Mealey's Securities
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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.
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June 06, 2024
Federal Judge Gives 1st OK To $490M Settlement Between Apple, Investors
OAKLAND, Calif. — A federal judge in California granted preliminary approval to a proposed $490 million settlement in a putative class complaint brought by investors in Apple Inc. who say the company’s CEO issued misleading statements about Apple’s sales of iPhones in China, saying the settlement appears to be fair and reasonable.
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June 05, 2024
U.S. High Court Extends Response Deadline In Review Of 9th Circuit FCA Suit Ruling
WASHINGTON, D.C. — The U.S. Supreme Court on June 3 granted a 30-day extension for the qui tam plaintiff in a district court decision to respond to pharmaceutical companies’ petition seeking review of the Ninth Circuit U.S. Court of Appeals’ reversal of a district court’s dismissal of a suit accusing them violating the False Claims Act (FCA) by artificially inflating drug prices, arguing in part that the Ninth Circuit “created a circuit split by holding that a relator can avoid the public disclosure bar by ‘stitching together’ public disclosures.”
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June 05, 2024
2nd Circuit Affirms Penalties Against Trader In SEC Enforcement Action
NEW YORK — A federal judge in New York did not abuse discretion when imposing a penalty of more than $10 million against a man the Securities and Exchange Commission accused of using multiple brokerage accounts to manipulate stock prices, a panel the Second Circuit U.S. Court of Appeals found, saying the record shows that the man acted manipulatively and deliberately.
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May 31, 2024
11th Circuit Upholds Disgorgement Entered Against Unregistered Stock Dealer
ATLANTA — The owner of a business that bought convertible debt notes from microcap issuers acted as an unregistered dealer of securities, a panel of the 11th Circuit U.S. Court of Appeals found, affirming a Florida federal judge’s decision to grant summary judgment in favor of the Securities and Exchange Commission and enter nearly $9 million in penalties and disgorgement against the man.
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May 31, 2024
NVDIA To High Court: Shareholders Don’t Show Scienter Circuit Split Is Illusory
WASHINGTON, D.C. — A computer manufacturer and its president and CEO told the U.S. Supreme Court in a reply brief in further support of their petition for a writ of certiorari that two retirement funds are incorrect to argue that Ninth Circuit U.S. Court of Appeals did not enlarge a split over the legal standard for alleging scienter under the Private Securities Litigation Reform Act of 1995 (PSLRA).
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May 30, 2024
Judge Enters Judgment Against CEO Of Investment Firm SEC Says Misstated Assets
NEW YORK — A federal judge in New York granted the Securities and Exchange Commission’s request to enter judgment against a man who had agreed to settle claims the commission brought against him alleging that he signed off on false claims issued by the investment adviser firm he co-owns substantially overstating the assets the fund managed.
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May 29, 2024
Federal Judge Dismisses Case In Which SEC Used False Info For Restraining Order
SALT LAKE CITY — A federal judge in Utah on May 28 dismissed without prejudice the Securities and Exchange Commission’s case against several defendants it accused of using a cryptocurrency scheme to defraud investors out of at least $49 million at the SEC’s request after imposing sanctions on the SEC for using false information when applying for a temporary restraining order (TRO), telling the crypto entities that dismissing the case with prejudice would amount to an additional sanction.
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May 24, 2024
Federal Judge: No Personal Jurisdiction Over Activist Shareholder Sued By Exxon
FORT WORTH, Texas — A federal judge in Texas dismissed one of two activist shareholder groups from a suit brought by Exxon Mobil Corp. seeking a declaration that a climate change proposal made by the groups can be left off the company’s proxy statement, determining that the court does not have personal jurisdiction over the entity.
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May 24, 2024
5th Circuit Hears Arguments In Rehearing Over SEC Disclosure Rule
NEW ORLEANS — On the day before the Fifth Circuit U.S. Court of Appeals heard oral arguments in an en banc rehearing for two petitioners who question whether the Securities and Exchange Commission had the right to approve a rule implemented by Nasdaq Stock Market LLC that requires companies listed on the exchange to publicly disclose information about the race and gender identity of their board members, one of the petitioners again said in a supplemental brief that the SEC did not show that it had the authority to approve the rule.
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May 23, 2024
11th Circuit Affirms Disgorgement From Man Who Violated SEC Order
ATLANTA — A man accused by the Securities and Exchange Commission of violating an agreement with the commission by continuing to promote penny stocks after being ordered not to will be required to pay more than $700,000 in disgorgement and penalties after a panel of the 11th Circuit U.S. Court of Appeals ruled that a Florida federal judge did not abuse his discretion when determining the amount to be disgorged.
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May 23, 2024
Federal Judge OKs Attorney Fees In Suit Over FriendFinder Shares
NEW YORK — Two investment firms that accused the founder of a social networking website of attempting to force the firms to sell their stake in the company at a discount will pay more than half a million dollars in attorney fees after a New York federal judge found May 22 that the firms brought their suit despite unambiguous terms of the firms’ purchase of securities.
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May 23, 2024
Federal Judge Partly Grants SEC Request For Judgment Against Crypto Influencer
AUSTIN, Texas — A federal judge in Texas on May 22 found that a crypto asset influencer sold an unregistered security by selling crypto tokens to investors from a pool he controlled, partially granting a motion for summary judgment from the Securities and Exchange Commission and denying a motion for summary judgment filed by the influencer.
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May 14, 2024
COMMENTARY: The Risk In Disclosing Risk Factors
By Jordan Eth and Jocelyn Greer
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May 22, 2024
Bankruptcy Judge OKs Crypto Company’s $2B Settlement With New York AG
WHITE PLAINS, N.Y. — A federal bankruptcy judge in New York approved a settlement between bankrupt cryptocurrency platforms and the New York Attorney General’s Office (NYAG) that will resolve claims that the platforms defrauded investors out of billions of dollars; the settlement creates a victim’s fund that will receive up to $2 billion of the platforms’ remaining assets.
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May 22, 2024
Counsel Withdrawal Hearing Continued In SEC Suit Against Insolvent Insurers’ Owner
WINSTON-SALEM, N.C. — A North Carolina federal magistrate judge granted, in part, a joint motion to appear remotely at a hearing scheduled in the U.S. Securities and Exchange Commission’s suit alleging that an advisory services company, its former executive and its former owner, who also owned now-insolvent insurers, defrauded clients of more than $75 million, continuing the hearing and requiring the parties to file a joint status report by May 23.
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May 22, 2024
Federal Judge OKs SEC Subpoena Over Musk’s Claims Of ‘Harassment’
SAN FRANCISCO — A federal judge in California ordered the enforcement of a Securities and Exchange Commission subpoena targeting Elon Musk as part of an investigation into Musk’s 2022 purchase of stock in the company formerly known as Twitter Inc., finding that the “SEC’s actions were constitutional, and the subpoena reasonably seeks information relevant to the SEC’s investigation.”