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A Compilation of Non-Enforcement Actions

Non-Enforcement - Amendments to the Venture Capital Fund Adviser and Private Fund Adviser Exemptions - Last month the SEC’s Division of Investment Management issued a guidance update (Update) addressing recent...more

TN COA Tosses Fraud & Securities Claims Over “Crazy” Scam

Tennessee fraudulent misrepresentation claims – and “investment contract” claims under the State’s Blue Sky Law – fail the “reasonable reliance” requirement, where the plaintiff himself asserts it’s a fraud because nobody...more

Employee Benefits Developments - April 2016

Stock Drop Case Update: Settlement Reached in Dudenhoeffer Case; Dismissal of Lehman Brothers Lawsuit Upheld. Two recent developments in stock drop litigation are worth noting: Dudenhoeffer Settlement. In Fifth Third...more

SEC Sanctions Audit Firm, Partner Tied to Custody Rule

Custody Rule cases are rapidly becoming a staple of SEC enforcement. Rule 206(4)-2 requires registered investment advisers with custody of client funds or securities to implement certain controls to protect those assets....more

This Week In Securities Litigation

The SEC requested comment on the development of a consolidated audit trail this week, a concept long discussed. The audit trail would enable regulators to track trading activity in the U.S. markets. Enforcement initiated...more

Underwriters May Have Expertise But That Does Not Make Them “Experts”

In the LBP Holdings v. Allied Nevada Gold Corp. decision released on April 27, 2016, the Ontario Superior Court of Justice refused to allow the underwriters of a secondary public offering (SPO) to be added as defendants to a...more

Corporate Trustees and Cash Managers: can historic miscalculations and underpayments be an Event of Default? The English High...

We now have the English High Court’s first judgment concerning the position of Class X Notes in a CMBS structure. The rights of the Class X Notes in the Windermere VII CMBS were considered by the Court in Hayfin Opal Luxco 3...more

SEC Complaint: How To Create A Manipulation Vehicle

Microcap fraud has long been a focus of SEC enforcement. Many of the cases start with a public shell followed by a reverse merger in which the promoters end up with large portions of the stock. The transaction culminated with...more

Class Certification: Halliburton II and Basic

The predicate for many securities class actions is the fraud-on-the-market theory, adopted by the Supreme Court in Basic, Inc. v. Levinson, 485 U.S. 224 (1988). There the Court held that a securities law plaintiff could...more

Is Your Corporation “Zeroing Out” Income at End of Year Through Bonuses? Watch Out!

For the last few years the IRS has warned taxpayers that it would look closely at year-end bonuses that resulted in “zeroing out” taxable income of a corporation by deducting the bonuses as salary rather than a payment of...more

District Court Holds Private Equity Funds Jointly Liable for Portfolio Company's ERISA Withdrawal Liability

The U.S. District Court for the District of Massachusetts ruled on March 28, 2016 that two private equity funds were jointly and severally liable for the multiemployer pension plan withdrawal liability of their jointly-owned...more

SEC Settles With Apple Stock Day Trader

Apple stock is well known and popular among investors. It is also attractive to fraudsters who focus on the high tech giant’s shares for schemes. One scheme, for example, brought down New York brokerage Rochdale Securities...more

District Court Applies Dudenhoeffer “More Harm Than Good” Standard to Closely-Held Corporation

A federal district court in Mississippi ruled for the first time that the “more harm than good” pleading standard established by the Supreme Court in Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459 (2014), applied to...more

X-tra X-tra read more about it! First English Court Ruling on Class X Notes in European CMBS

As outlined in our previous blog, X-tra, X-tra, Real All About It! published on Friday 8 April, Mr Justice Snowden handed down judgment of the High Court in the much anticipated Windermere VII Class X Notes dispute (Hayfin...more

This Week In Securities Litigation

The Commission prevailed at trial in a market manipulation case. The trial followed a series of settlements and a grant of summary judgment in the Commission’s favor as to one defendant. The remaining defendant, a former NFL...more

Hong Kong Market Misconduct: SFC Extends Enforcement Power to Insider Dealing in Overseas Listed Securities – Part 2

Section 300 of the Securities and Futures Ordinance (the “SFO”) prohibits the use of fraudulent or deceptive schemes or engagement in any practice which is fraudulent or deceptive “in a transaction involving securities,...more

The SEC’s Increasing Use of Data Analysis

The Commission has increasingly focused on data analysis as an aid to its enforcement program. Two recent cases brought against investment advisers for cherry picking illustrate different facets of the approach....more

Goldman Sachs Set to Pay $5.1 Billion in RMBS Settlement

On April 11, Goldman Sachs agreed to pay roughly $5.1 billion in a settlement with federal and state officials regarding the marketing and sale of RMBS during the years leading up to the financial crisis.  The settlement is...more

SEC Prevails At Trial Over Former Professional Athlete

Sometimes is does not pay to be the last man standing – particularly in a Commission enforcement action. Such was the fate of former NFL player and Olympic athlete Willie Gault. SEC v. Heart Tronics, Inc., Case No....more

DOJ Suit Against ValueAct Shines Spotlight on HSR Requirements for Shareholder Activists

Suit signals potential consequences for activist investors who rely on the HSR “solely for purposes of investment” exemption. On April 4, 2016, the U.S. Department of Justice (DOJ) sued certain ValueAct Capital entities...more

Criminal Action is Brought Against Municipal Officials for Fraudulent Bond Disclosure

In what is believed to be the first action of its kind, on April 14, 2016, the U.S. Department of Justice brought a criminal action against municipal officials based on disclosure claims in connection with municipal bond...more

Investing in Law Suits – Just Another Offering Fraud Says SEC

The lure of big profits from the settlement of large personal injury law suits was the hook used by a lawyer and his partner to attract investors to Prometheus Law. The thought of all those dollars — virtually riskless...more

Fifth Circuit: Diversity Jurisdiction Over FINRA Award Based on Demand

The Fifth Circuit Bar Association’s summary reports: “Appellants were investors who suffered financial losses as a result of R. Allen Stanford’s Ponzi scheme. In their arbitration complaint, they sought $80 million in...more

New York Supreme Court Dismisses ACE Action Re-Asserting Repurchase Claims against DB Structured Products

On March 29, 2016, Justice Marcy Friedman of the New York Supreme Court rejected the trustee’s attempt to renew previously dismissed claims in ACE Securities v. DB Structured Products, Inc. As we previously reported, the...more

This Week In Securities Litigation

Budget hearings were a focus this week as the Chair of the SEC and Chairman of the CFTC visited Capitol Hill. Both sought substantial increases, requesting more money for technology, inspections and enforcement. While the...more

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