SEC Tweaks In-House Court Rules

Posted on July 14th, by in SEC Guidance. Comments Off on SEC Tweaks In-House Court Rules

While not directly acknowledging the criticism its in-house courts have received over the past year, the Securities and Exchange Commission (“SEC”) yesterday adopted final amendments to the rules of practice governing its administrative proceedings that were  initially proposed in September 2015. Among other things, these amendments:

Extend the potential length of the prehearing period from the current four months to a maximum of 10 months for the cases designated for the longest timelines;
Allow parties in the cases designated for the longest timelines the right to notice three depositions per side in single-respondent cases and five depositions per side in multi-respondent cases, and to request an additional two depositions;
Clarify the types of dispositive motions that may be filed at various stages of proceedings and the applicable procedures and legal standards for the motions; and
Make additional clarifying and conforming changes to other rules, … Read More »


Insider-Trading Prosecutions Continue Post-Newman: USAO/SDNY and SEC Press Charges Against Ex-Barclays Director and Plumber

Posted on June 2nd, by in Insider Trading. Comments Off on Insider-Trading Prosecutions Continue Post-Newman: USAO/SDNY and SEC Press Charges Against Ex-Barclays Director and Plumber

Perhaps looking to put Newman in the rearview mirror, the U.S. Attorney for the Southern District of New York (“USAO/SDNY”) and the Securities and Exchange Commission (“SEC”) recently brought charges against former Barclays Bank PLC director Steven McClatchey alleging that tips that he provided to a plumber, Gary Pusey, relating to at least ten impending M&A deals resulted in illicit gains of $76,000. The allegations are a distinct departure from the “misappropriation” claims pursued pre-Newman and demonstrate the pursuit of more traditional insider-trading theories reminiscent of those popularized in films such as 1987’s “Wall Street,” with the USAO/SDNY and SEC focusing on in-person meetings between Messrs. McClatchey and Pusey at a Long Island marina where cash was exchanged in a gym bag for tips on the yet-to-be-announced transactions. It will be interesting to see over the coming months whether federal authorities will … Read More »


Second Circuit to Supreme Court on Whistleblowers: Your Turn

Posted on September 14th, by in Dodd-Frank, SEC Guidance, Whistleblower. Comments Off on Second Circuit to Supreme Court on Whistleblowers: Your Turn

The U.S. Court of Appeals to the Second Circuit’s recent decision holding that Dodd-Frank’s “whistleblower” anti-retaliation protections apply to employees who are dismissed after reporting alleged violations internally but before alerting the Securities and Exchange Commission (the “Commission”) creates a Circuit spilt and sets up a potential statutory-interpretation showdown in the U.S. Supreme Court. Berman v. Neo@Ogilvie LLC & WPP Group USA, Inc., slip op. at 2 (2d Cir. Sept. 10, 2015).

The Second Circuit’s decision focuses on the conflict between Dodd-Frank’s definition of “whistleblower” as “any individual who provides . . . information relating to a violation of the securities laws of the Commission,” 15 U.S.C. § 78u-6(a)(6) (emphasis added), and the retaliation protection provision of the same statute which through incorporation of the Sarbanes-Oxley Act provides a cause of action to a “whistleblower” terminated after reporting alleged violations to … Read More »


Dodd-Frank 180-Day “Deadline” For SEC to Take Action Not Really a Deadline After All

Posted on July 15th, by in Administrative Proceedings, SEC Guidance. Comments Off on Dodd-Frank 180-Day “Deadline” For SEC to Take Action Not Really a Deadline After All

A three-judge panel of the U.S. Court of Appeals for the D.C. Circuit recently ruled that Section 4E of the Securities Exchange Act of 1934, 15 U.S.C. § 78d-5(a)(1) – which provides that “[n]ot later than 180 days after the date on which [Securities and Exchange Commission (“SEC”)] staff provide a written Wells notification to any person, the [SEC] staff shall either file an action against such person or provide notice to the Director of the Division of Enforcement of its intent not to file an action” – did not bar an administrative action against an individual (Ernest V. Montford, Sr.) and his investment advisory firm (Montford Associates) commenced 187 days after such notification.   Montford & Co. v. SEC, No. 14-1126, slip op. at 2 (D.C. Cir. July 10, 2015).

