SEC issues warning to analysts profiting from “short and distort” schemes, opens the door for civil claims

2019 ◽  
Vol 20 (2) ◽  
pp. 34-38
Author(s):  
Perrie Michael Weiner ◽  
Edward D. Totino ◽  
Aaron Goodman
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Market Manipulation ◽  
Securities Fraud ◽  
Content Type ◽  
Short Sellers ◽  
Legal Challenges ◽  
The Us ◽  
Recent Activity ◽  
Enforcement Activity

Purpose To analyze the evolution of market manipulation and fraud by short-sellers and online bloggers and mechanisms available for addressing and remediating the damage caused by such fraud, including recent activity by the US Securities and Exchange Commission (the “SEC” or “Commission”). Design/methodology/approach This article discusses the development of a modern market manipulation and fraud scheme – the “short and distort” – including a review of potential claims by the targeted companies and anticipated impediments to asserting such claims.It further examines the need for regulation and the possibility that the SEC has opened the door for civil claims for this type of fraud. Findings Companies wrongfully targeted by illegitimate short-sellers may pursue claims for securities violations, defamation, business interference, securities fraud and extortion, among other claims.However, each of these claims has had, and still has, both business and legal challenges, as the short-seller’s initial defense tends to be to attempt to prove the truth of their statements to the market or establish those statements as legitimate opinion.The SEC has made the pursuit easier but there is still a long way to go. Originality/value This article contains valuable information about recent SEC enforcement activity and practical guidance from experienced securities lawyers.

SEC charges “ICO Superstore” as unregistered broker-dealer

2019 ◽  
Vol 20 (1) ◽  
pp. 40-43
Author(s):  
John J. Sikora Jr. ◽  
Stephen P. Wink ◽  
Douglas K. Yatter ◽  
Naim Culhaci
Keyword(s):  
Financial Services ◽  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
The Us ◽  
Recent Developments ◽  
Practical Guidance ◽  
Securities Laws ◽  
Enforcement Activity

Purpose To analyze the settled order of the US Securities and Exchange Commission (SEC) against TokenLot LLC (TokenLot), which was the SEC’s first action charging a seller of digital tokens as an unregistered broker-dealer. Design/methodology/approach Analyzes the SEC’s order within the context of other recent actions by the SEC on cryptocurrencies and digital tokens and discusses future implications of the order in this area. Findings The SEC’s order against TokenLot as an unregistered broker-dealer was a logical next step in its enforcement activity in the cryptocurrency and digital token space.The order demonstrates that the SEC expects firms in the cryptocurrency space to use the well-established constructs of federal securities laws to evaluate their business activities to ensure those activities are legally compliant. Originality/value Practical guidance from experienced securities and financial services lawyers analyzing recent developments in a nascent area of SEC enforcement.

Bringing order to non-GAAP financial measures: SEC sues to enforce “equal-or-greater-prominence” requirement

2019 ◽  
Vol 20 (4) ◽  
pp. 51-57
Author(s):  
Richard J. Parrino
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
Financial Measures ◽  
Generally Accepted Accounting Principles ◽  
Enforcement Action ◽  
Accounting Principles ◽  
Depth Analysis ◽  
The Us ◽  
Earnings Releases

Purpose This article examines the first action by the US Securities and Exchange Commission to enforce the “equal-or-greater-prominence” requirement of its rules governing the presentation by SEC-reporting companies, in their SEC filings and earnings releases, of financial measures not prepared in accordance with generally accepted accounting principles (GAAP). Design/methodology/approach This article provides an in-depth analysis of the equal-or-greater-prominence rule and the SEC’s enforcement posture in the context of the SEC’s concern that some companies present non-GAAP financial measures in a manner that inappropriately gives the non-GAAP measures greater authority than the comparable GAAP financial measures. Findings Although the appropriate use of non-GAAP financial measures can enhance investor understanding of a company’s business and operating results, investors could be misled about the company’s GAAP results by disclosures that unduly highlight non-GAAP measures. The SEC’s enforcement action signals a focus on the manner in which companies present non-GAAP financial measures as well as on how they calculate the measures. Originality/value This article provides expert guidance on a major SEC disclosure requirement from an experienced securities lawyer.

