Securities Litigation Blog | Burr & Forman LLP

Who Needs Proof? Not The Notice of Removal.

Tue, 23 Dec 2014 09:00:01 -0500

In a previous blog, we explained that the Supreme Court was considering whether a defendant merely has to allege jurisdictional facts or provide evidence regarding the amount in controversy when removing a case. On December 15, 2014, the Supreme Court answered the question. In Dart Cherokee Basin Operating Co., LLC v. Owens, No. 13-719, 2014 WL 7010692 (U.S. Dec. 15, 2014), the Court held that, pursuant to 28 U.S.C. § 1446(a), a defendant's notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold. The notice need ...

A New Prosecutorial Frontier: SEC Seeks Bans on Municipal Officials

Mon, 22 Dec 2014 09:00:02 -0500

The Securities and Exchange Commission ("SEC") was recently granted a preliminary agreement by a federal judge to bar a municipal official from participating in future bond sales. As reported by the Wall Street Journal, the move marks a new enforcement method utilized by the SEC and was undertaken pursuant to the SEC's broad antifraud authority. While the SEC has received preliminary agreement in one case, other requests are still outstanding. The preliminary agreement awarded to the SEC involved a Harvey, Illinois city official who allegedly diverted municipal bonds for ...

Cybersecurity Continues as a Major Focus of Financial Industry's Concerns

Sat, 13 Dec 2014 09:00:03 -0500

With only three official days left of the current Congress, conversations Wednesday turned towards cybersecurity in the financial sector. The Commodity Futures Trading Commission, Office of the Comptroller of the Currency, and the Securities Exchange Commission all discussed planned or ongoing strategies to prepare for future cyber-attacks, highlighting such methods as compliance examinations of firms' cybersecurity measures. These organizations' efforts emphasize the substantial scrutiny on the effects that cyber-attacks can have on both financial institutions and ...

2nd Circuit Narrows Scope of Tippee Liability for Insider Trading

Thomas K. Potter, III — Fri, 12 Dec 2014 09:00:04 -0500

The US Second Circuit this Wednesday narrowed the scope of "tippee" liability for insider trading, rejecting the "doctrinal novelty" of recent government prosecution theories. In United State v. Newman, Nos. 13-1837-cr c/w 13-1917-cr (2nd Cir. Dec. 10, 2014), the Court reversed the insider-trading and conspiracy convictions of two portfolio managers. They were downstream tippees, who traded on information passed along from corporate insiders to securities analysts and, ultimately, Newman and Chaisson. The Court of Appeals reversed, because the jury instructions had ...

SEC Sanctions 8 Auditors in "Broken Gate" Enforcement Sweep

Thomas K. Potter, III — Wed, 10 Dec 2014 09:00:05 -0500

The SEC this week issued cease-and-desist orders against eight auditors, fining them $140,000 collectively, for violating auditor independence rules by preparing the very broker-dealer financials they were to audit. Broker-dealer auditors are bound by auditor-independence criteria established under Reg. S-X. By using BD-provided documents to prepare the client's financial statements, the sanctioned firms "essentially put themselves in the position of auditing their own work," said the SEC's release, here. The Release is another in a growing trend in which Enforcement ...

FINRA Proposes Arbitration and Exam Fee Increases, Declares Rebate

Tue, 09 Dec 2014 09:00:06 -0500

Following the final 2014 meeting of the Board of Governors last week, FINRA announced its proposal to increase fees associated with cancelling or postponing an arbitration hearing. In a December 4, 2014 email to firms, FINRA reported that the Board proposed to amend Rules 12601 and 13601 of the Code of Arbitration Procedure to extend the time required to give notice of an arbitration cancellation and increase cancellation fees. Under the proposed rule, if a party requests and receives a postponement or cancellation less than 10 days from a scheduling hearing, it would have to pay an ...

Is a Licensed Securities Dealer a "Professional" Under Alabama Law Prohibiting Enforcement of Nonsolicitation Agreements Against Professionals? (UPDATE)

Gerald P. Gillespy — Wed, 26 Nov 2014 09:00:07 -0500

The Alabama Court of Civil Appeals released a slip opinion on May 16, 2014 addressing enforcement of a nonsolicitation agreement against a licensed securities broker. See G.L.S. & Associates, Inc., and G.L. Smith & Associates, Inc. v. Keith Rogers, No. 2130322 (Ala. Civ. App. May 16, 2014) (Slip Opinion). The defendant (Rogers) worked for a securities firm (GLSA) and had an employment agreement that contained a nonsolicitation provision which prohibited Rogers from soliciting GLSA's clients for a period of two years after termination of employment. Rogers resigned from his ...

Court Sets Aside SEC's First Muni "Control-Person" Settlement

Thomas K. Potter, III — Mon, 24 Nov 2014 09:00:08 -0500

Earlier this month, the SEC used a "control-person" charge in a settled action against an elected municipal official in connection with municipal bond offering. Enforcement touted that "first" on the Monday after: "An enforcement model with no penalties was not sustainable," Enforcement Director Andrew Ceresney, said during a panel discussion. "The most effective deterrent is individual liability, so we need to be focused on that." (at SIFMA Monday, Nov. 10 as reported Bloomberg) But the SEC's releases, and press coverage of remarks in the days after, did not disclose ...

FINRA Solicitor Pay-to-Play Rules Complete IA & MSRB Suite

Thomas K. Potter, III — Thu, 20 Nov 2014 09:00:09 -0500

Last Friday, FINRA proposed pay-to-play prohibitions that parallel and implement similar Investment Adviser Act provisions in Rule 206(4)-5. That IA Rule prohibits investment advisers from paying third-parties to solicit government-entity advisory clients unless the solicitor is a "regulated person" subject to similar pay-to-play provisions. The SEC adopted the IA Rule in July 2010, but this particular requirement wasn't triggered until the Commission's adoption of the Municipal Advisor Rule, which became effective this past July 1. FINRA's proposed Rules are modeled ...

Scalia & Thomas Look to Take on SEC's Insider-Trading Theory

Thomas K. Potter, III — Thu, 13 Nov 2014 09:00:10 -0500

In an unusual three-page concurrence to a November 10 cert denial, Justice Scalia (joined by Justice Thomas) virtually called for a case that would subject the SEC's insider-trading interpretations to scrutiny. Because courts owe no deference to a prosecutor's interpretation of a criminal law, asked Scalia, then why should they owe Chevron deference to an executive agency's interpretation of a law [like '34 Act § 10(b)] that's enforced both criminally and administratively? Scalia also criticized deferring to the SEC's expansive insider-trading theory in the case as turning ...