Category: SEC

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New SEC Guidance: Dodd-Frank Protects Internal Whistleblowers

Shortly after the July 2010 adoption of the Dodd-Frank Act’s whistleblower program, disputes began arising over whether its anti-retaliation protections apply to employees who report misconduct internally to the company, but not externally to the SEC.  On August 4, 2015, the SEC issued new guidance through an interpretive rule, maintaining that the Act’s whistleblower protections are not limited only to … Continue Reading

9th Circuit Rejects Newman Holding on Insider Trading

In an apparent circuit split that may well garner attention from the Supreme Court, a Ninth Circuit panel issued an opinion in United States v. Salman affirming that the requisite “personal benefit” for insider trading liability is established where an “insider makes a gift of confidential information to a trading relative or friend.”  In doing so, the … Continue Reading

DOJ and SEC Dig In After Judicial Blow to SEC’s Home “Court” Advantage

As observed in this blog and elsewhere, the U.S. Securities and Exchange Commission has aggressively pursued enforcement actions in administrative proceedings before its own Administrative Law Judges (ALJs), rather than before federal judges in the U.S. District Courts.  In response, defendants have begun raising constitutional challenges to the SEC’s administrative proceedings, claiming that the SEC’s … Continue Reading

SEC Action To Protect Whistleblowers May Impact Internal Investigations

On April 1, 2015, the Securities and Exchange Commission announced its first enforcement action against a company for using improperly restrictive language in confidentiality agreements allegedly aimed at stifling potential whistleblowers. The SEC charged KBR Inc. with violating whistleblower protection Rule 21F-17 enacted under the Dodd-Frank Act, which prohibits companies from “imped[ing] an individual from … Continue Reading

SEC Awards First Whistleblower Payout to Former Company Officer

The Securities and Exchange Commission announced this week that it has awarded its first whistleblower payout to a former company officer. The redacted order indicates that the former officer will receive an award between $475,000 and $575,000 for reporting high-quality, original information about a securities fraud that resulted in an SEC enforcement action with sanctions exceeding $1 … Continue Reading

DOJ’s “Top 10” for Effective FCPA Compliance Programs

At the American Conference Institute’s 9th Annual Houston Foreign Corrupt Practices Act Boot Camp, January 27-28, 2015, Deputy Criminal Chief Jason Varnado, from the Major Fraud Section of the United States Attorney’s Office in the Southern District of Texas, offered the audience of compliance and audit professionals insight into what the Department of Justice (DOJ) expects … Continue Reading

Second Circuit Narrows Scope of Remote Tippee Liability in Landmark Insider Trading Decision

In a ground-breaking decision, the Second Circuit dealt a substantial blow to federal prosecutors’ epic crackdown on insider trading by raising the bar for the government’s burden of proof in “remote tippee” cases that have plagued the financial industry in recent years. The decision in United States v. Newman (available here) places significant restrictions on the ability … Continue Reading

Big Paydays for Whistleblowers? Not so fast…

With over 10,000 whistleblower tips since 2011, the Securities and Exchange Commission (“SEC”) recently unveiled its most detailed portrait yet of the whistleblowers who have received awards under the SEC incentive program created by the Dodd-Frank Wall Street Reform and Consumer Protection Act. According to its 2014 SEC Annual Report to Congress on the Dodd-Frank Whistleblower Program, 14 whistleblowers … Continue Reading

Supreme Court Questions Deference to SEC in Insider Trading Cases

At first glance, the 24-pages of orders issued by the Supreme Court on November 10, 2014, appear to be nothing more than the usual proscriptions, including a long list of cases for which the Supreme Court has declined to consider further appeals.  However, at the end of a perfunctory list of certiorari denials is a three-page Statement … Continue Reading

SEC’s Home “Court” Advantage Being Challenged

The U.S. Securities and Exchange Commission has made clear that it intends on filing more enforcement actions in administrative proceedings, which are heard by its own Administrative Law Judges (ALJs).  Perhaps not surprisingly, the SEC ALJs have found in favor of the SEC in every decision from September 2013 to September 2014.  Now, however, at … Continue Reading

The SEC’s Potential Disruption of Internal Audit and Compliance Efforts

Somewhat overlooked in the attention to the SEC’s recent $30 million whistleblower award is a more frightening development for public companies.  Just weeks earlier, the SEC announced an award to an employee who performed internal audit and compliance functions.  The SEC said such employees “are on the front lines against fraud and corruption” and offered … Continue Reading

