Second Circuit Upholds Effectiveness of Section 16 Beneficial Ownership Blockers

Short summary

The Second Circuit affirmed that properly drafted contractual beneficial ownership blockers under Section 16 of the Securities Exchange Act are legitimate, provided they are adhered to in practice and not illusory. The ruling involved Bed Bath & Beyond's bankruptcy successor suing a fund holding BBBY warrants and convertible preferred stock. Private fund managers using blockers in PIPE investments gain reassurance from this decision.

• •Second Circuit upheld contractual beneficial ownership blockers under Section 16 of the Exchange Act
• •Blockers must be adhered to in practice and not illusory to be effective
• •Decision benefits private fund managers using blockers in PIPE and convertible security transactions

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