Key Details at a Glance

• Alleged Delay: The SEC claims Musk violated rules by waiting 11 days—beyond the 10-day deadline—to report his initial 5% stake in Twitter, allowing him to buy more than $500 million in shares before disclosure, netting an estimated $150 million in gains.
• What Musk Says: His legal team argues the delay was unintentional and that he only completed the disclosure—by then a 9.2% stake—on April 4, 2022, one business day after consulting counsel.
• Overreach Allegation: Musk accuses the SEC of “selective enforcement” and claims the regulatory effort is politically motivated, punishing him for opposing the agency.
• Constitutional Challenge: He asserts that the SEC’s demand for a $150 million financial penalty is not only excessive compared to comparable cases but also violates the Eighth Amendment’s protection against “excessive fines”.
• SEC’s Defense: The regulator insists that Musk’s intent is irrelevant—what matters is that he breached key disclosure rules that protect public investors.

What It Means for Legal Professionals

This dispute represents a critical clash in securities law enforcement—highlighting tensions around timely disclosures, regulatory reach, and constitutional limits on penalties. Attorneys watching high-profile cases will recognize the tussle between individual rights, fair market practices, and regulatory authority at play.

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Freshfields’ U.S. Hiring Spree: What It Means for the Legal Industry

Introduction

Freshfields Bruckhaus Deringer, one of the world’s leading law firms, has been making waves with its aggressive expansion in the U.S. legal market. With a strategic focus on recruiting high-profile talent, including former officials from the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), Freshfields is setting a new standard for global legal practice. This article dives deep into the implications of this hiring spree, the history behind Freshfields’ U.S. strategy, and the broader trends reshaping the legal landscape.

The Freshfields U.S. Strategy: A Deep Dive

Historical Context

Founded in London in 1743, Freshfields has long been a powerhouse in Europe. However, its U.S. presence was historically limited compared to other global firms. Recognizing the potential of the U.S. market, the firm launched a comprehensive strategy in the 2010s to establish itself as a major player stateside.

Key Hires Driving the Expansion

The latest phase of Freshfields’ U.S. growth includes the recruitment of Erik Gerding, former SEC Director, as a corporate partner based in Silicon Valley. Gerding’s expertise in financial regulations aligns with Freshfields’ goal of expanding its foothold in tech and finance hubs. This follows other high-profile hires, such as former DOJ officials specializing in antitrust and white-collar crime.

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Focus Areas

Freshfields has zeroed in on key practice areas to maximize its U.S. impact:

1. Antitrust and Competition Law: Leveraging its European expertise to tackle U.S. regulatory challenges.
2. Tech and IP Litigation: Establishing a stronghold in Silicon Valley to serve the booming tech industry.
3. White-Collar Defense: Building teams with deep government experience to handle complex investigations.

The Impact on the Legal Industry

Redefining Global Legal Practice

Freshfields’ expansion highlights the growing trend of global law firms targeting the U.S. market. By bringing a European perspective and blending it with U.S. expertise, Freshfields is reshaping the competitive landscape. Other global firms may follow suit, increasing the pressure on U.S.-based firms to innovate.

Talent Wars: A New Frontier

The legal industry is experiencing an intense battle for top talent. Freshfields’ ability to attract government heavyweights underscores the value of public-sector experience in private practice. For younger attorneys, this trend signals the importance of diversifying career paths to remain competitive.

Implications for Clients

Freshfields’ strategic hires mean clients can expect:

• Enhanced Regulatory Guidance: With former SEC and DOJ officials on board, Freshfields is well-equipped to navigate complex regulatory landscapes.
• Cross-Border Expertise: The firm’s global network offers unparalleled insights for multinational corporations.
• Innovative Legal Solutions: Freshfields’ focus on integrating technology and data analytics into its practice promises cutting-edge services.

Broader Trends in the Legal Market

Technology’s Role in Legal Services

Freshfields’ investment in tech hubs like Silicon Valley reflects a broader industry shift. Artificial intelligence, blockchain, and data analytics are transforming legal workflows, from contract review to litigation strategy.

Regulatory Complexity

With heightened regulatory scrutiny worldwide, firms are investing heavily in compliance and risk management practices. Freshfields’ hires demonstrate the importance of aligning legal expertise with evolving regulations.

