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

Category Archives: Securities Regulatory

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SEC Continues to Use Advanced Data Analytics to Investigate Insider Trading

The SEC has continued to pursue a number of insider trading cases this year, both large-scale and small. Some of those matters involved trades that yielded relatively small amounts of profits: $40,000-$60,000. Why does the enforcement division spend resources on these smaller cases? First, they serve as a reminder that violations can be identified, even … Continue Reading

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

Joshua Newville Discusses Amendments to Rules Governing SEC Administrative Proceedings with Compliance Week

Last month, the SEC announced that it had adopted amendments updating the rules of practice governing its in-house administrative proceedings.  On August 9, 2016, Compliance Week published an article on the recently-adopted amendments, entitled, SEC modifies administrative proceedings, but did it go far enough? The article features insights from Proskauer partner Joshua Newville, who discusses … Continue Reading

Key Takeaways from Cornerstone Research’s Securities Class-Action Filings 2016 Midyear Assessment

Cornerstone Research recently released its 2016 midyear assessment of federal securities class-actions filings. The report finds an increase in filings in the first half of 2016, with particular increases in M&A filings, filings against U.S.-exchange-listed companies and S&P 500 companies, and filings within both the Financial and Consumer Non-Cyclical sectors. Below are some key takeaways … Continue Reading

SEC Adopts Amendments to Rules Governing Its Administrative Proceedings

Earlier today, the SEC announced that it will adopt certain amendments to its rules of practice governing administrative proceedings. Faced with criticism from practitioners and the media regarding a perceived “home field advantage” in administrative proceedings, as well as various constitutional challenges to the ALJ process, the SEC has now approved amendments “intended to update … Continue Reading

Supreme Court’s Manning Decision Leaves Questions Unanswered

The U.S. Supreme Court’s decision yesterday in Merrill Lynch v. Manning clarified the scope of federal jurisdiction under the Exchange Act in certain important respects, but also left open critical issues that may arise in future cases.  Although the Court rejected federal jurisdiction in resolving the sole issue that was before it, the Court also … Continue Reading

Investors Fight Back – Court Battle Could Determine Scope of HSR Act Exemption

When an enforcement action for a violation of the Hart-Scott-Rodino Act is announced, chances are the matter has already come to a close – by the time the action becomes public, the agency and the parties usually have agreed upon financial penalties and other sanctions to be levied. But that is not the case for … Continue Reading

Second Circuit Adopts Actual-Knowledge Standard for MD&A Disclosures

The Second Circuit held yesterday that Item 303 of SEC Regulation S-K requires issuers to disclose only those trends, events, or uncertainties about which the issuer has actual knowledge, rather than those matters about which the issuer allegedly should have known.  The court’s decision in Indiana Public Retirement System v. SAIC, Inc. also reinforced prior … Continue Reading

Second Circuit Addresses Statutes of Repose and Tolling in Securities Class Actions

The Second Circuit has clarified the applicable statutes of repose for securities-fraud and proxy-related claims under §§ 9(f), 14(a), and 18(a) of the Securities Exchange Act. The court’s March 17, 2016 decision in DeKalb County Pension Fund v. Transocean Ltd. holds that the five-year statute of repose enacted in the Sarbanes-Oxley Act of 2002 (“SOX”) applies to … 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

Regulatory And Litigation Hot Topics For Private Funds In 2016

Private investment funds are likely to face increased regulatory scrutiny and litigation risk in 2016, not only based on the Securities and Exchange Commission’s focus on the industry but also due to transparency and compliance initiatives of limited partners and other market developments. We have highlighted several areas that should be on the top of … Continue Reading

SEC’s 2016 Examination Priorities Focus on Retail Investors, Market Wide Risk and Use of Data Analytics

The recently issued Examination Priorities for 2016 reveals that the SEC’s priorities are organized around the same three thematic areas as last year: (i) retail investors, including retirement investments; (ii) market-wide risks; and (iii) the SEC’s increasing analysis of data to identify problematic activity.… Continue Reading

FINRA Arbitration Task Force Fails To Reach Consensus On Many Major Issues

The FINRA Dispute Resolution Task Force issued its final report last week, making certain recommendations designed to improve the arbitration process. More notably, however, the Task Force reported that it was unable to reach agreement on a number of more controversial issues, reflecting deep divisions among practitioners in this area.… Continue Reading

