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Cady Bar the Door Insight & Commentary on SEC Enforcement Actions and White Collar Crime

Category Archives: SEC Litigation

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SEC Comments on Whistleblower Anti-Retaliation Provisions/Internal Reporting

Posted in SEC Litigation, Whistleblowers

In the wake of Dodd-Frank’s passage in July 2010, many companies and corporate organizations lobbied the SEC on its upcoming whistleblower rules.  One of their specific goals was to require whistleblowers, to be eligible for the awards provided in the statute, to report potential securities violations to internal compliance departments before bringing them to the… Continue Reading

You Can Settle Your Insider Trading Case with a Negligence-based Charge

Posted in Insider Trading, SEC Litigation

This is almost certainly not true anymore.  But it was true once!  Maybe only once.  Back in October 1991, the SEC sued Shared Medical Systems, a Pennsylvania health care information services company and three of its officers and directors: the company for financial reporting fraud and the individuals for insider trading, among other things.  Here’s… Continue Reading

The SEC Doesn’t Love Secret Perks for Executives

Posted in Accounting Fraud, Administrative Proceedings, Compliance, Financial Fraud, Non-scienter-based Violations, SEC Litigation

If you find yourself as the CEO of a public company, you’ll probably find pluses and minuses.  You’ll have to work really hard, but it can be lucrative, too.  You can get paid a lot of money.  And your company can pay you whatever it wants.  But there is one catch: your company has to… Continue Reading

In Ordering Disgorgement in SEC Cases, Courts Have Discretion, but Not That Much Discretion

Posted in SEC Litigation

When defendants argue in federal court against the SEC’s calculation of a disgorgement figure, they hear a lot of this: “A district court has broad discretion to order disgorgement of profits obtained through violation of federal securities laws and, if ordered, in calculating the disgorgement amount. SEC v. First Jersey Sec., Inc., 101 F.3d 1450,… Continue Reading

The SEC Totally Cares about Its Injunctions

Posted in SEC Litigation

Last week I wrote a post discussing the injunctions the SEC typically obtains against defendants in federal court.  I noted the oddity of these obey-the-law injunctions and wondered aloud why the Commission never pursues findings of contempt when those defendants disobey the very provisions they were ordered never to disobey again. In a comment to… Continue Reading

Does SEC Enforcement Treat Bigger Companies Differently?

Posted in SEC Litigation

I’m stealing the title of this post from Broc Romanek, who asked this question on January 2nd.  He was responding to a study authored by Jonas Heese, an assistant professor at Harvard Business School, entitled Government Preferences and SEC Enforcement.  Here’s part of Heese’s abstract: I examine whether political pressure by the government as a response… Continue Reading

Second Circuit Limits Insider Trading Law for Remote Tippees

Posted in Insider Trading, SEC Litigation

Matt Levine is a big jerk.  He just sits there at Bloomberg following events in finance and securities enforcement, and then writes interesting things about those events really quickly and with insight that no one else has thought of yet.  It’s so obnoxious.  Today he struck again with this piece about the Second Circuit’s huge… Continue Reading

Proposed “Fair Fund” for CR Intrinsic Case Stirs Dustup among SEC’s Commissioners

Posted in Insider Trading, SEC Litigation

In the right kind of enforcement action, the SEC can take the money it’s generated and set up what’s called a Fair Fund to redistribute that money to harmed investors.  But what is the right kind of case?  This procedure was established as part of the 2002 Sarbanes-Oxley law, and it’s relatively easy to contemplate… Continue Reading

Rengan Rajaratnam Settlement Exposes Slightly Weak Point in SEC’s Newish Admissions Policy

Posted in Insider Trading, Parallel Proceedings, SEC Litigation

You remember Rengan Rajaratnam, right?  He broke the S.D.N.Y.’s long streak of insider trading victories when a jury acquitted him in July.  I wondered what the effect on his case with the SEC would be.  Would he settle?  Would he take that one to trial and win, too? Well, he and the SEC came to… Continue Reading

Wrapping up Securities Enforcement Forum 2014

Posted in Non-scienter-based Violations, SEC Litigation, SEC Structure

I was lucky enough to spend Tuesday at Bruce Carton’s Securities Enforcement Forum 2014.  In three years, it has gone from zero to the preeminent securities enforcement law conference anywhere.  I blogged it hurriedly throughout the day, but here are what I think are the most salient points or comments after some reflection: “Broken Windows”… Continue Reading

Ghost of David Sokol Haunts SEC’s Insider Trading Case against Szymik and Peixoto

Posted in Insider Trading, SEC Litigation

It never actually became a case, but maybe you remember this matter from a few years ago.  In January 2011, former Berkshire Hathaway executive David Sokol bought about 100,000 shares in Lubrizol Corporation shortly before suggesting to Warren Buffett that Berkshire consider acquiring the company.  Berkshire did acquire Lubrizol on March 14th, and the company’s… Continue Reading

Judge Rakoff Reversed by Second Circuit on SEC-Citi case, Still Sort of Wins

Posted in SEC Litigation, Structured and New Products

You’d be forgiven if you’d forgotten at this point, but way back in Obama’s first term, the SEC once investigated and sued Citigroup for its involvement in a collateralized debt obligation deal.  As the SEC said in its complaint, Citigroup told investors that a CDO fund had been populated with assets selected by an independent… Continue Reading

SEC Not Kidding about Subpoena Enforcement Actions, Obtains Coronati’s Arrest

Posted in SEC Litigation

Here’s one of the questions I get from some individual clients when they receive subpoenas from the SEC:  Could I get arrested over this?  Well, no.  First things first – The SEC has civil authority, not criminal authority.  Unless the Justice Department or some state criminal authority gets involved, you’re not going to be arrested…. Continue Reading

Thinking about SEC Disgorgement

Posted in SEC Litigation

Upon starting work at on SEC enforcement cases – on either side – one quickly learns that the SEC isn’t authorized to seek money damages in its cases.  Instead, the SEC seeks disgorgement of what it contends is a defendant’s illicit profits.  Disgorgement?  What’s that?  A number of cases call it “an equitable remedy designed… Continue Reading

JPMorgan Chase Admissions May Be Less Than Meet the Eye

Posted in SEC Litigation, SEC Structure

Drama continues with JPMorgan Chase’s London Whale trades.  For the few who don’t remember, the debacle emerged early last year, when trader Bruno Iksil, now known as the “London Whale,” lost a then-estimated $2 billion as a result of a series of derivatives transactions involving credit default swaps.  The trades, supposedly part of a JPMorgan… Continue Reading

SEC Puts Some Color on Its New Admissions Policy

Posted in Hedge Funds, Microcap Fraud, SEC Litigation

Earlier this summer, SEC chair Mary Jo White told a Wall Street Journal conference that the Commission would in some circumstances depart from its longstanding policy of allowing defendants to settle cases without admitting or denying wrongdoing.  She didn’t let Labor Day hit before putting the new plan into action. You may remember that the… Continue Reading