SEC Brings Action Against Exchanges Centered on Order Types

There was a time when orders for securities were straight forward – buy, sell, limit and perhaps a few variations. Now, however, there is a multiplicity of order types as Michael Lewis points out in his book “Flash Boys.” Just what each of those order types is and does is probably unknown...

SEC-USAO File Actions On “Old Fashioned” Spoofing Scheme

Spoofing or layering is typically associated these days with computers and high speed trading. It is a form of market manipulation in which the trader places a series of fictitious orders on one side of the market to draw interest from would-be investors who believe they are real, legitimate orders....

This Week in Securities Litigation (The Week Ending January 16, 2015)

The Commission brought cases related to HFT this week, but not against those traders. One action involved the operations of one of the largest dark pools. A second involved two exchanges. Each action involved specific types of orders which gave advantages to select groups of traders who were familiar...

Tipper in Serial Insider Trading Ring Indicted

Criminal insider trading charges were filed against the former managing clerk of Simpson Thacher & Bartlett, Steven Metro. U.S. v. Metro (D. N.J. Jan. 15, 2015). Mr. Metro was indicted by a grand jury on one count of conspiracy to commit securities fraud, one count of securities fraud and one count...

Personal Benefit Test Does Not Apply to Misappropriation Theory of Insider Trading — USAO

In U.S. v. Newman, Nos. 13-1837-cr, 13-1917, 2014 U.S. App. LEXIS 23190 (2 nd Cir. Decided Dec. 10, 2014) the Second Circuit handed prosecutors perhaps the only defeat they have suffered in recent years in an insider trading cases [ an enhanced version of this opinion is available to lexis.com subscribers...

S&P to Pay More Than $58M to Settle Claims in SEC Enforcement Action

WASHINGTON, D.C. — (Mealey’s) Credit ratings agency Standard & Poor’s (S&P) will pay more than $58 million and accept a one-year ban on rating conduit fusion commercial mortgage-backed securities (CMBS) as part of a settlement agreement reached today with the Securities and...

Standard & Poor’s Resolves Three SEC Actions, Makes Admissions

Standard & Poor’s Ratings Services was named as a Respondent in three settled administrative proceedings by the SEC. Each is tied to the Rating Services’ role in the conduit/fusion Commercial Mortgage Backed Securities market after the market crisis. In resolving one action S&P admitted...

This Week in Securities Litigation (Week ending January 23, 2015)

The SEC named ratings giant Standard & Poor’s in three actions this week and one of its senior executives in another. The firm settled all three actions, admitting to a series of facts but not violations of the law in one action. The proceeding involving the executive will be set for hearing...

The SEC Increases Focus on Digital Currencies

It is clear that the SEC has been focusing on securities fraud involving digital currencies. In July 2013 , the SEC charged Trendon T. Shavers, the founder and operator of Bitcoin Savings and Trust, with defrauding investors in a Ponzi scheme involving Bitcoin. In June 2014 , the SEC charged a Bitcoin...

This Week in Securities Litigation (Week ending January 30, 2015)

The SEC settled another action this week based on admissions of fact and that the Federal securities laws were filed, this time involving Oppenheimer. The action was based on the fact that the firm permitted an off-shore and non-U.S. broker to use its account to engaged securities transactions with its...

SEC Settles Financial Fraud Action

Financial fraud is an enforcement priority of the SEC. A financial fraud task force was formed in July 2013 to focus on this traditional staple of enforcement. A data analysis group was formed at the same time to give the task force a new big data type approach under which computers would aid with prospecting...

SEC Settles Insider Trading Case Based on Father’s Misappropriation

The SEC filed a settled insider trading case in which a father is alleged to have misappropriated inside information obtained from his Son who obtained the information from his Girlfriend. The disgorgement he paid included the trading profits of his four tippees. SEC v. Epstein, Civil Action No. 15-cv...

