June 2011: White Collar Litigation Update


SEC Exercises Expanded Power to Bring Administrative Enforcement Proceedings: The passage of the Dodd-Frank Act in July 2010 broadened the SEC’s power to bring administrative proceedings rather than civil actions in federal court for violations of securities laws. The SEC has now begun exercising that expanded power. Before Dodd-Frank, the SEC could bring administrative cases only against individuals and entities whom the SEC directly regulates, such as broker-dealers, brokerage firm executives, investment banks, mutual funds, and brokerage firms themselves. If the SEC wanted to challenge the conduct of public companies or officers or directors who did not fit within the above groups, it had to bring civil actions in federal court. Further, the SEC could not seek monetary remedies beyond disgorgement of illegal profits in administrative proceedings.

The Dodd-Frank Act expanded the SEC’s powers on several fronts. The SEC can now bring administrative proceedings against any public company and its officers or directors for violations of federal securities laws. Dodd-Frank also authorized the SEC to obtain substantial monetary penalties in addition to disgorgement in administrative proceedings. Further, Dodd-Frank expands the “collateral bar” remedy so that an individual may be barred not just from working in his specific job role again, but also from associating with any entity the SEC regulates. These expanded administrative powers are significant to SEC targets because, as described below, administrative proceedings give the SEC distinct procedural advantages not available to it in federal court proceedings. For example...

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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