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

Tag Archives: SEC Enforcement

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

Who Wins in SEC Administrative Proceedings?

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

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

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

Key Takeaways from SEC/DOJ Enforcement Panel

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

SEC Increases Focus on Private Equity Enforcement

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

Eleventh Circuit Considers Challenge to SEC Administrative Proceedings

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

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 Once Again Sanctions The CCO of An Investment Advisory Firm

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

SEC Charges Private Equity Firm and Four Executives with Failing to Disclose Conflicts of Interest

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

Supreme Court Denies Review of Second Circuit Insider-Trading Case

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

Coding Errors Lead To SEC Sanctions for High-Frequency Trading Firm

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

D.C. Circuit Joins Seventh Circuit in Rejecting Court Challenges to Pending SEC Administrative Enforcement Proceedings

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

SEC Proposes Amendments to Rules Governing Administrative Proceedings

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

SEC Again Rejects Constitutional Challenges to Administrative Enforcement Proceedings

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

SEC Sanctions Senior Executives Of Failed Clearing Broker

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

SEC Rejects Constitutional Challenge to Administrative Proceeding

The Securities and Exchange Commission joined the raging debate about whether SEC administrative proceedings conducted by administrative law judges (“ALJs”) are unconstitutional if the ALJs have not been appointed in accordance with the Appointments Clause of the U.S. Constitution. In a 3-2 decision in In the Matter of Raymond J. Lucia Companies, Inc., the Commission … Continue Reading

Seventh Circuit Rejects Court Challenge to Pending SEC Administrative Enforcement Proceeding

The Seventh Circuit has held that federal district courts do not have subject matter jurisdiction over challenges to ongoing SEC administrative enforcement proceedings where the challenger is already a party to those proceedings.  Instead, a party to a pending administrative proceeding must defend against the proceeding and then seek review from the SEC Commissioners and, eventually, the … 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

New York District Court Preliminarily Enjoins SEC Administrative Proceeding

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 … Continue Reading
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