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
The Second Circuit Court of Appeals recently issued a decision that may prevent the expansion of scheme liability under the federal securities laws. The SEC brought scheme liability allegations against Rio Tinto, its CEO, and its CFO, based on their alleged failure to correct prior materially misleading statements that had been made to the company’s … Continue Reading
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
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
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
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 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
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
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
The Court of Appeals for the Second Circuit held yesterday that a securities-fraud plaintiff cannot establish corporate scienter without pleading facts showing that employees who allegedly knew of underlying corporate misconduct had some connection to the corporation’s purportedly false or misleading public statements. The decision in Jackson v. Abernathy should prevent securities plaintiffs from establishing “collective” … Continue Reading
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
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
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
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
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
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
Terrorist attacks, most recently in London and Manchester, England, have raised the pressure on law enforcement and lawmakers in countries like the U.K. and the U.S., to proactively intercept and interrupt terrorist communications. On May 24, members of the Senate Judiciary Committee’s Subcommittee on Crime and Terrorism addressed practical issues regarding warrants for overseas data … Continue Reading
The Supreme Court confirmed today that the “personal benefit” required to establish a claim for insider trading can consist of making a gift of material, nonpublic information to a family member or friend and that an exchange of “something of a pecuniary or similarly valuable nature” is not required. The decision in Salman v. United … Continue Reading
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
On Tuesday, the Second Circuit in In Re Vitamin C Antitrust Litigation vacated a $147 million award against two Chinese companies for engaging in anti-competitive behavior. At issue was how a federal court should respond when a foreign government’s regulatory scheme conflicts with U.S. laws. Because the Chinese companies could not simultaneously comply with Chinese law … 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
The Second Circuit held yesterday that Item 303 of SEC Regulation S-K requires issuers to disclose only those trends, events, or uncertainties about which the issuer has actual knowledge, rather than those matters about which the issuer allegedly should have known. The court’s decision in Indiana Public Retirement System v. SAIC, Inc. also reinforced prior … Continue Reading
The Second Circuit has clarified the applicable statutes of repose for securities-fraud and proxy-related claims under §§ 9(f), 14(a), and 18(a) of the Securities Exchange Act. The court’s March 17, 2016 decision in DeKalb County Pension Fund v. Transocean Ltd. holds that the five-year statute of repose enacted in the Sarbanes-Oxley Act of 2002 (“SOX”) applies to … Continue Reading
On March 4, 2016, the U.S. Court of Appeals for the Second Circuit reinforced the stringency of the new standard for liability in securities cases arising from allegedly misleading statements of opinion. Construing the Supreme Court’s 2015 Omnicare decision, the Second Circuit held in Gen. Partners Glenn Tongue v. Sanofi Pharmaceuticals, Inc. that a statement … Continue Reading
The Second Circuit last week affirmed the conviction of a former corporate executive on charges of insider trading. The court’s unpublished decision on January 14 in United States v. Riley held that the Government had adduced sufficient evidence that the defendant had received a personal benefit – in the form of investment advice – in exchange … Continue Reading
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