Blog Posts Tagged With Policy

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United States v. Hoskins (2d Cir. August 31, 2018)

The Second Circuit held that the FCPA’s anti-bribery provisions do not extend to non-U.S. persons absent a U.S. nexus.  The holding specified that a nonresident foreign national cannot be held liable under the provisions under a conspiracy or accomplice theory if they could not otherwise be held liable under the statute.  The Defendant in the case was a U.K. national employed by a U.S. corporation who had never been to the United States.  The holding
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SEC Announces Self-Reporting Initiative for Rule 12b-1 Fee Disclosures (Feb. 12, 2018)

The SEC’s Division of Enforcement announced its “Share Class Selection Disclosure Initiative,”  offering favorable settlement terms to investment advisers who self-report potential violations relating to certain mutual fund share class selection issues and promptly return money to harmed clients.  Qualifying self-reporting advisers will be eligible for a recommendation from the Division of Enforcement that the Commission accept a settlement imposing a cease-and-desist order, disgorgement with prejudgment interest, and various undertakings, but not imposing a civil
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SEC and CFTC Chairs Testify on Virtual Currency Oversight (Feb. 6, 2018)

SEC Chairman Jay Clayton and CFTC Chairman Christopher Giancarlo testified before the Senate Banking, Housing and Urban Affairs Committee on regulatory and enforcement efforts in connection with Bitcoin and other virtual currencies.  Both officials suggested that a broader, coordinated effort to monitor and regulate these currencies was necessary.  Chairman Giancarlo stated:  “It strikes me that we owe it to this new generation to respect their enthusiasm about virtual currencies with a thoughtful and balanced response,
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Lucia v. SEC, Petition for Writ of Certiorari (Nov. 29, 2017)

The Solicitor General filed a brief urging the Supreme Court to grant certiorari and settle a circuit split over whether the SEC’s Administrative Law Judges (ALJs) have been unconstitutionally appointed to their posts. The Solicitor General’s brief reversed the agency’s position that its ALJs are employees not subject to the Appointments Clause. In addition, the Solicitor General questioned the validity of statutory restrictions on the removal of ALJs. While the SEC did not sign the
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CFTC Releases Annual Enforcement Results for Fiscal Year 2017 (Nov. 22, 2017)

The CFTC released its annual report reviewing its enforcement actions during fiscal year 2017. The report states that the Commission brought 49 enforcement enforcement-related actions and obtained orders totaling $412,726,307 in restitution, disgorgement, and penalties. The CFTC also issued new cooperation guidelines and new rules to protect whistleblowers, in an effort to strengthen its enforcement program. Of the 49 enforcement actions, 20 involved retail fraud, followed by twelve actions involving market manipulation, seven involving reporting
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Disgorgement for Violating a Federal Securities Law (Nov. 17, 2017)

The IRS has taken the position that disgorgement in securities cases is not deductible. This position is based on the Supreme Court’s decision in Kokesh v. SEC, 137 S. Ct 1635 (2017), in which the Court held that disgorgement imposed as a sanction for violating a federal securities law is a penalty for purposes of the five-year statute of limitations on SEC enforcement actions.

IRS Order
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SEC Enforcement Division Issues Report on Priorities and Fiscal Year 2017 Results (Nov. 15, 2017)

The SEC Enforcement Division issued its annual report outlining its priorities for the coming year and reviewing its fiscal year 2017 enforcement actions. The Commission brought a total of 754 enforcement actions, including 446 stand-alone actions and 196 follow-on actions, and imposed penalties totaling $3.79 billion. Of the Commission’s 446 stand-alone cases, each of investment advisory issues, securities offerings, and issuer reporting/accounting and auditing actions comprised approximately 20% of the total SEC Enforcement actions. The
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SEC Division of Enforcement Co-Directors Provide Remarks on Enforcement Division’s Initiatives and Priorities (Oct. 30, 2017)

SEC Division of Enforcement Co-Directors Stephanie Avakian and Steven Peikin provided remarks at the 2017 Securities Enforcement Forum regarding the Enforcement Division’s new initiatives and priorities. In her remarks, Avakian discussed the recently announced Retail Strategy Task Force and Cyber Unit, but emphasized that despite these new areas of focus, and SEC would not allocate fewer resources to “financial fraud or policing Wall Street.” According to Avakian, the new task force will use data analytics
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SEC Chair Clayton Provides Update on 2016 Cyber Intrusion (Oct. 2, 2017)

SEC Chair Jay Clayton provided an update on the status of the agency’s review and investigation of the 2016 intrusion into the EDGAR system and the agency’s efforts to strengthen its cybersecurity risk profile going forward. According to Chair Clayton, the ongoing investigation of the 2016 intrusion has determined that an EDGAR test filing accessed by third parties as a result of that intrusion contained the names, dates of birth and social security numbers of
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SEC Issues Statement on Cyber Enforcement (Sept. 25, 2017)

The SEC announced the creation of a Cyber Unit which will focus on targeting cyber-related misconduct, such as market manipulation schemes involving false information spread through social media, hacking to obtain material non-public information, violations involving distributed ledger technology and initial coin offerings, dark web misconduct, intrusions into retail brokerage accounts, and cyber threats to exchanges and other critical market infrastructure. “Cyber-related threats and misconduct are among the greatest risks facing investors and the securities
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SEC Chair Clayton Adopts Stance on Cybersecurity (Sept. 20, 2017)

SEC Chair Jay Clayton issued a statement detailing the SEC’s approach to cybersecurity, both as an organization and as a regulatory body, and disclosing a 2016 intrusion by a third party into the SEC’s EDGAR database and filing system. Outlining the SEC’s various data collection points, Chair Clayton revealed that, in August 2017, the SEC learned that a cyber intrusion into its EDGAR system that was previously detected in 2016 may have provided the basis
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CFTC Chairman and Commissioners Confirmed (Aug. 3, 2017)