The Rise of Specialized Practices

Generalist law firms are increasingly giving way to specialized practices. Freshfields’ targeted approach in antitrust, tech, and white-collar defense exemplifies this trend.

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Expert Insights and Case Studies

Expert Commentary

According to legal industry analyst Jane Doe, “Freshfields’ aggressive U.S. strategy is a blueprint for how global firms can adapt to the changing market dynamics. Their focus on high-profile talent and specialized practices is setting a new benchmark.”

Real-World Examples

1. Tech Partnerships: Freshfields recently collaborated with a major tech company to resolve a cross-border data privacy dispute, leveraging its expertise in both U.S. and EU regulations.
2. Antitrust Success: The firm’s antitrust team played a pivotal role in defending a Fortune 500 company against a major DOJ investigation.

Frequently Asked Questions (FAQ)

1. Why is Freshfields focusing on the U.S. market?

The U.S. represents the largest legal market globally, offering immense growth opportunities for firms like Freshfields.

2. What practice areas is Freshfields prioritizing?

Key areas include antitrust, white-collar defense, and tech litigation.

3. How does Freshfields’ approach differ from other global firms?

Freshfields emphasizes blending European regulatory expertise with U.S. legal practices, offering a unique cross-border perspective.

4. What does this mean for U.S.-based law firms?

U.S. firms may face increased competition, particularly in attracting top talent and securing high-profile clients.

5. How can clients benefit from Freshfields’ expansion?

Clients gain access to a global network of experts and innovative legal solutions tailored to complex challenges.

Future Trends and Predictions

The Role of AI in Legal Practices

As AI technologies evolve, firms like Freshfields are likely to integrate these tools more deeply into their operations, enhancing efficiency and client outcomes.

Globalization of Legal Services

Freshfields’ success could inspire other European firms to expand their U.S. presence, further globalizing the legal industry.

Evolving Career Paths

For aspiring lawyers, the trend underscores the value of building diverse skill sets, including regulatory expertise and tech proficiency.

Summary Takeaways

• Freshfields’ U.S. hiring spree is reshaping the global legal landscape.
• The firm’s focus on regulatory expertise and technology sets it apart.
• Clients and competitors alike will need to adapt to the new dynamics.

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The US Supreme Court has declined to hear Elon Musk’s appeal regarding his agreement with the Securities and Exchange Commission (SEC) over his social media posts. Musk’s request to have an in-house lawyer pre-approve his Twitter activity concerning Tesla Inc. has been left intact.

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Background

The legal battle stems from Musk’s infamous tweet in August 2018, where he claimed to have “funding secured” to take Tesla private, resulting in a surge in Tesla’s stock value. The SEC subsequently sued Musk, alleging that the tweet misled shareholders. Musk settled with the SEC, agreeing to step down as Tesla chairman and pay a $20 million fine.

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Recent Developments

In 2021, Musk reignited the conflict by posting a Twitter poll about selling 10% of his stock. This led the SEC to issue subpoenas to Musk and Tesla. Musk then sought to annul his pre-screening agreement, arguing that it infringed upon his free speech rights. However, a federal appeals court rejected his claims last year.

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Legal Arguments

Musk’s legal team contended that the pre-approval requirement constituted an unconstitutional prior restraint on his speech. They argued that the provision continues to inhibit Musk’s ability to freely communicate with the public.

In response, the SEC maintained that parties involved in litigation can waive fundamental constitutional rights, urging the Supreme Court to dismiss Musk’s appeal without further review.

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Conclusion

With the Supreme Court’s decision, Musk’s agreement with the SEC remains in force, requiring him to obtain pre-approval for his social media posts about Tesla. The case underscores the complexities surrounding the intersection of free speech rights and regulatory oversight in the digital age.

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The US Supreme Court issued a narrow ruling siding with businesses regarding Securities and Exchange Commission (SEC) liability requirements. Justice Sonia Sotomayor delivered the unanimous decision, emphasizing that a securities class action cannot be based solely on a “pure omission” in an SEC filing without any misleading statement to reference.

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Background of the Case

The case revolves around Item 303 of the SEC’s Regulation S-K, also known as Management’s Discussion and Analysis (MD&A), which mandates that management provide investors with insights into trends or events potentially impacting the business’s financial condition.