This Week in Securities Litigation (Week ending February 6, 2015)

The DOJ’s settlement with S&P for $1.4 billion, coupled with admissions of fact, made headlines this week. The settlement was joined by 19 states and the District of Columbia. The DOJ and the states will essentially split the settlement amount. The SEC brought cases this week centered on...

SEC, People's Republic of China-Based Audit Firms Reach a Settlement

The SEC and the People's Republic of China (PRC)-based affiliates of five major accounting firms entered into a settlement of proceedings initiated over the failure to produce audit work papers for issuers with substantial operations in China. The settlement, which provides a mechanism for governing...

SEC Files SOX Claw-back Action

The Commission filed a settled administrative proceeding against two former CEOs of Saba Software, Inc. under the Sarbanes-Oxley claw back provisions. The action is based on the fact that the company has announced it will be required to restate its financial statements but, to date it has not undertaken...

SEC Brings Another Insider Trading Case as Administrative Proceeding

There is little doubt that the SEC is bringing more cases in an administrative forum. While the agency has not acknowledge the trend, over the last several months it has filed a series of insider trading cases as administrative proceedings ( here ) rather than in Federal district court. Generally those...

This Week in Securities Litigation (Week ending February 12, 2015)

The Commission resolved its actions against the PRC based affiliates of five major accounting firms for failure to produce audit work papers. The settlement contains a series of procedures designed to facilitate production in the future tied to the MOU the PCAOB previously negotiated with PRC officials...

Politics and SEC Enforcement

A number of factors might be supposed to affect the SEC’s exercise of its judgment in deciding which firms to investigate. Some possibilities that immediately come to mind are the nature and seriousness of the suspected problem; the way the problem came to the agency’s attention; and the...

This Week in Securities Litigation (Week ending February 20, 2015)

The Commission recently filed an amicus brief defending its Dodd-Frank whistleblower rules. Those rules specify that the anti-retaliation provisions of those amendments to the Exchange Act protect those who chose not to report to the Commission but only internally. Yet the definition of whistleblower...

SEC Commissioner Gallagher, The Bad Boy Provisions and Remedies

Waivers from the automatic disqualifications of the “bad boy” provisions which can come into play following the resolution of a Commission enforcement action is a topic of increasing concern. Consider the recent decision regarding Oppenheimer for example. There the Commission agreed to waivers...

The SEC Commissioners Speak: Part I

The SEC Speaks conference has traditionally been a forum in which the agency reviewed significant recent undertakings and indicated its future direction. This year was no different. Four of the five Commissioners addressed conference participants, discussing recent significant undertakings and sketching...

The SEC Commissioners Speak: Part II

Yesterday’s article reviewed the remarks of SEC Chair Mary Jo White and Commissioner Kara M. Stein at SEC Speaks. The article today reviews the remarks at the conference of Commissioners Michael S. Piwowar and Daniel M. Gallagher. Collectively, the comments of the Commissioners provide insight...

This Week in Securities Litigation (Week ending February 27, 2015)

Four SEC Commissioners addressed the annual SEC Speaks Conference, reviewing recent agency initiatives and tracing potential paths for the future. The SEC also brought another FCPA action, a misappropriation case and an action centered on a failed audit of a broker-dealer that is now defunct. SEC...

Cooperation by Broker Mitigates SEC Sanctions

Cooperation was a key factor in the resolution of an action involving a minority owner of a broker-dealer that is alleged to have facilitated a fraudulent scheme to conceal losses at a major Japanese company. In the Matter of Hajime Sagawa, Adm. Proc. File No. 3-16412 (February 27, 2015). Hajime Sagawa...

SEC Staples: Trading Suspensions, Market Manipulation and Ponzi Schemes

Trading suspensions, market manipulation and Ponzi scheme actions – staples of SEC enforcement. The Commission suspended trading for 128 dormant shell companies this week while bringing a market manipulation action involving two recidivists and a case against an adviser involving Ponzi like schemes...