Archives: Securities Litigation & Enforcement

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Supreme Court Probes “Midway” Position in Halliburton

The United States Supreme Court yesterday heard oral argument in Halliburton Co. v. Erica P. John Fund, Inc. In that much-watched case, Halliburton asks the Court to overrule the fraud-on-the-market theory of reliance in securities fraud cases established by the Court’s decision in Basic v. Levinson, or, at least, to adopt a modification that would … Continue Reading

China Auditor Update: After Round One – SEC 1, Auditors 0

  In the first blow to land in the long running dispute between U.S. regulators and the accounting firms that certify the financial statements of China-based companies listed on U.S. exchanges, yesterday an Administrative Law Judge at the Securities and Exchange Commission (“SEC”) issued a decision barring the Chinese affiliates of the “Big Four” accounting … Continue Reading

The Lawman Cometh: The SEC Adds Deferred Prosecution Agreements to Its Bag of Remedies

This post was written by Terence Healy. Last week the Securities and Exchange Commission (“SEC”) announced it had entered into its first deferred prosecution agreement (“DPA”) with an individual.  The announcement is interesting for two reasons.  It reflects the increasing tone of law enforcement the Commission is taking in its enforcement proceedings, and it raises the … Continue Reading

Bold and Unrelenting: Six Months In

This post was written by Terence Healy and Amy J. Greer. Mary Jo White promised Congress she would pursue a “bold and unrelenting” enforcement program as chairman of the Securities and Exchange Commission (“SEC”). Six months into her tenure, we should take her at her word. In public remarks this week, White reiterated her desire for … Continue Reading

CFTC Enforcement Division Drops ‘Absent Objection’ Investigatory Orders

In a reversal of course, the Commodities Futures Trading Commission’s Division of Enforcement has confirmed that it will no longer pursue omnibus orders of investigation by means of an “absent objection” procedure, and instead will seek Commission approval before extending such orders. Last month, CFTC Commissioner Scott O’Malia issued a sharply worded objection to the … Continue Reading

The SEC Brings Charges Against ‘Gatekeeper’ Accountants

This post was written by James A. Rolfes. In a “crackdown” on the “gatekeepers” who put investors at risk when they fail to uncover financial statement fraud and misstatements, the Securities and Exchange Commission this week highlighted the work of “Operation Broken Gate” when it announced the filing of several proceedings against certified public accountants … Continue Reading

U.S. District Court Vacates SEC’s Rule Requiring Public Disclosure of Energy Companies’ Payments to Foreign Governments

  On July 2, 2013, the U.S. District Court for the District of Columbia vacated a rule promulgated by the Securities and Exchange Commission (“SEC”) that would have required energy companies to publicly disclose payments to U.S. and foreign governments in connection with the commercial development of oil, natural gas, or minerals. The American Petroleum … Continue Reading

Déjà Vu All Over Again? SEC Announces More Specialized Initiatives

This post was written by Amy J. Greer and Terence Healy. After several weeks of anticipation, the SEC’s Division of Enforcement announced July 2 three new special initiatives: a Microcap Fraud Task Force, a Financial Reporting and Audit Task Force, and a Center for Risk and Quantitative Analytics. These new groups are in addition to … Continue Reading

Will the Third Time be the Charm for FINRA’s New Supervision Rules?

This post was written by Daniel Z. Herbst. After two unsuccessful attempts to implement consolidated supervisory rules, the Financial Industry Regulatory Authority, Inc. (FINRA), on June 21, 2013, filed with the Securities and Exchange Commission (SEC) a long-anticipated notice of proposed Rules 3110 (Supervision) and 3120 (Supervisory Control System). The proposed rules would replace and consolidate … Continue Reading

Third Time Is the Charm for Auditor Seeking Dismissal of Securities Fraud Case

This post was also written by Terence Healy. On April 8, 2013, District Judge Shira Scheindlin (S.D.N.Y.) dismissed Deloitte Touche Tohmatsu CPA Ltd. (“Deloitte”) from a securities fraud class action brought by investors in Longtop Financial Technologies, Ltd. (“Longtop”), a Chinese company which was delisted from the NYSE in 2011. The plaintiffs alleged auditing giant Deloitte … Continue Reading

