conduct a background check on investment firms and investment professionals, such as brokers, brokerage firms, investment advisers and investment adviser firms. By inserting the name of an investment professional or their firm name into the BrokerCheck dialogue box, users can access information such as:
- Giovanni Ribisi as Seth Davis in "Boiler Room"
How can you find out if your securities broker or other investment professional is a straight shooter or an extra from the movie "Boiler Room"? There is no substitute for thorough due diligence, and a great place to start such research is FINRA's BrokerCheck. FINRA stands for the Financial Industry Regulatory Authority, an independent organization that regulates the securities industry.
FINRA's website homepage (www.FINRA.org) includes the BrokerCheck feature. BrokerCheck is a terrific (and free!) online tool which allows users to conduct a background check on investment firms and investment professionals, such as brokers, brokerage firms, investment advisers and investment adviser firms. By inserting the name of an investment professional or their firm name into the BrokerCheck dialogue box, users can access information such as:
- is this person registered and a broker or investment adviser with the SEC, any self-regulatory organization or one or more states?
- how long has this person been registered?
- which securities firms has this person been affiliated with and what is his or her employment history for the last 10 years?
- has this person had any "Disclosure Events," such as customer complaints, arbitrations, regulatory actions, employment terminations, bankruptcy filings or criminal or civil judicial proceedings?
- has this person passed any state or federal securities industry exams?
To the extent the investment professional or investment firm has been involved with one or more reported Disclosure Events, users can review the allegations made against the professional or firm, the status of the claim, and a summary of how the matter was resolved.
Special thanks to John Fahy for bringing to my attention the news that FINRA recently released an enhanced version of BrokerCheck which is more user-friendly.
Monday, November 4, 2013
Doing Good and Doing Well: Texas Corporations with a Social Purpose
The wall between for-profit and not-for-profit corporations in Texas may be tumbling.
Historically, under Texas corporate law, one could either:
(1) form a for-profit corporation, in which case the corporation ans its management team was expected to maximize shareholder value by maximizing profits for the benefit of the corporation's shareholders; or
(2) form a not-for-profit corporation, in which case the corporation and its management team was expected to pursue one or more social goals (such as enhancing education, culture or the arts) without paying any dividends or other economic benefits to any particular owner or investor.
The so-called "social entrepreneurship" movement has objected to this dichotomy. Why shouldn't a corporation be allowed to pursue both profits and social benefits so long as the stockholders approved of the approach, this movement asked. Under prior Texas law, officers and directors of a for-profit corporation might risk liability for breaching their fiduciary duty to the corporation if they pursued a social purpose at the expense of profits.
But Texas law has become more social entrepreneurship-friendly. Effective September 1, 2013, Section 3.007 of the Texas Business Organizations Code (TBOC) has been amended to authorize Texas corporations to include a social purpose in their certificates of formation.
Under the new law, "social purpose" is defined as: "promoting one or more positive impacts on society or the environment or of minimizing one or more adverse impacts of the corporation's activities on society or the environment. Those impacts may include:
(A) providing low-income or underserved individuals or communities with beneficial products or services;
(B) promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business;
(C) preserving the environment;
(D) improving human health;
(E) promoting the arts, sciences, or advancement of knowledge;
(F) increasing the flow of capital to entities with a social purpose; and
(G) conferring any particular benefit on society or the environment."
Section 21.101(a) of the TBOC now permits shareholders of a for-profit corporation to enter into an agreement governing the manner in which the corporation may exercise its power pursue a social purpose permitted by its certificate of formation.
Finally, Section 21.401 of the TBOC now authorizes directors and officers of a for-profit corporation to consider the social purpose of the corporation in discharging their duties to the corporation if such social purpose is stated in the corporation's certificate of formation.
It will be interesting to see how many Texas for-profit corporations take advantage of this new flexibility permitting Texas corporations to seek to both "do good" and "do well."
Historically, under Texas corporate law, one could either:
(1) form a for-profit corporation, in which case the corporation ans its management team was expected to maximize shareholder value by maximizing profits for the benefit of the corporation's shareholders; or
(2) form a not-for-profit corporation, in which case the corporation and its management team was expected to pursue one or more social goals (such as enhancing education, culture or the arts) without paying any dividends or other economic benefits to any particular owner or investor.
The so-called "social entrepreneurship" movement has objected to this dichotomy. Why shouldn't a corporation be allowed to pursue both profits and social benefits so long as the stockholders approved of the approach, this movement asked. Under prior Texas law, officers and directors of a for-profit corporation might risk liability for breaching their fiduciary duty to the corporation if they pursued a social purpose at the expense of profits.
But Texas law has become more social entrepreneurship-friendly. Effective September 1, 2013, Section 3.007 of the Texas Business Organizations Code (TBOC) has been amended to authorize Texas corporations to include a social purpose in their certificates of formation.
Under the new law, "social purpose" is defined as: "promoting one or more positive impacts on society or the environment or of minimizing one or more adverse impacts of the corporation's activities on society or the environment. Those impacts may include:
(A) providing low-income or underserved individuals or communities with beneficial products or services;
(B) promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business;
(C) preserving the environment;
(D) improving human health;
(E) promoting the arts, sciences, or advancement of knowledge;
(F) increasing the flow of capital to entities with a social purpose; and
(G) conferring any particular benefit on society or the environment."
Section 21.101(a) of the TBOC now permits shareholders of a for-profit corporation to enter into an agreement governing the manner in which the corporation may exercise its power pursue a social purpose permitted by its certificate of formation.
Finally, Section 21.401 of the TBOC now authorizes directors and officers of a for-profit corporation to consider the social purpose of the corporation in discharging their duties to the corporation if such social purpose is stated in the corporation's certificate of formation.
It will be interesting to see how many Texas for-profit corporations take advantage of this new flexibility permitting Texas corporations to seek to both "do good" and "do well."
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