The appeal stemmed from $860,000 in penalties and disgorgement that the … Read More »


SEC’s New Guidance on the Use of Administrative Proceedings: “It’s Up to Us.”

Posted on May 12th, by in SEC Guidance. Comments Off on SEC’s New Guidance on the Use of Administrative Proceedings: “It’s Up to Us.”

In an apparent response to criticisms from the defense bar and the federal judiciary, the Division of Enforcement of the U.S. Securities and Exchange Commission (“SEC”) last week issued its first formal guidance on the factors determining whether contested actions will be brought before administrative law judges or in federal district court.

The guidance – contained in a four page memorandum titled “Division of Enforcement Approach to Forum Selection in Contested Actions” that was  issued on May 8, 2015 – does not directly address the various critiques or otherwise offer a defense of the SEC’s sometimes maligned administrative courts.  The SEC instead emphasizes that there is no “rigid formula dictating the choice of forum” and provides a non-exhaustive list of “potentially relevant considerations” used to make these determinations, including whether:

The forum provides for the desired claims, legal theories, and relief applicable … Read More »


Judge Rakoff: Newman No Obstacle for SEC’s Civil Enforcement Action of “Tippees”

Posted on April 8th, by in Insider Trading. Comments Off on Judge Rakoff: Newman No Obstacle for SEC’s Civil Enforcement Action of “Tippees”

In a victory for the U.S. Securities and Exchange Commission (“SEC”), Judge Rakoff of the U.S. District Court for the Southern District of New York recently held that the U.S. Court of Appeals for the Second Circuit’s landmark insider trading ruling in United States v. Newman, 773 F. 3d 438 (2d Cir. 2014) did not preclude a civil enforcement action against two Euro Pacific Capital Inc. brokers (Daryl Payton and Benjamin Durant) whose criminal charges relating to the very same conduct were dismissed in January at the request of federal prosecutors.

The civil case and related criminal charges against the two brokers stem from allegations that an associate at the law firm Cravath Swaine & Moore LLP provided a former Bank of Scotland research analyst (Trent Martin) with material non-public information about a planned acquisition of SPSS Inc. by Cravath’s client … Read More »


The Aftermath of Newman Likely to Cause Problems for Prosecutors in Old and New Cases

Posted on January 29th, by in Insider Trading. Comments Off on The Aftermath of Newman Likely to Cause Problems for Prosecutors in Old and New Cases

In what is possibly a harbinger of how other courts will interpret the U.S. Court of Appeals for the Second Circuit’s landmark insider trading ruling in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), Judge Andrew Carter of the U.S. District Court for the Southern District of New York recently rejected the Government’s arguments that tipping liability was different in insider trading cases based on the “misappropriation theory” – which provides that individuals who trade on confidential information in breach of a duty of trust and confidence owed to the source of the information can face liability even though they are not corporate insiders – and vacated the guilty pleas of a former Bank of Scotland research analyst (Trent Martin) and three Euro Pacifica Capital Inc. brokers (Thomas Conradt, David Weishaus, and Daryl Payton).

The charges against the four individuals … Read More »


Second Circuit Limits Criminal Insider Trading Actions Against Tippees

Posted on December 11th, by and in Insider Trading. Comments Off on Second Circuit Limits Criminal Insider Trading Actions Against Tippees

In a landmark ruling that is likely to reshape the landscape of insider-trading prosecutions of “tippees,” a three-judge panel of the U.S. Court of Appeals for the Second Circuit reversed the convictions of former portfolio managers from Level Global Investors LP (Anthony Chiasson) and Diamondback Capital Management LLC (Todd Newman), finding that they did not know the alleged sources of inside information had disclosed the tips in exchange for a personal benefit.  United States v. Newman, Nos. 13-1837-cr (L), 13-191-cr (con), slip op. at 4 (2d Cir. Dec. 10, 2014)

Chiasson and Newman were convicted in 2012 of illegally trading Dell and Nvidia stock on the basis of information they received from individuals three and four levels removed from the technology-industry insider tippers. The defendants had no contact with the tippers. Id. at 5. Moreover, the Government offered no evidence … Read More »




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