Parties push to enforce statutory time limits on SEC enforcement actions

2015 ◽  
Vol 16 (3) ◽  
pp. 30-32
Author(s):  
Benjamin Neaderland ◽  
Jared Cohen
Keyword(s):  
Design Methodology ◽  
District Of Columbia ◽  
Securities And Exchange Commission ◽  
Courts Of Appeals ◽  
Content Type ◽  
Time Limits ◽  
Court Of Appeals ◽  
Securities Law ◽  
The Us ◽  
Practical Implications

Purpose – To alert companies and individuals subject to regulation and investigation by the US Securities and Exchange Commission (SEC) of potential arguments to enforce time limits on enforcement actions that have heretofore commonly been ignored. Design/methodology/approach – Analyzes two cases - one recently decided and one pending - in US Courts of Appeals, explains significance of issues at stake. Findings – The Courts of Appeals for District of Columbia Circuit has recently reviewed, and the Court of Appeals for the 11th Circuit will soon decide whether statutory timing provisions effectively remove SEC power to bring enforcement actions past their deadlines, at least in some circumstances. Practical implications – Depending on the outcomes of the cases, companies and individuals may gain a new procedural defense or two against SEC enforcement actions. They may also expect the SEC to respond by more actively seeking tolling agreements, and/or being more cautious in issuing Wells notices. Originality/value – Guidance based on pending decisions interpreting US securities law, may bring regulatory adjustments to agency practice and procedure.

A review of the SEC Participating Affiliate No-Action Letters’ relief from Investment Advisers Act of 1940 registration for foreign investment advisers

2017 ◽  
Vol 18 (4) ◽  
pp. 22-28 ◽  
Author(s):  
Wendy E. Cohen ◽  
David Y. Dickstein ◽  
Christian B. Hennion ◽  
Richard D. Marshall ◽  
Allison C. Yacker ◽  
...  
Keyword(s):  
Foreign Investment ◽  
Financial Services ◽  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
The Us ◽  
Information Update ◽  
Practical Guidance ◽  
Investment Advisers

Purpose To explain the US Securities and Exchange Commission (the “SEC”) staff’s (the “Staff”) participating affiliate exemption from investment adviser registration for foreign advisers set forth in a line of Staff no-action letters issued between 1992 and 2005 (the “Participating Affiliate Letters”) and to discuss recent guidance issued by the Staff in an information update published in March 2017 (the “Information Update”) with respect to complying with requirements of the Participating Affiliate Letters. Design/methodology/approach Reviews the development of the Staff’s approach regarding the non-registration of foreign advisers that rely on the Participating Affiliate Letters from prior to the issuance of those letters through the Information Update and sets forth recommendations for registered investment advisers and their participating affiliates. Findings While there are arguments that the Information Update goes beyond restating established standards and does not clearly explain whether submission of all listed documentation is required, the Information Update will likely standardize the information submitted to the SEC. Originality/value Practical guidance for advisers relying on the Participating Affiliate Letters from experienced securities and financial services lawyers.

SEC approves amendment to FINRA IPO allocation rule 5131, easing compliance for fund investors

2014 ◽  
Vol 15 (1) ◽  
pp. 52-57 ◽  
Author(s):  
Charles S. Gittleman ◽  
Russell D. Sacks ◽  
Jennifer D. Morton
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Allocation Rule ◽  
Content Type ◽  
The Us ◽  
Practical Guidance

Purpose – The purpose of the paper is to describe the recent amendments to FINRA's IPO Allocation Rule that were approved by the US Securities and Exchange Commission. Design/methodology/approach – The paper provides a description of the IPO Allocation Rule and its operation, followed by a description of the IPO Allocation Rule amendments recently amended. Findings – On November 27, 2013, the Securities and Exchange Commission approved a change to FINRA's IPO allocation rule 5131 (the “amendment”). The amendment allows a fund of funds or other collective investment account that is investing in an IPO to rely on a written representation from an unaffiliated private fund investor that does not look through to its beneficial owners, provided that such unaffiliated private fund is managed by an investment adviser, has assets greater than $50 million, and meets certain other indicia of independence that are described. Originality/value – The paper provides practical guidance from experienced regulatory lawyers regarding an amendment to an important rule governing IPO sales and allocation practices.