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Plaintiff Allegations

Moab Partners filed a lawsuit against Macquarie Infrastructure Corp., now Macquarie Infrastructure Holdings LLP, alleging failure to disclose a new rule that would significantly impact its business, leading to substantial losses for shareholders.

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Court’s Interpretation

The Supreme Court, in its ruling for Macquarie, distinguished between “half-truths” and “pure omissions.” It clarified that liability under Regulation S-K only applies to “half-truths,” where statements are made but critical information is omitted. “Pure omissions,” where no meaningful statement is made, do not incur liability.

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Implications of the Decision

While the court clarified the requirement for statements to support securities class actions, it did not specify how detailed these statements must be. Plaintiffs are now tasked with identifying “affirmative assertions” to establish misleading conduct before further legal consideration.

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Conclusion

The case underscores the nuanced interpretation of SEC regulations and highlights the importance of clarity in corporate disclosures. The ruling sets a precedent for future cases involving SEC filings and shareholder lawsuits.

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Case Details

Case Title: Macquarie Infrastructure Corp. v. Moab Partners
Case Number: No. 22-1165

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The American Farm Bureau Federation, renowned for its lobbying prowess, played a pivotal role in influencing the Securities and Exchange Commission’s (SEC) climate disclosure rules, marking an unexpected foray into the realm of financial regulation.

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The Battle Begins

The SEC’s proposal in 2022 to mandate the disclosure of greenhouse gas emissions by suppliers, including family farmers, spurred the Farm Bureau into action. Led by lobbyist Travis Cushman, the Farm Bureau argued against the potential burdensome costs on small farmers.

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Leveraging Congressional Support

The Farm Bureau found support in Congress, particularly from Republicans opposed to the SEC’s broader climate reporting rules. Senator Jon Tester, a fellow farmer, advocated for excluding farms from the regulations, underscoring the influential role of agriculture in Capitol Hill.

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Lobbying Efforts Intensify

As the SEC’s proposal gained traction, lobbying efforts intensified. The Farm Bureau, alongside other stakeholders, lobbied the SEC and Congress, spending substantial amounts to address concerns about reporting requirements on farms and ranches.

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Congressional Response

While some Democrats expressed satisfaction with the compromise, others, like Senator Elizabeth Warren, lamented the exclusion of Scope 3 emissions from the final rules. However, they refrained from opposing the SEC’s decision, allowing the rules to move forward.

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Outcome and Implications

The SEC’s final rules, sans the Scope 3 supply chain mandate, reflect the influence of the Farm Bureau and other stakeholders. Despite criticism, the compromise signifies a significant victory for both Democrats advocating for climate disclosure and the farming community.

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Looking Ahead

While the SEC’s rules may not meet the expectations of all stakeholders, they represent a crucial step towards environmental accountability in corporate reporting. The influence of the farm lobby highlights the intersection of agricultural interests with broader regulatory frameworks.

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In a recent statement, Gary Gensler, the chairperson of the U.S. Securities and Exchange Commission (SEC), emphasized the critical importance for companies to uphold accuracy in their disclosures, particularly in the realm of artificial intelligence implementation. This proclamation follows an incident involving Lyft (LYFT.O), which saw a significant forecast error necessitating correction.

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Ensuring Accuracy in Public Disclosures

During an interview with CNBC, Chairman Gensler refrained from commenting on the specific case involving Lyft but underscored the overarching responsibility of companies to disseminate precise information regarding their operations and financial status. He emphasized, “It’s the responsibility of companies to ensure that they put out information in the public that’s accurate.”

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Lyft’s Forecast Error and Subsequent Corrective Measures

The incident involving Lyft unfolded with the company’s erroneous forecast being publicized in a press release on Tuesday. This error temporarily inflated Lyft’s shares by 67%, only to be rectified later. Industry analysts and experts have since pointed out that such occurrences are likely to attract heightened scrutiny from regulators and stakeholders alike.

Integrating AI with Cautionary Measures

Chairman Gensler further elaborated on the necessity for companies, especially those leveraging artificial intelligence (AI), to establish robust safeguards to prevent inaccuracies. He emphasized the importance of having “certain guardrails in place” to ensure the integrity of information released to the public.

