FINRA Findings and Costs Not Sanctions Subject to SEC Appellate Jurisdiction

This case is of interest to those who need to understand the SEC's interpretation of its jurisdiction over FINRA disciplinary actions. FINRA sanctioned Sharemaster for failing to file an annual audit by a firm registered with PCAOB. At issue was whether or not an exemption from that requirement...

2nd Circuit Rules FINRA Cannot File Lawsuit In Federal Court To Collect Fines

FINRA has no authority to bring an action in federal court to collect fines it imposes on members according to the Second Circuit Court of Appeals. Likewise, a rule the SRO issued over two decades ago under which it claimed such authority is invalid. Fiero v . Financial Industry Regulatory Authority...

Finra Supervision and Unregistered Sale Sanctions Upheld

World Trade Financial Corp., et. al. , Exchange Act Rel. 66114, January 6, 2012. World Trade, its president Rodney Michel, its supervisor of trading Jason Adams and Frank Brickell a rep appealed Finra sanctions. Finra found World Trade and Brickell sold unregistered stock and that Michel and Adams failed...

FINRA Sanctions For Unregistered Distribution Upheld

Midas Securities, Jay S. Lee, Exchange Act Rel. 66200, January 20, 2012 This case is significant for two reasons. It restates clearly the duty that brokerage firms have to investigate sales of large amounts of stock of little known issuers. Most important, from a supervisory standpoint, it finds...

FINRA Sanctions Partially Upheld

John Edward Mullins, Kathleen Maria Mullins , Exchange Act Rel. 66373, February 10, 2012 John Mullins was sanctioned by FINRA for converting customer property, misusing customer funds, borrowing from a customer without firm authorization, and failing to disclose outside activities to his firm...

The Week in Securities Litigation: SEC Prevails In 4 Court Actions

The Commission prevailed in four court actions. In the district court the agency won a summary judgment motion against an investment adviser. In the Eleventh Circuit Court the SEC secured a pair of victories. In one it obtained the reversal of a grant of summary judgment against it in an ARS case. In...

PROTECTING INVESTORS IN THE U.S. AND ABROAD

The SEC faces a variety of issues in protecting U.S. investors in the capital markets of this country. Other regulators in this country and abroad face similar issues in protecting investors. A sample of recent actions from other regulators includes: FINRA: Citigroup Global Markets was fined $3.5...

THIS WEEK IN SECURITIES LITIGATION (Week ending May 25, 2012)

This week much of the news was dominated by two events. One was the difficulties and issues surrounding the IPO for Facebook. The other was the insider trading trial of Rajat Gupta, formerly a Goldman Sachs director. Congress heard testimony from SEC Chairman Mary Schapiro regarding the implementation...

The Week In Securities Litigation: Facebook IPO, Gupta Insider Trading Trial Dominate

For The Week ending May 25, 2012. This week much of the news was dominated by two events. One was the difficulties and issues surrounding the IPO for Facebook. The other was the insider trading trial of Rajat Gupta, formerly a Goldman Sachs director. Congress heard testimony from SEC Chairman Mary...

The Week In Securities Litigation: Insider Trading Probe Focuses On Retired Baseball Player

As the insider trading trial of a former Goldman director continued in Manhattan, another insider trading probe moved to the playing field, according to a Reuters report. The probe reportedly focuses on a prominent retired baseball player and other athletes. Other items at the top of the news were a...

THIS WEEK IN SECURITIES LITIGATION (Week ending June 8, 2012)

As the insider trading trial of a former Goldman director continued in Manhattan, another insider trading probe moved to the playing field, according to a Reuters report. The probe reportedly focuses on a prominent retired baseball player and other athletes. Other items at the top of the news were a...

The Week In Securities Litigation: SEC Brings Another Insider Trading Action

SEC enforcement brought another insider trading action this week in addition to a case alleging a manipulation, one claiming violations of Regulation M, Rule 105 and one alleging a failure to supervise. The Manhattan U.S. Attorney's Office secured another guilty plea in its expert network insider...

The Week In Securities Litigation: SEC Files Several Significant Actions, 2 Against Goldman Sachs

As the end of the government fiscal year approaches, the Commission filed several significant actions. Two involved Goldman Sachs and a former employee in a pay-to-play scheme centered on political contributions and business in the municipal markets. A significant market crisis case was brought against...

