Is there a legal argument to make to the SEC with regard to Sinclair?

[Onlooker]

Isn't a company supposed to act in the interest of shareholders? If Sinclair is acting in some other interest (e.g., the Republican Party) and its stock value declines, isn't there a chance the company could be subject to lawsuits? Isn't there even the possiblity that Sinclair board members could face lawsuits? Would it be possible to frame a letter to the SEC in this regard?

[juliagoolia]

1. I was thinking the same thing

Lets say your fund suffers, or your stocks go down because of this political move on the part of the officers on the board.. then it seems to me that would be some sort of violation to protect the interest of the investors?

[Onlooker]

2. Maybe a lawyer will see this thread and pipe in

I wonder if it's possible to get a class action suit and prevent Sinclair from acting or at least force them to prove the financial soundness of their action.

And welcome to DU!

[Infomaniac]

3. Sinclair is closely-held

I checked the Security Ownership table in Sinclair's most recent proxy statement. (You can view the Def 14A, dated 4/9/2004 at www.sec.gov) The Smith family together controls about 85% of the voting power of Sinclair. These guys would have to sue themselves. The SEC has rules concerning corporate governance but controlled corporations are exempt from many of them.

[Gothmog]

4. State law issue not an SEC issue

The Securities Act of 1933 and the Securities Exchange Act of 1934 are primarily about full disclosure and not about corporate governance. Sarbanes Oxley is the first federal statute to really get into corporate governance issues and this type of event is not covered.

The SEC and the federal securities laws leave this issue up to state law. A shareholder of Sinclair could sue on a derivative basis for corporate waste and use of corporate assets for improper individual use. However, derivative actions can only be brought by a shareholder and are very difficult to win. For example, normally you need to make demand on the board of directors of the company first and give the board a chance to review and fix the issue unless you can established that demand on the board would be futile (a hard standard to meet).

There will be litigation on this issue but the FCC may be a better place to try to make Sinclair pay than the SEC.