Securites Law

U.S. court rejects Republican challenge to SEC pay-to-play rule

Publisher: Reuters
Author: Sarah Lynch

A U.S. appeals court handed the Securities and Exchange Commission a victory on Tuesday by dismissing a challenge from two state Republican parties to the SEC pay-to-play rule for investment advisers.

Republicans in New York and Tennessee said the rule, which places some restrictions on asset managers who donate to political campaigns, was a violation of free speech rights. The U.S. Court of Appeals for the District of Columbia Circuit, however, said the Republicans missed a key 60-day deadline to challenge the rule after it went into effect and had lost their chance to try and have it overturned. Reuters could not immediately reach attorneys for the plaintiffs. An SEC spokesperson did not immediately respond to a request for comment on the ruling. The SEC’s pay-to-play rule aims to combat a potential quid pro quo between investment advisers and elected officials in a position to help them win business.

It prohibits advisers from receiving compensation for helping to manage public assets, such as pension plans, for two years after making a campaign contribution to public officials or candidates in a position to award contracts.

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By : Securex /August 26, 2015 /Securites Law /0 Comment Read More

U.S. charges nine in hacking, insider trading scheme

Publisher: Reuters
Author: Noeleen Walder

U.S. prosecutors have charged nine people over their alleged roles in a insider trading scheme to obtain corporate press releases before they were made public, which they said generated more than $30 million of illegal trading profit.

Prosecutors in Brooklyn, New York made public an insider trading indictment charging four traders: Vitaly Korchevsky, a former hedge fund manager from Glen Mills, Pennsylvania; Vladislav Khalupsky, of Brooklyn and Odessa, Ukraine and Leonid Momotok, of and Alexander Garkusha of Georgia.

An separate indictment made public in New Jersey charges Ivan Turchynov and Oleksandr Ieremenko, two alleged computer hackers who live in Ukraine; Pavel Dubovoy, a trader from Ukraine; and Arkadiy Dubovoy and his son Igor Dubovoy, traders from Georgia.

Authorities said that starting around February 2010, hackers infiltrated the networks of press release distributors Business Wire, MarketWired and PR Newswire, and gained access to corporate news such as financial results before it became public.

According to the indictments, the news was then passed to traders who made illegal trades in stocks and options based on the stolen information, with foreign shell companies being used to share the rewards.

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By : Securex /August 12, 2015 /Securites Law /0 Comment Read More

SEC Tries Flipping Witnesses

Publisher: Wall Street Journal
Author: Jean Eaglesham

Wall Street traders Ryan King and Thomas Gonnella were online buddies, chatting about college football and the late-season collapse of the Atlanta Braves as they sold each other millions of dollars worth of bonds.

But when Mr. King stood up in a New York courtroom last summer, he opened a new window in the enforcement of securities laws, while potentially helping end his pal’s career.

The trader was the first cooperating witness to take the stand for the Securities and Exchange Commission in a courtroom battle—a milestone for an agency that in its civil enforcement actions that hasn’t historically used that tactic. The SEC brings civil actions related to alleged securities violations, and until recently hasn’t relied on cooperators in the way that criminal prosecutors do.

Mr. King testified as part of an expanding cooperation program, started in 2010 but now drawing widespread attention. The agency has signed 91 cooperation agreements so far and has more on the way, officials said. Three cooperators have testified in court, including Mr. King.

The SEC touts the cooperation program as a vital source of testimony for enforcing against financial wrongdoing. Critics, however, worry that key safeguards on the use of cooperators in criminal cases are lacking in the SEC’s administrative courts, where the agency brings the cases, appoints and pays the judges, has first say on appeals and the power to decide what to fine the cooperator after he or she testifies.

The agency’s multiple roles strike at the “fundamental fairness” of its hearings, violating the checks and balances required by the constitution, Mr. Gonnella’s lawyers said in a court filing. The SEC in-house judge overseeing the case rejected this argument, saying it was an “attack on the administrative framework” of the SEC’s internal tribunal.

Andrew Ceresney, SEC enforcement chief, said the program has been “highly successful,” with witnesses giving “insiders’ views that have helped us uncover fraud more efficiently and succeed at trial.”

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By : Securex /August 07, 2015 /Securites Law /0 Comment Read More

CEO Pay: SEC Rules Would Require Companies To Compare Executive Pay With Performance

Publisher: International Business Times
Author: Owen Davis


The mood was downbeat during the 2015 annual shareholder meeting at Barrick Gold, the world’s largest gold mining company.

Barrick’s share price had tumbled 33 percent in the past year, and doubts swirled around upper management’s ability to weather a tough gold market.

