Tag Archives: Annette L. Nazareth

How the SEC Enforcement Division Responds to a Crisis

by Martine M. Beamon, Robert A. Cohen, Joseph A. Hall, Gary Lynch, Neil H. MacBride, Stefani Johnson Myrick, Paul J. Nathanson, Annette L. Nazareth, Linda Chatman Thomsen, and Kenneth L. Wainstein

As markets react to the spread of the coronavirus (COVID-19), the SEC has expressed its intent to respond proactively to the impact the crisis has had on capital formation, secondary trading, and investors.  Risks can become heightened during a market downturn, and we expect that the Enforcement Division will concentrate resources on certain types of investigations, including potential:  (1) material misrepresentations and omissions about the impact of the coronavirus on public companies and investment products; (2) trading based on material nonpublic information about changes in the financial performance of public companies; (3) errors in the operation of trading platforms being stressed by high trading volume and volatility; (4) misuse of investor assets, and (5) frauds seeking to take advantage of investor anxiety.  In the coming weeks and months, public companies should be vigilant regarding their disclosure practices and management of material, nonpublic information, and industry professionals similarly should be cautious when describing the impact of the pandemic on their investment services and products. Continue reading →

SEC Office of Compliance Inspections and Examinations (OCIE) Issues Observations on Cybersecurity and Resiliency Practices

by Greg D. Andres, Robert A. Cohen, Neil H. MacBride, Annette L. Nazareth, Margaret E. Tahyar, Leor Landa, Michael S. Hong, Matthew J. Bacal, Daniel F. Forester, and Matthew A. Kelly

The SEC Office of Compliance Inspections and Examinations (OCIE) recently published observations (PDF: 854 KB) related to cybersecurity and operational resiliency practices observed in its examinations. OCIE reiterated its continued focus on cybersecurity issues, citing eight risk alerts related to cybersecurity it has published over the last few years.[1] OCIE conducts examinations for compliance with Regulation S-P and S-ID, which apply to broker-dealers and investment advisers, and Regulation SCI, which applies to exchanges and other SCI entities. The publication provides important guidance to regulated entities about the likely subjects of SEC exams, the expectations of its examiners, and the subjects of potential enforcement referrals. Continue reading →

SCOTUS Expands Scope of FOIA Trade Secrets and Commercial Information Exemption

by Michael S. Flynn, Randall D. Guynn, Michael Kaplan, Neil H. MacBride, Paul J. Nathanson, Annette L. Nazareth, Margaret E. Tahyar, and Eric B. Lewin

The Supreme Court has updated an important Freedom of Information Act (“FOIA”) exemption for the digital age.  In Food Marketing Institute v. Argus Leader Media (PDF: 125 KB), the Supreme Court last week significantly expanded the scope of FOIA Exemption 4.  FOIA Exemption 4 is the exemption most commonly claimed by private-sector entities when seeking to protect competitively sensitive information that must be disclosed to a federal agency.  It shields from disclosure “trade secrets and commercial or financial information obtained from a person and privileged or confidential.”[1]  Beginning with a D.C. Circuit decision in 1974, National Parks & Conservation Ass’n v. Morton, 498 F.2d 765 (D.C. Cir. 1974), courts have interpreted FOIA Exemption 4 narrowly.  For commercial or financial information to be “confidential,” a number of federal courts of appeals have required a showing of “substantial competitive harm” from disclosure.  Proving “substantial competitive harm” has proven difficult in practice, and, in this digital age, there is an increasing awareness that information and data are valuable.  The majority opinion in Food Marketing, written by Justice Gorsuch, squarely repudiated the “substantial competitive harm” test in favor of a less difficult standard, thereby broadening Exemption 4.

It is significant that the justices were unanimous in rejecting the “substantial competitive harm” test.  They disagreed about whether harm has any role to play in Exemption 4.  In an opinion concurring in part and dissenting in part, Justice Breyer explained that he “would clarify that a private harm need not be ‘substantial’ so long as it is genuine.”[2]  In contrast, the majority wouldn’t apply a harm test at all, arguing that such a test is not supported by the statute.  Instead, the majority explained its test as follows: Continue reading →