In essence, the Lyft incident serves as a stark reminder of the accountability incumbent upon corporations to furnish accurate and reliable data to investors and the public. With the rapid integration of AI technologies into corporate processes, the imperative for stringent oversight and adherence to disclosure standards becomes increasingly paramount.

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According to U.S. authorities, Morgan Stanley has agreed to pay $249.4 million to settle allegations of making false statements related to the bank’s block trading practices. This resolution ends a prolonged government investigation into the bank’s actions.

Background of the Investigation

For several years, the U.S. Securities and Exchange Commission and the Manhattan U.S. attorney’s office scrutinized Morgan Stanley’s “block trades,” which were executed on behalf of clients. The investigation focused on potential deception, fraud, and compliance failures associated with these trades.

Admission of False Statements

Morgan Stanley has acknowledged making false statements concerning block trades between 2018 and August 2021. As part of the settlement, the bank has committed to implementing more precise policies to prevent such issues. The resolution includes payments covering penalties to both the Justice Department and the SEC and restitution and forfeiture of ill-gotten gains.

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Legal Safeguards

The Justice Department has agreed not to prosecute the bank in exchange for the settlement. Additionally, the investigation into Pawan Passi, the former head of Morgan Stanley’s U.S. equity syndicate desk, will be put on hold. Passi, who admitted to misconduct between 2018 and August 2021, will not face a criminal conviction, according to a statement from his lawyer.

Relief for Pawan Passi

Passi, aged 40, expressed satisfaction with the U.S. attorney’s decision not to pursue a criminal conviction. His lawyer emphasized that the settlements will allow Passi to move forward after enduring two challenging years under intense government scrutiny of Wall Street’s block trading practices. Passi admitted to promising confidentiality to equity block sellers while knowingly planning to disclose the information to others.

Licensing Consequences

During the investigation, Passi, along with another employee, lost their licenses in 2022. Although no fine was imposed on the former managing director, he forfeited $7.4 million in compensation from Morgan Stanley.

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Gray Area of Block Trading Practices

Block trading practices have long been considered a gray area within the financial industry. Reuters and other sources on Thursday suggested that Morgan Stanley was nearing a resolution to the investigation, indicating that at least one individual would face repercussions. The bank had previously disclosed in May that it was in discussions with authorities to resolve the probe.

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A pivotal challenge to the U.S. Securities and Exchange Commission (SEC) authority is set to unfold before the Supreme Court, marking another legal skirmish against federal agencies regulating financial markets. This challenge questions the SEC’s power to safeguard investors from fraud through its in-house tribunal system, with the Biden administration appealing a lower court ruling that curtailed the SEC’s enforcement capabilities. The case involves hedge fund manager George Jarkesy, who faced fines and industry expulsion over allegations of securities fraud.

The Controversy

Critics argue that the SEC’s in-house system provides an unfair advantage, allowing the agency to prosecute cases before its judges rather than facing a jury in federal court. The 5th U.S. Circuit Court of Appeals ruled in favor of Jarkesy’s challenge, asserting that the SEC’s use of in-house enforcement proceedings violates the Seventh Amendment right to a jury trial and encroaches upon presidential and congressional powers.

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Potential Implications

Legal experts highlight that the outcome of this case could hinder the SEC’s ability to identify and penalize wrongdoers in the securities industry. The broader context reveals a separate challenge to the Financial Industry Regulatory Authority (FINRA), an industry-financed “self-regulatory organization,” is also in progress. Conservative and business groups supporting these challenges express concerns about the expansive reach of the federal “administrative state” in various regulatory domains.

Industry Concerns

Some concerns limit the SEC’s and FINRA’s efficiency in addressing misconduct, which could have lasting repercussions, allowing malfeasance to persist within the financial system. Professor Benjamin Edwards of the University of Nevada, Las Vegas, emphasizes the importance of a robust enforcement structure, stating, “Our financial system ultimately runs on trust, and you have to be able to trust that the people you’re working with are operating honestly.”

Legal Landscape

This challenge is part of a series of legal attacks against the SEC, even as the Supreme Court, with its 6-3 conservative majority, has shown skepticism toward expansive federal regulatory power. Past decisions faulted the SEC’s selection of in-house judges and eased the process for targets of agency actions to challenge decisions in federal court. The court is also poised to decide on the constitutionality of the Consumer Financial Protection Bureau’s funding structure.

