Tag Archives: Stephen M. Cutler

DOJ Reverses Course on Definition of “Property” for Fraud on Blaszczak Remand, Leaving Statutory Action the Only Likely Hope for Insider Trading Reform—For Now

by Brooke Cucinella, Stephen M. Cutler, Sarah L. Eichenberger, Nicholas S. Goldin, Joshua A. Levine, Michael J. Osnato, Jr., and Jonathan S. Kaplan

On January 11, 2021, based on the consent—and indeed, at the request of the Department of Justice (“DOJ”)—the Supreme Court vacated and remanded the Second Circuit’s decision in United States v. Blaszczak. Blaszczak was the controversial 2-1 decision that arguably heightened (some say unfairly) the risk of criminal insider trading prosecution by upholding the multi-count convictions of the defendants for, at bottom, illegally trading while in possession of information stolen from the government. The Supreme Court agreed, remanding to the Second Circuit to reconsider its decision in light of the Court’s intervening decision in Kelly v. United States. Kelly overturned the convictions that had stemmed from New Jersey’s infamous BridgeGate scandal by finding that, in that case, the government information at issue was not “property” as would have been required to sustain a conviction under the wire fraud theory, and that while “allocating lanes” on the bridge required “the time and labor of Port Authority employees,” those expenditures were “incidental” to “run-of-the-mine exercise of regulatory power,” rather than a misappropriation of government property.[1]

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SEC Wells Submissions: A New Caution Required?

by Stephen M. Cutler, Michael J. Osnato, Jr., and Kelsey E. Vickery

On November 4, 2019, the Securities and Exchange Commission brought an enforcement action that has possible implications for the Wells process. The complaint filed by the Commission in SEC v. Bolton Securities Corp.[1] raises the question whether parties must consider reining in their advocacy in Wells submissions—lest such advocacy be taken as proof that potential respondents are unwilling to acknowledge wrongdoing or, in common enforcement parlance, that they “don’t get it.” We hope that the Commission’s approach in this action is an aberration rather than a new normal—one that, in our view, would undermine one of the hallmarks of due process in the Commission’s enforcement program.

The underlying case involves Massachusetts-based registered investment adviser, Bolton Securities Corp., doing business as Bolton Global Asset Management (“Bolton”). While the case itself is consistent with a long line of conflict-of-interest enforcement actions against investment advisers,[2] what is notable is the complaint’s discussion about Bolton’s Wells submission. In short, the Commission criticizes Bolton for “fail[ing],” in its advocacy, “to acknowledge the wrongfulness of its conduct” and “offer[ing] no assurances that it would amend its written policies and procedures so as to be reasonably designed to prevent future . . . violations.”[3] Continue reading →