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7th Circuit Affirms 1st Conviction For Spoofing

Posted on August 16th, by and in Futures, General, Spoofing. Comments Off on 7th Circuit Affirms 1st Conviction For Spoofing

Spoofing is not going away after all. Last week, the U.S. Court of Appeals for the Seventh Circuit unanimously upheld the first-ever criminal conviction for spoofing. The case, United States v. Coscia, 7th U.S. Circuit Court of Appeals, No. 16-3017, involved a multi-count indictment against futures trader Michael Coscia. The indictment alleged that Coscia engaged in illegal trading by employing computer algorithms that engaged in market activity that violated the anti-spoofing laws created and adopted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The indictment alleged that Coscia traded in a variety of futures products and made over $1.4 million as a result of his illegal trading.

By way of background, spoofing involves placing bids or offers to sell futures contracts with the intent to cancel the bids or offers before execution. By placing bids … Read More »


The CFTC Settles Another Spoofing Case

Posted on July 28th, by and in CFTC, Settlements, Spoofing. Comments Off on The CFTC Settles Another Spoofing Case

On July 26, 2017, the U.S. Commodity Futures Trading Commission (“CFTC”) issued an order finding that Simon Posen engaged in the “disruptive practice of ‘spoofing’ (bidding or offering with the intent to cancel the bid or offer before execution).” The CFTC’s findings, which spanned more than three years, beginning at least in December of 2011, indicated that Posen, based in New York City, had traded from his home, using his own account, in violation of Section 4c(a)(5)(C) of the Commodity Exchange Act (7 U.S.C. § 6c(a)(5)(C)), which explicitly outlaws spoofing.

The CFTC found Posen placed thousands of orders in gold, silver, copper, and crude oil futures contracts with the intent to cancel them before execution. These orders were placed so as to move the market prices so that smaller orders, which he would also place on the other side of the … Read More »


The Future of Futures: High-Speed Trading and CFTC Regulation & Enforcement

Posted on June 30th, by and in CFTC, Enforcement, Futures, Non-prosecution Agreements, Reg AT, Regulations, Spoofing. Comments Off on The Future of Futures: High-Speed Trading and CFTC Regulation & Enforcement

The future is now.

On June 29, 2017, the U.S. Senate Committee on Agriculture, Nutrition, and Forestry voted overwhelmingly to confirm the nomination of J. Christopher Giancarlo as Chairman of the U.S. Commodity Futures Trading Commission (“CFTC”), paving the way for his nomination to move forward to consideration on the floor of the U.S. Senate. Within two hours of this announcement, the CFTC announced its first non-prosecution agreements. These agreements and the related “spoofing” cases are discussed in more detail below. These same-day announcements reflect the advancing ambitious agenda outlined by Acting Chairman Giancarlo in his speech entitled “CFTC: A New Direction Forward,” given on March 15, 2017. Acting Chairman Giancarlo has since taken every opportunity to advise the industry of his goals to reduce regulatory burdens, modernize the agency, and maintain the CFTC’s aggressive enforcement efforts. All the while, the … Read More »


D.C. Circuit Split on Constitutionality of SEC’s Administrative Judges

Posted on June 27th, by and in Administrative Proceedings. Comments Off on D.C. Circuit Split on Constitutionality of SEC’s Administrative Judges

We previously blogged about the D.C. Circuit’s decision in Raymond J. Lucia Cos v. SEC, which rejected the petitioner’s constitutional challenges to the SEC’s use of administrative law judges that are not appointed by the President. Yesterday, the D.C. Circuit issued a two sentence per curiam order denying an en banc review by an equally divided court.

We noted that the panel’s original opinion was the first appellate ruling of its kind. Although the panel’s decision remains in effect because the full court did not rehear the case, the strength of that ruling is now severely undermined. As we previously reported, the Tenth Circuit has already disagreed with the D.C. Circuit’s panel and held that the SEC’s administrative law judges are subject to the Constitution’s Appointments Clause. Yesterday’s order likely sets the stage for a Supreme Court challenge.


MD&A-Related Claims against Corporate Execs Reinforce Recent SEC Enforcement Trends

Posted on June 22nd, by in Accountants, Corporate Disclosures, Enforcement, Individual Liability, Settlements. Comments Off on MD&A-Related Claims against Corporate Execs Reinforce Recent SEC Enforcement Trends

A June 15, 2017 settlement with two former executives of a publicly-traded, multinational freight forwarding and logistics company provides the most recent example of two emerging SEC enforcement initiatives in financial reporting and accounting-based actions that we spotlighted recently – a non-reliance on financial statement materiality and an absence of fraud-based allegations. Exchange Act Rel. No. 80947 (Jun. 15, 2017). According to the SEC, Eric W. Kirchner and Richard G. Rodick, the former chief executive officer and chief financial officer of UTi Worldwide, Inc. (“UTi”), purportedly were responsible for inadequate Management’s Discussion & Analysis (“MD&A”) disclosures in a Form 10-Q that UTi issued during fiscal year 2013. Without admitting or denying the findings, both agreed to settle purported violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-13, and 13a-14, thereunder, and to pay a $40,000 civil penalty.

