In 2010, in the wake of the financial crisis, Congress passed comprehensive financial regulation reform legislation known as the Dodd-Frank Act (Pub.L. 111-203). Section 922 of the Dodd-Frank Act established both a bounty award program as well as anti-retaliation protection for whistleblowers who report securities law violations.
Pursuant to the mandate of Section 922, the US Securities and Exchange Commission (“SEC”) established an Office of the Whistleblower, and implemented its final rules on the Dodd-Frank Program through a comprehensive rulemaking process that involved significant public input in May 2011. Continue reading →
In today’s world, data breaches are a regular occurrence. The size and scale varies, and they have different causes, but those matters are irrelevant if you are a data subject affected – you just want the situation resolved and compensation for any losses you suffer. Who should be responsible for those breaches? Where a company has not taken sufficient steps to safeguard personal data, the answer is obvious. But what about where a rogue employee leaks personal data with the deliberate intention of harming his employer? The English High Court has recently decided that even in that instance, the employer is liable to data subjects. Although there is no specific case on this point, we believe that a similar outcome would be reached in an action under US law. Continue reading →
On January 12, 2018, the Supreme Court granted a writ of certiorari in Raymond J. Lucia Cos., Inc. v. SEC, No. 17 130, a case raising a key constitutional issue relating to the manner in which the U.S. Securities and Exchange Commission’s (SEC or Commission) appoints its administrative law judges (ALJs). The Court will decide “[w]hether administrative law judges of the [SEC] are Officers of the United States within the meaning of the Appointments Clause.” The answer to this question matters because if SEC ALJs are “officers,” then they should have been appointed by the Commission itself instead of hired through traditional government channels—and the Commission only exercised its ALJ appointment authority in late-2017. Although the question is limited to SEC ALJs, any decision could also impact ALJs at other agencies government-wide.
At this point, both the petitioner and the Solicitor General (SG) actually agree that ALJs are officers. In its response to the cert petition raising this issue in Lucia, the SG, in an about-face, had abandoned the SEC’s long-held defense of the manner in which it appoints its ALJs. Up until now, in an attempt to fend off an asserted constitutional defect in their AJL’s method of appointment, the SEC has argued (with SG approval) that ALJs are “mere employees” of the SEC, and not “officers.” The day after the SG dropped this position—and with no warning in its briefing—the Commission took the step to appoint the current ALJs.Continue reading →
On December 20, 2017, President Trump issued a new Executive Order (EO) targeting corruption and human rights abuses around the world.
The EO implements last year’s Global Magnitsky Human Rights Accountability Act (the Global Magnitsky Act), which authorized the president to impose sanctions against human rights abusers and those who facilitate government corruption. The US Department of the Treasury’s Office of Foreign Assets Control (OFAC), which will administer the EO, also added 15 individuals and 37 entities to its Specially Designated Nationals and Blocked Persons List (SDN List). Continue reading →
Large-scale data breaches can give rise to a host of legal problems for the breached entity, ranging from consumer class action litigation to congressional inquiries and state attorneys general investigations. Increasingly, issuers are also facing the specter of federal securities fraud litigation.
The existence of securities fraud litigation following a cyber breach is, to some extent, not surprising. Lawyer-driven securities litigation often follows stock price declines, even declines that are ostensibly unrelated to any prior public disclosure by an issuer. Until recently, significant declines in stock price following disclosures of cyber breaches were rare. But that is changing. The recent securities fraud class actions brought against Yahoo! and Equifax demonstrate this point; in both of those cases, significant stock price declines followed the disclosure of the breach. Similar cases can be expected whenever stock price declines follow cyber breach disclosures. Continue reading →
The following post provides an overview of the key findings from our research on the enforcement outcomes of the Australian Securities and Investments Commission (ASIC) for the five-year period from 1 July 2011 to 30 June 2016. The full journal article can be accessed here.
ASIC is Australia’s corporate, markets, financial services and consumer credit regulator. This government organization regulates Australian companies, financial markets, financial services organisations and professionals who deal and advise in investments, superannuation, insurance, deposit taking and credit. ASIC dedicates a significant amount of resources (around 70%) to surveillance and enforcement activity, reflecting its view that enforcement is an important part of its regulatory role. Continue reading →
The following is the second post in a series of three on recent SEC enforcement. The full report can be accessed here. A note of caution to the readers: the SEC does not share enforcement data. All three posts are based on a database of SEC enforcement actions I have put together along with several research assistants, covering the period between 2007 and 2017. The data was collected by hand, and reviewed at least once. Entries were compared with SEC releases and reports, but the chance of error remains.
I. Enforcement Against Entities
The first post observed that enforcement against individual defendants remained largely unchanged in the second half of the 2017 fiscal year. Enforcement against entities, on the other hand, has changed quite substantially. Fewer entities were targeted in actions brought in the second half of FY 2017: 34% of defendants (165 of 488) in standalone actions in the second half were entities, compared with 47% (201 of 427) in the first half of the year. Continue reading →
What is the connection between what the SEC actually does and what it says it will do? In 2013, the SEC unveiled a new policy requiring some enforcement targets to admit wrongdoing when they settled with the agency. In An Empirical Study of Admissions in SEC Settlements, we analyze settlements from before and after the introduction of this policy to determine how the SEC’s practice lines up with its new approach to admissions. We find an uptick of admissions following the policy announcement, with the highest number in FY2016. Using an inclusive definition of admissions, we identify fewer than one hundred settlements containing admissions that were announced during the seven years of our study (FY2011-FY2017). Continue reading →
The U.S. government’s settlement with Hobby Lobby on July 5, 2017 is part of its broader effort to combat trafficking in looted antiquities from the war-torn Middle East and to reduce market demand for such objects by punishing participants in the black market. Having scored this high-profile settlement in an early test case, the U.S. government likely will try to build on this success with additional investigations and enforcement actions. Continue reading →
Should agencies require admissions of guilt from the targets of civil enforcement? The SEC’s policy of letting enforcement targets settle while neither admitting nor denying allegations provoked judicial rebukes and a public debate. But the SEC is only the tip of the iceberg. Administrative agencies rely heavily on settlement as a key enforcement tool. Admissions of guilt—or, more commonly, declarations that nothing is admitted—form part of these settlement agreements and the underlying negotiations.