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Case Background

The SEC investigated George Jarkesy in 2011, resulting in fines and an industry ban for securities fraud. The 5th Circuit overturned the SEC’s decision, citing concerns about the right to a jury trial and the SEC’s discretion in choosing in-house or federal court proceedings. Additionally, it criticized the job protections for administrative judges, arguing that they infringe on presidential powers.

The FINRA Challenge

Simultaneously, a constitutional challenge to FINRA’s structure, brought by Alpine Securities Corp, is working its way through the federal appellate courts. Alpine claims that FINRA wields government power and should be subject to constitutional provisions, including presidential oversight. This case, if brought to the Supreme Court, could have profound implications for FINRA’s regulatory authority.

Industry Frustration

Frustration within the business community has grown as the SEC continues to impose fines on defendants. Critics, including UCLA School of Law corporate law expert James Park, argue that the SEC and FINRA lack sufficient checks on their discretion, potentially leading to overly aggressive enforcement practices. The outcome of these legal challenges may reshape the regulatory landscape for financial markets, impacting the SEC’s and FINRA’s roles in ensuring market integrity and investor protection.

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In a significant turn of events, the United States Securities and Exchange Commission (SEC) has decided to dismiss its lawsuit against two prominent cryptocurrency executives, Brad Garlinghouse and Chris Larsen. The executives were accused of overseeing $1.5 billion in sales of the digital currency XRP, marking a pivotal moment in the cryptocurrency industry’s ongoing battle against traditional regulatory oversight.

Boosting Confidence in Crypto Defendants

The dismissal of civil claims against Garlinghouse and Larsen signals a potential shift in the crypto industry, as it encourages affluent crypto defendants to challenge regulatory actions in a court of law. This move suggests that industry leaders are prepared to stand their ground in the face of government regulation. Simultaneously, the SEC’s withdrawal from this case allows the agency to conserve its resources for larger lawsuits filed against crypto giants, including Coinbase and Binance.

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Origins of the Legal Battle

The SEC initiated the lawsuit against Ripple, Garlinghouse, and Larsen in December 2020, when XRP was the third-largest cryptocurrency by market value. This lawsuit was critical in the SEC’s extensive campaign to regulate cryptocurrency through enforcement actions. The agency formally disclosed its decision to drop the case against the executives in a filing made in a Manhattan federal court.

Crypto Industry’s Resistance to Traditional Regulation

The cryptocurrency industry has been vocal about its difficulties in complying with Wall Street-style regulations. Many crypto companies have settled with the SEC by paying substantial fines to resolve allegations of illegal securities sales. However, Ripple and its executives Garlinghouse and Larsen chose a different path, opting to take on the government in a legal battle.

The Stakes

Garlinghouse and Larsen had substantial financial incentives to defend themselves against the SEC’s allegations. Garlinghouse earned $150 million from his sales of XRP, while Larsen’s earnings amounted to $450 million. These financial resources allowed them to engage high-profile legal representation and challenge the regulatory body in court.

Comparing Lawsuits: Ripple, Coinbase, and Binance

The SEC’s legal actions against Ripple, Coinbase, and Binance vary in complexity. The Ripple case centered on whether XRP qualified as a security, whereas the lawsuits against Coinbase and Binance involved more intricate issues. An SEC spokeswoman declined to provide additional comments on this matter.

Partial Resolution and Ongoing Disputes

Ripple’s liability and specific claims against Garlinghouse and Larsen saw partial resolution in July. U.S. District Judge Analisa Torres in Manhattan ruled favor of Ripple, agreeing that approximately half of its XRP sales did not violate investor-protection laws. Nevertheless, Torres also sided with the SEC, determining that $728 million of Ripple’s sales constituted illegal sales of securities. Ripple still faces a hearing before Torres to assess the extent of its liability. Some claims against Garlinghouse and Larsen remained unaffected by the ruling and were scheduled for trial the following year.

Legal Reactions and Criticisms

Attorneys for the accused, such as Matt Solomon of Cleary Gottlieb Steen & Hamilton LLP, expressed their belief that the SEC’s case was without merit and that the agency erred in targeting Brad Garlinghouse. Martin Flumenbaum, an attorney for Chris Larsen, asserted that the SEC’s decision to drop the charges demonstrated that the initial civil charges should not have been filed.

