Securities Laws

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latham logo 1The SEC is the primary regulatory body charged with the enforcement of the U.S. securities laws. Most insurance and legal professionals are well-aware of the agency and familiar with its regulatory role. But in an era that has been (at least up until now) characterized by heightened enforcement activity, many of those professionals may be unfamiliar with the agency’s investigative and enforcement process and protocols. In the following guest post, Ted Carleton and Tammy Yuen of the Skarzynski Black law firm and John Sikora of the Latham & Watkins law firm provides a basic outline of the SEC’s investigative and enforcement processes, reviews some recurring D&O insurance coverage issues arising from SEC investigations and enforcement actions, highlights some of the current issues at the agency, and take a look ahead at what the change in administration may mean. I would like to thank Ted, Tammy, and John for their willingness to publish their guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Ted, Tammy and John’s guest post.
Continue Reading Guest Post: The Nuts & Bolts of SEC Investigations & Enforcement

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Sarah A. Good
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Laura C. Hurtado

One of the recurring questions in the securities regulatory enforcement arena has been the question of whether or not the Securities and Exchange Commission’s use of administrative law judges violates the U.S. Constitution. As discussed in the following guest post from Sarah A. Good and Laura C. Hurtado of the Pillsbury law firm, the Tenth Circuit, in direct conflict with a prior decision from the D.C. Circuit, recently held that the SEC’s appointment of administrative law judge’s violates the constitution. The circuit split suggests that this issue may be on its way to the U.S. Supreme Court.

I would like to thank Sarah and Laura for their willingness to allow me to publish their article as a guest post. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah and Laura’s guest post.
Continue Reading Guest Post: Constitutionality of SEC’s ALJs Headed to Supreme Court?

SEC logoWhile the confirmation earlier this week that Mary Jo White will step down as SEC Chair at the end of the Obama administration raises interesting questions about the SEC’s possible future direction and priorities, the agency’s public company-related enforcement activities during the last fiscal year provide some very interesting insights about the SEC’s recent priorities. In an interesting November 15, 2016 report entitled “SEC Enforcement Activity Against Public Companies and Their Subsidiaries: Fiscal Year 2016” (here), the NYU Pollack Center for Law & Business and Cornerstone Research take a detailed look the SEC’s enforcement activity during the fiscal year ending on September 30, 2016. The report examines the agency’s record levels of enforcement activity involving public company defendants during the fiscal year.
Continue Reading SEC Enforcement Activity Involving Public Companies

paul-weiss-large-300x53In the following guest post, attorneys from the Paul Weiss law firm review and analyze a November 3, 2016  Second Circuit decision (here)  in which the appellate court held that the standard pre-IPO lock-up agreements between a company’s pre-IPO shareholders and the company’s lead IPO underwriters do not make those parties a “group” within Section 13(d) of the ’34 Act, and therefore that the lock-up agreement alone is insufficient to trigger Section 16(b) short-swing profit liability. I would like to thank the Paul Weiss attorneys for their willingness to allow me to publish their article on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is the Paul Weiss attorneys’ guest post.
Continue Reading Guest Post: IPO Lock-Up Agreement Parties Not a “Group” Liable for Short-Swing Profits

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Senator Elizabeth Warren
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SEC Chair Mary Jo White

Perhaps SEC officials hoped they were bolstering their agency’s image as a tough regulator when they reported on October 11, 2016 that the SEC had filed a record number of enforcement actions in fiscal year 2016. That was certainly the way the officials quoted in the agency’s press release played it. But if that was their plan, Senator Elizabeth Warren, at least, was having none of it. Just days after the agency released its enforcement statistics, Senator Warren sent a 12-page letter to President Barack Obama calling for the President to fire Mary Jo White as SEC Chair, because, the Senator contends, under White’s watch the agency has undermined the administration’s priorities, ignored the SEC’s core mission of investor protection, and failed to promulgate or implement disclosure requirements Warren supports.
Continue Reading Despite Record SEC Enforcement Activity, Senator Warren Calls for President to Fire Agency Chair

supreme courtOctober 3, 2016 is the first Monday in October, and that means that on that date the U.S. Supreme Court, as it has on the first Monday of every October since 1917, will begin its new term. While the Court will begin its term this year as it traditionally has in the recent past, it will also be operating on an unusual basis. For the first time in almost 30 years, the Supreme Court will begin its new term will only eight justices.
Continue Reading First Monday in October: What to Watch in the Supreme Court’s New Term

wb-100-millionOne of the signature features of the Dodd-Frank Act was its creation of an SEC Whistleblower program. Under the program, the SEC can award whistleblowers a bounty of between ten percent and thirty percent of any recoveries the SEC makes in excess of $1 million as result of the information whistleblower provided. The program went into effect in 2011, and the agency immediately began receiving a huge volume of whistleblower reports. Over time the agency has made a number of awards, including the September 2014 award of $30 million, which is still the largest award under the whistleblower program.

While the program has been in operation now for several years, it recently kicked into high gear and the program has passed a number of important milestones. The trend lines suggest that the SEC whistleblower program is going to be an increasingly important part of the corporate liability landscape, and for that reason there are a number of important things to keep in mind.
Continue Reading Six Things to Know Now About the SEC Whistleblower Program

gavelOne of the practical effects of the U.S. Supreme Court’s 2010 decision in Morrison v. National Australia Bank is that, as a result of the decision, it is more difficult to bring a class action in a U.S. court under the U.S. securities laws against a company based outside the U.S. The Court rejected earlier standards allowing U.S. courts to consider securities suits against non-U.S. companies if conduct relating to or effects of an alleged fraud took place in the U.S. Instead, the Court said that U.S. securities laws apply only to “transactions in securities listed on domestic exchanges, and domestic transactions in other securities.”

At the time of the Morrison decision, the expectation was that the number of U.S. securities class action lawsuits filed against non-U.S. companies would decline. As it has turned out however, the number of securities lawsuits filed against non-U.S. companies in each of the years since Morrison has been greater than the number filed in the years prior to the decision. Indeed, for the past several years, non-U.S. companies have been likelier to get hit with a securities class action lawsuit than domestic companies.
Continue Reading The Continuing Question of Morrison’s Applicability to ADR Transactions

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Bruce Ericson

Among the many issues arising under the Sarbanes-Oxley Act are questions surrounding disgorgement under Section 304, particularly questions concerning what actions and whose actions might trigger disgorgement. In the following guest post, Bruce Ericson of the Pillsbury Winthrop Shaw Pittman law firm takes a look at the Ninth Circuit’s August 31, 2016 decision in U.S. Securities & Exchange Commission v. Jensen in which the appellate court held that the SEC can seek disgorgement from a company’s CEO or CFO even if the triggering restatement did not result from those corporate officers’ misconduct. I would like to thank Bruce for his willingness to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Bruce’s guest post.
Continue Reading Guest Post: Ninth Circuit Clarifies What Might Trigger SOX 304 Disgorgement

SEC logoThe SEC’s enforcement activity so far this fiscal year trails the record levels in the 2015 fiscal year. According to a recent report from Cornerstone Research (here), the SEC’s enforcement activity through the end of the fiscal third quarter (on June 30, 2016) is eight percent below the activity levels during the same period in FY 2015, largely as a result of an activity decline in the third quarter. At this point, even if the agency is active in the fourth fiscal quarter, it seems unlikely that by the end of the fiscal year on September 30, 2016 that the agency’s enforcement activity will catch up to the prior year.
Continue Reading SEC Enforcement Actions Decline