SEC Proposal Would Limit Investment In Derivatives By Investment Companies

Recognizing the substantial risks inherent in many derivatives transactions, and the substantial leverage that is often imbedded in derivatives, the SEC last week announced its proposed new rules that would impose limits on the exposure to derivatives for investment companies, which include mutual funds, exchange-traded funds and closed-end funds, and create other regulatory requirements. Exposure … Continue Reading

Top 10 Whistleblowing And Retaliation Events Of 2015

In 2015, we saw high-profile whistleblower litigation around the country under a variety of statutes (such as SOX and Dodd-Frank) that yielded decisions expanding the scope of protected activity and even limiting defenses to causation. We also saw significant activity from the U.S. Securities and Exchange Commission’s Office of the Whistleblower that caused employers to revisit … Continue Reading

SEC Proposes Rules To Enhance Transparency And Oversight Of Alternative Trading Systems

The SEC announced this week its proposal to substantially overhaul the rules regarding alternative trading systems (“ATS”), often referred to as dark pools. The proposed rules would require firms operating ATSs to make additional disclosure about business activities that may present conflicts of interest between firms and ATS subscribers, and considerable information as to how … Continue Reading

SEC Chair Calls for Reexamination of Treasury Market Regulations in Light of High Speed Electronic Trading

On October 20, 2015, SEC Chair Mary Jo White gave the keynote address at the “Evolving Structure of the U.S. Treasury Market” conference organized by the U.S. Department of Treasury and the Federal Reserve Bank of New York. The conference and speech follow this summer’s Joint Staff Report analyzing the significant volatility that the U.S. … Continue Reading

SEC to Conduct Second Round of Cybersecurity Examinations

On September 15, 2015, the Office of Compliance Inspections and Examinations (OCIE) of the Securities and Exchange Commission (SEC) issued a Risk Alert announcing its second round of examinations of registered investment advisers and broker-dealers under its cybersecurity examination initiative.… Continue Reading

FINRA Bars Former President Of Broker-Dealer Along With Former Registered Representatives

Reflecting increased regulatory willingness to discipline principals and supervisors, FINRA recently announced that it had imposed an industry bar on the former president of a defunct broker-dealer, along with five registered representatives who likewise were barred in all capacities. FINRA also barred two former principals from continuing to act in a principal capacity and imposed … Continue Reading

Big Loss For Plaintiffs In High Frequency Trading Cases

Last week, SDNY Judge Jesse Furman issued a 51 page decision in In Re: Barclays Liquidity Cross and High Frequency Trading Litigation dismissing all of the cases consolidated under the MDL.  In these cases, investor plaintiffs asserted  federal securities law claims under Section 10(b) and 6(b) of the Exchange Act against seven stock exchanges, Barclays … Continue Reading

SEC Brings First Major Cyber Insider Trading Case Against International Hacking Ring

In an action that emphasizes the agency’s commitment to cybersecurity, the SEC recently charged 32 defendants with violations of the federal antifraud laws and corresponding SEC rules, stemming from an alleged $100 million conspiracy to steal and trade on material non-public information contained in corporate earnings announcements that were obtained by hacking into the computer … Continue Reading

SEC Sanctions Dark Pool Operator and Affiliated High Frequency Trader

In the latest round of regulatory action involving high frequency trading and dark pools, the SEC announced yesterday that it reached a settlement with ITG, Inc., and its affiliate Alternet Securities, Inc., imposing a $20.3 million sanction based on ITG’s misuse of confidential order information to benefit the firm’s proprietary high-frequency trading.… Continue Reading

SEC Flexes Its Enforcement Muscle For Securities-Based Swaps

The broad definition of a “swap” in the Dodd-Frank Act, read literally, would encompass many transactions that Congress never intended to cover, so the SEC and the CFTC have jointly promulgated regulations that provide that many of those transactions are not treated as swaps.  However, a recent SEC Investor Alert, stating that fantasy stock trading … Continue Reading

Pay-to-Play Rule: SEC Announces Compliance Date for Ban on Third-Party Solicitation of Government Entities

Last month, the Securities and Exchange Commission (SEC) set a compliance date of July 31, 2015 for the ban on payments to third parties for the solicitation of advisory business from any government entity under Rule 206(4)-5 of the Investment Advisers Act of 1940 (Pay-to-Play Rule). At the same time, the SEC also clarified in … Continue Reading
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