The Week In Securities Litigation: Market Crisis Action Goes To Trial

Events surrounding the collapse of the first money fund to "break the buck" are being played out in a New York City courtroom on SEC charges that the principles of the fund misrepresented its financial condition in the wake of massive redemption demands. Investors lost confidence in the Reserve...

Managing the Risks Posed To Mutual Fund Industry Participants By Increasing Litigation And Regulatory Enforcement Activity

Over the last 10 years, the far-reaching examination of the trading practices of the mutual fund industry, numerous enforcement actions by the SEC against prominent broker-dealers and fund complexes, and scores of civil lawsuits resulted in very significant costs to the mutual fund industry. Additionally...

The Week In Securities Litigation: SEC Settles 'Suspicious Trading' Insider Trading Action

Significant events this week included the proposal by the SEC of additional swaps rules regarding security-based swap dealers and major participants. Enforcement settled a "suspicious trading" insider trading action with a Hong Kong based entity while initiating a case against an investment...

Fulbright Briefing: In Mixed Ruling, California Court Addresses Interplay Between Arbitration and Choice-of-Law Provisions in Customer Agreements

By Ellen Bush Sessions , Eric A. Herzog and Spencer Persson In a recent decision with implications for broker-dealers and other companies that do business in California, the California Court of Appeal considered whether the Federal Arbitration Act (FAA) (9 U.S.C. sections 1-16) preempted application...

The Week In Securities Litigation: Focus On White Collar Criminal Securities Cases

The focus this week was on white collar criminal securities cases. First, Rajat Gjupta, the former Goldman Sachs director convicted of passing confidential information to former hedge fund mogul Raja Rajartnam was sentenced. Second, Mr. Rajartnam's appeal of his conviction on insider trading and...

The Week In Securities Litigation: SEC Amends Insider Trading Case Against 2 Former Brokers

In this holiday shortened week the Commission amended an insider trading case brought against two former brokers to identify the source of the information, a research analyst who befriended a lawyer working on the underlying deal. The agency also resolved financial claims with convicted inside trader...

Morrison & Foster Client Alert: FINRA Provides Early Guidance About Its Exam Priorities; Firms Should Take Notice

By Jay G. Baris, Hillel T. Cohn, Kelley A. Howes, and Daniel A. Nathan In its annual summary of regulatory and examination priorities, the Financial Industry Regulatory Authority (FINRA) signaled that it will aggressively pursue market misconduct. The January 11, 2013 report follows closely on...

The Week In Securities Litigation: SEC, CFTC Chairmen Testify; 2 Sentenced To Long Prison Terms

SEC Chairman Elise Walter and CFTC Chairman Gary Gensler testified before a Senate Committee this week, focusing on the implementation of Dodd-Frank. The SEC also approved the budget for the PCAOB. Two former senior executive in the organization of jailed Ponzi schemer Allen Stanford were sentenced...

The Week In Securities Litigation: SEC Seeks Budget Hike, Brings 2 New Actions

The focus this week was on the proposed SEC budget as new SEC Chair Mary Jo White told a House subcommittee that the agency needs about a 26% increase. Part of the additional funding is to hire almost 700 new staff members. SEC enforcement, in conjunction with the Manhattan U. S. Attorney's Office...

SEC Reversed Again by the D.C. Circuit

The SEC lost another case in the D.C. Circuit Court of Appeals. This time, however, it did not involve rule making. Rather, the action focused on the imposition of a life time bar from the securities business by FINRA which was affirmed by the Commission on appeal. Saad v. Securities and Exchange...

The Week in Securities Litigation: SEC Files Another Reg FD Action

The recent NASDAQ outage was a key focus this week. The SEC held a meeting attended by the leaders of the securities and options exchanges, FINRA, DTCC and the Options Clearing Corporation. At its conclusion the SEC Chair gave the participants a homework assignment: Come up with a list of concrete measures...

2 Brokers Barred by FINRA for Allegedly Stealing $300,000 from Elderly Widow, with Diminished Mental Capacity

The Financial Industry Regulatory Authority (FINRA) has barred brokers Fernando L. Arevalo and Jimmy E. Caballero from the securities industry for allegedly converting approximately $300,000 from an elderly widow with diminished mental capacity and for failing to fully cooperate with FINRA’s investigation...