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

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

New York District Court Appears to Sustain Attack on SEC Administrative Proceedings

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 … Continue Reading

Government Seeks Supreme Court Review In Second Circuit Insider-Trading Case

After months of will-he-or-won’t-he speculation about whether the U.S. Solicitor General would ask the Supreme Court to review the Second Circuit’s restrictive insider-trading decision in United States v. Newman, the question has now been answered. The Government filed a certiorari petition on July 30, 2015 asking the Supreme Court to clarify the nature of the “personal … Continue Reading

SEC Sanctions Hedge Fund Advisory Firm For Improper Valuations of Illiquid Securities

Returning to an enforcement priority repeatedly articulated over the years (for example, here,  here and here), the SEC recently imposed sanctions on a registered investment advisory firm and two principals arising out of an alleged scheme to inflate the valuations of illiquid mortgage-backed securities held by private investment funds managed by the adviser. The SEC … Continue Reading

SEC’s Data-Driven Analysis Identifies Allegedly Improper Trade Allocations by Investment Advisor

Relying on a data-driven statistical analysis conducted by the Division of Economic and Risk Analysis (DERA), the SEC recently commenced administrative proceedings against an investment advisor, Welhouse & Associates, Inc., and its principal, charging them with improperly allocating profitable options trades to the principal’s own accounts while allocating unprofitable trades to the firm’s clients. The … Continue Reading

Senator Warren’s Letter to the SEC Chair Calls for More Aggressive Enforcement

Senator 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 … Continue Reading

Constitutional Challenges to SEC Administrative Proceedings

May defendants charged in SEC administrative proceedings challenge the constitutionality of those proceedings in federal district court? The determination of whether district courts have subject matter jurisdiction over such challenges has become the critical prelude in the ongoing controversy over the SEC’s seemingly arbitrary use of its “home court” alternative to pursue claims and remedies … Continue Reading

Goodyear Pays for the Acts of its Subsidiaries in a $16 Million FCPA Settlement

Following recent trends, the U.S. Securities and Exchange Commission brought an administrative proceeding against a U.S. issuer for the alleged corrupt activities of its foreign subsidiaries. Earlier this week, Goodyear Tire & Rubber Company agreed to pay the SEC over $16 million to settle charges alleging that it violated the accounting provisions of the Foreign … Continue Reading

District Court Rejects Constitutional Challenge to SEC Administrative Proceedings

We recently wrote that critics, including Judge Jed Rakoff, have been questioning the SEC’s policy of increasingly bringing enforcement actions in its administrative forum rather than federal court.  We noted that several cases had been filed recently that challenged the constitutionality of the SEC’s administrative proceedings.  The first of those cases has now been decided:  … Continue Reading

SEC Focus on Disclosure Issues for Municipal Securities, Private Equity and ETFs

At the recent Columbia Law School Conference, “Hot Topics: Leading Current Issues in Securities Regulation and Enforcement,” SEC Commissioner Kara M. Stein’s keynote address focused on a number of transparency and disclosure issues regarding municipal securities, private equity and exchange traded funds. Municipal Securities Commissioner Stein highlighted the importance of municipal finance to the growth of … Continue Reading

Private Equity Endures Heightened Public Scrutiny

The public scrutiny on private equity fund sponsors has continued to intensify this month, evidenced by at least three recent events. First, the government announced that it was probing performance figures at private equity funds: SEC Probing Private Equity Performance Figures. This focus on performance should not come as a surprise. Financial performance is what … Continue Reading

Critics Question SEC’s Increasing Use of Administrative Enforcement Proceedings

The SEC is increasingly bringing enforcement actions in its administrative forum rather than federal district court, setting the stage for a legal and policy battle over this tactic. The SEC’s approach has been made possible by a series of legislative enhancements to the agency’s enforcement powers that began with the passage of the Securities Enforcement … Continue Reading

Study: Does The Existence Of Whistleblowers In Enforcement Actions Mean Greater Penalties?

Guest Post from Proskauer’s Whistleblower Defense Blog Written By Steven J. Pearlman and Rachel Fischer on November 5, 2014 According to an academic study published on October 6, 2014 by Andrew C. Hall, Gerald S. Martin, Nathan Y. Sharp, and Jaron H. Wilde, the presence of whistleblowers may have a meaningful impact on the outcomes of … Continue Reading
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