NEW ORLEANS - Although the Federal Housing Finance Agency (FHFA) acted within its statutory authority when it adopted a net worth sweep as conservator of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corp. (Freddie Mac), the FHFA itself is unconstitutionally structured and violates the separation of powers provision of the U.S. Constitution, a Fifth Circuit U.S. Court of Appeals panel ruled July 16 (Patrick J. Collins, et al. v. Steven T. Mnuchin, et al., No. 17-20364, 5th Cir., 2018 U.S. App. LEXIS 19510).
SAN FRANCISCO - A Ninth Circuit U.S. Court of Appeals panel on July 17 ruled that Toshiba Corp. American Depositary Receipts (ADRs) are "securities" under the Securities Exchange Act of 1934, and a pension fund's purchase of Toshiba's ADRs on the over-the-counter market could be considered a domestic "purchase or sale of . . . any security not' registered on a national securities exchange" pursuant to the U.S. Supreme Court's ruling in Morrison v. National Australia Bank (Automotive Industries Pension Trust Fund, et al. v. Toshiba Cop., No. 16-56058, 9th Cir., 2018 U.S. App. LEXIS 19640).
PHILADELPHIA - The lead plaintiff in a securities class action lawsuit against a mortgage banking firm and several of its executive officers asked a federal judge on July 13 to grant preliminary approval of a $2.95 million settlement in the action, arguing that the proposed settlement meets all statutory requirements for settlement (Courtney Elkin v. Walter Investment Management Group, et al., No. 17-2025, E.D. Pa.).
DENVER - A shareholder filed a securities class action lawsuit against a real estate company and certain of its executive officers in Colorado federal court on July 11, alleging that the defendants overstated the company's revenues for its farm real estate lending business in violation of federal securities laws, causing the company's stock to trade at an artificially high rate during the class period (Alexander Kachmar v. Farmland Partners Inc., et al., No. 18-1771, D. Colo.).
BROOKLYN, N.Y. - The federal judge in New York overseeing criminal proceedings against convicted former pharmaceutical company CEO and hedge fund manager Martin Shkreli on July 10 granted the U.S. government's motion to liquidate a portion of Shkreli's E*Trade brokerage account and apply the liquidated funds to the outstanding fine and restitution liability that were part of his conviction on securities fraud and conspiracy charges (United States v. Martin Shkreli, No. 15-637, E.D. N.Y., 2018 U.S. Dist. LEXIS 114792).
CHICAGO - A Seventh Circuit U.S. Court of Appeals panel on July 12 ruled that a federal district court did not err in dismissing a securities class action complaint against retailed Kohl's Corp. and certain of its executive officers with prejudice because a pension fund failed to show that the defendants acted with the required scienter and failed to show that amendment of its complaint would cure the pleading defects that led to dismissal (Pension Trust Fund for Operating Engineers, et al. v. Kohl's Corp., et al., No. 17-2697, 7th Cir., 2018 U.S. App. LEXIS 19014).
SAN FRANCISCO - A Ninth Circuit U.S. Court of Appeals panel on July 13 ruled that no private right of action exists under the Investment Company Act of 1940 (ICA) for challenging "the continued validity of an ICA exemption," affirming a federal district court's dismissal of a shareholder derivative lawsuit against Yahoo! Inc. and certain of its executive officers and directors over their investment in a Chinese retail website (UFCW Local 1500 Pension Fund v. Marissa Mayer, et al., No. 17-15435, 9th Cir.).
PHILADELPHIA - A federal district court did not err in dismissing a derivative lawsuit brought by parties to variable annuity contracts with AXA Life Insurance Co. because the plaintiffs failed to show that AXA and its subsidiary breached their fiduciary duty by charging excessive management and fund administration fees under the provisions of the Investment Company Act (ICA), a Third Circuit U.S. Court of Appeals panel ruled July 10 (Mary Ann Sivolella, et al. v. AXA Equitable Life Insurance Co., et al., No. 16-4241, 3rd Cir., 2018 U.S. App. LEXIS 18678).
WASHINGTON, D.C. - No split among the federal circuit courts exists as to the proper application of the loss-causation pleading standard, and as a result, review of a Sixth Circuit U.S. Court of Appeals ruling that shareholders of a for-profit hospital operator pleaded loss causation in making their federal securities law claims is not warranted, the shareholders argue in a July 9 opposition brief filed in the U.S. Supreme Court (Community Health Systems Inc., et al. v. New York City Employees' Retirement System, et al., No. 17-1453, U.S. Sup.).
NEW YORK - Without providing explanation, a Second Circuit U.S. Court of Appeals panel on July 9 denied the U.S. government's petition for rehearing in an appeal of a bond trader's conviction on charges that he engaged in a securities fraud scheme to defraud investors in the residential mortgage-backed securities (RMBS) market (United States v. Jesse C. Litvak, No. 17-1464-cr, 2nd Cir.).
LOS ANGELES - Class representatives in a securities class action lawsuit against a Canadian precious metals streaming company, its auditor and others argue in a July 6 opposition brief that their second amended complaint should not be dismissed because their claims have been proven through discovery and because the class representatives have properly pleaded scienter and loss causation in making their federal securities law claims (In re Silver Wheaton Corp. Securities Litigation, No. 15-5146, C.D. Calif.).
BALTIMORE - A federal judge in Maryland on July 3 ruled that investors in a shareholder derivative lawsuit failed to plead transaction causation in arguing that certain current and former officers and directors of a real estate investment trust (REIT) and the company that managed it violated federal securities law and breached their fiduciary duty in negotiating the renewal of the REIT's management agreement (In re AGNC Investment Corp. Stockholder Derivative Litigation, No. 16-3215, D. Md., 2018 U.S. Dist. LEXIS 110711).
