Tag Archives: Alex Janghorbani

Headwinds and Shifting Priorities: Beyond the Numbers in the SEC Enforcement Division’s 2019 Annual Report

by Robin M. Bergen, Matthew C. Solomon, Alex Janghorbani, Jenny Paul and Samuel H. Chang

On November 6, 2019, the SEC’s Division of Enforcement released its annual report (the “Report”) describing its enforcement actions from fiscal year 2019.[1] Like prior reports, the Report quantifies the Division’s activities in a number of ways and discusses priority areas going forward. The Report also brings front-and-center certain challenges the Division has faced—including difficulties navigating recent Supreme Court decisions that call into question the constitutionality of the SEC’s administrative proceedings and the agency’s ability to obtain disgorgement, as well as the impact of the government shut-down and general resource constraints.

Notwithstanding these challenges, the Report somewhat surprisingly cites a 7% increase from last year in so-called “standalone” enforcement actions[2]—the true metric of the Division’s enforcement footprint because they exclude actions such as issuer delistings that entail little to no investigation. Although the Division brought cases in some areas where it had not been active for some time (including the first standalone Regulation FD case since 2013) and several of the settlements highlighted in the Report plainly resulted from substantial investigations, it is difficult to draw definitive conclusions regarding regulatory intensity from numbers alone in light of the Division’s ongoing initiatives and shifting enforcement priorities. To take one example, actions against investment advisers and investment companies in FY 2019 nearly doubled from the year before, but this increase was largely attributable to 95 settlements that resulted from self-reports in the SEC’s Share Class Selection Disclosure initiative. Continue reading →

Second Circuit Denies Gupta Appeal of Insider Trading Conviction—Continuing to Give Broad Meaning to “Personal Benefit” Requirement

by Joon H. Kim, Rahul Mukhi, Alex Janghorbani, Shannon Daugherty, and Destiny D. Dike

On January 11, the Second Circuit Court of Appeals denied the appeal of Rajat Gupta, who was seeking to undo his insider trading conviction.  Relying on the Second Circuit’s decision in United States v. Newman, Gupta argued that—to satisfy the requirement that Gupta personally benefit from tipping inside information—the Government must show “a quid pro quo – in which [Gupta] receive[d] an ‘objective, consequential . . . gain of a pecuniary or similarly valuable nature.’”[1]  In other words—intangible benefits should not, standing alone, constitute a personal benefit sufficient to uphold a criminal conviction.  The Second Circuit rejected this argument, finding that the Supreme Court’s decisions in Dirks v. SEC and Salman v. United States foreclosed such a narrow definition of “benefit,” opting instead for a test that looked at “varying sets of circumstances”—including those that involve indirect, intangible, and nonquantifiable gains, such as an anticipated quid quo pro that can be inferred from an ongoing, business relationship—to satisfy the “personal benefit” test.[2]  This case is the latest in a line of decisions—in the Supreme Court, as well as the Second and Ninth Circuits—to reject defendants’ arguments for a narrow definition of the “personal benefit” element of insider trading law based on Newman. Continue reading →