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John Reed Stark

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 the processes and responsibilities that constitute the agency’s watch. Stark calls on the country’s political leaders to end the stalemate and re-open the government, including the SEC. Every day the shutdown continues, and the SEC staff remain at home, Stark says, the risks to U.S. markets increase. A version of this article originally appeared on Securities Docket. I would like to thank John for allowing me to publish his article as a guest post. 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 John’s article.
Continue Reading Guest Post: Why the Shutdown Must End

In November, when the SEC released its annual enforcement activity report, the report showed that during the fiscal year that ended on September 30, 2018 both the volume of the agency’s enforcement activity and the level of financial recoveries increased compared to the prior fiscal year. The agency’s report did not separate out its enforcement activity involving public companies. However, a new report from the NYU Pollack Center for Law & Business and Cornerstone Research breaks out the enforcement numbers for public companies. The new report show that SEC enforcement actions against public companies and subsidiaries “jumped substantially” in the second half of FY 2018, reversing a decline in filings that began in the second half of 2017 and continued through the first half of 2018.
Continue Reading SEC Enforcement Activity Against Public Companies Surges in FY 2018’s Second Half

Both the volume of SEC enforcement activity and the level of financial recoveries increased in the fiscal year that ended September 30, 2018, according to the agency’s annual enforcement activity report. The increases came after activity had been down in the prior year, the first year under the current presidential administration. However, the agency’s enforcement chiefs cautioned against placing too much weight on the numbers alone. The report contains some interesting signs of what we might expect in the current fiscal year. The SEC’s enforcement report can be found here. The agency’s November 2, 2018 press release about the report can be found here.
Continue Reading SEC 2018 FY Enforcement Report Shows Increased Activity, Recoveries

John Reed Stark

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 information by individuals who do not qualify as insiders. 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 the SEC’s track record in this area and calls for the agency to reinforce its efforts to police outsider trading. A version of this article previously appeared on Securities Docket. I would like to thank John for his willingness to allow me 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 John’s article.
Continue Reading Guest Post: The SEC’s Outsider Trading Program: The Silence is Deafening

John Reed Stark

Earlier this week, media reports circulated that this past spring Google had exposed the private data of thousands of the Google+ social network users and then opted not to disclose the issue, in part because of concerns that doing so would draw regulatory scrutiny and cause reputational damage. In the wake of these revelations, one question is whether the SEC will look into these circumstances. 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 he regards as a likely SEC investigation and the questions that the SEC likely will be asking. A version of this article originally appeared on Securities Docket. I would like to thank John for allowing me to publish his article 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 an article. Here is John’s post.  
Continue Reading Guest Post: Ten Questions the SEC Will Probably Be Asking Google

One of the trendy concepts in certain circles in recent years has been the idea of litigation management bylaws – that is, the adoption by company of bylaw provisions that help manage the company’s litigation risks. For example, one bylaw provision that has been widely adopted by publicly traded companies is a forum selection provision specifying a particular jurisdiction as the preferred forum for litigating shareholder disputes.

Another one of the proposed litigation management bylaws that has proven more controversial is the idea of a mandatory arbitration clause, requiring shareholder claimants to submit claims – including even claims under the federal securities laws – to arbitration. This idea, which has been percolating for years, received a significant boost in a statement from SEC Commissioner Michael Piwowar. In a recent letter to a member of Congress, SEC Chair Jay Clayton weighed in with his views on the topic, suggesting that the idea is not a particular priority for him. But aspects of his communication and of the current state of debate on the issue suggest that the idea is probably not going to just go away.
Continue Reading Mandatory Arbitration of Shareholder Claims: What’s the Latest?

Amidst the flurry of Supreme Court decisions, new lawsuits, and other activity in the last few days, I have not yet had the chance to comment on a particularly important development earlier this week. That is, on March 19, 2018, the SEC announced the two largest whistleblower bounty awards in the history of its whistleblower bounty program. The value of the two awards to three whistleblowers, whose reports led to a $415 settlement with Merrill Lynch, totaled roughly $83 million. These awards are significant, and not just because of their size, as discussed below. The SEC’s March 19, 2018 press release about the awards can be found here, and the SEC’s heavily redacted March 19, 2018 Order Determining Whistleblower Award Claims can be found here.
Continue Reading A Lot is Going On Now, But Don’t Overlook the SEC’s Whistleblower Awards Earlier This Week

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 current and former SEC Commissioners and SEC representatives have weighed in on the issue, mostly to pour cold water on the idea. Because I believe this idea will continue to percolate, I survey the latest statements below. Even though the most recent statements strongly suggest a lack of support for the idea in many circles, I suspect we will continue to hear more about this issue.
Continue Reading The Latest on Proposed Mandatory Arbitration of Shareholder Claims

us capital 2One of the Trump administration’s high profile initiatives is the review and rollback of many of the Dodd-Frank Act’s features.  Consistent with these efforts, an updated version of a bill that would undo many of the Act’s provisions is now making its way through Congress. The Financial Choice Act (H.B. 10) was introduced in April by Rep. Jeb Hensarling (R-Tex.) Because Hensarling introduced a similar bill with the same name during the last Congressional session, the recently introduced bill is referred to as Financial Choice Act 2.0. The bill, which has already passed through the House Financial Services Committee, addresses a number of high profile issues affecting the regulation of the financial system. The systemic issues are attracting all of the headlines. Other features of the bill are attracting less notice. Of particular interest here, the bill introduces a number of changes to the SEC’s enforcement authority. As Columbia Law School Professor John Coffee commented in congressional hearing testimony, these changes, if enacted, would “hobble the SEC’s enforcement program,” and the “cumulative effect” would be “devastating.”
Continue Reading Financial Choice Act 2.0 Proposes Significant Changes to the SEC’s Enforcement Authority

Blair Nicholas
David Kaplan

Among the many concerns in the early days of the new Presidency is the question of what we can expect from the SEC in the new administration. In the following guest post, Blair Nicholas and David Kaplan of the Bernstein Litowitz Berger & Grossman law firm advocate that the SEC take an aggressive approach to securities enforcement, and they have a specific proposal to advance that approach. A version of this article previously appeared in the National Law Journal. I would like to thank Blair and David for their willingness to publish their article 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 Blair and David’s guest post.
Continue Reading Guest Post: President Trump, Let’s Strengthen the SEC