Mealey's Securities
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June 27, 2024
Supreme Court Curtails SEC’s Ability To Use ALJs In Enforcement Actions
WASHINGTON, D.C. — A defendant accused by the Securities and Exchange Commission of securities fraud has the right to a jury trial under the Seventh Amendment to the U.S. Constitution when the commission is seeking civil penalties, the U.S. Supreme Court held June 27, agreeing with a hedge fund manager and his hedge fund that the SEC inappropriately sought penalties before an administrative law judge (ALJ).
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June 26, 2024
California Federal Court OKs Venue Transfer For COVID Vaccine Securities Suit
LOS ANGELES — A federal judge in California transferred to a federal court in New York a putative class complaint brought by investors in a biotechnology company who say the company misled them by suggesting that its COVID-19 vaccine was still relevant despite not having approval from the Food and Drug Administration to target the most common subvariant at the time, after the parties stipulated to transfer the venue for the convenience of all involved.
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June 25, 2024
Judge: Securities Class Claims Against Crypto Firm Barred By Repose Statute
SAN FRANCISCO — A federal judge in California largely granted a motion from an issuer of crypto tokens and its CEO to dismiss class action securities claims against them, finding that the lead investor plaintiff failed to show that the crypto token at issue was first offered after the cutoff date for a statute of repose in the Securities Act of 1933.
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June 25, 2024
2nd Circuit Affirms Investor’s Standing To Bring Short-Swing Disgorgement Suit
NEW YORK — A 2021 Supreme Court ruling did not abrogate a finding from the Second Circuit U.S. Court of Appeals holding that a violation of Section 16(b) of the Securities Exchange Act of 1934 inflicts an injury, a Second Circuit panel held June 24, ruling that a New York federal magistrate judge incorrectly found that a shareholder lacked standing to file a shareholder derivative complaint seeking disgorgement of short-swing profits from a capital management company.
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June 25, 2024
Liquidating Trustee Answers Insurer’s Counterclaim In Breach Of Contract Suit
CINCINNATI — A viatical settlement provider’s liquidating trustee who sued a life insurer in Ohio federal court for breach of contract, seeking reimbursement from the insurer, has filed his answers to the insurer’s counterclaim.
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June 24, 2024
High Court Again Extends Response Deadline In Review Of 9th Circuit FCA Reversal
WASHINGTON, D.C. — The U.S. Supreme Court on June 21 granted a district court qui tam plaintiff’s second request for additional time to respond to pharmaceutical companies’ petition that seeks review of the Ninth Circuit U.S. Court of Appeals’ ruling reversing the district court’s dismissal of a suit accusing the companies of violating the False Claims Act (FCA) by artificially inflating drug prices.
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June 19, 2024
SEC Says Founder Of AI Hiring Company Lied To Investors About Capabilities
NEW YORK — The founder and former chief executive officer of an artificial intelligence company that claimed to use AI capabilities to help companies hire better candidates issued materially misleading statements regarding the AI’s capabilities and how many customers it had and falsified both bank statements and customer testimonials to raise investor funds, the Securities and Exchange Commission says in a suit filed in a New York federal court.
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June 19, 2024
Judgment Issued Against Former Exec SEC Said Faked Financial Documents
NEW YORK — A federal judge in New York entered final judgment against a former executive whom the Securities and Exchange Commission accused of falsifying public investment materials with her employer, ordering her to pay more than $430,000 in reimbursement to her employer and $125,000 in civil penalties to the SEC.
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June 19, 2024
Federal Judge: Employee’s Suit Alleges ‘Securities Claim’ Under D&O Policy
LOS ANGELES — A federal judge in California partly granted a biopharmaceutical company insured’s motion for judgment on the pleadings in a directors and officers liability coverage dispute, finding that a lawsuit brought by the insured’s former employee asserts a “securities claim” based on the policy’s clear language.
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June 19, 2024
SEC: Fund Manager Misappropriated Millions In Investor Funds
TRENTON, N.J. — An investment fund and its founder and chief investment officer led a three-year scheme that bilked investors out of at least $3 million, the Securities and Exchange Commission says in a suit filed in a New Jersey federal court, claiming that the man at the heart of the scheme lost millions of dollars of investors’ money in high-risk trades and then falsified documents to hide the losses.
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June 18, 2024
Judge Finds Exxon’s Claims Against Activist Shareholder Mooted
FORT WORTH, Texas — A federal judge in Texas on June 17 dismissed without prejudice a suit brought by Exxon Mobil Corp. against two activist shareholder groups after the only shareholder group remaining as a defendant agreed to stop making climate change proposals for the company’s proxy statements.
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June 17, 2024
Supreme Court Won’t Consider SEC Disgorgement For Venture Capitalist
WASHINGTON, D.C. — The U.S. Supreme Court will not hear arguments over whether a cross-appeal requirement was triggered before the Second Circuit U.S. Court of Appeals remanded the Securities and Exchange Commission’s enforcement action against a venture capitalist for re-calculation of disgorgement after amendments to the Securities Exchange Act of 1934, denying on June 17 the venture capitalist’s petition for a writ of certiorari and one from his wife in a related proceeding.
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June 17, 2024
Supreme Court To Consider PSLRA Scienter Standards, Granting Certiorari To NVIDIA
WASHINGTON, D.C. — The U.S. Supreme Court on June 17 granted a petition for a writ of certiorari filed by a computer manufacturer and its CEO, who argue that the Ninth Circuit U.S. Court of Appeals enlarged a split over the legal standard for alleging scienter under the Private Securities Litigation Reform Act of 1995 (PSLRA) by allowing retirement funds to rely on the findings of experts to show falsity.