According … Read More »


SEC Names Co-Directors of Enforcement

Posted on June 12th, by and in Enforcement, General, SEC Guidance. Comments Off on SEC Names Co-Directors of Enforcement

Last week, the Securities and Exchange Commission (SEC) announced that Acting Enforcement Director Stephanie Avakian and former federal prosecutor Steven Peikin had been named Co-Directors of the Division of Enforcement. In making the announcement, SEC Chairman Jay Clayton advised:

There is no place for bad actors in our capital markets, particularly those that prey on investors and undermine confidence in our economy. Stephanie and Steve will aggressively police our capital markets and enforce our nation’s securities laws as Co-Directors of the Division of Enforcement. They have each demonstrated market knowledge, impeccable character, and commitment to public service, and I am confident their combined talents and experience will enable them to effectively lead the Division going forward.

Prior to being named Acting Director in December 2016, Ms. Avakian served as Enforcement’s Deputy Director since June 2014. Mr. Peikin joins the SEC … Read More »


The Supreme Court Unanimously Holds SEC Disgorgement Constitutes a “Penalty”

Posted on June 6th, by and in Disgorgement, Statute of Limitations. Comments Off on The Supreme Court Unanimously Holds SEC Disgorgement Constitutes a “Penalty”

On June 5, 2017, the Supreme Court of the United States released its unanimous opinion in Kokesh v. Securities and Exchange Commission and established that “SEC disgorgement constitutes a penalty within the meaning of § 2462” and therefore is restricted by the applicable 5-year statute of limitations. As predicted in our previous blog post, the Court determined that the SEC cannot impose disgorgement fees without regard to statute of limitations.

The Supreme Court determined that SEC disgorgement “bears all the hallmarks of a penalty” and therefore should be subject to the 5-year statute of limitation in § 2462 for three main reasons: (1) “SEC disgorgement is imposed by courts as a consequence for violation” of public laws, i.e. for violations committed against the United States rather than a “aggrieved individual”; (2) “SEC disgorgement is imposed for punitive purposes” such as deterrence, … 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 »


SEC Puts Administrative Proceedings within Tenth Circuit on Hold After Court Rules Them Unconstitutional

Posted on May 25th, by and in Administrative Proceedings. Comments Off on SEC Puts Administrative Proceedings within Tenth Circuit on Hold After Court Rules Them Unconstitutional

The SEC announced this week that it would stay all administrative proceedings involving certain provisions of the Securities Act, the Securities Exchange Act, and the Investment Company Act in the wake of the Tenth Circuit’s decision in Bandimere v. SEC, 844 F.3d 1168 (10th Cir. 2016).

In Bandimere, the Tenth Circuit held that the SEC’s administrative law judges (“ALJs”) were “inferior officers” who are subject to the Appointments Clause of the U.S. Constitution. The appeals court granted the petition for review on constitutional grounds because the ALJ was not constitutionally appointed and his duties involved the exercise of significant authority. The court denied the petition for rehearing en banc on May 3, 2017.

The SEC explained that “[i]n light of the U.S. Court of Appeals for the Tenth Circuit’s recent decision denying rehearing en banc in Bandimere v. SEC, we find it … Read More »


Kokesh v. Securities and Exchange Commission: A New Limitation to the Government’s Enforcement Power?

Posted on April 21st, by and in Disgorgement, Statute of Limitations. Comments Off on Kokesh v. Securities and Exchange Commission: A New Limitation to the Government’s Enforcement Power?

The United States Supreme Court will soon decide whether the SEC can continue to impose disgorgement fees without regard to any statute of limitations. Based on the oral argument in Kokesh v. Securities and Exchange Commission, held on Tuesday, April 18, 2017, it appears likely that the Court will determine that the SEC does not have the wide power it claims in pursuing disgorgement, or the return of profits made from illegal actions.

Background

The petitioner, Charles Kokesh, was the owner of two registered investment advisers. Between 1995 and 2006, he misappropriated $34.9 million from the business development companies operated by the investment advisers. The SEC pursued civil enforcement actions against him in 2009 and the jury found he violated the Securities Exchange Act, the Investment Advisers Act and the Investment Company Act. The United States District Court for the District of … Read More »






From the Blog:

7th Circuit Affirms 1st Conviction For Spoofing

Spoofing is not going away after all. Last week, the U.S. Court of Appeals for the Seventh Circuit unanimously upheld the first-ever criminal conviction...

The CFTC Settles Another Spoofing Case

On July 26, 2017, the U.S. Commodity Futures Trading Commission (“CFTC”) issued an order finding that Simon Posen engaged in the “disruptive practice of...

The Future of Futures: High-Speed Trading and CFTC Regulation & Enforcement

The future is now.

On June 29, 2017, the U.S. Senate Committee on Agriculture, Nutrition, and Forestry voted overwhelmingly to confirm the nomination of J....