Susan Bysiewicz, the former Secretary of State for the state of Connecticut, was a partner with Pastore (then Pastore & Dailey) for several years, running the firm’s office in Glastonbury, CT. She left to run for Governor, and has been elected now to her second term as Lt. Governor. While at the Firm, Ms. Bysiewicz worked on corporate, banking and election law matters. A graduate of Yale University and Duke Law School, Ms. Bysiewicz serves with Connecticut Governor Ned Lamont.
Earlier this month, Pastore successfully defended former hedge fund manager’s claims of unfair trade practices against investment vehicles established by heirs to a multi-billion dollar national retail company. Hon. Sheila Ozalis, presiding over the Stamford, CT Complex Litigation Docket, held that genuine issues of material fact exist as to whether defendants’ conduct was unfair and/or deceptive in a manner violating the Connecticut Unfair Trade Practices Statute. Accordingly, plaintiff’s claims, which related to the unfair attempt to deflect an investment commitment from one of world’s largest hedge funds to a potentially competing fund, will proceed to trial.
Pastore LLC successfully negotiated the separation of C-suite executive from a publically traded Boston based bio-tech company. Key issues involved the vesting of stock options and related plan documents, adherence to Rule 144 in the disposition of stock and the scope of non-competition agreements under Delaware law.
In a decision issued November 9, 2022, the Connecticut Superior Court upheld Pastore’s position against a nationally recognized broker-dealer, holding that a FINRA arbitration provision agreed to by one’s parent does not bind a person that seeks to invalidate that very agreement. As the Court stated, plaintiff’s claims “are personal to her based on alleged tortious and illegal conduct directed toward harming her as a putative beneficiary, not her mother’s interests as the account holder.” The decision strengthens Connecticut’s strong policy against enforcing arbitration agreements against those who have not themselves agreed to arbitrate disputes.
Pastore regularly enforces and defends FINRA arbitration provisions, and is familiar with the intricacies of compelling parties to arbitrate disputes when they have so agreed.
Joseph Pastore, the chairman of Pastore LLC, has been named a 2023 Top Rate litigator nationally by the American Lawyer and has received recognition as 2023 AV Preeminent from Martindale- Hubbell. Both publications evaluate attorneys from around the country using independent criteria.
On September 23, the Connecticut Crypto Forum (the “Forum”) held an event at the University of Connecticut at Stamford. The Forum connects large and sophisticated capital pools with leading players and thinkers across the crypto, defi and Web 3.0 markets to strengthen investor knowledge, understanding and skill. Pastore LLC is proudly a Founder and Sponsor of the Connecticut Crypto Forum. The Forum’s September 23 event was an invite-only session.
In the first half of the event, a panel of speakers discussed the current maturity of the crypto and blockchain markets. The panel addressed the current challenges facing the evolving asset class and concluded that crypto/blockchain assets are still “metaphorically” in their teenage years. The asset class still is characterized by volatility. Moreover, the panelists noted the time of hyper valuation of projects in the industry is over. What follows now is a time of acquisitions. Many companies and projects will likely fail, but the ones with worthwhile technology that lack sufficient cashflows to continue operation will likely be consolidated within larger players and ultimately be poised to make the industry more efficient. However, the panelists agreed that the industry’s best days are ahead of it.
During the second half of the event, Pastore LLC’s Managing Partner, Christopher Kelly, led a discussion with Congressman Jim Himes, an emerging leader in the crypto/blockchain industry on Capitol Hill. Congressman Himes noted the significant attention that crypto and blockchain assets have received in Congress. He noted that he is working with other members of Congress on legislation concerning the industry.
When a member of the crowd asked what should businesses do considering the lack of legal and regulatory clarity surrounding crypto assets, Mr. Kelly gave a poignant response: Don’t be afraid, be transparent and work with counsel to navigate the murky regulatory waters. Pastore, as a thought leader in the field, is positioned to help businesses and individuals plan a path forward despite the uncertainty.
Pastore LLC continues to advise a large private equity general partner in connection with the sale by one of its sub funds of a substantial portion of its automotive dealership portfolio. Pastore LLC has advised the client on multiple issues with the sale, and most recently, on escrow issues arising from state regulatory matters as a result of the sale of a certain asset within the portfolio. The sale was subject to review by the state automotive regulator overseeing the transaction after one party to the transaction objected to the sale. After review, the state regulator has sided with the client and ordered the sale, but the challenging party has sought to appeal the order, placing barriers to the closing of the transaction.
Pastore LLC represented one of the Nation’s largest investment banks before the Third Circuit on a case involving the scope of a bankruptcy court’s subject matter jurisdiction. White & Case represented an issuer of private debt, arguing that bankruptcy court subject matter jurisdiction extends to disputes involving a reorganized debtor. Law 360 has issued several articles regarding this matter. In addition to handling this appeal, Pastore LLC has won Appeals at the Eighth Circuit (Rights holders in a merger) and Second Circuit (Hedge Fund investments) over the last year.
