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Thomas O. Gorman On This Week in Securities Litigation -May 13, 2011


The war on insider trading by the Manhattan U.S. Attorney was propelled forward this week with the conviction of Galleon hedge fund founder Raj Rajaratnam on all fourteen counts. At the same time another defendant in the expert network investigation pleaded guilty. DOJ also prevailed in an FCPA jury trial.

SEC enforcement filed another investment fraud case and a settled financial fraud action. The division lost an effort to retroactively apply a Dodd-Frank collateral bar provision.

Market Reform

Monitoring risk: SEC Chairman Mary Schapiro testified on May 12, 2011 before the Senate Committee on Banking, Housing and Urban Affairs on monitoring systemic risk and promoting financial stability. In her testimony the Chairman addressed a number of topics including: steps the SEC is taking to examine strengthening market structure; its response to the flash crash; rule making under Dodd-Frank regarding derivatives and private fund adviser registration and reporting; the Financial Stability Oversight Council; new authority regarding Financial Market Utilities; and systemic risk assessment (here).

Capital formation: SEC Chairman Mary Schapiro also testified before the House Committee on Oversight and Government Reform regarding the future of capital formation. In her testimony the chairman addressed issues concerning registered offerings, private placements, capital formation for smaller companies, IPOs and reporting. The Chairman also stated that a review is underway of restrictions on communications in IPOs, whether the general solicitation ban should be revisited, the number of shareholders that trigger public reporting and regulatory questions posed by new capital raising strategies (here).

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For more cutting edge commentary on developing securities issues, visit SEC Actions, a blog by Thomas Gorman.

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