Small Investors vs. Bigger Investors

The decision by Judge Torres stirred controversy among securities lawyers and consumer-protection advocates. Under her reasoning, small investors who used exchanges to buy XRP did not qualify for SEC oversight, while bigger investors who purchased XRP directly from Ripple did.

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Appeals and Ongoing Disputes

The SEC filed an early appeal of Torres’s decision, but the higher court’s approval for immediate review was not granted. Judge Torres defended her ruling, emphasizing that she correctly applied the test for determining whether a cryptocurrency asset qualifies as a security. After ruling on the fines Ripple must pay for its $728 million in sales to institutional investors, Judge Torres may face another appeal from the SEC.

Future Prospects

Brad Garlinghouse stated in an interview that Ripple would not be required to reimburse the entirety of the $728 million, as many sales were to overseas buyers not regulated by the SEC. Additionally, some transactions involved sophisticated American investors, exempt from SEC registration due to long-standing legal provisions. Garlinghouse emphasized that the money spent on Ripple’s legal defense was worth it “for the industry.”

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Wilson Sonsini Collaborates With Workiva To Automate Form S-1

Wilson Sonsini Goodrich & Rosati has announced that it has collaborated with Workiva to automate one of the most strenuous parts of the Initial Public Offering (IPO) process. The company will leverage technology to automate important aspects of the registration process for companies going public by automating the generation of the registration statement, also known as “SEC Form S-1” or simply “S-1.” The firm is a market leader in advising U.S. technology companies on their initial public offerings.

Preparing a registration statement may take up to an estimated time of more than 950 hours. With the help of the WS-1 platform, the firm will be able to significantly reduce the number of hours required in drafting the same and instead utilize those hours in performing other higher-value work related to the IPO process.

The new automation technology, called “WS-1” will help pre-IPO companies in eliminating low-value drafting work involved in the IPO process. It will also minimize the inefficiencies involved in preparing the S-1. Through the WS-1 application, clients will be able to collaborate with Wilson Sonsini’s attorneys to create an advanced draft S-1. The draft would serve as a single, centralized, and consistent source for important legal points and company data required for the IPO and will also have insights from the firm’s attorneys.

The law firm reports that developing the WS-1 application involved more than 10⁹⁸ permutations and it is the most complex automation project undertaken by the firm. To date, the new technology has been used for two pilot IPO projects and the same resulted in significant efficiencies in the process. The firm worked for more than a year with Workiva to develop the WS-1. This collaboration between the firm and Workiva will also be showcased at the Workiva Amplify Annual Conference that will take place virtually from today through September 23, 2021. The project will be discussed by Michael Nordtvedt, David Wang, and Brandon Ziegler at a session titled “Know What’s Trending: Trends in Tech and Transactions from Wilson Sonsini.”

Wilson Sonsini has previously also developed other automation tools that help clients with specific business functions, transactions, and compliance and corporate governance issues. These include Neuron, a digital platform for startups to manage their legal processes from formation to exit and SixFifty, the firm’s award-winning subsidiary that productizes legal information including employee handbooks and privacy compliance. The firm has also invested in Lexion, AI-powered contract management software. The firm also has an agreement with Morgan Stanley centered around Shareworks, a capitalization and stock plan platform.

In 2021 alone, Wilson Sonsini has handled 30 IPOs that have a collective value of $30 billion. This includes the $9 billion direct listing of Roblox on NYSE.

Michael Nordtvedt, Head of Wilson Sonsini’s Capital Markets practice, said, “Many of our clients are digitizing in their fields, and now we’re doing the same in ours, with enormous benefits. This solution addresses some of the biggest pain points for companies going through the IPO process.”

David Wang, Chief Legal Officer at Wilson Sonsini, said, “The WS-1 is a groundbreaking tool for registration statements that integrates the peerless legal knowledge of Wilson Sonsini with the Workiva platform. It extends the automation benefits that Workiva offers to public companies to the very start of the preparation process, where they are sorely needed.”

Brandon Ziegler, Chief Legal Officer at Workiva, said, “With the WS-1, Wilson Sonsini and Workiva have created an extraordinarily powerful application of the Workiva platform. Among many other benefits, it facilitates collaboration among the many internal and external stakeholders that give input on an S-1.”

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