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All eyes were on the U.S. Supreme Court yesterday as it heard arguments in Salman v. United States (No. 15-628) concerning the “personal benefit” required to establish a claim for insider trading. After an hour punctuated by the Justices’ constant questioning of attorneys for both the defendant and the government, it appears unlikely that the Supreme Court will radically depart from its 1983 decision in Dirks v. SEC, which held that insider trading violates the federal securities laws if an insider makes a gift of nonpublic information to a trading relative or friend.

We blogged last week about a New York federal court’s decision in Duka v. SEC conditionally sustaining a facial challenge to an administrative enforcement proceeding conducted by Administrative Law Judges (“ALJs”) of the Securities and Exchange Commission. In that case, Judge Richard M. Berman, of the Southern District of New York, held that SEC ALJs are “inferior officers” of the United States for purposes of the U.S. Constitution’s Appointments Clause and that the ALJs at issue had not been appointed by the SEC Commissioners, in seeming violation of that constitutional provision. However, the court gave the SEC seven days to cure the defect “by having the SEC Commissioners issue an appointment or preside over the matter themselves.”

The SEC refused to take the bait. The SEC informed the court on August 10, 2015 that the Commission has already heard argument on the constitutional challenge in at least one proceeding, but has not yet issued a decision or taken any other action.

A federal District Judge in the Southern District of New York appears to have conditionally sustained a facial challenge to an administrative enforcement proceeding conducted by Administrative Law Judges (“ALJs”) of the Securities and Exchange Commission. In an August 3, 2015 decision in Duka v. SEC, 1:15-cv-00357, Judge Richard M. Berman held that he had subject-matter jurisdiction to entertain the plaintiff’s application to enjoin the administrative proceedings, that SEC ALJs are “inferior officers” of the United States for purposes of the U.S. Constitution’s Appointments Clause, and that the ALJs at issue had not been appointed by the SEC Commissioners in seeming violation of the Appointments Clause. However, the court gave the SEC seven days to cure the defect “by having the SEC Commissioners issue an appointment or preside over the matter themselves.”

Sen. Warren LetterSenator Elizabeth Warren recently released a letter to SEC Chair Mary Jo White, complaining that her leadership of the SEC over the past two years has been “extremely disappointing.” The Senator opined that the nation’s largest financial institutions are “mounting an aggressive effort to repeal, postpone, and dilute” the laws enacted by Congress following the financial crisis, and called for more rigorous activity by the SEC in a number of key areas.

First, Senator Warren criticized the SEC’s delay in implementing Dodd-Frank rules requiring disclosure of CEO pay, pay for companies’ median workers, and the ratio of the two.

Second, Senator Warren criticized the SEC’s failure to require admissions of wrongdoing in SEC enforcement cases, noting that in 520 settlements during Chair White’s tenure, the SEC had required admissions of guilt in only 19 cases. Moreover, Senator Warren noted that in 11 of those 19 cases, the SEC required only a broad admission of facts specified by the SEC rather than requiring the firms to admit violations of specific securities laws.

The Court of Appeals for the Seventh Circuit last week reversed a $2.46 billion judgment in a long-running securities-fraud class action against Household International and granted a new trial on limited issues. The opinion in Glickenhaus & Co. v. Household International, Inc. 2015 WL 2408028 (7th Cir. May 21, 2015), provides a sophisticated analysis of events studies and loss causation and brings further clarity to what it means to “make” a false statement under the federal securities laws.

The case, which was filed 2002, alleged that Household and three of its top executives committed securities fraud by misrepresenting Household’s lending practices, delinquency rates, and earnings from credit-card agreements. Those misrepresentations purportedly inflated Household’s stock price during the relevant period.

On April 23, 2014, the U.S. Court of Appeals for the Second Circuit reinstated the action brought by the European Community and its 26 member states against RJR Nabisco and related entities (collectively, “RJR”) for allegedly laundering drug money through the exchange of discounted euros and cigarettes. In the long-running case European Community v. RJR Nabisco, Inc., the Second Circuit applied and clarified the presumption against extraterritoriality of United States laws.

The European Community claims that Columbian and Russian criminal organizations smuggled illegal narcotics into Europe. The drugs were allegedly sold, producing revenue in euros, which the criminal organizations “laundered” by using money brokers in Europe to exchange the euros for the domestic currency of the criminal organizations’ home countries.  The money brokers then sold the euros to cigarette importers at a discounted rate, and the cigarette importers then used the euros to purchase RJR’s cigarettes from wholesalers or “cut-outs.” The wholesalers then purchased the cigarettes from RJR and shipped the cigarettes to the importers who purchased them. Finally, the money brokers used the funds derived from the cigarette importers to continue the laundering cycle.