Dump "Fraud on the Market" Yet Preserve Securities Plaintiffs' Ability to Establish Reliance?

Since the U.S. Supreme Court agreed to revisit the “fraud on the market” theory by granting cert in the Halliburton case a few weeks ago, many commentators (including this blog ) have considered whether the Court might wind up taking an intermediate position that addresses criticisms of the...

Even if Fraud on the Market is Dumped, Don’t Cut Back on D&O Insurance

It is hard to prognosticate the outcome of the Halliburton case now before the U.S. Supreme Court. But while we can’t be sure what the outcome will be, we can start to think about what will happen if the Supreme Court overturns Basic. In an interesting February 7, 2014 post on the Harvard Law School...

SEC Charges Securities Law Recidivist In Fraudulent Trading Scheme

The Commission filed another action against a securities law recidivist, this time centered on a fraudulent trading and investment program. SEC v. Lee, Civil Action No. 14CV0347 (S.D. Cal. Filed Feb. 13, 2014). James Lee is an unregistered investment adviser. Beginning in late 2008 he solicited investors...

RBS to Pay $275M to Settle Mortgage-Backed Securities Claims

NEW YORK — (Mealey’s) The Royal Bank of Scotland Group (RBS) will pay $275 million to settle claims that it concealed the investment quality of certain mortgage-backed securities sold in stock offerings in violation of federal securities laws, according to a press release issued today ( New...

SEC Names Company, Eight Directors and Officers in Financial Fraud Actions

Since the market crisis enforcement officials have heard repeated calls to prosecute not just companies but high ranking corporate officials. While the Commission brought a series of market crisis actions against firms and individuals, as part of the new “get tough” policy individuals will...

BAC CEO Pays $10 Million Plus D&O Bar to Settle NYAG Market Crisis Case

Former Bank of America CEO Kenneth Lewis agreed to pay $10 million and to be barred from serving as an officer or director of a public company for three years to settle fraud charges brought by the New York Attorney General based on the firm’s acquisition of Merrill Lynch just prior to the bankruptcy...

This Week In Securities Litigation (Week ending April 11, 2014)

Former hedge fund giant SAC Capital was sentenced this week. This concluded one of the most prominent insider trading cases. Under the terms of the sentence SAC Capital will no longer accept public funds. The DOJ and the SEC filed settled FCPA actions involving Hewlett-Packard and three of its subsidiaries...

Barclays Bank Reaches $280M Settlement in Fannie, Freddie Lawsuits

NEW YORK — (Mealey’s) Barclays Bank PLC and certain of its affiliates will pay $280 million to settle claims with the Federal Housing Finance Agency (FHFA) in two related lawsuits alleging that Barclays and its affiliates misrepresented the investment quality of certain residential mortgage...

Investment Manager Pleads Guilty After Bilking Institutions, Others Out of Billions

The investment manager and principal of WG Trading Company, LP and WG Trading Investors, Stephen Walsh, pleaded guilty to two counts of securities fraud. In entering the plea Mr. Walsh agreed to forfeit $50,743,779 which represents the amount he misappropriated and by which he personally profited from...

SEC Names Recidivist, Claimed Country Music Fund Raiser, In Fraud Order

The Commission directed the institution of an administrative proceeding charging recidivist Stanley Jonathan Fortenberry, an unregistered fund adviser, with fraud in connection with the operation of a fund supposedly tied to a country music talent. In the Matter of Stanley Jonathan Fortenberry, Adm....

A Step Toward Credibility – SEC Wins in the Wyly Case

The SEC won a significant courtroom verdict Monday when a jury in New York returned a verdict in favor of the agency in the complex, high profile trading action brought almost four years ago against Samuel Wyly and the estate of his late brother Charles Wyly, Jr. who passed away during the case. Samuel...

Supreme Court Refuses To Overrule Basic v. Levinson Presumption in Securities Fraud Suits

WASHINGTON, D.C. — (Mealey’s) The U.S. Supreme Court today found that Halliburton Co. has not shown a “special justification” for overruling the reliance presumption of Basic v. Levinson , 485 US. 224 (1988) in securities fraud cases ( Halliburton Co., et al. v. Erica F. John...

