Source: http://www.techlawjournal.com/alert/2009/09/15.asp
Timestamp: 2019-04-18 10:56:12+00:00

Document:
TLJ Daily E-Mail Alert No. 1,983, September 15, 2009.
September 15, 2009, Alert No. 1,983.
9/15. The U.S. Court of Appeals (9thCir) issued its opinion [19 pages in PDF] in LVRC v. Brekka, a civil case involving Section 1030 and unauthorized access to a protected computer system. The Court of Appeals affirmed the summary judgment of the District Court for a former employee of a company that accused him of unauthorized access both during and after his employment.
9/15. The U.S. Court of Appeals (4thCir) issued its opinion [38 pages in PDF] in SEC v. Pirate Investor, a Section 10b civil securities fraud case. The Court of Appeals affirmed the judgment of the District Court against Pirate Investor.
In so doing, the Court of Appeals rejected the argument of numerous amicus curiae news media publishers, including Forbes, Hearst, and Tribune, that upholding this interpretation of Section 10b chills constitutionally protected free speech by publishers of financial news and commentary.
This case may further illustrate that the Securities and Exchange Commission (SEC) balances its inability to perform the major tasks with which it is charged by the Congress, such as preventing people like Bernard Madoff from conducting large scale investment fraud, by aggressively interpreting its statutory authority in a manner that threatens activities, such as those of financial news publishers, that do not frustrate the policy goals of the Congress.
Pirate publishes investment newsletters, and offers an e-mail service. It sent a bulk e-mail message titled "Super Insider Tip E-mail" to about 800,000 recipients. This message provided some detailed information about a company, but did not disclose the name of the company. The e-mail related, inaccurately, the substance of a telephone conversation with the Director of Investor Relations of the company. Pirate then sold for $1,000 the name of the company. It made over a thousand sales. Its revenue came from the sale of information, not from buying and/or selling securities.
The SEC filed a civil complaint in the U.S. District Court (DMd) against Pirate Investor and others alleging violation of the Section 10b of the Securities Exchange Act of 1934, which is codified at 15 U.S.C. § 78j(b), and rule 10b5 thereunder.
The District Court, following a bench trial, ruled that Pirate violated Section 10b. Pirate brought the present appeal, and major news publishers filed an amicus curiae brief in support.
Section 10b provides, in part, that "It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange ... To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe ...", including those that "prohibit fraud".
The Court of Appeals concluded Pirate violated Section 10b. It explained that "Appellants made misrepresentations of a material fact -- whether an insider had provided the information in the stock tip -- and Appellants did so with the requisite scienter. Moreover, the misrepresentations were ``in connection with´´ securities transactions because securities transactions were necessary to maximize the fraudulent scheme, Appellants made their misrepresentations with the intent that investors would rely on them, and Appellants knew that investors would so rely. This conduct violates § 10(b), and Appellants cannot avoid application of the statute by invoking constitutional concerns because the text and purpose of § 10(b) admit of no exception for ``disinterested publishers.´´"
This case is Securities and Exchange Commission v. Pirate Investor LLC, et al., U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 08-1037, an appeal from the U.S. District Court for the District of Maryland, D.C. No. 1:03-cv-01042-MJG, Judge Marvin Garbis presiding. The Court of Appeals issued a per curiam opinion of Judges Niemeyer and Motz.
The House will meet at 10:30 AM for morning hour, and at 12:00 NOON for legislative business. It will consider numerous non-technology related items under suspension of the rules. See, Rep. Hoyer's schedule for week of September 14.
The House will meet at 10:00 AM for legislative business. It will consider HR 3246 [LOC | WW], the "Advanced Vehicle Technology Act". See, Rep. Hoyer's schedule for week of September 14.
The Senate will meet at 9:30 AM. It will resume consideration of HR 3288 [LOC | WW], the "Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2010".
10:00 AM. The House Judiciary Committee (HJC) will meet to mark up several bills, including HR 2994 [LOC | WW], the "Satellite Home Viewer Update and Reauthorization Act". It is the first item on the agenda. See, notice. Location: Room 2141, Rayburn Building.
The House will meet at 10:00 AM for legislative business. See, Rep. Hoyer's schedule for week of September 14.
10:00 AM. The House Commerce Committee's (HCC) Subcommittee on Communications, Technology and the Internet will hold a hearing titled "Oversight of the Federal Communications Commission". See, notice. Location: Room 2123, Rayburn Building.
Rep. Hoyer's schedule for week of September 14 states that "no votes are expected in the House".
Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) regarding its draft NIST IR 7609 [65 pages in PDF] titled "Cryptographic Key Management Workshop Summary".
11:00 AM. The House Judiciary Committee's (HJC) Subcommittee on the Constitution, Civil Rights and Civil Liberties will hold a hearing titled "USA PATRIOT Act". See, notice. Location: Room 2141, Rayburn Building.
10:00 AM. The Senate Judiciary Committee (SJC) will hold a hearing titled "Reauthorizing the USA PATRIOT Act: Ensuring Liberty and Security". The SJC will webcast this event. See, notice. Location: Room 226, Dirksen Building.

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