Securities Enforcement

Subscribe to Securities Enforcement

The reach and scope of the federal securities laws is a concern most obviously relevant to publicly traded companies. However, as I have emphasized previously, private companies are not immune from scrutiny under the federal securities laws. The SEC has in fact an extensive history of pursuing enforcement actions against private companies for alleged federal securities laws violations; one needs to go back no further than the high-profile enforcement action brought against the supposed blood testing company Theranos for an example of this phenomenon in action.

A recent memo from Wiley law firm underscores these points about the exposures of private companies; as the memo’s authors put it, “private entities should be aware that an aggressive SEC can investigate and penalize them (and their executives), even if they are not directly involved in issuing securities.” The law firm’s September 23, 2023, memo, entitled “Think Because You Are a Private Company the SEC Is Not Your Problem? Think Again,” can be found here.Continue Reading Private Companies and SEC Enforcement Actions

On June 30, 2023, the U.S. Supreme Court agreed to take up a case to consider the legality of the SEC’s use of in-house administrative tribunals, which the agency uses to enforce the federal securities laws. The agency sought Supreme Court consideration of a federal appellate court ruling that held the administrative courts to be unconstitutional. The case could significantly impact the way in which the agency enforces the federal securities laws. The court’s June 30, 2023 order in which the SEC’s petition for a writ of certiorari was granted can be found here.Continue Reading U.S. Supreme Court Takes Up Case Concerning the SEC’s Use of In-House Court

When the SEC established a Climate and ESG Task Force in March 2021, the agency said that the group would “develop initiatives to proactively identify ESG-related misconduct.” Since that time the Task Force has indeed filed enforcement actions alleging ESG-related misrepresentations. Now the agency has reached a settlement with the Brazil-based mining company Vale, S.A. of the Task Force’s first-filed enforcement action, in connection with alleged misrepresentations in the company’s sustainability report about the safety of the company’s mining dams. In the settlement, the company agreed to pay a total of $55.9 million. The enforcement action and its settlement signify the agency’s increasing focus on ESG-related disclosure and its willingness to pursue enforcement actions using existing procedural mechanisms. A copy of the SEC’s March 28, 2023, press release about the Vale settlement can be found here.Continue Reading Mining Company Settles SEC’s ESG Task Force’s First-Ever Enforcement Action

On March 9, 2023, the SEC announced that it had settled charges that data management software company Blackbaud, Inc. had settled charges that the company’s cybersecurity disclosure policies and procedures violated the agency’s public company disclosure reporting requirements and that the company had made misleading disclosures about a 2020 ransomware attack that impacted more that 13,000 of its customers. The company, which neither admitted or denied the charges, agreed to a cease-and-desist order and to pay a $3 million penalty. The action, which follows a similar proceeding involving cybersecurity disclosures and procedures, highlights the agency’s focus on cybersecurity-related disclosures.Continue Reading SEC Charges Company Over Disclosures Concerning Ransomware Attack

In what the agency says is the first prosecution of its type, the U.S. Department of Justice has brought criminal charges against Terren Peizer, the Executive Chairman of the healthcare company Ontrak, alleging that the executive improperly used Rule 10b5-1 trading plans to sell shares in the company ahead of the company’s disclosure of bad news. The SEC has separately brought a civil enforcement action against Peizer based on the same allegations. The government alleges that Peizer set up the plans while aware of the undisclosed bad news and that his stock sales allowed him to avoid more than $12.7 million in losses.

 A copy of the U.S. Department of Justice’s March 1, 2023 press release about Peizer’s prosecution can be found here, and the February 24, 2023 grand jury indictment of Peizer can be found here. The SEC’s March 1, 2023, press release can be found here, and its complaint against Peizer can be found here.Continue Reading First-Ever Criminal Action Charges Exec with Misuse of Rule10b5-1 Trading Plans

If you have had the sense that under the current administration the SEC is more active and more aggressive, two reports issued this past week will confirm that your sense is correct. First, on November 15, 2022, the SEC’s Enforcement Division issued its Enforcement Results Report for FY 2022 (ended September 30, 2022), showing that during the fiscal year money ordered in SEC enforcement actions totaled $6.439 billion, the most on record in SEC history. Second, on November 16, 2022, Cornerstone Research, in conjunction with the NYU Pollack Center for Law & Business, issued its report on SEC Public Company-related enforcement activity during FY 2022, which shows that the agency’s actions against public companies increased relative to prior fiscal years and that the agency’s $2.8 billion in aggregate total monetary settlements with public companies was the highest in any fiscal year.
Continue Reading You Aren’t Just Imaging Things: The Current SEC Really is More Active

The SEC imposed fines on U.S. exchange-listed publicly traded companies at the highest levels in years during fiscal year 2022 (which ended September 30, 2022), according to an analysis published Saturday by the Wall Street Journal. As the Journal noted, the fines imposed during the fiscal year on firms accused of wrongdoing “underscore the Biden Administration’s tougher regulatory stance.” The October 29, 2022 Wall Street Journal article, entitled in the online edition “Under Biden Administration, Wall Street Watchdog’s Fines Surge,” can be found here.
Continue Reading Massive SEC Fines Surged During the Most Recent Fiscal Year