E&Y “State Secrets” Case Kicks Off in Hong Kong – But a Long Way to Go

Evidence kicked off last week in the highly anticipated case brought by Hong Kong’s Securities and Futures Commission (“SFC”) against Ernst & Young Hong Kong (“E&Y”) over its failure to adequately respond to statutory requests for information in relation to an SFC investigation of the failed 2009 IPO of Chinese waste management company, Standard Water … Continue Reading

SEC Order Emphasizes Need to Follow Disclosed Valuation Method when Valuing Private Equity Fund

This post was written by James A. Rolfes. Expressing its concern that “the current difficult fundraising environment … can incentivize private equity managers to artificially inflate valuations,” the Securities and Exchange Commission emphasized the need for private equity firms to “implement policies and procedures to ensure that investors receive performance data derived from the disclosed … Continue Reading

“Know Your Customer” No More? The SEC Signals a Uniform Fiduciary Standard May Be Coming for Broker-Dealers and Investment Advisers

This post was written by Terence Healy and Daniel Herbst. On March 1, 2013, the Securities and Exchange Commission (“SEC”) published a sweeping request for comments that may determine whether a uniform fiduciary standard will be required for all broker-dealers and investment advisers providing services to retail customers. Under the present regime, registered investment advisers … Continue Reading

Supreme Court Hands Plaintiff’s Securities Class Action Bar A Win

This post was also written by Thomas M. Levinson. In its ruling on February 27, in Amgen, Inc. v. Connecticut Retirement Plans & Trust Funds (No. 11-1085), the first of several highly anticipated class action decisions this term, the Supreme Court, in a 6-3 opinion written by Justice Ruth Bader Ginsburg, held that securities fraud … Continue Reading

The Death of Class Actions? A FINRA Panel Ruling Could Signal the End of Class Claims against Brokers

This post was written by Terence Healy and Daniel Herbst. A recent ruling by a hearing panel of the Financial Industry Regulatory Authority (“FINRA”) could provide a path to effectively kill customer class actions against brokers. On February 21, a FINRA panel upheld an arbitration clause in a Charles Schwab and Co. customer agreement which … Continue Reading

Down goes Frazier!… The SEC Takes It on the Chin in Supreme Court Fight to Maintain “Discovery Rule” in Enforcement Actions

This post was written by Terence Healy. The discovery rule is no more. The Supreme Court today issued its decision in Gabelli v. SEC, 568 U. S. ____ (2013), and held the five-year limitations period under 28 U.S.C. § 2462 runs from the date of the underlying violation, and not from when the government reasonably … Continue Reading

SEC Better Fasten Those Seat Belts, Looks Like A Bumpy Ride

This post was written by Amy J. Greer. As the securities enforcement world awaits the U.S. Court of Appeals for the Second Circuit’s decision in the SEC v. Citigroup matter – where Judge Jed Rakoff balked at the Commission’s “neither admit nor deny” policy and refused to approve a settlement for lack of evidentiary support … Continue Reading

Industry Gives Chilly Response to FINRA’s Proposed Recruitment Compensation Disclosure Rule

This post was written by Daniel Z. Herbst. With just a few weeks remaining until the close of the comment period (ending March 5, 2013), the brokerage industry nearly uniformly has given a chilly reception to FINRA’s proposal to require disclosure of broker recruiting incentives to customers when an individual broker is recruited to a … Continue Reading

The Clock Is Ticking for the SEC… (Or Is It?)

This post was written by Terence Healy. The Supreme Court heard oral argument this morning in a case addressing the time within which the Securities and Exchange Commission (“SEC”) can initiate an action seeking civil penalties for violations of the federal securities laws. In Gabelli v. SEC, the Court considered whether the “catch all” five-year limitations … Continue Reading

Securities and Exchange Commission (“SEC”) Charges Chinese Affiliates of Five Large Accounting Firms for Failing to Produce Work Papers

This post was also written by Terence Healy. Yesterday, the SEC instituted administrative proceedings against the Chinese affiliates of the “Big Four” accounting firms and BDO related to audits they conducted at nine Chinese companies. At issue is the accounting firms’ “willful refusal” to provide audit work papers and other materials the Commission seeks in its … Continue Reading

Lost in Translation: Chinese Spring Ducks Beware the SFC!

Defining “insider trading” is already difficult enough, especially across different jurisdictions where elements and defenses can vary ever so slightly, and yet can result in very big differences. But try translating the term to your Chinese-speaking client. The most commonly used translation for insider trading is “內幕交易” (nèimùjiāoyì) – which literally means “trading behind the … Continue Reading
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