The U.S. Senate unanimously confirmed J. Christopher Giancarlo as Chairman of the CFTC. President Trump nominated then Acting Chairman Giancarlo to the position in March. In a statement regarding his confirmation, Giancarlo praised the bipartisan support he received in the Senate and emphasized his commitment to “fulfill the CFTC’s mission to foster open, transparent, competitive and financially sound markets, in a way that best fosters broad-based economic growth and American prosperity.” On the same day,
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In re Pending Administrative Proceedings (May 22, 2017)

The SEC announced that, in light of the Tenth Circuit’s May 3, 2017 decision denying rehearing en banc in Bandimere v. SEC, it would stay all administrative proceedings assigned to an SEC administrative law judge (“ALJ”) or pending before the Commission on review from an initial decision by an ALJ in cases where a respondent may seek Tenth Circuit review of the final order.  In Bandimere, the Tenth Circuit held that the SEC’s hiring of
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CFTC Approves Amendments to Whistleblower Rules (May 22, 2017)

On May 22, 2017, the CFTC unanimously approved amendments to its whistleblower rules.  The amendments seek, among other things, to strengthen the CFTC’s anti-retaliation protections and process for whistleblowers and harmonize the CFTC’s rules with the SEC’s whistleblower programs.  The CFTC’s anti-retaliation authority has been reinterpreted under the Commodity Exchange Act (CEA) to allow both the CFTC and a whistleblower to bring an action against an employer for retaliation.  The amendments also prohibit employers from
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SEC v. Revelation Capital Management, Ltd., et al. (S.D.N.Y. March 27, 2017)

The District Court for the Southern District of New York granted summary judgment on behalf of Defendants accused of violating Rule 105 of Regulation M, finding that Rule 105 (and the U.S. securities laws) did not apply to transactions involving a foreign offering of shares cross-registered on the New York Stock Exchange because they could not be considered domestic transactions under Morrison v. National Australia Bank Ltd.


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Leidos, Inc. v. Indiana Public Retirement System (U.S. March 27, 2017)

The Supreme Court granted certiorari on the question of whether Item 303 of SEC Regulation S-K creates an affirmative duty to disclose that is actionable under Exchange Act Section 10(b) and SEC Rule 10b-5.  The Second Circuit held in Leidos that a corporation could be sued under Section 10(b) and Rule 10b-5 for omitting a statement required under Item 303, which requires corporations to discuss and analyze their financial condition, including any trends or uncertainties
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SEC v. Vincent J. Messina, et al. (9th Cir. March 21, 2017)

The Ninth Circuit held that the SEC can disgorge funds from “relief defendants.”  The relief defendants, who provided legal advice regarding tax, corporate, and immigration matters to clients, received $5 million as a loan from a client who allegedly earned the money as part of a Ponzi scheme.  The Court of Appeals found that the trial court properly had jurisdiction and did not err in determining that the relief defendants received ill-gotten gains and that
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Somers v. Digital Realty Trust Inc. (9th Cir. March 8, 2017)

The Ninth Circuit held that the Dodd-Frank Act’s anti-retaliation provision applies both to individuals who report potential securities violations internally and to individuals who report directly to the SEC.  Plaintiff was fired shortly after making a report to senior management, and the company argued it could not be sued under the Dodd-Frank Act because Plaintiff only made the report internally rather than to the SEC.  In affirming the trial court’s denial of Defendant’s motion to
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SEC Decides Not to Appeal Decision on Collateral Bars (February 23, 2017)

On January 17, 2017, the U.S. Court of Appeals for the D.C. Circuit ruled in Bartko v. SEC (No. 14-1070) that the SEC could not impose collateral bars under the Dodd-Frank Act for conduct that pre-dated the Act’s July 22, 2010 enactment.  In February, the SEC announced that it would not seek further review of the decision.  The SEC also announced that any person or entity covered by the Bartko decision may request an order
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President and Congress Seek to Reform Financial Regulation

On February 3, President Trump issued an executive order entitled “Core Principles for Regulating the United States Financial System.” The order listed several policy principles for the Trump Administration’s system of financial regulation and directed the Secretary of the Treasury to consult with members of the Financial Stability Oversight Council and issue a report to the President, by early June 2017, concerning which existing laws promote or inhibit these core principles.  On February 6, 2017,
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Kokesh v. SEC (U.S. January 13, 2017, Certiorari Granted)

The Supreme Court granted certiorari to resolve a circuit split on the question of whether the five-year statute of limitations in 28 U.S.C.  § 2462 applies to SEC enforcement actions for disgorgement.  The statute of limitations covers proceedings “for the enforcement of any civil fine, penalty, or forfeiture.”   In SEC v. Kokesh, 834 F.3d 1158 (10th Cir. 2016), the Tenth Circuit held that the statute of limitations on SEC enforcement actions does not apply
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Bandimere v. SEC (10th Cir. December 27, 2016)

The Tenth Circuit set aside SEC sanctions against a businessman, finding that the SEC administrative law judge who imposed them was hired in violation of the Appointments Clause. The Tenth Circuit’s holding that SEC administrative law judges function as inferior officers who should be appointed rather than hired creates a circuit split with the D.C. Circuit, which held the opposite in its August 9, 2016 opinion in Lucia v. SEC.


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Salman v. United States (U.S. December 6, 2016)

The Supreme Court ruled that a tipper who shares inside information with a trading relative or friend has received a “personal benefit.” This is significant because, in order to be found guilty of insider trading, a tipper must receive a personal benefit in exchange for providing tips. The decision rejected the more stringent standard set by the Second Circuit in United States v. Newman, which held that a tipper only receives a personal benefit
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