SEC’s disclosure effectiveness initiative reshapes MD&A disclosure requirements

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Richard J. Parrino
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Financial Information ◽  
Content Type ◽  
Market Participants ◽  
Financial Condition ◽  
Disclosure Requirements ◽  
Depth Analysis ◽  
The Us ◽  
Financial Disclosures

Purpose This article examines rule amendments issued by the US Securities and Exchange Commission in November 2020, as part of the SEC’s ongoing “disclosure effectiveness initiative”, that revise in significant respects the requirements for financial disclosures presented in SEC filings as Management’s Discussion and Analysis of Financial Condition and Results of Operations. Design/methodology/approach This article provides an in-depth analysis of the rule amendments in the context of contrasting perspectives expressed by the SEC, individual SEC Commissioners who dissented from adoption of the amendments, and market participants regarding the merits of the SEC’s movement away from prescriptive disclosure requirements towards a more principles-based approach to disclosure. Findings Although the SEC’s rules have long reflected a mix of principles-based and prescriptive disclosure elements, the principles-based emphasis in this latest stage of the SEC’s disclosure modernization project accords the managements of filing companies greater latitude to determine whether financial information is material to investors and how such information should be presented. Originality/value This article provides expert guidance on a major new SEC disclosure development from an experienced securities lawyer.

SEC charges private fund administrator with gatekeeping failures

2017 ◽  
Vol 18 (1) ◽  
pp. 65-67
Author(s):  
Keith Miller ◽  
Martin E. Lybecker ◽  
Jesse Kanach ◽  
Mary C. Moynihan ◽  
Hillary B. Levun
Keyword(s):  
Financial Services ◽  
Design Methodology ◽  
Service Providers ◽  
White Collar ◽  
Financial Service ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
Services Sector ◽  
Financial Services Sector ◽  
Enforcement Activity

Purpose To explain a set of recent US Securities and Exchange Commission (SEC) administrative settlements targeting fund administrators and to alert fund administrators and other financial service providers to their growing “gatekeeper” obligations. Design/methodology/approach This article explores the factual and legal contours of SEC administrative settlements with a fund administrator, as well as related enforcement actions against investment managers, to better understand the affirmative steps the SEC is expecting financial service providers to take to help root out fraud and misappropriation in the financial services sector. Findings The SEC’s administrative settlements with this fund administrator illustrate the SEC’s expanding focus on the “gatekeeper” function and signal the intent of the SEC to impute culpability for wrongdoing to fund administrators and other financial service providers simply for not doing enough to root out fraud and misappropriation in the financial services sector. Originality/value This article contains valuable information about recent SEC enforcement activity and practical guidance from experienced white collar, securities, and investment management lawyers.

Heightened supervision of branch offices

2015 ◽  
Vol 16 (2) ◽  
pp. 18-21
Author(s):  
Daniel A. Nathan ◽  
Lauren Navarro ◽  
Kevin Matta
Keyword(s):  
Regulatory Authority ◽  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Financial Industry ◽  
Content Type ◽  
National Examination ◽  
Policies And Procedures ◽  
The Us ◽  
Branch Office ◽  
Practical Implications

