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: Second Circuit

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Second Circuit Questions Use of Criminal Insider-Trading Statute Without Proof of Receipt of Personal Benefit

The Second Circuit held yesterday that a government agency’s nonpublic, pre-decisional regulatory information does not constitute “property” for purposes of the federal insider-trading and wire-fraud statutes.  The decision in United States v. Blaszczak (2d Cir. Dec. 27, 2022) (“Blaszczak II”) effectively vacated convictions under those statutes for defendants who had traded on nonpublic, market-moving information that had … Continue Reading

Father Sometimes Knows Best: District Court Blasts SEC’s “No Admit, No Deny” Provisions

In a scathing opinion, Southern District of New York Judge Ronnie Abrams recently blasted the SEC’s standard demand that defendants settling with the Commission agree never to deny the allegations against them.  Judge Abrams’ decision in SEC v. Moraes reluctantly approved a consent decree containing the usual “no admit, no deny” provision in light of … Continue Reading

Second Circuit Reverses Dismissal of Securities Claim Alleging Failure to Disclose SEC Investigation

The Court of Appeals for the Second Circuit yesterday reversed the dismissal of a securities class action alleging fraud based on the defendants’ failure to disclose an SEC investigation into the company’s disclosed financial-control weaknesses.  The May 24, 2022 ruling in Noto v. 22nd Century Group, Inc. (No. 21-0347) is fact-specific, requiring disclosure of the investigation because … Continue Reading

Second Circuit Holds that Expanding FSIA to Criminal Cases Would Not Save a Turkish Bank from U.S. Prosecution

The Second Circuit recently held that a denial of a motion to dismiss a criminal indictment based on the Foreign Sovereign Immunities Act (“FSIA”) is immediately appealable under the collateral-order doctrine but concluded that even if FSIA did provide immunity from criminal prosecutions, that immunity would not extend to a foreign sovereign’s or its instrumentality’s commercial activities. … Continue Reading

Second Circuit Holds that Accurately Reported Financial Statements Are Not Actionable and that Materiality Has a Half-Life

The U.S. Court of Appeals for the Second Circuit held earlier this week that a company’s accurately reported financial statements are not misleading simply because they do not disclose that alleged misconduct might have contributed to the company’s financial results. The court also ruled that alleged misstatements made three to four years before the plaintiffs … Continue Reading

Second Circuit Upholds Insider Trading Conviction, Finding Sufficient Confidentiality Duty and Personal Benefit

The Second Circuit yesterday affirmed the insider trading conviction of the principal of a potential acquiror who, in breach of a nondisclosure agreement with a potential target company, had provided a tippee with nonpublic information about an impending acquisition of the target. The decision in United States v. Chow held that: The nondisclosure agreement (“NDA”) between … Continue Reading

The Government May Not Hold on to Illegally Seized Rent, Says the Second Circuit

The Second Circuit has recently held that the Government must account for rental income it denied a property owner during a period of illegal seizure even though the Government was able to establish probable cause at a post-seizure hearing. The appeal stemmed from a decades-long sanctions and civil forfeiture action in which the U.S. Department … Continue Reading

Second Circuit Reaffirms that Federal Securities Laws Do Not Apply to Predominantly Foreign Transactions

The U.S. Court of Appeals for the Second Circuit reaffirmed yesterday that the federal securities laws do not apply to “predominantly foreign” securities transactions even if those transactions might have taken place in the United States.  The ruling in Cavello Bay Reinsurance Ltd. v. Shubin Stein (No. 20-1371) reinforces the Second Circuit’s prior decisions concerning the … Continue Reading

Second Circuit Upholds Insider-Trading Conviction and Clarifies Scope of Requisite Fiduciary Relationship

The Second Circuit yesterday affirmed the insider-trading conviction of a doctor who, in breach of a confidentiality agreement, had traded on nonpublic information about a drug trial in which he had been participating.  The decision in United States v. Kosinski (2d Cir. Sept. 22, 2020) held that: A person can be convicted of insider trading under both … Continue Reading

Second Circuit Holds that a “Personal Benefit” Is Not Required for Insider Trading Under Criminal Securities Statute

The Second Circuit held earlier this week that the criminal statute proscribing securities fraud permits convictions for insider trading without proof that the provider of material, nonpublic information received a personal benefit in exchange for that information, even though proof of a personal benefit would be required under the general securities-law statute prohibiting insider trading. … Continue Reading

Second Circuit Rejects Securities Claims Based on Generic Statements About Ethics and Compliance

The Court of Appeals for the Second Circuit yesterday affirmed the dismissal of a securities class action alleging misrepresentations arising from generalized statements about an issuer’s compliance efforts and Code of Ethics. The decision in Singh v. Cigna Corporation held that such generic statements are not material because a reasonable investor could not have relied on … Continue Reading

Second Circuit Again Upholds Tipper/Tippee Liability from Gift of Information Without Close Relationship

The Second Circuit confirmed this week that a “meaningfully close personal relationship” is not required for insider-trading liability where a tipper discloses inside information as a gift with the intent to benefit the tippee.  The June 25, 2018 decision on panel rehearing in United States v. Martoma (No. 14-3599) retreats from the panel’s original decision and no longer … Continue Reading

Supreme Court Rules That Federal Courts Are Not Bound to Give Conclusive Effect to Foreign Governments’ Statements About Their Laws

The Supreme Court ruled today that, when a foreign government presents a formal submission to a federal court about the content of the government’s own laws, the court should accord “respectful consideration” to the government’s statements, but is not bound to grant them “conclusive effect.”  The decision in Animal Science Products, Inc. v. Hebei Welcome … Continue Reading

Second Circuit Holds That Tipper/Tippee Liability Can Arise from a Gift of Inside Information Even Without a Close Personal Relationship

The Second Circuit ruled today that a “meaningfully close personal relationship” is not required for insider-trading liability where a tipper discloses inside information as a gift or in exchange for some other type of nonpecuniary personal benefit.  The requisite personal benefit exists “whenever the information was disclosed ‘with the expectation that [the recipient] would trade … Continue Reading

Second Circuit Requires Increased Scrutiny of Securities Class Actions Involving Off-Exchange Transactions

The Second Circuit held today that putative securities class actions involving transactions in non-U.S.-listed securities require careful scrutiny to determine whether the class members’ claims can be litigated on a classwide basis. The court’s ruling in In re Petrobras Securities (No. 16-1914) will likely increase the difficulty of certifying securities class actions arising from transactions in … Continue Reading

Second Circuit Affirms Exclusion of Certain Foreign Purchasers and Purchases from Securities Class Action

The U.S. Court of Appeals for the Second Circuit issued a lengthy opinion today in the long-running In re Vivendi, S.A. Securities Litigation, affirming the jury’s verdict on liability and addressing issues about loss causation and expert-witness testimony.  But the tail on the proverbial dog also dealt with another set of issues that this blog … Continue Reading
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