Disgorgement

News & Analysis as of

S.D.N.Y. Judge Permits Novel Theory And Allows SEC To Use Unpaid Taxes As Measure Of Disgorgement In Securities Fraud Case

In a case against Dallas billionaires Sam Wyly and the estate of his late brother, Charles, Judge Shira Scheindlin of the U.S. District Court for the Southern District of New York agreed with the U.S. Securities and Exchange...more

SEC Continues Its “Strict Liability” Enforcement Campaigns, Focusing on Filing Failures and Rule 105 Violations

Nearly five years ago, the SEC launched an extensive "crackdown" on violations of Rule 105 of Regulation M, which prohibits short selling securities and then participating in secondary offerings of the same securities within...more

U.S. Bank v. Indian Harbor: Insurers Face Another Restitution/Disgorgement Setback

In a recent decision, the United States District Court for the District of Minnesota held that insurers could not use the so-called restitution/disgorgement defense to avoid covering amounts that their insured bank agreed to...more

Profits Do Not Always Equal Disgorgement

Judge Scheindlin of the Southern District of New York recently rejected the SEC’s attempt to seek disgorgement of almost $500,000,000 from Samuel Wyly and Donald R. Miller Jr., the Independent Executor of the Will and Estate...more

U.S. Bank v. Indian Harbor: Another Blow to the Restitution/Disgorgement Defense

In recent years, purchasers of D&O and professional liability insurance have been stunned to learn that their carriers have denied coverage for a wide range of claims on the theory that their policies do not cover loss that...more

Court Limits Scope of SEC Disgorgement In Case Involving Failure to Disclose Beneficial Interests

Just last week, Judge Scheindlin from the Southern District of New York precluded the SEC from seeking wide-ranging disgorgement in an order issued in the SEC v. Wyly, 10-cv-5760 (S.D.N.Y.) case....more

SEC Settlement: The FCPA Risks of Entering New Markets

Entering into new, international markets may be good for developing business, but it also carries certain risks. This is particularly true in many countries where doing business may include making gifts, paying gratuities and...more

Guns and More Guns: SEC Hits Smith & Wesson for FCPA Violations

One thing the SEC likes to do is bring cases with a lot of deterrent value. That is, cases that it hopes will scare other people and companies into complying with the law. Often that means cases with large price tags...more

California Court of Appeal Allows Taxpayer Lawsuit Against Contractors on Public Works Projects

Public works contractors: Beware of accusations of corruption. In Gilbane Building Company v. Superior Court, 223 Cal.App.4th 1527 (2014), an appellate court cleared the way for taxpayers to sue contractors for engaging in...more

Court of Appeal Ameliorates (a Bit) the "Harshness" of Business and Professions Code Section 7031

California courts have variously described Business and Professions Code section 7031 as “draconian,” “harsh[ ]“ and “[u]njust[ ],” but nonetheless enforceable. Section 7031 both prohibits unlicensed or improperly...more

SEC Makes First Finding of Retaliation in Violation of the Exchange Act’s Anti-Retaliation Rule

On June 16, 2014, the SEC entered an order (the “Order”) instituting cease and desist proceedings against an investment adviser, Paradigm Capital Management, Inc. (“Paradigm”), and Paradigm’s founder, Director, President,...more

Deference and Compromise Reigns over Establishment of Truth: Second Circuit Validates SEC Use of "Neither Admit Nor Deny"...

On June 4, 2014, the Second Circuit Court of Appeals vacated U.S. District Judge Jed Rakoff’s influential and controversial decision to reject a consent injunction between the SEC and Citigroup Global Markets Inc. (Citigroup)...more

SEC Brings Lawsuit Against Unregistered Broker Dealer

On May 15, the Securities and Exchange Commission filed a complaint against Behrooz Sarafraz in California federal court, alleging Sarafraz violated federal securities laws by acting as an unregistered broker dealer. ...more

Doctors Settle SEC Insider Trading Charges

The Commission filed two settled insider trading cases against medical practitioners who traded while in possession of material non-public information regarding clinical trials for a drug. SEC v. Lama, Case No. 5:14-cv-00996...more

Three Company Founders Settle SEC Insider Trading Case

Most insider trading cases center on news about a corporate event such as an acquisition or an earnings announcement that has not become public. In SEC v. Lawson, Civil Action No. 3:14-cv-02157 (N.D. Cal. Filed May 12, 2014)...more

Defendants Owed No Duty, But Still Liable

In Am. Master Lease Llc v. Idanta, 2014 Cal. App. LEXIS 402 (Cal. Ct. App. 2014), the Second District Court of Appeal resolved the following four questions...more

Three Blind Mice And The HP FCPA Settlement

The HP FCPA settlement was not your run-of-the-mill enforcement action. The blogosphere has been filled with different analyses and interpretations. Client alerts have been taking shots at coming up with original ideas and...more

Sixth Circuit Revisits Controversial ERISA Decision

The Sixth Circuit Court of Appeals voted to rehear an ERISA action that awarded an unprecedented remedy for the alleged denial of long term disability benefits. The order, granting en banc rehearing, vacates a controversial...more

Punishment Without Cause: Disgorgement And Forfeiture Of Salary And Pensions

It has become popular among prosecutors and regulators in recent years to claim that officials who engaged in wrongdoing on the job should be forced to surrender every dollar earned on that job....more

Would Texas Law Support Disgorgement of Payments When Plaintiff’s Daughter Makes Comments On Facebook?

In a case that received national attention, on February 26, 2014, a Florida District Court of Appeal held that a plaintiff’s comments to his daughter regarding a settlement with his former employer and his daughter’s...more

Contorting The Law Of Disgorgement In Contorinis: Disgorging Ill-Gotten Gains That Were Never Gotten

For all the complexities inherent to securities enforcement litigation, the law of available remedies has been comparatively simple. There are monetary penalties, there are officer-and-director (or other) bars, and there is...more

SEC May Have a New Weapon to Combat Insider Trading

The Second Circuit may have granted the Securities and Exchange Commission (SEC) a new weapon against insider trading. In SEC v. Contorinis, the court endorsed an expansive theory of disgorgement, allowing the SEC to require...more

Second Circuit Upholds SEC’s Authority to Obtain Disgorgement from Non-Trading Insider Profits Earned by Portfolio Fund from...

In SEC v. Contorinis, 2014 U.S. App. LEXIS 2927 (2d Cir. Feb. 18, 2014), the United States Court of Appeals for the Second Circuit upheld the authority of the Securities and Exchange Commission (“SEC”) to obtain...more

SEC Continues Crack Down on Short Sale Rule Violations: Settles $7.3 Million Case Against Worldwide Capital

In the largest Rule 105 (Short Sale Rule) enforcement case to date, the SEC reached a $7.3 million settlement against Worldwide Capital and its principal last Wednesday, March 5. The SEC's message has been consistent since...more

SEC Enforcement of Rule 105: The Hits Just Keep on Comin’

Last week, in In the Matter of Worldwide Capital, Inc. and Jeffrey W. Lynn, AP File No. 3-15772 (Mar. 5, 2014), the SEC announced the latest—and largest ever—settlement of an administrative enforcement action concerning...more

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