In its April 27 Weekly Update, the Financial Industry Regulatory Authority’s (“FINRA”) National Cause and Financial Crimes Detection program urged FINRA member firms to review a cyber-threat alert arising from Russia’s invasion of Ukraine.
The Cybersecurity and Infrastructure Security Administration (“CISA”) issued an April 20, 2022, Advisory warning of increased Russian state-sponsored and criminal cyber threats in retaliation for Western support for resistance to Russia’s invasion of Ukraine. The cybersecurity authorities of Australia, Canada, New ...
On January 12, the US Supreme Court agreed to review the constitutionality of the SEC's administrative law judges.
On November 29, 2017, the SEC did an abrupt about-face, telling the Court it now regards its ALJs as inferior officers and no longer would defend the lower-court decisions against Lucia. The next day, the SEC itself ratified the appointments of its ALJs. Nevertheless, the Commission argued that the Court should grant cert, appointing an amicus to defend the D.C. Circuit's opinion and considering the "for-cause" removal requirement for current ALJs.
It remains to be seen ...
A unanimous Supreme Court held June 5 that SEC disgorgement is a "penalty" subject to five-year limitations under 28 U.S.C. §2462 and Gabelli v. SEC, 568 U.S. 442 (2013)(5-year limitations applies to civil monetary penalties).
Justice Sotomayor's Opinion started with the premise that a "penalty is a punishment … imposed and enforced by the State," redressing a public wrong for punishment and deterrence, rather than victim compensation. Slip Op. at 5-7. She rejected all three of the SEC's standard arguments.
First, the Court held that deterrence is not a legitimate non-punitive ...
On April 18, the SCOTUS heard oral argument in Kokesh v. Securities and Exchange Commission, an action concerning whether the five year statute of limitations of 28 U.S.C Section 2462 applies to disgorgement. This was the first securities case involving Justice Gorsuch at the SCOTUS level.
The wait will not be long for Gorsuch's second securities case. SCOTUS has agreed to hear Leidos, Inc. v. Indiana Public Retirement System, which will resolve a circuit split over whether Item 303 of SEC Regulation S-K creates a duty to disclose under Section 10(b) of the Securities Exchange Act. The ...
On Friday, January 13, the Supreme Court granted certiorari to resolve a Circuit split on the extent to which SEC enforcement actions are restricted by the five-year statute of limitations in 28 U.S.C. § 2462.
Section 2462 sets a five-year limitations period "for the enforcement of any civil fine, penalty, or forfeiture." The Supreme Court has held those limitations accrue when the violation occurs and the SEC does not benefit from a "discovery rule." Gabelli v. SEC, 133 S. Ct. 1216, 1220 (2013).
But there's disagreement over whether it applies to the commonly-sought disgorgement and ...
A unanimous Supreme Court reaffirmed the "gifting" theory of insider trading under Dirks and rejected Newman "to the extent" it required more.
The Court's long-standing rule in Dirks v. SEC, 463 U.S. 646, 664 (1983) allows a jury to infer a tipper's personal benefit "where the tipper receives something of value in exchange for the tip or 'makes a fit of confidential information to a trading relative or friend.'"
Recently, the Second Circuit appeared to limit the "gifting" theory. In United States v. Newman, 773 F.3d 438, 452 (2nd Cir. 2014), cert. denied, 577 U.S. ___ (2015), the Court ...
Within weeks, the Second and Third Circuits reached opposite conclusions over federal jurisdiction to confirm, modify or vacate arbitration awards. The Second Circuit now allows courts to look through the face of the petition to assess the federal-question jurisdictional merit of the underlying dispute; the Third Circuit doesn't (along with the DC and Seventh Circuits).
In 2009, the Supreme Court held the text of Section 4 of the Federal Arbitration Act required "look-through" assessment of the underlying dispute in motions to compel arbitration, based on the statute's text:
"A ...