But there was a glimmer of good news at the Toronto mining company, at least for one person: Chairman John Thornton saw his compensation rise 35 percent, to nearly $13 million.

The contradiction between the Barrick’s performance and its leader’s pay rankled shareholders, who voted overwhelmingly against the pay deal. This week, Thornton told investors, “We have heard you loud and clear,” and announced plans to overhaul his company’s executive compensation system.

Those kinds of battles could soon become more common. On Wednesday, the Securities and Exchange Commission proposed new rules that would require publicly traded companies to make public the relationship between executive compensation and corporate financial performance.

The 2010 Dodd-Frank Act empowered the SEC to enact a number of measures around executive pay, including an as yet unwritten requirement that companies compute the ratio of CEO pay to earnings of average workers. Pay for CEOs grew 12 percent in 2014, compared with about 2 percent for private, non-supervisory workers.

The new disclosures promise to give shareholders concerned with executive pay new ammunition for proxy battles. Under the proposed rules, companies would be required to publish tables showing their executives’ actual compensation alongside the company’s financial performance over the previous five years, as measured by stock performance and dividends, as well as the returns of similar companies.

Though simple on its face, calculating these measures invites debate. Dodd-Frank required the comparison to include executives’ “actual pay,” a phrase the bill didn’t define. Should stock options, for instance, be counted as compensation in the year they are granted, the year they vest or the year the executive exercises the options?

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By : Securex /July 29, 2015 /Securites Law /0 Comment Read More

SEC proposes rules to gather more Holding data on mutual funds, advisers

Publisher: Reuters
Author: Sarah Lynch

U.S. securities regulators proposed new rules on Wednesday that would require mutual funds and other asset managers to report much more detailed data about their holdings.

The Securities and Exchange Commission’s plan is one of a series of reforms announced late last year by SEC Chair Mary Jo White.

Wednesday’s proposal comes as asset managers are facing scrutiny as part of a broader attempt to clamp down on potentially risky financial activities not fully addressed by the 2010 Dodd-Frank Wall Street reform law.

The Financial Stability Oversight Council (FSOC), a panel of regulators with the power to impose greater oversight on non-bank financial firms, has been scrutinizing activities and products in the sector.

One of the council’s chief complaints has been about a lack of adequate data to help it better evaluate systemic risks.

The industry has feared the FSOC could designate a fund or large firm as systemic. Many view the SEC’s planned reforms as an agency effort to take charge and address any concerns of systemic risk.

SEC Republican Commissioner Daniel Gallagher said Wednesday’s plan may help “stave off the nonsense of bank regulators” who have helped perpetuate “false narratives” that the SEC’s oversight of asset managers is deficient.

“These narratives are of course preposterous, but they appear to hold water at the Basel cocktail parties,” he said.

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By : Securex /May 20, 2015 /Compliance, Securites Law /1 Comment Read More

SEC enables Avon stock scam and doesn’t seem to care

Publisher: Fortune
Author: Dan Primack

When normal people nod off behind the wheel, they hopefully wake up with a start and immediately course-correct.

But when the SEC is driving, it just shrugs and goes back to sleep. That’s the lesson of yesterday’s debacle for Avon products, the door-to-door cosmetics company that has been a regular subject of takeover talk. Shortly before noon on Thursday, an investment firm calling itself PTG Capital filed a document with the SEC, saying that it had offered to acquire Avon for $18.75 per share.  It did not also issue a press release or use any other third party for distribution. Just the SEC’s EDGAR platform.

For context, Avon shares had been trading at around $6.50 prior to the news. Once the filing hit, however, the shares began to surge – climbing nearly 15% before the NYSE halted trading. Pretty soon, media outlets were raising alarm bells over the supposed offer. No one had ever heard of PTG Capital before, nor did the firm seem to exist via Google or LinkedIn searches. Moreover, boilerplate in the filing twice referred to the acquirer as “TPG Capital” – suggesting that it had cribbed the language.

Also not seeming to exist was PTG’s Texas-based law firm. Neither the listed phone numbers nor addresses were legitimate. About an hour and a half after the filing first hit, Avon put out a press release saying that it had not received any takeover offer, and that it couldn’t verify PTG’s existence.

Most likely, this was a stock scam. Someone owned Avon stock, filed the bogus document and sold when shares spiked.

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By : Securex /May 18, 2015 /Compliance, Securites Law /1 Comment Read More

Ex- SEC Head Urges Agency to Check Use of In-House Court

Publisher: Law360
Author: Stephanie Russell-Kraft

Former US SEC Commissioner Chair Christopher Cox urged the agency Wednesday to exercise more discretion in its use of administrative proceedings in order to fight the troubling appearance that they unfairly favor the SEC.

