Archives: Securities Laws

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The SEC’s Enforcement Division Reports Elevated Enforcement Action and Monetary Recovery Levels

The SEC’s Enforcement Division had another active enforcement year in fiscal 2019, which ended September 30, 2019, that resulted in substantial recoveries. According to the Division’s latest annual report, the agency pursued more enforcement actions in fiscal 2019, including more standalone actions, than in the past several years. The agency’s enforcement action monetary recoveries, including … Continue Reading

Supreme Court to Consider SEC’s Authority to Seek and Obtain Disgorgement

In its June 2017 decision in Kokesh v. SEC  (discussed here), the U.S. Supreme Court held that disgorgement in an SEC enforcement action represents a “penalty,” and therefore a SEC enforcement action  claim for disgorgement is subject to a five-year statute of limitation. In reaching this decision, the Court emphasized (in footnote 3 to the … Continue Reading

SEC Public Company Enforcement Activity Remained Near Record Levels in FY2019’s First Half

Driven in significant part by the new actions filed as part of the SEC’s Share Class Selection Disclosure Initiative, the number of SEC enforcement actions against public companies and subsidiaries remained at “near-record levels” in the first half of fiscal year 2018, according to a recent report. The report, published by Cornerstone Research in collaboration … Continue Reading

Supreme Court: Even One Who Did Not “Make” a False Statement May Still be Subject to Scheme Liability

In its 2011 decision in the Janus Group case, the U.S. Supreme Court held that one who does not “make” a false statement cannot be held liable under section (b) of Rule 10b-5. In an enforcement action brought against him by the SEC, the defendant, Francis Lorenzo, argued that under the Janus case, he could … Continue Reading

Just a Reminder: Private Company Executives Can Be Held Liable Under the Federal Securities Laws

Although it is not always appreciated or taken into account, the fact is that executives of private companies can be held liable for statements or other actions made in violation of the federal securities laws. One very recent and high-profile example where this happened involved the SEC enforcement action (and subsequent criminal proceedings) involving the … Continue Reading

Guest Post: Why the Shutdown Must End

Among the agencies largely closed by the current partial U.S. federal government shutdown is the U.S. Securities and Exchange Commission (SEC). In the following guest post,  John Reed Stark, President of John Reed Stark Consulting and former Chief of the SEC’s Office of Internet Enforcement, takes a look at what the SEC’s closure means for … Continue Reading

Guest Post: Section 11 Claims May Remain in State Court; How Will Companies and D&O Carriers Respond?

As I noted at the time (here), on December 19, 2018, Delaware Vice Chancellor Later held that under Delaware law, a corporate charter provision specifying that liability actions under Section 11 of the Securities Act of 1934 must be brought in federal court are invalid and ineffective. A copy of Laster’s opinion in Sciabacucchi v. … Continue Reading

Guest Post: Five Hidden Takeaways from the Khaled and Mayweather SEC Orders

On November 29, 2018, the SEC announced that it had settled charges with boxer Floyd Mayweather Jr. and music producer DJ Khaled for failing to disclose payments they received for promoting investments in Initial Coin Offerings (ICOs). In the following guest post, John Reed Stark, the President of John Reed Stark Consulting and former Chief … Continue Reading

Guest Post: The SEC’s Outsider Trading Program: The Silence is Deafening

Most readers are undoubtedly familiar with the concept of “insider trading” – that is, the purchase or sale by company insiders of their personal holdings in company shares based on material non-public information. Readers may be less familiar with “outsider trading,” which is trading in shares of a company on the basis on material non-public … Continue Reading

House Passes JOBS Act 3.0

Since it first enacted the Jumpstart Our Business Startups (JOBS) Act in 2012, Congress has continued to modify the original JOBS Act as part of an ongoing effort to try to boost small businesses and business startups. For example, in 2015, Congress acted to expand a number of the JOBS Act’s provisions. On July 17, … Continue Reading

Supreme Court’s SEC ALJ Decision Leaves Many Unanswered Questions

In a June 21, 2018 decision, the U.S. Supreme Court held that the SEC’s administrative law judges (ALJs) are not merely “employees” but rather are “officers” who must be appointed to their position by the “Heads of Departments” under the Constitution’s Appointments Clause. The Court’s decision at one level represents a rather straightforward application of … Continue Reading

U.S. Supreme Court: Equitable Tolling Does Not Allow Follow-On Class Claims Outside of the Limitations Period

In the latest of several recent high court decisions addressing the questions of statutes of limitations and related questions of tolling, on June 11, 2018, the U.S. Supreme Court unanimously held that equitable tolling principles do not apply to toll statutes of limitation to permit previously absent class members to bring a subsequent class action … Continue Reading

U.S. Supreme Court: Notwithstanding SLUSA, State Courts Retain Concurrent Jurisdiction for ’33 Act Claims

In a unanimous March 20, 2018 opinion written by Justice Elena Kagan, the U.S. Supreme Court held that state courts retain concurrent jurisdiction over class action lawsuits alleging only violations of the Securities Act of 1933’s liability provisions and that these state court class action lawsuits are not removable to federal court. The court’s holding … Continue Reading

Critical Implications of the SEC’s Enforcement Action Against Theranos

Many readers undoubtedly saw the news last week of the enforcement action the SEC filed against Theranos, Inc., its founder, Chairman, and CEO Elizabeth Holmes, and its President and COO Ramesh “Sunny” Balwani. Theranos and Holmes have settled with the agency, although the complaint against Balwani apparently will be going forward. The SEC’s action is … Continue Reading

The Latest on Proposed Mandatory Arbitration of Shareholder Claims

SEC Commission Michael Piwowar caused quite a stir last summer when he suggested that the SEC would favorably view submissions by IPO companies that included bylaw provisions requiring mandatory arbitration of securities claims. The idea of mandatory arbitration for shareholder claims has continued to circulate in the intervening months. In the past few days, several … Continue Reading

SEC Releases Cybersecurity Disclosure Guidance

After a bit of last-minute drama, the SEC on Wednesday issued its guidance for public company cybersecurity disclosures. The Commission’s guidance document emphasizes companies’ disclosure obligations under existing law and requirements. The statement also underscores the Commission’s concerns about insider trading prohibitions and the obligation of reporting companies to refrain from making selective disclosures about … Continue Reading

U.S. Supreme Court Adopts Narrow View of Who Can Rely on Dodd-Frank Act’s Anti-Retaliation Protections

The U.S. Supreme Court ruled on February 21, 2018 that the Dodd-Frank Act’s anti-retaliation provisions protect only whistleblowers that make a report to the SEC, and do not apply to whistleblowers who report internally. The Court’s ruling, which resolved a circuit split on the question of who was entitled to the Act’s provisions, will significant … Continue Reading
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