The Supreme Court held May 16 that the exclusive federal jurisdiction provision of the 1934 Securities Exchange Act means the same as the "arising under" test for federal-question jurisdiction and does not pre-empt state law claims unless they require proving a violation of a rule or regulation under the Act.
Manning and other shareholder plaintiffs filed suit against Merrill Lynch and others in New Jersey state court alleging naked short selling in violation of SEC Regulation SHO (which requires a "good locate" at the time of a short trade to prevent naked shorting). But ...
The Supreme Court Monday re-affirmed the enforceability of class-waivers in arbitration agreements. The five-justice majority felt the need to rebuke the California courts for trying to end-run Federal preemption through a latent "States-rights" nullification approach. Two of the three dissenters saw the case as a consumerist crusade against big business. But the biggest take away for businesses using arbitration clauses just might lie hidden within the opinion. DirectTV's Conditional Class-Waiver. DirectTV's consumer contracts contained a conditional class waiver ...
On December 1, 2015, amendments to the Federal Rules of Civil Procedure adopted by the United States Supreme Court will be effective (absent action by Congress). The amendments to the Rules should be duly noted by litigation practitioners as certain of the amended rules appear to represent an increased focus on limiting discovery and even a departure from prior practice. If the intent of these changes are actually followed, these amendments should have an impact not only on securities cases but on any case filed and litigated in federal court.
One of the most significant changes is the ...
The Department of Justice today appealed the Second Circuit's Newman decision to the U.S. Supreme Court, after several extensions. United States v. Newman, No. 15-137 (U.S. filed July 30, 2015). Last December's ruling narrowed the scope of tippee liability in insider-trading cases. The latest extension of the cert-petition deadline resulted in a bit of row, when the government hand-delivered the request June 15 and Justice Ginsburg granted it June 16, (extending the filing deadline to August 1). But Newman's counsel apparently wasn't even served with the government's request ...
On June 5, the Tennessee Supreme Court rejected a per se rule of unconscionability for non-mutual arbitration clauses, holding them enforceable if not too-one-sided and commercially reasonable under the circumstances. Berent sued his mobile-home sellers in chancery court, arguing that foreclosure exceptions for the seller within a generally broad-form arbitration clause rendered it unconscionable and unenforceable. The trial and intermediate appellate courts agreed, under the Supreme Court's prior decision Taylor v. Butler, 142 S.W.2d 277 (TN 2004). The Sellers sought ...
In an opinion Thursday, the Delaware Supreme Court held that independent directors should be dismissed from shareholder derivative litigation - even over transactions presumptively subject to "entire fairness" review - unless plaintiffs adequately plead non-exculpated claims against them. Prior precedent suggested, and the lower courts in these consolidated appeals adopted, a transactional approach to the issue: If the transaction was subject to entire-fairness review, then all the directors presumptively remained in the case through discovery to summary judgment at ...
On February 20, 2015, the Alabama Supreme Court affirmed the order of the Circuit Court of Jefferson County, Alabama dismissing claims asserted by Walter Energy, Inc. against investor Julian A. Treger, his firm Audley Capital Advisors, LLP and other associated investment entities related to a purported "pump and dump" scheme executed by the Audley defendants related to Walter Energy stock. In late 2010, Walter Energy purchased Western Coal Corporation. Walter Energy alleged in the trial court that the Audley defendants initiated a "pump and dump" scheme on July 17, 2011, when ...
Short fish, Long fish, Red fish, Gone fish.[1] Old fish, New fish,[2] Red fish, Few fish.[3] This one is tangible,[4] That one's an object[5] The evidence was tampered.[6] Say, wasn't investigation hampered?[7] "Records" and "files" With Latin canon wiles What does it say? No! Don't read it that way.[8] Verbs and nouns[9] Dissenters frown[10] Four plus one, The statute's done.[11] (with apologies to Theodor Geisel). Thomas K. Potter, III (tpotter@burr.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Managing Partner of the Nashville ...