On November 4, 2022, compliance with the amendments to the advertising and cash solicitation rules in Rule 206(4)‑1 under the Investment Advisers Act of 1940 (Marketing Rule), which the Commission issued on December 22, 2020 will become mandatory.
Since the advertising and cash solicitation rules were adopted (Rule 206(4)-1 in 1961 and Rule 206(4)-3 in 1979, respectively) the advent of the internet and social media, among other things, has dramatically changed the landscape of marketing professional services. The Marketing Rule is designed to modernize rules that govern investment adviser advertisements and payments to solicitors, replacing the broadly drawn limitations and prescriptive or duplicative elements in the previous rules with more principles-based provisions, as described below.
Definition of Advertisement. The amended definition of “advertisement” contains two prongs:
- The first prong captures communications traditionally covered by the advertising and includes any direct or indirect communication an investment adviser makes that: (i) offers the investment adviser’s investment advisory services with regard to securities to prospective clients or private fund investors, or (ii) offers new investment advisory services with regard to securities to current clients or private fund investors. The first prong of the definition excludes most one-on-one communications.
- The second governs solicitation activities previously covered by the cash solicitation rule and includes any endorsement or testimonial for which an adviser provides cash and non-cash compensation directly or indirectly (e.g., directed brokerage, awards or other prizes, and reduced advisory fees).
General Prohibitions. Under the Marketing Rule, the following advertising practices are prohibited:
- making an untrue statement of a material fact, or omitting a material fact necessary to prevent making the statement misleading;
- making a material statement of fact that the adviser does not have a reasonable basis for believing it will be able to substantiate;
- including information that would reasonably be likely to cause an untrue or misleading implication or inference to be drawn concerning a material fact relating to the adviser;
- discussing potential benefits without providing fair and balanced treatment of any associated material risks or limitations;
- referencing specific investment advice provided by the adviser that is not presented in a fair and balanced manner;
- including or excluding performance results, or presenting performance time periods, in a manner that is not fair and balanced; and
- including information that is otherwise materially misleading.
Testimonials and Endorsements. The Marketing Rule prohibits the use of testimonials and endorsements in an advertisement, unless the adviser satisfies certain disclosure, oversight, and disqualification provisions:
- Disclosure. Advertisements must CLEARLY and PROMINENTLY disclose whether the person giving the testimonial or endorsement (the “promoter”) is a client and whether the promoter is compensated. Additional disclosures are required regarding compensation and conflicts of interest. There are exceptions from the disclosure requirements for SEC-registered broker-dealers under certain circumstances. Advisers will no longer need to obtain from each investor acknowledgements of receipt of the disclosures.
- Oversight and Written Agreement.An adviser that uses testimonials or endorsements in an advertisement must oversee compliance with the marketing rule. An adviser also must enter into a written agreement with promoters, except where the promoter is an affiliate of the adviser or the promoter receives de minimis compensation (i.e., $1,000 or less, or the equivalent value in non-cash compensation, during the preceding twelve months).
- Disqualification. Subject to certain exceptions, “bad actors” may not serve as promoters.
Third-Party Ratings. The rule prohibits the use of third-party ratings in an advertisement, unless the adviser provides disclosures and satisfies certain criteria pertaining to how the rating was prepared.
Performance Information Generally. In order to deter the provision of misleading information, the rule prohibits including in any advertisement:
- gross performance, unless the advertisement also presents net performance;
- performance results, unless they are provided for specific time periods in most circumstances;
- any statement that the Commission has approved or reviewed any calculation or presentation of performance results;
- performance results from fewer than all portfolios with substantially similar investment policies, objectives, and strategies as those being offered in the advertisement, with limited exceptions;
- performance results of a subset of investments extracted from a portfolio, unless the advertisement provides, or offers to provide promptly, the performance results of the total portfolio;
- hypothetical performance (which does not include performance generated by interactive analysis tools), unless the adviser adopts and implements policies and procedures reasonably designed to ensure that the performance is relevant to the likely financial situation and investment objectives of the intended audience and the adviser provides certain information underlying the hypothetical performance; and
- predecessor performance, unless there is appropriate similarity with regard to the personnel and accounts at the predecessor adviser and the personnel and accounts at the advertising adviser. In addition, the advertising adviser must include all relevant disclosures clearly and prominently in the advertisement.
If you are an investment adviser, now is the time to ensure your marketing materials comply with the modernized Marketing Rule.
On June 3, 2022, Pastore LLC won an important motion against Travelers Insurance and several of its affiliates. Pastore LLC is representing a company that provides cybersecurity education that brought an action against its insurance provider for its failure to defend it in a regulatory action, as specified by its insurance policy. Pastore worked to cite in the insurance’s company’s parent corporation and subsidiary and amend the complaint to add claims against the new parties. Pastore was able to show the court that the new parties had participated in the wrongs against its client and should not be allowed to hide behind corporate shell games to avoid liability.