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June 14, 2024
Judge: Medical Company Can’t Bring Claims Against Shareholders Over Board Vote
DALLAS — A federal judge in Texas dismissed a biopharmaceutical company’s complaint against certain of its own investors, alleging that they issued false statements in an attempt to elect outside director candidates onto the company’s board, finding that the company lacked standing to bring certain federal securities claims as the issuer of the stock in question and that other claims were mooted by the investors filing amended disclosure statements.
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June 14, 2024
Judge Approves Nearly $4.5B Penalty Against Terraform In SEC Enforcement Action
NEW YORK — Crypto asset firm Terraform Labs Pte. Ltd. will pay nearly $4.5 billion in disgorgement and penalties after it and its CEO were found liable in April for claims brought by the Securities and Exchange Commission accusing the company and its owner of issuing false statements about crypto assets, a New York federal judge ordered.
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June 14, 2024
Nevada High Court: Investors Lack Standing; Company Allowed Attorney Fees
LAS VEGAS — The Nevada Supreme Court held that a state judge was correct to grant judgment in a case brought against a technology company by investors who say they were harmed by additional shares being issued in the wake of the company’s merger, finding that the shareholders failed to bring direct claims and lacked standing to bring derivative claims; the Supreme Court also held that the judge erred by granting presuit costs and denying attorney fees to the company and its new ownership.
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June 13, 2024
Investors’ Short-Swing Disgorgement Claims Mooted By Bankruptcy, Judge Rules
NEW YORK — A federal judge in New York dismissed a complaint brought by shareholders of a bankrupt big-box store chain alleging that an investment company should disgorge short-swing profits made off the store’s shares, finding that the shareholders’ claims are moot because the bankruptcy plan canceled all shares in the company.
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June 11, 2024
2nd Circuit: Investors Don’t Show Falsity Of Real Estate Company’s Statements
NEW YORK — A panel of judges in the Second Circuit U.S. Court of Appeals affirmed in a June 10 summary order a New York federal judge’s decision to dismiss a putative class complaint brought by investors against a real estate company and certain of its executives, finding that the investors did not show how statements issued by the company related to a merger were false or misleading.
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June 11, 2024
7th Circuit Won’t Rethink Whether Investors Are Priority For Ponzi Liquidation
CHICAGO — The Seventh Circuit U.S. Court of Appeals denied a private lender’s petition for rehearing en banc, declining to consider a panel opinion upholding an Illinois federal judge’s decision to award priority to individual investors over the lender to receive proceeds from the liquidation of assets related to a Ponzi scheme.
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June 11, 2024
6th Circuit: Investors Don’t Show Scienter For Law Firm Of Fraudster’s Counsel
CINCINNATI — A federal judge in Tennessee was correct to dismiss claims of federal securities laws violations against a law firm that employed an attorney who acted as general counsel for a man who pleaded guilty to federal criminal charges on allegations that he operated a Ponzi scheme, the Sixth Circuit U.S. Court of Appeals found, holding that investors failed to show scienter on the part of the attorney under the heightened pleading standard of the Private Securities Litigation Reform Act (PSLRA).
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June 11, 2024
SEC Hit With FOIA Suit Over Brokers’ Off-Channel Messages Investigations
TAMPA, Fla. — A securities trade association alleges in a complaint filed in Florida federal court that the U.S. Securities and Exchange Commission violated the Freedom of Information Act (FOIA) by withholding all responsive documents related to its investigations of broker-dealers that used unauthorized personal devices to communicate with clients during the COVID pandemic, arguing that the commission improperly invoked an FOIA exemption without explanation.
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June 10, 2024
High Court Grants Facebook Cert Bid To Consider Disclosure Requirements
WASHINGTON, D.C. — The U.S. Supreme Court on June 10 granted a petition for a writ of certiorari from the social media giant formerly known as Facebook Inc., agreeing to consider whether the Ninth Circuit U.S. Court of Appeals widened a circuit split when it found that publicly traded companies must disclose that risks materialized in the past even if the risks do not continue to have the potential to harm investors.
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June 10, 2024
Shareholder Fails To Show She Was Harmed By Proxy Statement, Causing Dismissal
NEW YORK — A federal judge in New York dismissed with prejudice a shareholder derivative complaint brought by a shareholder of a beauty supply company who said the company and certain of its executives made misleading statements about its CEO’s compensation package in a proxy statement, finding that the shareholder failed to show how she suffered a loss from the proxy statement.
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June 10, 2024
Delaware Vice Chancellor: Shareholder Does Not Show Presuit Demand Was Futile
WILMINGTON, Del. — A vice chancellor in the Delaware Court of Chancery held that a shareholder’s derivative complaint alleging that a telecommunications company failed to prevent its parent company’s alleged scheme to centralize customer data to train artificial intelligence must be dismissed, finding that the shareholder failed to show that making a demand on the board would have been futile.
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June 06, 2024
5th Circuit Finds SEC Lacked Authority To Enact New Private Fund Rule
NEW ORLEANS — A panel of the Fifth Circuit U.S. Court of Appeals on June 5 found that the Securities and Exchange Commission exceeded its statutory authority when it adopted a rule designed to increase regulations on private funds, holding that the Dodd-Frank Wall Street Reform and Protection Act only allowed the SEC to implement rules related to retail investors, who do not typically invest in private funds.