SEC Measures Unpaid Taxes to Achieve “Staggering” Disgorgement Award

Last week, U.S. District Court Judge Shira Scheindlin of the Southern District of New York ordered disgorgement of $187.7 million in U.S. Securities and Exchange Commission v. Wyly et al, and further estimated that the amount will balloon to between $300 million to $400 million after the SEC recalculates pre-judgment interest.  The award, to be paid by Sam … Continue Reading

The SEC’s Athletic Pursuits

Summer’s close brings with it the beginning of football season.  This time of year also generates confusion among sports fans about the abbreviation “SEC.”  During my years of service at the Securities and Exchange Commission, we once sent an investigator to the Southern states to interview witnesses during the investigation of famous sports agent “Tank” … Continue Reading

Criminalizing Insider Trading from Wall Street to K Street: Taking Stock of the STOCK Act

Recent court filings have confirmed that the U.S. Department of Justice and the Securities and Exchange Commission are continuing to conduct parallel criminal-civil investigations involving insider trading on Capitol Hill.  Most notably, DOJ and the SEC allege that a Congressional staffer provided a lobbyist with information regarding healthcare reimbursement- rate policy, and that the lobbyist leaked … Continue Reading

Once More Unto The Cybersecurity Breach – Ready For The SEC?

Public companies confronting a cybersecurity attack should ready themselves for the arrival of a new party stepping into the breach—the U.S. Securities & Exchange Commission.  As several companies have learned, the SEC has recently opened enforcement investigations looking not only into whether several companies had adequately prepared for and responded to cybersecurity breaches, but also … Continue Reading

The SEC’s Increasing Focus on the Municipal Bond Market

Recent SEC actions confirm that the SEC is making good on its promise to focus attention on the municipal bond market and the disclosure obligations of municipalities. According to the SEC, investors hold approximately $3.7 trillion dollars in municipal debt today, in contrast to just $20 billion in 1945. In light of the increase in … Continue Reading

Danger, Will Robinson? – The SEC’s “Robocop” Not on the Beat

In recent years, the SEC has touted a new enforcement tool known as “Robocop,” purportedly designed to detect fraud in the financial statements of public companies. Robocop’s architect, Craig Lewis, then the Director of the SEC’s Division of Economic and Risk Analysis, described the virtues of Robocop in a speech in December 2012. Last year, … Continue Reading

Directors Beware – The SEC’s High Expectations for Gatekeepers

In a recent speech, SEC Chair Mary Jo White put directors of public companies on notice of their responsibility as “essential” and “important” gatekeepers upon whom their investors and the SEC rely.  Chair White described directors as the SEC’s “partners” in preventing, detecting, and stopping violations of the federal securities laws.  She set forth a … Continue Reading

SEC Announces Development of Rules to Oversee High-Speed Trading

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 … Continue Reading

Whistleblowers: Boom or Bust?

It is no secret that whistleblower complaints are on the rise. According to the SEC Office of the Whistleblower’s (OWB) recently released annual report, during the 2013 fiscal year, OWB received more than 3,200 whistleblower complaints, tips, and referrals—up from 3,001 in 2012 and just 334 in 2011 (the year OWB was created). Similarly, in … Continue Reading

Revisiting SEC Consent Decrees in the Wake of SEC v. Citigroup

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 … Continue Reading

Will Rakoff’s “Legal Error” Change SEC’s View of Settlement Admissions?

On June 4, 2014, the Second Circuit Court of Appeals vacated Judge Rakoff’s November 28, 2011 Order that had rejected the Citigroup-SEC settlement on a number of grounds, including that the SEC had allowed Citigroup to avoid admitting guilt. The Appellate Court found that Judge Rakoff abused his discretion and committed “legal error” in requiring … Continue Reading

SEC Exams Director “Spreads Sunshine” Over Private Equity’s “Risks and Temptations”

Private equity firms may face tougher scrutiny in light of recent SEC examinations revealing violations of law or material weaknesses in controls governing fee collection and expense allocation procedures among more than half of the 150 private equity advisers examined since October 2012. Last week, Andrew Bowden, the director of the SEC’s Office of Compliance Inspections … Continue Reading
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