SEC News and Public Statement

Appeal by ‘Diva of Distressed’ spotlights SEC in-house court

Publisher: Reuters
Author: Nate Raymond

The U.S. Securities and Exchange Commission’s controversial use of in-house judges to enforce federal securities laws is about to undergo a major test.

The 2nd U.S. Circuit Court of Appeals in New York on Wednesday will hear arguments over whether to revive a lawsuit by Lynn Tilton, a private equity chief dubbed the “Diva of Distressed,” to block the SEC from pursuing fraud charges in an in-house administrative proceeding instead of federal court.

Critics say the proceedings are unfair because there are no juries, and defense lawyers have a limited ability to depose witnesses and gather evidence. Some, including Tilton, also say the appointment of administrative judges, who are on the SEC payroll, is unconstitutional.

The SEC charged Tilton, 56, and her Patriarch Partners firm in March with hiding the poor performance of assets underlying three collateralized loan obligation funds that raised over $2.5 billion.

Tilton and Patriarch deny wrongdoing, and have said their investment strategy was consistently disclosed. Should the in-house court not intervene, Tilton faces trial on Oct. 13.

The decision by the 2nd Circuit could prove a major factor in the SEC’s ability to continue pursuing enforcement actions administratively, invoking the 2010 Dodd-Frank law granting it the authority to bring more cases before its in-house court.

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By : Securex /September 15, 2015 /SEC News and Public Statement /0 Comment Read More

Aguilar says SEC waiver process, especially denials, should be more transparent

Publisher: MarketWatch
Author: Francine McKenna

Luis Aguilar, a Democrat commissioner on the Securities and Exchange Commission whose term expired in June but whose successor has not yet been appointed, said in a statement on Thursday that the agency needs to enhance transparency and clarity for the waiver process.

Waiver requests are typically made when individuals or organizations are subject to SEC oversight and risk automatic disqualification from continuing some business activities after a penalty of some sort. Aguilar revealed that although he and his fellow Commission members vote on some waiver requests—and those votes have been contentious with Aguilar and Kara Stein often denying the requests— the vast majority of requests are handled by the staff who deny them without ever notifying the commissioners.

Aguilar said he learned through a news article that, in the past two years, most SEC waiver requests are not granted. He was surprised to learn that the number of times the Commission has not granted the “well-known seasoned issuer” waiver or a Regulation D Rule 506 (“Bad Actor”) waiver “has not been recorded consistently. ”In a March 12, 2015 speech, Chairwoman Mary Jo White said she had directed the staff to keep better track of waivers, including those that have not been granted. Aguilar recommends revising the waiver review process “so that both the Commission and the public have greater insight into the entire process”, particularly for waivers that are denied by the staff. His suggestions include the creation of a public website to track the progress and ultimate resolution of all waiver requests and inquiries.

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By : Securex /September 01, 2015 /SEC News and Public Statement /0 Comment Read More

U.S. appeals court backs SEC in-house enforcement cases

Publisher: Reuters
Author: Jonathan Stempel

A federal appeals court on Monday handed the U.S. Securities and Exchange Commission a victory in its use of in-house enforcement proceedings, rejecting a challenge by a former chief executive of Assisted Living Concepts Inc.

The 7th U.S. Circuit Court of Appeals in Chicago agreed with U.S. District Judge Rudolph Randa in Milwaukee that it lacked jurisdiction to hear former CEO Laurie Bebo’s constitutional challenge to the SEC administrative case against her until the regulator’s proceedings have concluded.

Circuit Judge David Hamilton said it was “fairly discernible” that Congress intended defendants like Bebo to “proceed exclusively through the statutory review scheme” rather than have federal courts hear their cases from the outset. Kate Maternowski, a lawyer for Bebo, said her client will continue pursuing her constitutional claims. SEC spokesman John Nester declined to comment. Monday’s decision is at odds with rulings by federal judges Richard Berman in Manhattan and Leigh Martin May in Atlanta.

They have halted SEC administrative cases on the grounds that the appointment of judges who handle them is likely unconstitutional.

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By : Securex /August 25, 2015 /SEC News and Public Statement /0 Comment Read More

SEC is dealt fresh blow as NY judge halts enforcement case

Publisher: Reuters
Author: Jonathan Stempel

A federal judge in Manhattan has handed the U.S. Securities and Exchange Commission a big defeat over its use of in-house judges, halting its enforcement case against a former Standard & Poor’s executive because the way SEC judges who handle such cases are appointed is likely unconstitutional.

U.S. District Judge Richard Berman issued a preliminary injunction on Wednesday stopping the regulator’s civil administrative proceeding against Barbara Duka, the former S&P executive, over her role in an alleged fraud involving mortgage debt ratings.

Berman is at least the second federal judge to halt in-house SEC cases because of concern that the regulator’s practice of letting staff rather than commissioners appoint its five administrative law judges may be unconstitutional.

His decision is significant because many SEC cases arise from activities in the financial services industry in Manhattan, and sets a precedent for judges in his court.

Other defendants suing to stop similar cases include financier Lynn Tilton, whose lawsuit is overseen by Berman’s fellow Manhattan judge, Ronnie Abrams.

Berman’s decision is “gratifying,” Duka’s lawyer Guy Petrillo said. “Regardless of the courtroom in which we ultimately land, we look forward to vindicating our client, who did nothing wrong.”

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By : Securex /August 12, 2015 /SEC News and Public Statement /0 Comment Read More

U.S. Asks Supreme Court to Review Insider Trading Ruling

Publisher: NY Times
Author: Alexandra Stevenson

The Justice Department asked the Supreme Court on Thursday to review a court ruling that sharply narrowed the definition of insider trading.

