In the months following revelations about the potentially-unfair advantages created by high-speed trading, SEC Chairman Mary Jo White announced that the SEC intends to develop rules to target high-speed trading in order to quell concerns that the practice allows traders to manipulate the market by, among other things, “front running” other traders. The SEC is not the first agency to set its sights on high-speed traders.  Among those looking into the practice, New York Attorney General Eric Schneiderman and United States Attorney General Eric Holder have announced investigations.  More recently, Schneiderman brought suit against Barclay’s, alleging that it gave high-speed traders an unfair advantage in its private securities trading venue.  But while prosecutors appear to have strong medicine in mind, the SEC is aiming for a more measured approach.  
Continue Reading SEC Announces Development of Rules to Oversee High-Speed Trading

With the Second Circuit’s recent reaffirmation of the SEC’s substantial discretion in negotiating the terms of settlement—notably vacating Judge Jed Rakoff’s rejection of the proposed $285 million settlement in SEC v. Citigroup Global Markets, Inc.—eyes are turning to the decision’s immediate impact on at least one other high-stakes case:  a $602 million insider trading settlement between the SEC and CR Intrinsic Investors, an affiliate of S.A.C. Capital Advisors.  Similar to the SEC-Citigroup settlement, CR Intrinsic was not required to admit wrongdoing in settling the SEC’s charges.  Judge Victor Marrero had conditionally approved the settlement pending the outcome of the Citigroup appeal.  
Continue Reading Revisiting SEC Consent Decrees in the Wake of SEC v. Citigroup

In the 1987 film “Wall Street,” Gordon Gecko gives a memorable speech in which he declares “that greed, for lack of a better word, is good.  Greed is right, greed works.”  On Wall Street today, one might say that speed is good.  Milliseconds (1/1,000th of a second) and microseconds (1/1,000,000th of a second) matter.  Traders relentlessly pursue methods to access the most current information from Wall Street, employing fiber-optic cable, microwave dishes, and even laser beams.  But is acting upon this virtually-instant data, which may arrive at a high-speed trader’s computer mere milliseconds before the average trader, insider trading?  Some are claiming, “yes.”  After the publication of Michael Lewis’s book Flash Boys: A Wall Street Revolt, allegations are circulating that a speed advantage allows high-speed traders to effectively “front run” other traders.
Continue Reading Speed is Good: But Is High-Speed Trading A Crime?

Enforcement officials from the U.S. SEC’s Chicago Regional Office and the U.S. Attorney’s Office for the Northern District of Illinois gathered to discuss their enforcement initiatives at the “SEC & DOJ Hot Topics 2014” program on February 11, 2014.  Local regulators reinforced the theme that in 2014, the SEC will continue to adopt enforcement tools that historically have been used by their counterparts in criminal law enforcement.

The program was among the first public speaking engagements by David Glockner in his new role as director of the SEC’s Chicago Regional Office.  Mr. Glockner was appointed as the Chicago Regional director in November 2013, following an impressive, decades-long career in the Chicago U.S. Attorney’s Office, including 11 years as the criminal division chief.  Joining Mr. Glockner on the panel were regulators Thomas Dunn, a Financial Economist in the SEC’s Division of Economic and Risk Analysis, and Julie Porter, Chief of the Financial Crimes Division at the Chicago U.S. Attorney’s Office.

In discussing the SEC’s 2014 enforcement priorities, Mr. Glockner noted that the economy seems to be “between major financial crises” at the moment, which presents an opportunity for the SEC to set its own agenda – rather than reacting to various market failures.  In setting this agenda, Mr. Glockner warned that companies should expect the SEC to be present in as many of its different areas of regulatory responsibility as possible.  He noted that even activities that have not garnered much attention from the SEC in the recent past may now fall under scrutiny, especially if there is a high potential for misconduct in a previously overlooked area.  He specified that current areas of interest include: (1) accuracy of books and records, earnings reports and investor communications; (2) municipal securities / public pensions; and (3) utilizing staff exams to conduct targeted reviews of risk-based areas.
Continue Reading New Regime at SEC Takes a Page From the Prosecutors’ Playbook