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 Law

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Supreme Court Rules that State Courts can Adjudicate Class Actions Under the Securities Act of 1933

On March 20, 2018, the Supreme Court ruled that the 1998 amendments to the federal securities laws did not strip state courts of jurisdiction over class actions alleging violations of only the Securities Act of 1933. The Court further held that those amendments do not empower defendants to remove those federal-law cases from state to … Continue Reading

Fourth Circuit Upholds Disclosure of Government Subpoena as Evidence of Loss Causation

The Fourth Circuit ruled yesterday that a plaintiff can sufficiently plead loss causation to establish a securities-fraud claim based on an “amalgam” of two theories:  corrective disclosure, and materialization of a concealed risk.  In so holding, the court concluded in Singer v. Reali that the issuer’s disclosure of a government subpoena and an analyst’s report discussing that … Continue Reading

S.D.N.Y Dismisses Dodd-Frank Whistleblower Action

On February 5, 2018, U.S. District Court for the Southern District of New York granted Defendant Khan Funds Management America, Inc.’s Rule 12(b)(6) motion to dismiss a whistleblower retaliation claim under Dodd-Frank on the grounds that Plaintiff failed to state a claim upon which relief could be granted. Read the full post on Proskauer’s Whistleblower Defense blog.… Continue Reading

SEC Staff Announces 2018 OCIE Examination Priorities

Last week, the staff of the SEC’s Office of Compliance Inspections and Examinations (OCIE) recently released its sixth annual examination priorities announcement. The alert lays out general issues industry can expect OCIE to focus on during the administration of the agency’s examination program in 2018. While reflecting a renewed emphasis of SEC Chair Jay Clayton … Continue Reading

Supreme Court Holds That Securities-Law Statutes of Repose Are Not Subject to Class-Action Tolling

On June 26, the U.S. Supreme Court ruled that the pendency of a securities class action does not allow individual class members to opt out of the class and file separate actions under the Securities Act of 1933 more than three years after the relevant securities offering took place. The Court’s decision in California Public Employees’ … Continue Reading

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

Watch the Napkin: First Circuit Affirms Insider-Trading Conviction

In what appears to be the first appellate decision since the Supreme Court’s December 2016 ruling in Salman v. United States, the U.S. Court of Appeals for the First Circuit affirmed an insider-trading conviction based on a tip of material, nonpublic information. The February 24, 2017 decision in United States v. Bray held that the jury had … Continue Reading

SEC Staff Announces 2017 OCIE Examination Priorities

On January 12, 2017, the staff of the Office of Compliance Inspections and Examinations (OCIE) of the Securities and Exchange Commission (SEC) released its annual announcement on examination priorities in the coming calendar year. The 2017 examination priorities are organized around three thematic areas: (i) examining matters of importance to retail investors; (ii) focusing on … Continue Reading

California Federal Court Holds that U.S. Securities Laws Apply to Sponsored, Unlisted ADRs

The U.S. District Court for the Northern District of California held on January 4, 2017 that the federal securities laws apply to U.S. transactions in sponsored, but unlisted, American Depositary Receipts (“ADRs”) for a foreign issuer’s shares. The decision in In re Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation adds to the … Continue Reading

New York Court Upholds Insider-Trading Verdict

U.S. District Judge Jed Rakoff denied motions for judgment as a matter of law or for a new trial after a jury found the defendants civilly liable for insider trading. The decision in SEC v. Payton (S.D.N.Y. Nov. 29, 2016) held that the jury had sufficient evidence to conclude that the initial tipper of inside information had … Continue Reading

Supreme Court Hears Argument on Meaning of “Personal Benefit” in Insider Trading

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 … Continue Reading

Proskauer Attorneys Pen Cover Article for New York Law Journal’s White-Collar Crime Special Report

Proskauer partner Joshua M. Newville and associate Lindsey A. Olson recently wrote the lead article for New York Law Journal’s White-Collar Crime special report. In the article, they discuss how proposed amendments to the Electronic Communications Privacy Act of 1986 could affect financial fraud investigations by the SEC and DOJ.  For more information, please read … 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

