Richards Kibbe & Orbe partners Daniel Zinman and Rowan Gaither published their article "Building a Due Diligence Defense for Directors and Officers" in Corporate Counsel.
On March 16, 2015, trial is scheduled to begin in FHFA v. Nomura Holding America Inc. in the U.S. District Court for the Southern District of New York. This case—brought by the Federal Housing Finance Agency over the issuance of residential mortgage-backed securities (RMBS)—exposes the individual defendants to potentially ruinous liability under the Securities Act.
Two recent Securities Act decisions in the Southern District of New York should give pause to any director and officer defendants facing Securities Act claims. Both were authored by Judge Denise Cote, who will preside over the Nomura trial.
In this article, Mr. Zinman and Mr. Gaither discuss Judge Cote’s opinions, consider the limitation on corporate indemnification of individuals for Securities Act violations and propose a framework for the development of a personal due diligence defense under the Securities Act.