Corporate Defense and Disputes

Important developments in U.S. securities law, white collar criminal defense, regulatory enforcement and other emerging issues impacting financial services institutions, publicly traded companies and private investment funds

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SEC Overrules Its Own Administrative Law Judge to Clear Customer of Fraud Charges

In a rare reversal of its own administrative law judge in the Matter of optionsXpress, the full Securities and Exchange Commission unanimously held that the SEC’s Enforcement Division had not met its burden of proof that the customer of a broker-dealer had committed securities fraud in connection with his clearing broker-dealer’s failure to deliver stock … Continue Reading

Second Circuit Reinforces Liability Standard in Securities Cases Based on Statements of Opinion

On March 4, 2016, the U.S. Court of Appeals for the Second Circuit reinforced the stringency of the new standard for liability in securities cases arising from allegedly misleading statements of opinion. Construing the Supreme Court’s 2015 Omnicare decision, the Second Circuit held in Gen. Partners Glenn Tongue v. Sanofi Pharmaceuticals, Inc. that a statement … Continue Reading

CFTC Proposes New Regulations For Algorithmic Trading

On November 24, 2015, the CFTC announced the new proposed Regulation Automated Trading (“Reg. AT”), which contains a variety of measures designed to prevent potential market disruptions arising from algorithmic trading.   Among other things, Reg. AT proposes certain pre-trade risk and order management controls, the implementation of policies and procedures governing algorithmic trading, and additional … Continue Reading

SEC Once Again Sanctions The CCO of An Investment Advisory Firm

On November 19, 2015, the SEC announced a settlement with investment advisory firm Sands Brothers Asset Management, LLC for violating the Custody Rule, SEC Rule 206(4)-2, which requires that registered investment advisers who have custody of their clients’ assets put in place policies and procedures intended to safeguard those assets against loss, misuse or misappropriation. … Continue Reading

UK Regulators Address Manipulation of Trading Benchmarks and Other Misconduct

Concluding a year-long review, UK regulators issued the final report of the Fair and Effective Markets Review Committee last week, making a number of recommendations intended to restore confidence in the trading markets for fixed income, currency and commodities (“FICC”) in the wake of past misconduct. The report noted the substantial fines that have been … Continue Reading

FINRA CEO Criticizes DOL Fiduciary Proposal (Again)

Last week, Richard Ketchum, Chairman and CEO of the Financial Industry Regulatory Authority (“FINRA”), doubled-down on his recent criticism of the U.S. Department of Labor’s (“DOL”) proposed regulation addressing the standard of care for broker-dealers providing retirement investment advice. Speaking at FINRA’s annual conference, Chairman Ketchum said that, while he supports a “best interests of … Continue Reading

FINRA Introduces Revised Sanction Guidelines

FINRA recently released updated and revised Sanction Guidelines and an accompanying Regulatory Notice that, among other things, call for stricter penalties against broker-dealers who commit fraud or violate suitability rules. The revisions are effective as of May 12, 2015. The Sanction Guidelines, first published in 1993, are intended to assist FINRA’s adjudicators in determining the … Continue Reading

Recent Appellate Decisions Limit Access To Customer Assets Held At Foreign Bank Branches

Originally published as a Proskauer Client Alert. On October 23, 2014, the New York Court of Appeals held for the first time that, under New York law, the “separate entity” rule prevents a court from ordering a foreign bank operating branches in New York from restraining a judgment debtor’s assets held in foreign branches of the bank. Motorola … Continue Reading

Second Circuit Rules That Derivatives Counterparty Is Not A “Customer” of Broker-Dealer Under FINRA Rules

In the recent case Citigroup Global Markets Inc. v. Ghazi Abdullah Abbar, et al., 13 Civ. 2172 (2d Cir. Aug. 1, 2014), the Second Circuit held that, under FINRA rules, an investor who purchased an over-the-counter derivative from a financial institution was not a “customer” of the financial institution’s affiliated broker-dealer, notwithstanding the broker-dealer’s involvement … Continue Reading
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