Blog Posts Tagged With Decisions/Developments of Note

Allison Herren Lee Sworn in as SEC Commissioner (July 8, 2019)

Allison Herren Lee was sworn in as SEC Commissioner after being unanimously confirmed by the U.S. Senate.  Commissioner Lee previously served as a lecturer, counsel to Commissioner Kara Stein, Senior Counsel in the Division of Enforcement’s Complex Financial Instruments Unit, and a Special Assistant U.S. Attorney.  Commissioner Lee fills a term that expires on June 5, 2022.

SEC Press Release
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Chairman Jay Clayton Announces Change in SEC Waiver Process (July 3, 2019)

SEC Chairman Jay Clayton issued a statement announcing a change in the SEC’s waiver application process that will streamline the SEC settlement process. The Commission will now consider settlement offers that address both the underlying enforcement actions and waiver of collateral automatic disqualifications as a single proposal; settling parties will also have the opportunity to withdraw an offer of settlement if a waiver request is not granted. This new approach should result in a more
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United States v. Matthew Connolly and Gavin Campbell Black (S.D.N.Y. May 2, 2019, Contested)

Judge Colleen McMahon ruled that interviews conducted during an internal investigation by a defendant’s employer and its counsel at the request of the CFTC were “fairly attributable” to the CFTC.  The court determined that, under Second Circuit precedent,[1] the CFTC’s request that the employer conduct an internal investigation and interview one of the defendants was a government directive, given the pressure that the defendant felt to cooperate.  Accordingly, the use of a criminal defendant’s
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Robare Group v. SEC (D.C. Cir. Apr. 30, 2019)

The D.C. Circuit held that while a defendant investment adviser’s failure to disclose conflicts of interests on registration applications was sufficient to support the SEC’s finding of a violation of § 206 of the Investment Advisers Act, which imposes a negligence standard, the evidence was insufficient to support the SEC’s finding of a violation of § 207 of the Act, which imposes a willfulness standard. According to the court, in order to prove willfulness, the
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SEC Enforcement Staff Offer Guidance in Panel Discussion (Apr. 11, 2019)

SEC enforcement officials participated in a panel discussion at the PLI SEC Speaks conference in Washington, D.C.  The panel was led by SEC Enforcement Co-Directors Stephanie Avakian and Steve Peiken.  Panelists discussed several topics including cooperation, multijurisdictional and interagency investigations, Wells notices, and negotiations with SEC staff.  Panelists also discussed the implications of the Supreme Court’s decision in Lorenzo v. SEC , which held that an investment banker violated Rules 10b-5(a) and (c), Section 10(b)
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Lorenzo v. SEC (U.S. Sup. Ct. Mar. 27, 2019)

The Supreme Court ruled in favor of the SEC in a 6-2 decision, holding that an investment banker had violated Rules 10b-5(a) and (c), Section 10(b) of the Exchange Act, and Section 17(a)(1) of the Securities Act by knowingly disseminating false information to prospective investors at the direction of his boss. The investment banker signed and forwarded two emails that were drafted by his boss to investors that contained false and misleading statements. The Supreme
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Senators Propose Doubling SEC Deadline for Recovering Investor Money from Fraudsters (Mar. 14, 2019)

Two members of the Senate Banking Committee introduced the Securities Fraud Enforcement and Investor Compensation Act in the Senate. The bill seeks to amend the Exchange Act to give the SEC ten years to seek restitution for investors from fraudulent actors while maintaining the five-year limitation on SEC disgorgement actions set forth in the Supreme Court’s 2017 decision in Kokesh v. SEC.

Law360 Coverage
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Congressman Proposes Requiring Public Companies to Disclose Board Members’ Cybersecurity Expertise (Mar. 13, 2019)

A member of the House Intelligence Committee has reintroduced the Cybersecurity Disclosure Act of 2019 that would require the SEC to issue a set of rules making publicly traded companies disclose whether any of their board members have cybersecurity expertise, and if not, to justify the skills gap. A companion bill is pending in the Senate.
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SEC Files Motion for Order to Show Cause in Case Against Elon Musk (S.D.N.Y. Feb. 27, 2019)

The SEC sought an order to show cause why Elon Musk, the CEO of Tesla, should not be held in contempt for a violation of an October 2018 final judgment by the District Court for the Southern District of New York.  The judgment required Musk to obtain pre-approval of any written communications that “contained, or reasonably could contain, information material to Tesla or its shareholders.”  The SEC filed this motion after Musk tweeted about the
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CFTC and UK Authorities Issue Joint Statement on Continuity of Derivatives Trading and Clearing Post-Brexit (Feb. 25, 2019)

The CFTC and the Bank of England, including the Prudential Regulation Authority and the Financial Conduct Authority, issued a joint statement assuring the market that derivative trading and clearing activities will continue between the U.K. and U.S. after the U.K.’s withdrawal from the EU. The statement sets out a list of measures to ensure regulatory and financial stability, including continued supervisory cooperation, extension of existing CFTC relief and comparability for the U.K., and U.K. equivalence
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