Securities

Recent Posts

Insider Trading and Suspicious Trading, Not the Same
Posted on 26 Aug 2010 by Thomas O. Gorman

Investigating insider trading is difficult. Proving it is even more difficult. Frequently, the trading is "suspicious" because of its timing, magnitude, or for a variety of other reasons. Market watchers such as FINRA use this term to classify... Read More

The Impact of Newman on SEC Enforcement: Part I
Posted on 29 May 2015 by Thomas O. Gorman

This is the first segment of a five part series discussing the impact of the Second Circuit’s ruling in Newman on SEC insider trading cases Introduction In seeking rehearing and an en banc hearing before the Second Circuit Court of Appeals... Read More

This Week in Securities Litigation (Week ending May 8, 2015)
Posted on 8 May 2015 by Thomas O. Gorman

The debate over waivers WKSI waivers and other similar provisions continued this week. The Commission granted a WKSI waiver to Deutsche Bank despite a guilty plea to criminal felony charges but only over the dissent of Commissioner Stein. The agency... Read More

This Week in Securities Litigation (Week ending May 23, 2014)
Posted on 27 May 2014 by Thomas O. Gorman

SEC Chair Mary Jo White indicated in comments this week that the agency plans to make greater use of Exchange Section 20(b) in the future. That section generally provides for imposing liability on those who cause another to violate the federal securities... Read More

Jury Gives SEC Split Verdict In Insider Trading – Front Running Trial
Posted on 15 Jan 2014 by Thomas O. Gorman

The Commission was handed a split verdict in its insider trading – front running case against Siming Yang and his investment company, Prestige Trade Investments Limited by an Illinois jury yesterday. SEC v. Yang, Case No. 12-cv-02473 (N.D. Ill.... Read More

The Battle Lines are Drawn over the Citigroup Settlement
Posted on 10 Nov 2011 by Thomas O. Gorman

The battle lines have been drawn over the proposed settlement in the SEC's action against Citigroup Global Markets, Inc. SEC v. Citigroup Global Markets, Inc., Civil Action No. 1:11-cv-07387 (S.D.N.Y.) ( here ). Judge Rakoff entered an order posing... Read More

This Week in Securities Litigation (October 14, 2011)
Posted on 14 Oct 2011 by Thomas O. Gorman

This week three Galleon related defendants were sentenced to prison for insider trading, including Raji Rajaratnam. The Commission filed another significant market crisis case naming the senior officers of a failed bank as defendants. The Commission... Read More

This Week In Securities Litigation (Week ending November 21, 2014)
Posted on 21 Nov 2014 by Thomas O. Gorman

The Commission filed another settled FCPA action this week. The proceeding named two U.S. citizens living abroad as Respondents. The DOJ issued an Opinion discussing successor liability. The DC Circuit agreed to rehear the suit which challenged the... Read More

The Chairman Outlines a Timetable for Dodd-Frank Rules
Posted on 12 Oct 2010 by Thomas O. Gorman

The Dodd-Frank Wall Street Reform and Consumer Protection Act is a sprawling piece of legislation. It is also very much a work in progress, requiring hundreds of new rules to be written and dozens of studies. The burden imposed on the SEC is considerable... Read More

A Fund Operator Defrauds the Public – and Tries to Fool the SEC
Posted on 8 Mar 2011 by Thomas O. Gorman

A key focus of SEC Enforcement in recent months has been investment fund fraud and Ponzi scheme cases. Once considered difficult to detect in the past the Commission brought few actions. Now, however, seldom a week goes by without at least one and... Read More

The SEC, the Goldman Case and Critics
Posted on 27 Apr 2010 by Thomas O. Gorman

Sometimes the SEC is an aggressive market regulator and at other times it appears to be the gang that cannot shoot straight. In filing the Goldman case, discussed here , it not only brought the most significant enforcement action in years, but also responded... Read More

This Week in Securities Litigation (October 21, 2011)
Posted on 21 Oct 2011 by Thomas O. Gorman

Eight SEC Enforcement attorneys were recognized by the Counsel of the Inspector General on Integrity for Excellence in connection with their work regarding the investigation of a significant market crisis case. The Commission filed its third significant... Read More

The Disqualification Provisions and the SEC’s Use of Wavers
Posted on 16 Mar 2015 by Thomas O. Gorman

One key debate regarding current SEC enforcement policy centers on the application of the so-called “bad actor” provisions. Previously the Commissioners split over the nature, use and application of those provisions. Central to the debate... Read More

