Welcome to the 2017 Mid-Year Report from the BakerHostetler Securities Litigation and Regulatory Enforcement Practice Team.
The purpose of this report is to provide a periodic survey – in addition to our Practice Team Executive Alerts – on matters we believe to be of interest to sophisticated general counsel, chief compliance officers, compliance departments, legal departments, and members of the securities and commodities industries at financial institutions, private investment funds, and public companies.
We issue this Securities Litigation and Enforcement Highlights Report at mid-year and shortly after year-end. We hope you find the information and commentary useful, and we welcome your comments and suggestions. We encourage you to contact any of the practice team members listed at the end of the report.
This report highlights recent, significant developments, including, but not limited to the following:
Supreme Court Cases, including the impact of the ruling in Kokesh to limit the time period of the SEC's disgorgement recovery; whether the tolling rule announced under American Pipe applies to statutes of repose; and whether federal securities class actions may be brought in state court.
Securities Law Cases, including heightened standards on pleading falsity post-Omnicare; SLUSA's application in state-law pre-emption cases; the deepening of a circuit split concerning whether to extend Dodd-Frank's anti-retaliation protections to internal whistleblowers; the Ninth Circuit finding that CEO conduct in violation of corporate ethics is not actionable under Section 10(b) and Rule 10b-5; the Second Circuit rejecting the First Circuit's "extreme departure" materiality standard for omissions in registration statements; and the D.C. Circuit in Lucia teeing up the issue of administrative law judge constitutionality for Supreme Court review with respect to the SEC's practice of bringing enforcement actions using its in-house courts.
Insider Trading Cases, including cases reflecting the SEC's continued use of data analytics and artificial intelligence; monitoring and prosecuting the illegal use of confidential employer information; cracking down on pre-merger insider trades; securing stiff monetary sanctions for foreign traders who violate U.S. insider trading laws; and other recent, noteworthy insider trading cases.
Settlements, including settlements with financial institutions regarding inadequate disclosures of both investment and billing practices to clients; settlements of insider trading allegations; and other settlements stemming from the 2008 financial crisis.
Investment Adviser and Hedge Fund Cases, including SEC actions against hedge fund managers and investment advisers for a variety of alleged infractions stemming from members' failures to develop and implement proper written supervisory procedures, and new guidelines for investment advisers and hedge fund managers to revisit their procedures to ensure that they (1) are adequately drafted to meet all current laws and regulations; (2) have been properly implemented; and (3) are regularly tested to ensure the policies are working as designed.
SEC Cooperation and Whistleblower Programs, including SEC determinations to levy reduced civil penalties (or abandon the imposition of civil penalties altogether) in recognition of cooperation efforts; legislative efforts to curtail awards to "culpable" whistleblowers; awards of significant amounts to individual whistleblowers; SEC efforts to curtail the practice of requiring departing employees to sign "bounty waivers" relinquishing their rights to whistleblower awards; and SEC and court interpretation of anti-retaliation protections applicable to internal whistleblowers who do not ultimately report to the SEC.
Commodities and Futures and Regulation Cases, including furthering innovative technology programs in FinTech, and enforcement cases focusing on spoofing, anti-fraud enforcement, Ponzi schemes, and compliance with regulatory requirements.
Securities Policy and Regulatory Developments, including analysis of priorities under new chiefs at the SEC; the House passing the Financial CHOICE Act, unwinding many Dodd-Frank regulations and policies; and amendments to SEC rules to promote efficiency and transparency, including those that affect emerging businesses and individual retail investors.
View the 2017 Mid-Year Securities Litigation and Enforcement Highlights
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.