NEW YORK - Customers of Bernard L. Madoff Investment Securities LLC (BLMIS) may not bring a federal securities law claim against the estate and related entities of one of Madoff's investors because the claim is derivative of the BLMIS bankruptcy trustee's fraudulent transfer claim against the investor and is, thus, subject to a permanent injunction barring BLMIS customers or creditors from bringing such a claim, a Second Circuit U.S. Court of Appeals panel ruled June 27 (A&G Goldman Partnership, et al. v. Irving H. Picard, et al., No. 17-512, 2nd Cir.).
RICHMOND, Va. - A man convicted on claims of money laundering and other crimes was represented on appeal by ineffective counsel, a Fourth Circuit U.S. Court of Appeals panel ruled June 26 in vacating a federal district court's contrary order and remanding the action to the district court for proceedings consistent with the panel's opinion (United States of America v. Christian M. Allmendinger, No. 17-6447, 4th Cir., 2018 U.S. App. LEXIS 17382).
NEW YORK - A divided Second Circuit U.S. Court of Appeals panel on June 25 affirmed the conviction of a portfolio manager for his involvement in an insider trading scheme, ruling that although a federal district court's jury instruction was not in line with the U.S. Supreme Court's ruling in United States v. Newman, the error did not affect the defendant's substantial rights (United States of America v. Mathew Martoma, No. 14-3599, 2nd Cir.).
WASHINGTON, D.C. - The U.S. Supreme Court on June 25 declined to hear appeals in a pair of related securities fraud lawsuits, originally brought by the Federal Housing Finance Agency (FHFA) and stemming from the sale of residential mortgage-backed securities to government-sponsored agencies (GSEs) Federal Home Loan Mortgage Corp. (Freddie Mac) and Federal National Mortgage Association (Fannie Mae) (David Findlay, et al. v. Federal Housing Finance Agency, No. 17-1300, and Nomura Securities International Inc. v. Federal Housing Finance Agency, No. 17-1302).
SAN FRANCISCO - The Securities and Exchange Commission properly determined that a whistleblower is not entitled to a whistleblower award under the Securities Exchange Act of 1934 because the information he provided to the SEC did not provide any information that led to the successful enforcement of a covered action, a Ninth Circuit U.S. Court of Appeals panel ruled June 19 in an unpublished memorandum opinion (Brad Greenspan v. U.S. Securities and Exchange Commission, No. 17-72832, 9th Cir., 2018 U.S. App. LEXIS 16496).
WASHINGTON, D.C. - In a divided opinion, the U.S. Supreme Court on June 21 ruled that Securities and Exchange Commission administrative law judges (ALJs) are "Officers of the United States" and are subject to the appointments clause of the U.S. Constitution (Raymond J. Lucia, et al. v. Securities and Exchange Commission, No. 17-130, U.S. Sup., 2018 U.S. LEXIS 3826).
BOSTON - A federal judge in Massachusetts on June 15 substantially dismissed a shareholder class action lawsuit, ruling that lead plaintiffs failed to cure a number of pleading deficiencies noted by the judge during oral arguments on several motions to dismiss filed by the defendants in the action (Steven Tharp v. Acacia Communications Inc., et al., No. 17-11504, D. Mass., 2018 U.S. Dist. LEXIS 100687).
NEW YORK - A federal judge erred in dismissing a securities fraud lawsuit because investors properly alleged a "domestic transaction" under Section 10(b) of the Securities Exchange Act of 1934, a Second Circuit U.S. Court of Appeals panel ruled June 19 in reversing and remanding the action to the district court (Ryan Giunta, et al. v. James B. Dingman, et al., No. 17-1375, 2nd Cir., 2018 U.S. App. LEXIS 16407).
NEW YORK - Deutsche Bank AG and its foreign exchange (FX) business on June 20 agreed to pay $205 million to settle claims with the New York Department of Financial Services (DFS) stemming from the DFS's investigation into the global bank's operation of its foreign exchange business.
WASHINGTON, D.C. - The U.S. Supreme Court on June 18 agreed to hear an appeal of an SEC ruling that an investment banker's two emails sent to prospective investors violated provisions of federal securities laws because there is no split among the federal circuit courts as to the "scope of liability under" provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and SEC Rule 10b-5 (Francis V. Lorenzo v. Securities and Exchange Commission, No. 17-1077, U.S. Sup.).
SAN FRANCISCO - A shareholder on June 13 sued an investment adviser and its board of directors in California federal court, seeking to halt the company's proposed merger deal with a financial planning firm until information necessary for shareholders to vote on the proposed deal is disclosed (Jerry Rubenstein v. Financial Engines Inc., et al., No. 18-3542, N.D. Calif.).
NEWARK, N.J. - An investor sued a biosciences company and certain of its senior officers and directors in New Jersey federal court on June 13, alleging that the defendants concealed certain weaknesses in the company's internal controls, allowing it to improperly recognize revenue in violation of federal securities laws (Tim Faulkner v. Akers Biosciences Inc., et al., No. 18-10521, D. N.J.).
SALT LAKE CITY - Utah's Pattern of Unlawful Activity Act allows the state to establish a pattern of unlawful conduct on crimes that fall outside the statute of limitations, the Utah Supreme Court ruled June 12 in reversing and remanding a state trial court's ruling (Utah v. Scott R. Stewart, No. 20160484, Utah Sup., 2018 Utah LEXIS 76).