Did the DOJ and the SEC Go Soft on Business Crime?
Posted on 11 Jul 2011 by Thomas O. Gorman

In recent years DOJ and SEC prosecutors have adopted a new, more lenient approach toward business organizations engaged in wrongful conduct according to a recent New York Times article. This is evidenced by the increased use of non-prosecution and... Read More

SEC Sanctions Adviser, and Its CEO, GC and Auditor Based on Conflicts
Posted on 30 Apr 2015 by Thomas O. Gorman

Conflicts of interest are a central focus for the SEC. Indeed, conflicts are at the core of many of the actions brought against regulated entities. And, an undisclosed conflict was at the center of actions brought against a hedge fund, its founder, general... Read More

  • Blog Post: Looking to the Past to Find the Future

    The insider trading case against Raj Rajaratnam, founder of Galleon Fund, and others, discussed here , is being heralded as the most significant in years, leading some to ask if its signals the rejuvenation of SEC enforcement. The significance of the case, and whether it eclipses those such as Guttenberg...
  • Blog Post: This Week in Securities Litigation (April 9, 2010)

    This week the SEC proposed new rules regarding asset backed securities while Chairman Mary Schapiro, in an op-ed article in the Washington Post, called for the Senate financial reform bill to be strengthened. SEC enforcement saw another of its proposed settlements held by Judge Rakoff in the Southern...
  • Blog Post: Outside Director Exposure for Disclosure Violations

    From time to time, the SEC reiterates its view of the critical role companies' outside directors play in safeguarding investors' interests. Nevertheless, it has been relatively rare for SEC to pursue enforcement actions against outside directors based on an alleged failure to fulfill that...
  • Blog Post: Shifting Theories of Criminal Liability Should Raise Red Flags

    The line between civil and criminal violations of the securities laws is, at best, difficult to discern. That difficulty is compounded by the increasing criminalization of the federal securities laws. In some instances, this had led to overreaching by prosecutors in an effort to establish the charges...
  • Blog Post: No Implied Cause of Action Under the Anti-Pyramiding Section

    A complaint brought by closed end fund Gabelli Global Multimedia Trust, Inc. alleging violations of the anti-pyramiding provisions of the Investment Company Act was dismissed for a lack of standing. The defendants were Arthur Lipson and a group of investment companies he controlled. The Gabelli Global...
  • Blog Post: O.K., So The SEC Sued Goldman Sachs - Now What?

    The SEC's blockbuster announcement last Friday of its civil enforcement action against Goldman Sachs and one of its investment bankers rocked the securities markets and made headlines in the financial press around the world. Undoubtedly because of Goldman's prominence and perhaps also because...
  • Blog Post: This is "God's Work"?

    About a year ago, Lloyd Blankfein tried to burnish Goldman Sachs' post-financial crisis image by arguing in an interview with the Times of London that Goldman was performing God's work by bringing buyers and sellers together to do deals and safeguarding the interests of shareholders. Whatever...
  • Blog Post: SEC Drops Most Significant Claims Against Stockman

    In the wake of filing what is the most significant enforcement action brought in years against Goldman Sachs & Co., discussed here, the Commission obtained what can only be called a face saving settlement in its action against former OMB director David Stockman arising out of his tenure at Collins...
  • Blog Post: The Knowledgeable Employee Exemption for Private Funds

    When operating under the Section 3(c)(7) exemption from the Investment Company Act, the issue then becomes how a private investment fund can provide an equity ownership to key employees. Its unlikely that your key employees will have the $5 million in investments needed to qualify as an investor. (Each...
  • Blog Post: Madoff Investor Lawsuit Against the SEC Dismissed

    In an April 20, 2010 order ( here ), Central District of California Judge Stephen V. Wilson granted the motion of the SEC to dismiss the suit brought against the agency by Madoff investors' under the Federal Tort Claims Act . The investors had alleged that the SEC "owed a duty of reasonable...
  • Blog Post: The SEC, the Goldman Case and Critics

    Sometimes the SEC is an aggressive market regulator and at other times it appears to be the gang that cannot shoot straight. In filing the Goldman case, discussed here , it not only brought the most significant enforcement action in years, but also responded to critics who claim the agency cannot take...
  • Blog Post: SEC Prevails at Trial in Option Backdating Case

