Thomas O. Gorman On This Week In Securities Litigation (May 27, 2011)

Thomas O. Gorman On This Week In Securities Litigation (May 27, 2011)

The Commission issued it controversial new Dodd-Frank whistleblower rules by a 3 to 2 vote this week. Many critics claim the rules will undermine corporate compliance programs.

Insider trading is the key theme this week. Insider trading on Capitol Hill with a Senator sending a request to the SEC regarding how it handled certain possible insider trading referrals from FINRA. Two settled insider trading actions filed by the Commission. Another was filed in tandem with DOJ against an NASDAQ official who has pleaded guilty. Insider trading for which a former investment adviser was sentenced to prison.

Market Reform 

Whistleblower program: The SEC issued the final rules for the new Dodd-Frank whistleblower program this week. Generally, under the rules those who furnish the SEC with original information that leads to a successful enforcement action in which the penalties exceed $1 million will be eligible for an award. The rules do not require that the information be first reported to the business organization, although additional incentives are offered for such reporting (here).

Insider trading: Senator Charles Grassley, in a May 24, 2011 letter to SEC Chairman Mary Schapiro, is asking the Commission to explain how it has handled possible insider trading inquiries about SAC Capital referred by FINRA beginning as early as January 1, 2000. The letter also requests that the Commission explain: "(1) how the SEC resolved each of these referrals, (2) how the number of referrals over this timeframe compares to similarly situated firms, (3) whether a Wells Notice was ever drafted with regard to SAC Capital related to any of these referrals or related to any other matter (if so, please provide a copy of any Draft or Final Wells Notice)."

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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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