The Supreme Court handed down two significant securities law decisions this week. In the first the High Court, in unanimous opinion, rejected the contention of the SEC that the five year statute of limitations for seeking a penalty can be extended by invoking a discovery rule. In the second, the Court concluded that a securities law class action plaintiff need not establish materiality at the class certification stage to invoke the fraud on the market theory. Rather, materiality is a merits issue.
The SEC filed two new enforcement actions this week. One involved a PRC based issuer formed by a reverse merger charged with falsifying its financial statements by failing to include related party transactions and an off-books account. The second focused on claims that a hedge fund manager amended the structure to give certain shareholders a liquidation preference and then sold additional shares without disclosing this fact.
Finally, the SEC Chairman and three Commissioners addressed the annual SEC Speaks Conference, focusing on market safety and structure, regulatory measures to promote the stability of markets, disclosure policy and regulatory burdens and raising questions about the independence of the agency in view of certain provisions in Dodd-Frank. Chairman Walter was honored at a dinner held in connection with the conference of ASECA, the alumni association of former SEC staff.
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For more commentary on developing securities issues, visit SEC Actions, a blog by Thomas Gorman.
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