DOJ Drops Insider Trading Charges After Guilty Plea Found Insufficient

Posted on November 14th, by and in DOJ, Insider Trading, SEC. Comments Off on DOJ Drops Insider Trading Charges After Guilty Plea Found Insufficient

Last week, the Southern District of New York dropped its prosecution of Richard Lee, a former portfolio manager at SAC Capital who, in 2013, entered a guilty plea to trading on material nonpublic information that he gained from corporate insiders. The court recently ruled that Mr. Lee’s guilty plea must be vacated to conform with the ruling in United States v. Newman, 773 F.3d 438, 450-51 (2d Cir. 2014), abrogated on other grounds by Salman v. United States, 137 S. Ct. 420 (2016). Newman held that a tippee who traded on material nonpublic information must have knowledge that the insider acted for personal benefit in disclosing the information. Thus, in 2017, Mr. Lee moved to withdraw his guilty plea on the grounds that (1) he was innocent; (2) had he known additional information, he would not have pleaded guilty; and … Read More »


SEC Settles Charges of Auditor Independence Violations for $8 Million

Posted on September 27th, by and in Civil Penalties, Disgorgement, Neither Admit Nor Deny, SEC, Settlements. Comments Off on SEC Settles Charges of Auditor Independence Violations for $8 Million

The SEC announced settlements with an auditing firm (the “Firm”) and one of its partners relating to violations of certain auditor independence rules involving nineteen audit engagements with fifteen SEC-registrant issuers.

More specifically, the SEC found the Firm and its partner violated the Commission’s and Public Company Accounting Oversight Board’s (“PCAOB”) auditor independence rules. The alleged conduct involved performing prohibited non-audit services, including exercising decision-making authority in the design and implementation of software relating to one of its issuer client’s financial reporting as well as engaging in management functions for the company. The partner was responsible for supervising the performance of the prohibited non-audit services. Additionally, the SEC charged additional PCAOB-rule violations for failing to notify the clients’ audit committees about the non-audit services. The SEC described these failures as “mischaracterized non-audit services” despite the services involving financial software “that … Read More »


Supreme Court Unanimously Holds that Whistleblowers Must First Report to the SEC Before Being Afforded Dodd-Frank Anti-Retaliation Protections

Posted on February 26th, by and in Dodd-Frank, Whistleblower. Comments Off on Supreme Court Unanimously Holds that Whistleblowers Must First Report to the SEC Before Being Afforded Dodd-Frank Anti-Retaliation Protections

In a 9-0 opinion issued on Wednesday, February 21, in Digital Realty Trust v. Somers (2018), the Supreme Court resolved a circuit split by holding that Dodd-Frank’s anti-retaliation provision does not apply to an individual, like Somers, who reported a violation of the securities law internally at his company but did not report the violation to the SEC.

As we have previously written, this case came to the Supreme Court from the Ninth Circuit, affirming the District Court’s holding that Section 78u-6(h), Dodd-Frank’s anti-retaliation provision, did not necessitate reporting a potential violation to the SEC before gaining “whistleblower” status. Somers v. Digital Realty Trust Inc., 850 F.3d 1045 (9th Cir. 2016). The Fifth Circuit had previously come to the opposite holding. Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013). The Supreme Court decided this circuit split and … Read More »


SEC Insider Trading Update: A New Remedy, A Governmental Insider Case, & An Emboldened SEC After Salman

Posted on May 30th, by and in Enforcement, Insider Trading. Comments Off on SEC Insider Trading Update: A New Remedy, A Governmental Insider Case, & An Emboldened SEC After Salman

The Securities and Exchange Commission (SEC) recently announced two significant insider trading cases. These pronouncements serve as reminders that the new Commission under the Trump Administration, while pursuing its agenda, will continue to ensure that the financial industry is “playing by the rules.” In addition, these particular cases involve: the SEC using a remedy that it had not used before in this context; and the SEC continuing to investigate and bring cases that involve governmental “insider” information.

Regarding the SEC extending the use of a “tool” from its remedy arsenal to the insider trading area, last week the SEC entered into a settlement with a billion-dollar hedge fund and its founder, which included an undertaking for an independent compliance consultant. The novel extension of this remedy to an insider trading settlement prompted the Acting Enforcement Division Director to issue a statement. … Read More »




From the Blog:

The SEC in 2019: Doing More With Less

Facing a 35-day government shutdown and new restrictions on the ability to recover disgorgement, it would be perfectly understandable if the SEC’s Division of...

DOJ Drops Insider Trading Charges After Guilty Plea Found Insufficient

Last week, the Southern District of New York dropped its prosecution of Richard Lee, a former portfolio manager at SAC Capital who, in 2013,...

The SEC’s SCSD Initiative Second Wave and the Applicability of the President’s Recent Executive Order

On September 30, 2019, the SEC ordered an additional 16 self-reporting investment advisory firms to pay nearly $10 million in disgorgement. Some have referred...