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
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
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
A Pennsylvania federal court held yesterday that an agreement not to use confidential inside information for trading purposes need not precede the receipt of that information in order to create liability under the misappropriation theory of insider trading. The ruling in SEC v. Cooperman (E.D. Pa.) appears to be the first decision to address the “novel … Continue Reading
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
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
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
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
A handful of recent SEC defeats in administrative proceedings have caused us to question the conventional narrative that the SEC has a distinct “home field advantage” before its own administrative law judges. According to analysis conducted by the Wall Street Journal, the SEC had a 90% win rate in contested cases it brought before its … Continue Reading
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
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
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
Last week, representatives of the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) participated in Sandpiper Partners LLC’s Annual SEC/DOJ Enforcement 2016 Panel at the Metropolitan Club. Participants included: Stephanie Avakian (Deputy Director, Division of Enforcement, SEC), Nicole Friedlander (Chief, Complex Frauds and Cybercrime Unit, U.S. Attorney’s Office, Southern District … Continue Reading
Yesterday, SEC Director of Enforcement Andrew Ceresney gave a keynote address on Private Equity Enforcement. In his remarks, Ceresney reiterated the SEC’s view that private equity is and will be a key enforcement area, and detailed recent actions showing the Commission’s particular focus on undisclosed fees and expenses and on increasing transparency in the industry. … Continue Reading
Yesterday the SEC announced its first enforcement proceeding for breach of the fiduciary duty for municipal advisors created by the 2010 Dodd-Frank Act.… Continue Reading
Last week, in the consolidated cases of Charles Hill, Jr. v. SEC (No. 15-12831) and Gray Financial Group, Inc. v. SEC (No. 15-13738), the U.S. Court of Appeals for Eleventh Circuit heard oral argument on the question of whether federal district courts have jurisdiction to review constitutional challenges to SEC administrative enforcement proceedings. The Eleventh … Continue Reading
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
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
On November 3, 2015, the Securities and Exchange Commission (SEC) announced that it had reached a settlement with Fenway Partners, LLC, a New York-based private equity firm, and several of the firm’s executives (the Respondents) in connection with a failure to disclose conflicts of interests to investors with respect to payments made by portfolio companies of … Continue Reading
The Supreme Court today refused to grant review of the Second Circuit’s restrictive insider-trading decision in United States v. Newman. The Government, through the Solicitor General, had asked the Supreme Court to clarify the nature of the “personal benefit” that a tipper must receive in order to create liability for insider trading. But the Supreme … Continue Reading
Mistakes in computer coding by a high frequency trading firm that went undetected for approximately four years were responsible for approximately 12.6 million orders that violated Reg NMS, according to an Order settling an enforcement proceeding with Latour Trading LLC, announced by the SEC on September 30. These noncompliant orders involved more than $4.6 billion … Continue Reading
The U.S. Court of Appeals for the District of Columbia Circuit held today that federal District Courts do not have subject-matter jurisdiction to entertain challenges to ongoing SEC administrative enforcement proceedings. A party to a pending administrative proceeding must defend against that proceeding and then seek review from the SEC Commissioners and, eventually, the federal … Continue Reading
The Securities and Exchange Commission appears to be hearing the music. In response to the many voices that have expressed dissatisfaction with the procedures used in SEC administrative hearings, the SEC today issued proposed amendments to the rules governing those hearings. Those proposals are now subject to public notice and comment.… Continue Reading
The Securities and Exchange Commission again rejected constitutional challenges to the use of administrative enforcement proceedings presided over by Administrative Law Judges (“ALJs”). The Commission’s September 17, 2015 decision in In the Matter of Timbervest, LLC – the Commission’s second ruling on the constitutional issue in the past two weeks – rebuffed arguments that ALJ … Continue Reading
By Harry Frischer and James Unger on Posted in SEC Enforcement
On Thursday, the SEC announced charges against several senior executives of Penson Financial Services Inc., once the second-largest clearing broker-dealer in the country, and its parent corporation, Penson Worldwide, Inc., again highlighting the regulatory risks associated with supervisory responsibilities.… Continue Reading