SEC Sues Company and its GC/CCO for Failure to Disclose and Accrue Charge for a Pending DOJ Investigation

On September 9, 2016, the SEC filed a complaint against RPM International Inc. (“RPM”) and the company’s General Counsel/CCO. The SEC claims the company filed false and misleading SEC filings that failed to disclose any loss contingency relating to a DOJ investigation that the company eventually settled for $60.9 million.  The complaint also charged the … Continue Reading

Ninth Circuit Holds That SOX Disgorgement of Incentive Compensation Does Not Depend on Executives’ Own Misconduct

The U.S. Court of Appeals for the Ninth Circuit held today that the Sarbanes-Oxley Act’s disgorgement provision – which requires disgorgement of certain CEO and CFO compensation when an issuer restates its financial statements “as a result of misconduct” – applies even if the CEO and CFO were not personally involved in the misconduct. Although … Continue Reading

Seventh Circuit Adopts Trulia Standard for Disclosure-Only Settlements

Last week, in an opinion authored by Judge Richard Posner, the U.S. Court of Appeals for the Seventh Circuit rejected a proposed class-action settlement arising from Walgreen Co.’s acquisition of the Swiss-based pharmacy company, Alliance Boots GmbH. In re Walgreen Co. Stockholder Litigation, No. 15-3799 (7th Circ. Aug. 10, 2016).  Judge Posner’s sharply-worded opinion endorsed … Continue Reading

Sixth Circuit Court of Appeals Accepts Materialization-of-Risk Standard for Loss Causation

The U.S. Court of Appeals for the Sixth Circuit yesterday recognized the “materialization of the risk” standard as a means of proving loss causation in securities-fraud cases. The court’s decision in Ohio Public Employees Retirement System v. Federal Home Loan Mortgage Corp. aligns the Sixth Circuit with the majority of other circuits, which have also … Continue Reading

U.S. Court of Appeals to Consider Class-Certification Ruling in Petrobras Securities Litigation

The U.S. Court of Appeals for the Second Circuit has allowed the defendants in the Petrobras securities litigation to pursue an immediate appeal from the District Court’s order certifying classes of investors who had purchased unlisted Petrobras securities in off-exchange transactions.  The appeal in In re Petrobras Securities Litigation could help resolve questions about whether … Continue Reading

SEC Announces Settlement with Adviser Found to Have Acted as an Unregistered Broker and Engaged in Conflicted Transactions

On June 1, 2016, the U.S. Securities and Exchange Commission announced a $3.12M settlement with Maryland-based registered investment adviser, Blackstreet Capital Management, LLC, and its managing  member and principal owner, Murry N. Gunty. The SEC’s finding that Blackstreet acted as an unregistered broker-dealer in portfolio company transactions highlights the regulatory focus on broker registration for … Continue Reading

Eleventh Circuit Rules Disgorgement No Different Than Forfeiture, Barring SEC From Seeking Ill-Gotten Gains Outside Five-Year Limitations Period

A three judge panel in the Eleventh Circuit issued a ruling last Thursday in Securities and Exchange Commission v. Barry Graham et al., Case No. 14-13562, holding—contrary to several other circuits—that the remedy of disgorgement was effectively a forfeiture, and therefore subject to the standard five-year statute of limitations.  The SEC brought this case in … Continue Reading

California Federal Court Holds That U.S. Securities Laws Do Not Apply to Unsponsored, Unlisted ADRs

The U.S. District Court for the Central District of California held on May 20, 2016 that the federal securities laws do not apply to U.S. transactions in unlisted, unsponsored American Depositary Receipts (ADRs) for a foreign issuer’s shares. The decision in Stoyas v. Toshiba Corporation also held that principles of international comity and forum non … 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

Second Circuit: Intent to Harm Is Not Required for Criminal Conviction Under Investment Advisers Act

The U.S. Court of Appeals for the Second Circuit yesterday affirmed the fraud conviction of a registered investment adviser and held that proof of intent to harm is not an element of a criminal conviction under section 206 of the Investment Advisers Act of 1940, 15 U.S.C. §80b-6 (“IAA”).  The court’s decision in U.S. v. Tagliaferri, … Continue Reading
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