Speaking at a securities enforcement conference in San Francisco, Cox urged the SEC to further clarify how it decides which cases it will bring in federal court or in-house courts where it has a greater win-loss record. The agency has spent the past year fighting off criticism and a growing public perception that it uses administrative proceedings solely to get a leg up on defendants. Unlike federal courts, administrative proceedings do not allow juries or follow the federal rules of evidence, and the SEC has a greater win-loss record for the cases it brings in-house.

“Substituting these proceedings for federal court proceedings, for decisions by judges and juries, is going to contribute to the further appearance of partiality that is already an issue,” Cox said during the keynote speech. “It is incumbent on the agency to show it can exercise this discretion wisely.”

Though the SEC has had the ability to bring cases administratively for decades, the Dodd-Frank Act of 2010 gave the agency new powers to file in-house enforcement actions and levy fines against non-regulated entities.

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By : Securex /May 14, 2015 /Compliance, Securites Law /1 Comment Read More

SEC commish blasts Dodd-Frank as huge ‘distraction’

Publisher: CNBC
Author: Bob Pisani

On the fifth anniversary of the Flash Crash, I sat down with SEC Commissioner Dan Gallagher to talk about what changes have been made to the way trading has been conducted since then. The conversation quickly turned to Dodd-Frank.

Why the sudden left turn? Because the SEC staff has been consumed by writing rules for Dodd-Frank for the past four years, practically to the detriment of everything else, and it’s not over, not by a long shot. Gallagher wants to spend more time on strengthening the trading system, but Dodd-Frank is taking up all the time.

“These are all hugely important things that are critical to the agency, but we’re not spending time on them because we’re doing silly rules like some of the ones we’ve been handling the last couple of months. Dodd-Frank has been an awful distraction to the agency, and I’m hoping that, although it’s the law of the land and we have to implement the remaining 50 percent, that we can prioritize other, more important things ahead of it,” Gallagher said.

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By : Securex /May 06, 2015 /SEC News and Public Statement, Securites Law /1 Comment Read More

SEC May Seek Companies’ Agreements to Determine Whistleblower Treatment

Publisher: Morgan Lewis

As the SEC continues to focus on it’s whistleblower initiative, companies should review their agreements and policies in light of the latest SEC actions.

The SEC’s Office of the Whistleblower has made clear that it will use its authority to ensure that companies do not use agreements and policies to impede whistleblowers from reporting information to regulators. In public comments last year, Sean McKessy, chief of the SEC’s Office of the Whistleblower, stated, “[W]e are actively looking for examples of confidentiality agreements, separat[ion] agreements, employee agreements… that in substance say ‘as a prerequisite to get this benefit you agree you’re not going to come to the commission or you’re not going to report anything to a regulator.’”[2] He also explained that if the SEC finds language that creates a chilling effect for potential whistleblowers to report to the SEC, “not only are we going to go to the companies, we are going to go after the lawyers who drafted it” and may revoke the lawyers’ ability to appear before the SEC.[3]

According to the Wall Street Journal article, “[t]he agency has asked the firms to turn over every nondisclosure agreement, confidentiality agreement, severance agreement and settlement agreement they entered into with employees since Dodd-Frank went into effect, as well as documents related to corporate training on confidentiality, according to the letter and the people familiar with the matter. The agency letter viewed by the Journal also asked for ‘all documents that refer or relate to whistleblowing’ and a list of terminated employees.”

To date, however, the SEC has not articulated specific guidance regarding what language or clauses it considers permissible or impermissible. Its position may become clear through enforcement actions.

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By : Securex /March 05, 2015 /Compliance, Securites Law /0 Comment Read More

Pay-disclosure advocates chafe at SEC rule delays

Publisher: Marketwatch
Author: Eric Garcia

Supporters of a rule that would require public companies to disclose the ratio between executive and median employee pay say the SEC should move soon to enact the regulation.

Under Dodd-Frank law, publicly traded companies have to disclose the ratio of executive pay to that of media employees. The disclosure must come at annual shareholder meetings. The SEC is responsible for implementing the requirement.

In September 2013, commissioners voted 3-2 to propose creating the rule. Testifying before the Senate Banking Committee in September 2014, SEC Chairwoman Mary Jo White said the commission hoped to finish the rule by the end of the year.

The commission hasn’t yet set a to vote on the proposal. A source familiar with the matter said scheduling is at White’s discretion.

An SEC spokesman declined to comment Friday.

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By : Securex /January 05, 2015 /Compliance, Public Company Accounting, Securites Law /0 Comment Read More