The SEC has announced a series of proposed changes to the Rules of Practice governing its internal enforcement actions. The changes update the decade-old Rules and respond in small part to a groundswell of criticism about the Commission's administrative forum. A. Lengthening the "rocket docket." Rule 360 presently requires actions to go from the Order Instituting Proceedings ("OIP" - the charging document) through to decision within 120, 210 or 360 days. That's a very fast schedule for Respondents to digest and defend a case the Enforcement Division might have taken up to 5 ...
Two rulings last week ordered the SEC to stop administrative proceedings in two cases, pending the Second Circuit's ruling on the constitutionality of its administrative forum. The Second Circuit stayed the SEC's prosecution of Lynn Tilton, pending appeal of her case. Tilton v. SEC, No. 15-2103 (2nd Cir. Sept. 17, 2015). The same day, Judge Richard Berman, denied the SEC's motion to allow its administrative case to proceed (by staying his preliminary injunction). Duka v. SEC, No. 15 Civ. 357 (USDC S.D.N.Y. Sept. 17, 2015). Judge Berman cited the "goose/gander" rule, noting the ...
Recent decisions try to clarify insider trading liability, but may have caused more confusion. In United States v. Newman, 773 F.3d 438 (2d Cir. 2014), the Second Circuit explained that to be convicted of insider trading, the tippee must have knowledge that the insider tipper disclosed information in exchange for a personal benefit. What does this mean? In Newman, the tipper and tippee attended business school together and had been colleagues, but they were not "close." The tippee provided career advice and assistance to tipper, but the advice began before the tipper gave the ...
This week the SEC's Office of Compliance Inspections and Examinations ("OCIE") announced a second-round of cybersecurity examinations, continuing its initiatives on the issue. The move follows the SEC's: March 2014 roundtable of regulators and industry representatives; April 2014 Risk Alert announcing a sweep exam to identify risks and issues; and February 2015 summary observations from that sweep. In this second round of exams, OCIE will engage in more testing directed at firms' implementation of key controls and procedures, especially:
- Governance & Risk Assessment
An SEC administrative law judge ("ALJ") found that former Wells Fargo trader Joseph Ruggieri traded on material nonpublic information tipped him by former analyst Greg Bolan, but dismissed the insider-trading charges against Ruggieri, because the Division of Enforcement did not prove personal benefit to his tipper. The bottom line: It doesn't violate anti-fraud rules to trade on material non-public information obtained from a casual acquaintance who "simply could not follow the rules and keep his mouth closed," where there is no clearly-demonstrable personal benefit to ...
The Municipal Securities Rulemaking Board ("MSRB") announced September 2 that it has submitted for SEC approval proposed amendments extending its gift-limitations Rule G-20 to municipal advisors. In general, the Rule prohibits gifts or services (including gratuities) exceeding $100 per year to any person if they relate to the provision of municipal advisory services, with some exceptions, including:
- Normal Business Dealings: Occasional gifts of meals or tickets to events hosted and attended by advisors, or sponsored business functions recognized by the IRS as deductible ...
Unless you live under a rock, you've heard about "Deflategate:" The Patriots' use of allegedly under-inflated footballs during their 45-7 win over the Colts in last-year's AFC Championship. In a 40-page opinion issued September 3, Southern District of New York federal Judge Richard Berman overturned the NFL's four-game suspension of Patriot quarterback, Tom Brady. Commissioner Goodell said the League will appeal. Deflategate also proves that it's not impossible to overturn an adverse arbitration award under Federal Arbitration Act ("FAA"). Cross-Motions on an ...