Donald B. Verrilli Jr., the solicitor general, filed a petition with the Supreme Court to examine the ruling by a three-judge panel in a federal appellate court in December that overturned the convictions of two hedge fund managers, Anthony Chiasson and Todd Newman, and threatened to undermine a number of other convictions.

The ruling was a major setback for Preet Bharara, the United States attorney in Manhattan, who secured more than 80 convictions in a widespread, multiyear crackdown on insider trading on Wall Street. It threatens to reverse many of the convictions and pleas secured by Mr. Bharara’s office.

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By : Securex /July 31, 2015 /SEC News and Public Statement /0 Comment Read More

Head of market abuse unit, U.S. SEC’s Hawke, to depart agency

Publisher: Reuters
Author: Sarah Lynch

Daniel Hawke, a 16-year veteran at the Securities and Exchange Commission who helped lead major high-profile enforcement cases against stock exchanges and brokerages, is planning to leave the agency in August, the SEC announced on Wednesday.

Hawke, who heads the SEC enforcement division’s market abuse unit, is a well-known figure among defense attorneys and on Wall Street, where for the last few years he has presided over a crackdown on violations of equity market structure rules and pursued new methods for detecting insider trading.

The SEC did not say where Hawke, 52, is headed, but a person familiar with the matter told Reuters he will be working in Washington, D.C., for the Arnold & Porter law firm.

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By : Securex /July 31, 2015 /Compliance, SEC News and Public Statement /0 Comment Read More

Democrats corporate and progressive wings dicker over SEC opening

Publisher: Marketwatch
Author: Francine McKenna

An internecine battle between the so-called corporate and progressive wings of the Democratic Party has broken out over who will replace outgoing Securities and Exchange Commissioner Luis Aguilar, whose term expired in June.

Groups aligned with Sen. Elizabeth Warren have pushed back against the idea of nominating Keir Gumbs, a former SEC attorney and current partner at Covington & Burling.

While Warren was criticized earlier this month on the Wall Street Journal’s editorial page for political hostage taking, Brad Miller, a former Democratic member of the House who worked on the 2010 Dodd-Frank Act and is now with the law firm Grais & Ellsworth LLP, said Warren’s actions are part of the job. “Sen. Warren, who is a member of the Senate Banking Committee that would vote on the SEC appointment, has a constitutional right and obligation as a senator under Article II, Section 2, of the Constitution to provide advice and consent on the appointment of public officials by the president,” Miller said.

But it’s not just Warren — a favorite villain of Republicans and bankers, and at times the Obama administration — pushing the White House to look at alternatives to Gumbs. A broad coalition of Democrats and bipartisan reform organizations have acted individually and in concert to send a message to the president that the process of Wall Street veterans and their lawyers at the SEC supporting the appointment of more of their own must end.

Sen. Tammy Baldwin, a Democrat from Wisconsin, wrote the president about the open spot, asking him to consider professionals with a variety of backgrounds: “We need experts but we also need people with a passion for public service and a willingness to advocate for those who have been harmed by the financial services industry.”

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By : Securex /July 28, 2015 /SEC News and Public Statement /0 Comment Read More

SEC probes marketing of private tech shares

Publisher: Marketwatch
Authors: Susan Pulliam & Telis Demos

Securities regulators have launched a broad investigation into whether hedge funds and other investors are improperly selling hot private technology stocks amid a boom in the trading of such shares, people close to the probe say.

The regulatory scrutiny, which is at an early stage, follows a March page-one article in The Wall Street Journal that delved into the role of middlemen in the burgeoning market for private shares.

The investigation, by the Securities and Exchange Commission, is focused on a burst of new activity recently by people selling pre-IPO shares as valuations of private tech companies have exploded and companies have opted to remain private for longer.

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By : Securex /July 08, 2015 /SEC News and Public Statement /0 Comment Read More

US SEC Chair says agency will propose “universal proxy ballot” rules

Publisher: Reuters
Author:  Sarah Lynch

The U.S. Securities and Exchange Commission is working to propose new rules to simplify the voting process for contested corporate board elections by permitting the use of so-called universal proxy ballots, SEC Chair Mary Jo White said on Thursday.

In remarks prepared for a speech in Chicago, White said she has directed staff to draft recommendations for new rules amid concerns that shareholders do not have a “sufficient range of choice” when voting in contested company elections.

Currently, only shareholders who physically attend annual meetings are allowed to split their ticket in contested elections and vote for a mix of candidates nominated by company management and by large shareholders.

If they vote by proxy, they can generally only support one slate – management’s or the one nominated by shareholders.

Shareholder advocates, as well as SEC Democratic Commissioner Kara Stein, have previously raised concerns about how this approach could limit shareholders and have called for rules to permit universal ballots so shareholders have more free choice.

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By : Securex /June 29, 2015 /Compliance, SEC News and Public Statement /0 Comment Read More

Candidate for SEC commissioner helps companies avoid disclosure

Publisher: Marketwatch

The Securities and Exchange Commission must find replacements for two commissioners soon, but one candidate frequently mentioned in the media, Keir Gumbs from law firm Covington & Burling, advises publicly traded corporations on how to avoid political spending disclosures, according to The Intercept.

Since at least 2013 Gumbs and partner Robert Kellner have organized “one-hour primers” for corporate executives responding to shareholder demands for more disclosure, the article says. Gumbs and Kellner just published a comprehensive how-to guide for companies.

The article says Kellner went on CNBC to attack Senator Elizabeth Warren for her comments in a letter to SEC Chairwoman Mary Jo White that asked why campaign finance disclosure has been missing from the SEC agenda. Kellner called Warren’s criticism of the SEC’s inaction on corporate political disclosure “misplaced because corporate political disclosure has utterly nothing to do with the SEC.”

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By : Securex /June 18, 2015 /SEC News and Public Statement /0 Comment Read More