Halliburton: Assessing Its Impact on Securities Class Actions

The Supreme Court declined to scrap the way in which securities class actions are typically brought in Halliburton Co. v. Erica P. John Fund, No. 13-317 (Decided June 23, 2014) [lexis.com subscribers may access Supreme Court briefs and the opinion for this case]. At the same time it may have rewritten...

Microcap Fraud: An FBI Controlled Shell Company

Five men came together to plan the manipulation of an over-the-counter traded shell. What they did not know was that the shell was controlled by the FBI. SEC v. Affa, Civil Action No. 1:14-cv-12959 (D. Mass. Filed July 11, 2014). The action names as defendants Michael Affa, Andrew Affa, Mitchell Brown...

Jury Convicts Investment Adviser on Multiple Counts of Fraud

James Tagliaferri, the former President of TAG Virgin Islands, a registered investment adviser, was found guilty by a jury of one count of investment adviser fraud, six counts of violating the Travel Act, one count of securities fraud and four counts of wire fraud. The jury was unable to reach a verdict...

SEC Obtains Nearly $70 Million Judgment Based on Prior Jury Verdict

The SEC obtained a judgment for nearly $70 million in a fraud action based on a jury verdict obtained last fall. SEC v. AIC, Inc., Civil Action No. 3:11-cv-00176 (E.D. Tenn.). The action named as defendants the AIC, Community Bankers Securities, LLC, Nicholas Skaltsounis, John Guyettte and John Graves...

SEC Brings an Offering Fraud Action Against a Claimed App Maker

The SEC brought an action against a reputed “app” manufacturer who sold shares in two different entities beginning first in Colorado and later from Georgia. From each location, and for each entity, the sales pitch was essentially the same. Indeed, investors were told that the second company...

Loss Causation in a Securities Fraud Case From a Stream of Small Disclosures

A critical element in a Section 10(b) and Rule 10b-5 securities fraud claim for damages is loss causation. Mandated as a key component of such a claim by the PSLRA, the element provides the essential link between the alleged injury and the claimed damages. It is not enough that the plaintiff claim the...

SEC Charges City Mayor as a Control Person in Allen Park, Michigan, Enforcement Action

by M. Norman Goldberger, John C. Grugan, and Tesia N. Stanley Last Thursday, the Securities and Exchange Commission (SEC) announced fraud charges against the City of Allen Park, Michigan (City), and two of its former officials—the former City Mayor and former City Administrator. It is the first...

SEC Files Offering Fraud Action Against Sellers of Over $10M Worth of Bonds to Public

A business man, a real estate company he acquired from his grandfather, a registered representative who has now been barred by FINRA from the securities business and Maryland Division of Securities from the advisory business and an unnamed broker teamed-up to sell millions of dollars of bonds to the...

SEC Files Action Based on Misappropriation of Pre-IPO Shares

The SEC filed a fraud action based on the misappropriation of shares of a private firm held by investors through an LLC. The shares were then resold and reissued to other investors. SEC v. Kumar, Civil Action No. 23145 (N.D. Cal. Filed December 2, 2014). Defendant Vinay Kumar Nevatia solicited real...

How Falsifying Compliance With a Lease Became Securities Fraud

The CEO and CFO of a successful senior living firm sought to expand the business by acquiring the operations of another firm and leasing its facilities. Despite warnings that the lease terms were far to onerous, the deal was concluded. The result was securities fraud, according to a proceeding filed...

Second Circuit Splits With Ninth Circuit, Holds Item 303 Omissions Can Be Actionable in Section 10(b) Claims

On January 12, 2015, the Second Circuit ruled, “as a matter of first impression” for the appellate court, that a failure to make a disclosure required by Item 303 of Reg. S-K is an omission that can serve as a basis for a Section 10(b) securities fraud claim, but only if the other requirements...

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...

The Business Court Rules Again on Claims Under the North Carolina Securities Act

Last week's decision in Atkinson v. Lackey , 2015 NCBC 13 doesn't tell you everything you wanted to know about the North Carolina Securities Act (the "NCSA"), but it comes pretty close [ an enhanced version of this opinion is available to lexis.com subscribers ]. The lawsuit was...