Purpose – To explain expectations of the US Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) as to what constitutes successful branch inspection programs for broker-dealers. Design/methodology/approach – Summarizes FINRA’s rules requiring firms to implement branch inspection programs; examines the SEC’s and FINRA’s joint 2011 National Examination Risk Alert, which expanded upon FINRA’s rules, requiring firms to conduct risk-based analyses on each branch office to determine the appropriate frequency, intensity, and focus of inspections; discusses FINRA’s expectation that firms examine their registered representatives’ financial circumstances to reduce the risk of fraud; explains how FINRA’s Comprehensive Automated Risk Data System may impact branch inspections; and recommends several sources that firms should review when implementing a successful branch inspection program. Findings – Regulators have heightened their expectations as to what constitutes successful branch inspection programs for broker-dealers. Practical implications – To avoid regulatory intervention and discipline, firms should continue to review their policies and procedures to ensure that their programs are sufficiently comprehensive. Originality/value – This article will encourage firms with branch offices to review their branch inspection programs, and assist those firms in implementing sufficiently comprehensive policies and procedures.

What is a Regulation SHO bona-fide market maker?

2017 ◽  
Vol 18 (2) ◽  
pp. 19-26 ◽  
Author(s):  
Larry E. Bergmann ◽  
James P. Dombach
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Market Maker ◽  
Market Making ◽  
Content Type ◽  
The Us ◽  
Bona Fide ◽  
Administrative Proceeding ◽  
Practical Guidance

Purpose To summarize and analyze guidance provided by the US Securities and Exchange Commission (“SEC”) on what constitutes “bona-fide market making” for purposes of Regulation SHO’s exception to the locate requirement. Design/methodology/approach Explains SEC guidance on this subject, focusing on statements by the SEC and its staff related to Regulation SHO and SEC enforcement matters, including a recent SEC administrative proceeding providing concrete examples of activity that does not constitute bona-fide market making. Findings While there is still a lot of room for additional SEC guidance on what constitutes bona-fide market making, the SEC has provided some details on the specific type of trading that would not fall within the Regulation SHO exceptions applying to bona-fide market making activities. However, there is still a large gap between the type of activity that most likely falls within the exception and the concrete examples analyzed by the SEC. Originality/value Practical guidance from experienced securities lawyers that consolidates SEC guidance on the bona-fide market making exception.

US Supreme Court clarifies liability standard under Section 11 of the Securities Act of 1933 for statements of opinion in registration statements

2015 ◽  
Vol 16 (3) ◽  
pp. 37-42
Author(s):  
Richard Parrino ◽  
Douglas Schwab ◽  
David Wertheimer
Keyword(s):  
Supreme Court ◽  
Financial Services ◽  
Design Methodology ◽  
Pension Fund ◽  
Securities And Exchange Commission ◽  
Federal Courts ◽  
Content Type ◽  
The Supreme Court ◽  
The Us ◽  
Us Supreme Court

Purpose – The purpose of this article is to examine the US Supreme Court’s much anticipated decision in Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund. In this 2015 case, the Supreme Court announced important principles for interpreting the application of the two bases for liability under Section 11 of the Securities Act of 1933 to statements of opinion expressed in registration statements filed with the Securities and Exchange Commission in connection with public securities offerings. Design/methodology/approach – The article examines the Supreme Court’s articulation of the standards federal courts must apply under Section 11 to determine if opinion statements were untrue statements of a material fact or misleading because they omitted material facts necessary to make the statements of opinion not misleading. The paper identifies a number of the complexities involved in the Supreme Court’s approach and emphasizes the nuanced assessment of the facts surrounding opinion statements courts will be required to undertake by Omnicare. Findings – The Omnicare decision has significant implications for the litigation of Section 11 claims challenging statements of opinion and for the preparation of registration statement disclosures. The Omnicare decision dramatically alters the standards for reviewing Section 11 claims premised on opinions long applied in a number of US federal appellate circuits. The decision is likely to result in more Section 11 claims based on supposedly misleading opinion statements, and potentially in a greater number of Section 11 claims that survive at least an initial motion to dismiss. Omnicare highlights the importance of including in registration statement disclosures meaningful cautionary statements identifying important facts that could cause actual outcomes to differ materially from views expressed in an opinion. Originality/value – Expert guidance from experienced financial services lawyers.

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