Securities Litigation and Regulatory Enforcement

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Toby M. Galloway

Latest from Securities Litigation and Regulatory Enforcement

Securities Litigation and Regulatory Enforcement

Fifth Circuit Overturns Receiver’s Settlement Barring Third-Party Claims Against Stanford Financial Insurers

By Toby M. Galloway & Matthias Kleinsasser

June 25, 2019

The Fifth Circuit overturned a U.S. District Court’s approval of a settlement between Ralph Janvey, the Receiver for Stanford International Bank, and various insurance company Underwriters, under which the Underwriters had agreed to pay $65 million to the Stanford Receivership estate. Writing for the Court, Judge Edith H. Jones held that the District Court abused its discretion in approving the settlement because the injunction issued by the District Court (referred to as a “bar order”)…

Securities Litigation and Regulatory Enforcement

An RIA’S Communications with Attorney Consultants Associated with its Outside Compliance Firm are Always Privileged, RIGHT? Well, That Depends . . .

By John Kincade

June 21, 2019

An opinion this week from the Southern District of New York, SEC v. Alderson[1] [click here], held that an RIA’s communications with lawyers associated with its third-party compliance consultant were not protected by the attorney-client privilege or the attorney work-product doctrine. As a result, the district court compelled disclosure of over 230 communications passing between the RIA’s in-house counsel and its third-party compliance firm (staffed with licensed attorneys) before and during the course of…

Securities Litigation and Regulatory Enforcement

Audit Firm to Pay $50 Million Penalty for Using Information Pilfered From PCAOB

By Toby M. Galloway & Matthias Kleinsasser

June 18, 2019

Magnifying Glass On Financial Report — Close-up Of Magnifying Glass On Monthly Financial Report

KPMG must pay $50 million after the Securities and Exchange Commission charged the accounting giant with cheating on training exams and using purloined information concerning audit inspections to be conducted by the Public Company Accounting Oversight Board (PCAOB). KPMG agreed to the $50 million penalty and also accepted a public censure as part of the settlement. The findings in the SEC’s cease-and-desist order—which KPMG has admitted—are that now-former members of KPMG’s Audit Quality and Professional…

Securities Litigation and Regulatory Enforcement

Freight Company Charged with Truckload of Accounting Fraud

By Toby M. Galloway

April 26, 2019

Celadon Group Inc. announced a settlement with the SEC and the DOJ over allegations of accounting fraud.[1] The company agreed to pay restitution of over $42 million in connection with a Deferred Prosecution Agreement with the DOJ, and to pay disgorgement of roughly $7.5 million in a parallel SEC settlement. The disgorgement obligation is deemed satisfied by payment of the $42 million restitution amount. The SEC and DOJ alleged that a Celadon subsidiary…

Securities Litigation and Regulatory Enforcement

Janus Meets Its Maker: The Supreme Court Expands Primary Liability in Lorenzo v. SEC

By Toby M. Galloway

April 8, 2019

Securities litigation frequently raises the question of what conduct constitutes a primary violation of the federal securities laws, specifically, Rule 10b-5 and the various other antifraud provisions. Must one make a false statement in order to be primarily liable?[1] The Supreme Court held in Janus Capital Group, Inc. v. First Derivative Traders that only those who “make any untrue statement of material fact” may violate Rule 10b5-(b).[2] Other questions include whether one who merely disseminates…

Securities Litigation and Regulatory Enforcement

You WILL (not May) Face the Heat

By Ronak V. Patel

March 18, 2019

The Securities and Exchange Commission (SEC) recently announced other notable examples of the scrutiny being applied to investment advisers’ disclosures of conflicts of interest. The criticism is notably sharp on issues involving fees and costs associated with advisory services. Of course, there are the well-publicized actions involving the disclosure of 12b-1 fees pursuant to the share class initiative. On March 11, 2019, the SEC announced that 79 investment advisory firms had agreed to return over…

Securities Litigation and Regulatory Enforcement

What You Should Know About FINRA’s Exam Priorities for 2019

By John Kincade, Jamie Lacy & Ronak V. Patel

February 26, 2019

The Financial Industry Regulatory Authority (“FINRA”) recently published its Risk Monitoring and Examination Priorities Letter (the “Letter”) for 2019 and signaled its intent to expand the scope of its priorities and exam program. Unlike previous years, FINRA’s 2019 Letter took a “somewhat new approach” by identifying materially new areas of emphasis.[1] Admittedly, FINRA will continue to examine longstanding priorities detailed in prior letters,[2] but in adding “Risk Monitoring” to the title to the…

Securities Litigation and Regulatory Enforcement

Update: The EB-5 Program Has Been Renewed . . . For Now

By Jamie Lacy

February 22, 2019

As a follow-up to our last post on the status of the EB-5 Program, the EB-5 Program has been renewed, at least for the short-term. After the government shutdown ended, and on the evening of Valentine’s Day, Congress pushed the spending bill through to renew the EB-5 Program until September 30, 2019.[1] Because the EB-5 Program does not have permanent legislation authorization, it will continue so long as Congress periodically renews the program. However,…

Securities Litigation and Regulatory Enforcement

529 Problems, but FINRA Ain’t One

By Ronak V. Patel & Toby M. Galloway

February 18, 2019

New York City, USA - October 30, 2017: Sign on the building of Financial Industry Regulatory Authority, or Finra, in Manhattan NYC lower financial district downtown, businessman man walking

The Financial Regulatory Authority (FINRA) recently announced an initiative it presents as an effort to promote member firms’ compliance with rules applicable to the recommendation of 529 plans. FINRA’s initiative is designed, first and foremost, to encourage firms to engage in a self-assessment specific to their 529 plan sales as well as the supervision of such sales. But, as with similar regulatory initiatives, this program only affords firms a degree of protection as to any…

Securities Litigation and Regulatory Enforcement

Attorney Responsible for Insider-Trading Compliance Faces Charges of…Insider Trading

By Toby M. Galloway & Ronak V. Patel

February 18, 2019

Businessmen Eavesdropping on a Business Conversation

The SEC recently announced insider-trading charges against the former senior lawyer at Apple specifically tasked with ensuring insider-trading compliance at the company.[1] The Department of Justice also addressed this case of “the fox guarding the hen house” by filing criminal charges against the former Apple attorney. The defendant, Gene Daniel Levoff, denies all charges and vows to defend himself. The SEC alleges that Levoff received material non-public information about Apple’s quarterly earnings announcements…

Securities Litigation and Regulatory Enforcement

Resources for Broker Dealers, Investment Advisers, General Counsels, and Directors and Officers

Blog Authors

Fifth Circuit Overturns Receiver’s Settlement Barring Third-Party Claims Against Stanford Financial Insurers

An RIA’S Communications with Attorney Consultants Associated with its Outside Compliance Firm are Always Privileged, RIGHT? Well, That Depends . . .

Audit Firm to Pay $50 Million Penalty for Using Information Pilfered From PCAOB

Freight Company Charged with Truckload of Accounting Fraud

Janus Meets Its Maker: The Supreme Court Expands Primary Liability in Lorenzo v. SEC

You WILL (not May) Face the Heat

What You Should Know About FINRA’s Exam Priorities for 2019

Update: The EB-5 Program Has Been Renewed . . . For Now

529 Problems, but FINRA Ain’t One

Attorney Responsible for Insider-Trading Compliance Faces Charges of…Insider Trading

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