On April 1, 2021, the Texas State Securities Board (TSSB) announced the entry of a Consent Order against an SEC registered investment adviser named Independent Financial Group, LLC (“Independent”). The TSSB’s action may represent a large shift in investment adviser regulation and enforcement considerations for SEC-registered investment advisers. (Emphasis on “may.”) Continue Reading SEC Investment Advisers: Texas says “April Fools!” to Federal Preemption?
Capital raising through Special-Purpose Acquisition Companies (“SPACs”) has gone through the roof in the last two years. Last year was by far the single highest deal value for SPACs, and the first quarter of 2021 has already surpassed last year’s total deal value. Given the explosion of SPAC transactions, often backed by celebrities, it is a safe bet that the SEC will increase its scrutiny of SPACs.
In fact, on March 25, 2021, Reuters reported that the SEC has requested voluntary information from Wall Street banks on SPAC deals. Whether this inquiry broadens into a full-scale industry sweep remains to be seen, but it is clear that the hotbed of SPAC activity has captured regulatory attention. Also notable is that the plaintiffs’ bar has been filing lots of cases arising from SPAC transactions, which can be a harbinger of SEC inquiries. For these reasons, it is important to understand the regulatory risks of these deals.
As we discussed in our recent post “What to Expect from the SEC Under the Biden Administration,” market participants can expect a more vigorous SEC enforcement program under the new administration. President Biden’s nominee to chair the SEC, Gary Gensler, was known as a tough enforcer while serving as chairman of the CFTC during the financial crisis. If confirmed as SEC Chairman by the Senate, Mr. Gensler is sure to bring an assertive approach to SEC enforcement. Continue Reading What Investment Advisers and Fund Managers can Expect from the SEC Under the Biden Administration
The dust has settled on the 2020 election, and the Biden administration has begun pressing forward with its policy objectives. Critical to achieving such objectives is the Democrats’ control of both the House of Representatives and the Senate, albeit by the narrowest of margins after the Democratic senatorial candidates won their run-off elections in Georgia. As a result of the Georgia elections, Vice President Harris will be able to cast the tie-breaking vote in the case of a deadlock in the Senate. What does the change in administrations mean for SEC enforcement? Continue Reading What to Expect from the SEC Under the Biden Administration
The government cannot take action against abuses of the various aid programs associated with the CARES Act without first identifying abuses. In a recent round of inquiries, FINRA sent requests to numerous individuals it has identified as having obtained aid under the CARES Act (e.g., the Paycheck Protection Program (PPP) or Economic Injury Disaster Loan (EIDL)). FINRA has acknowledged the existence of these requests and has stated the focus of the inquiries is the representatives and not FINRA member firms. Continue Reading When PPP met OBA – An Investigation was Born
The Securities and Exchange Commission’s disgorgement powers have made legal headlines a couple of times over the last few years – most notably, with the U.S. Supreme Court’s decisions in Kokesh v. SEC, 137 S. Ct. 1635 (2017) and Liu v. SEC, 140 S. Ct. 1936 (2020). Disgorgement surfaced again with the recent passage of the National Defense Authorization Act for Fiscal Year 2021, Section 6501 of which doubled the statute of limitations for some disgorgement actions from five years to 10. Continue Reading Four Things You Need to Know About the Extended Limitations Period for SEC Disgorgement
The Securities and Exchange Commission (the “SEC”) recently adopted amendments to the definition of “accredited investor,” which will permit a wider range of investors to participate in certain private offerings. The amended definition includes several new categories of natural persons and entities who qualify as accredited investors for purposes of Rule 501(a) of Regulation D under the Securities Act of 1933 (the “Securities Act”). The amendments also expand the definition of “qualified institutional buyer” under Rule 144A under the Securities Act. Continue Reading SEC Adopts Amendments to “Accredited Investor” Definition
A very effective panel discussion on “Leadership Matters: Meaningful, Measured Impact in Diversity and Inclusion” took place September 23, 2020 during the SIFMA C&L Virtual Forum. Elaine Mandelbaum, General Counsel of Interactive Brokers and the current SIFMA C&L Society president moderated with panelists Christopher Lewis, General Counsel, Edward Jones; Robert Marchman, Senior Policy Advisor on Diversity and Inclusion, U.S. Securities and Exchange Commission; and Grace Speights, chair of Morgan Lewis’ Labor and Employment practice. Too many highlights to cover fairly, but these points that resonated with me.
On September 3, 2020, the Securities & Exchange Commission charged Daniel Kamensky with abusing his fiduciary position as co-chair of the Neiman Marcus Group Unsecured Creditors’ Committee by pressuring a rival bidder to abandon its bid for securities so that Kamensky’s hedge fund could purchase them at a lower price. The U.S. Attorney’s Office for the Southern District of New York also brought charges against Kamensky for securities fraud, wire fraud, extortion, and obstruction of justice. The allegations—if proven—are a fascinating story in and of themselves. But they also serve as an excellent illustration of the pitfalls awaiting Unsecured Creditors’ Committee members who ignore their fiduciary duties. Continue Reading Charges Against Marble Ridge Capital Founder Illustrate the Pitfalls That Await Members of Unsecured Creditors’ Committees Who Ignore Their Fiduciary Duties
Earlier this week, a near-unanimous United States Supreme Court issued its much anticipated ruling on the SEC’s ability to obtain disgorgement of ill-gotten gains in cases involving securities fraud, FCPA violations, and other securities violations. Justice Sotomayor, writing for the majority, confirmed in Liu v. SEC that the SEC has the authority to obtain such relief. The SEC’s authority to obtain disgorgement had seldom been questioned until the Supreme Court itself raised the issue in a footnote in its landmark Kokesh v. SEC decision in 2017. Continue Reading Supreme Court Affirms SEC’s Authority to Obtain Disgorgement, But Recognizes Limits on Such Relief