    The SEC prevailed on most counts of its option backdating case against the former CFO of Maxim Integrated Products, Inc., Carl W. Jasper. SEC v. Jasper , Case No. CV 07-6122 (N.D. CA. Filed Dec. 4, 2007). The Commission's complaint alleged that over a five year period beginning in 2000 Mr. Jasper...
  • Blog Post: This Week in Securities Litigation (April 30, 2010)

    This week, the Supreme Court handed down its decision in Merck on the statute of limitations in securities fraud damages actions. Nevertheless, the spotlight remains on Goldman and the SEC's case against the firm. Congressional hearings were held. The SEC received a letter requesting information...
  • Blog Post: Regulatory Reform and the Merger of the SEC and CFTC

    Periodically, there have been calls to merge the SEC and the Commodity Futures Trading Commission (CFTC). As the market crisis unfolded, for example, former Treasury Secretary Henry Paulson proposed reforms which included merging the SEC and the CFTC. Many commentators thought the Madoff and other...
  • Blog Post: Will the Financial Reform Bill Include An Aiding and Abetting Liability Provision?

    The financial reform bill now working its way through Congress will include an amendment to the securities laws allowing private civil actions for aiding and abetting liability, if an amendment Senator Arlen Specter proposed on May 4, 2010 is part of the final bill. According to the Blog of the Legal...
  • Blog Post: Discovering the Madoff Scheme by 1997-1998

    The saga of Ponzi scheme king Bernard Madoff continues with the filing of a new action by New York Attorney General Andrew Cuomo against an investment adviser who is alleged to have had information of the fraud by the late 1990s. The complaint suggests that millions of dollars in investor losses...
  • Blog Post: Global Accounting Standards, Myths and the News Cycle

    President Obama frequently cites the "twenty-four hour news cycle" which pounces on everything and often becomes a source of misinformation, rumors and distortions rather than news. This has become such a regular part of his speeches that the pundits are now commenting on his commentary...
  • Blog Post: This Week in Securities Litigation (May 21, 2010)

    SEC Chairman Schapiro and others appeared before congress this week to testify about the recent market disruption. At the same time the SEC, while joining yet another financial fraud task force, took the unprecedented step of designating the deputy director of the division of enforcement as lead...
  • Blog Post: Sting Operation Catches Two Insider Trading

    Last year so-called blue collar tactics - wire taps and informants - resulted in the Galleon insider trading cases, discussed here . In January, an undercover sting operation yielded 22 arrests for FCPA violations, discussed here . Yesterday, another undercover sting operation resulted in criminal...
  • Blog Post: Idiot Inside Traders

    This week the FBI arrested the administrative assistant to a high-level Disney executive and her boyfriend. Turns out they were not the smartest couple of inside traders out there. The SEC's complaint speaks for itself: The Plan 9. Beginning in early March 2010, various hedge funds, including...
  • Blog Post: Lessons from the Pequot Investigation

    Things are not always as they seem. This sage maxim has been cited many times in different contexts. The resolution of Pequot insider trading investigation last week, along with the earlier scandal the initial inquiry generated, is a good illustration of how this principle applies in SEC investigations...
  • Blog Post: Two Financial Fraud Cases and a SOX Section 304 Action

    Based on a five-year financial fraud that began in 2002 and culminated in a $127 million 2008 restatement by Diebold, Inc., the Commission filed three actions. One settled case was filed against the company. SEC v. Diebold, Inc. , Civil Action No. 1:10-CV00908 (D.D.C. Filed June 2, 2010). A second...
  • Blog Post: This Week in Securities Litigation (June 4, 2010)

    SEC enforcement this week brought another SOX claw back case, as well as actions alleging financial fraud and another investment fund case. DOJ dropped their appeals in the two Broadcom criminal option backdating cases which were dismissed for prosecutorial misconduct. DOJ's action finally brought...
  • Blog Post: Getting Cleaned by Oil Spill Stock Scams

    I doubt you have missed the news about the oil spill mess in the Gulf of Mexico. The scammers have clearly noticed and sense an opportunity to make a quick buck. Some companies may issue press releases, or send unsolicited faxes or spam emails that might include: Claims to have products...
  • Blog Post: This Week in Securities Litigation (June 11, 2010)

    Dell, Inc. filed a 10-KA late on Thursday reporting that it has revised the financial results previously reported to record a $100 million liability for a potential settlement of an SEC investigation. While the filing did not provide the terms of any settlement, Bloomberg reports that CEO Michael...