Securities Enforcement

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Last week, the U.S. Securities and Exchange Commission brought five insider-trading cases against a slew of individuals. The U.S. Attorney’s Office for the Southern District of New York also announced parallel criminal charges against the defendants in four of the five cases. These cases contain examples of the classical theory and the misappropriation theory of insider trading.

These cases were the result of close coordination with the SDNY and SEC, and they appear to be the result of an enforcement sweep. Increasingly sophisticated data analytics and market surveillance make it highly likely that those who wish to exploit material nonpublic information will be caught, with severe consequences, including disgorgement, criminal restitution, civil penalties, and incarceration.…

Continue Reading SEC and DOJ Go On An Insider-Trading Enforcement Spree

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

Earlier this week, a near-unanimous[1] 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.[2]  Justice Sotomayor, writing for the majority, confirmed in Liu v. SEC[3] 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.[4]…
Continue Reading Supreme Court Affirms SEC’s Authority to Obtain Disgorgement, But Recognizes Limits on Such Relief

This week the Delaware Supreme Court ruled that Delaware corporations may enforce federal forum selection clauses (so-called federal forum provisions or “FFPs”) for lawsuits alleging breaches of the Securities Act of 1933. See Salzberg v. Sciabacucchi, No. 346, 2019, 2020 Del. LEXIS 100 (March 18, 2020). This ruling is significant because Delaware companies can require the filing of ‘33 Act claims, including class actions, in federal court. Federal court is perceived as a more favorable forum than state court, including because of dismissal procedures and the perceived familiarity of federal jurists with the federal securities acts. By statute, for instance, federal courts already have exclusive jurisdiction of claims under the Securities Exchange Act of 1934, i.e. Section 10(b) and Rule 10b-5 actions.
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Continue Reading Keeping it All in the Family

Hollywood martial arts sensei Steven Seagal was recently karate-chopped by the SEC for his alleged undisclosed payments for Twitter-touting a security that was being offered and sold in an initial coin offering.  In a settled cease-and-desist order, the Moscow-based B movie actor consented to a violation of Section 17(b) of the Securities Act of 1933,…