Source: http://saclitigation.com/slc/feature?key=&md5email=
Timestamp: 2019-04-26 10:33:08+00:00

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The Supreme Court ruled last month that the 1998 amendments to the federal securities laws did not strip state courts of jurisdiction over class actions alleging violations of only the Securities Act of 1933. The Court further held that those amendments do not empower defendants to remove those federal-law cases from state to federal court.
Remember when Maria sang “Let’s start at the very beginning, it’s a very good place to start”? Well, that seems to be what federal circuit courts are doing with their arbitration decisions recently. This article will run through some Do Re Mis of arbitration law, as articulated by those decisions (and will close with some arbitration cases on SCOTUS’s docket).
Each month, FINRA publishes a summary of recent disciplinary actions taken against brokers and firms. It is something like a small-town newspaper police blotter for the industry. But instead of reading about a neighbor who was arrested for DUI, you learn that two brokers were disciplined last month for failing to update their Form U4s to reflect tax liens.
The monthly disciplinary report is worth reading for reasons other than prurient interest. It serves as a reminder for both industry professionals and attorneys of common compliance mistakes. It also shows what brings a modest fine or suspension and, more importantly, what can end a career.
Even before President Trump’s nomination of Jay Clayton as the next Chairman of the Securities and Exchange Commission (“SEC” or “Commission”), signs have been appearing that changes are afoot within the Division of Enforcement (“Enforcement Division”). The power of Enforcement Division attorneys in the field to issue subpoenas and open new investigations was recently scaled back, and now will require personal sign-off by the Director of Enforcement in Washington, D.C. With new incoming leadership at the top, and looming legislative proposals by the Republican-majority Congress that promise to take a hard look at the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), the Enforcement Division under the Trump Administration is likely to be more centralized and potentially will focus on a different set of priorities and a different approach than the SEC has taken in recent years.
On October 5, 2016, the United States Supreme Court began hearing argument in Salman v. United States,1 one of the most closely watched insider trading cases to reach the high court in recent years. Salman could resolve a circuit split between the Second and Ninth Circuits and clarify generally what constitutes a personal benefit to the insider sufficient to establish insider trading under the longstanding tipper/tippee framework set forth in Dirks v. SEC, 463 U.S. 646 (1983). The personal benefit requirement is the line defining when a tippee trading on material, nonpublic information commits securities fraud. For that reason, lawyers and securities professionals alike hope that the Court’s decision in Salman will clarify the nature and type of personal benefit that must be shown in insider trading cases.
Readers of my blogs here and at Arbitration Resolution Services may recall how I fared on one of my predictions for 2015. To refresh your recollections, prediction #4 for 2015 was “SCOTUS will rebuke the National Labor Relations Board on its anti-arbitration policy.” That didn’t happen in 2015, but it turns out I may just have been too aggressive in my timetable. In recent weeks, three petitions for certiorari have been filed seeking SCOTUS review of this very issue. And as discussed below I am confident the Supreme Court will take up at least one of these cases to resolve a major split among the Circuits.
The Department of Labor’s (“DOL”) new Fiduciary Rule that this author reviewed in Part I of this article is conceptually sound in seeking to combine textual clarity, fact-specific inquiries to determine fiduciary status and breaches of the duty and the flexibility to apply norms of aspiration (i.e., a professional without conflict or engaging in conduct that, though it may present a conflict, substantially avoids and mitigates harm, both in perception and reality). Yet, the textually-based rules, at least from our perceptions, do not definitively resolve whether the conduct at issue complies with the appropriate standards of ethical conduct.
The other challenge is to make the forthcoming SEC Fiduciary Duty Rule, applicable to brokers, compatible with the DOL Fiduciary Duty Rule, so as to ensure that the law, regulations, and traditional industry customs and practices are premised on sound principles that are appropriately adaptable whatever the nature of the relationship between the financial service professional and the client–customer and always serve the investor’s best interest.
This two-part article addresses the Department of Labor's (“DOL”) new Fiduciary Duty Rule for ERISA Plans and IRA accounts, published in April 2016, and its relationship to both the Fiduciary Duty Rule to be promulgated by the Securities and Exchange Commission (“SEC”) in April 2017, and to the broader category of accounts serviced by investment advisers and broker-dealers. Part I describes the scope of the duty created by the DOL Rule.
From the impacts of U.S. Supreme Court Omnicare and Halliburton cases to the uptick in Securities Act class actions, Skadden Arps litigation partners Scott Musoff and Susan Saltzstein discuss the latest securities litigation developments.
On Dec. 16, 2015, the Financial Industry Regulatory Authority (FINRA) and Municipal Securities Rulemaking Board (MSRB) simultaneously filed with the Securities and Exchange Commission (SEC) rule proposals that will have broad and substantial impacts on the political giving of broker-dealers, investment advisers and municipal advisors and their ability to engage in business with governmental entities under SEC, FINRA and MSRB rules.
Litigation arising out of Bernard Madoff’s Ponzi scheme has generated multiple legal developments, including new case law regarding the Securities Litigation Uniform Standards Act of 1998 (SLUSA). SLUSA provides a powerful legal defense in securities class actions, often enabling defendants to secure dismissal at the outset of the case.
Prior to August 2004, transitions of registered representatives who left one brokerage firm to join another often resulted in litigation. Generally, the former employer sought temporary restraining orders and preliminary injunctions to enforce contractual non-solicitation and non-competition provisions by preventing the departing advisor from contacting the customers he or she served at the former firm. These suits were costly, time consuming and often resulted in injunctions that prevented the departing broker from servicing or even contacting their former customers on behalf of their new firm.
A FINRA Hearing Panel issued a decision on March 9, 2015 that will have a potentially significant impact on any broker-dealer that allows its registered representatives to have their own investment adviser. In light of this decision, broker-dealers should assess and evaluate the adequacy of their supervisory systems and procedures relating to supervision of a representative’s outside advisory activities.
Title IX of The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) is now the primary and most critical legislation designed to protect investors, address systemic risk, prevent securities fraud and establish and enhance professional standards in our capital markets. Congress has stated its intent that Title IX of Dodd-Frank achieve substantial and significant regulatory reform to avoid a repeat of Enron, Madoff and other notorious Ponzi schemes, financial failures, and the accompanying catastrophic investor losses. Most especially, the statute was intended to correct the organizational inefficiencies that have and will frustrate effective regulation, self-regulation, supervision within financial service firms, and overall compliance.
Andrew Ceresney, Director, Division of Enforcement (the “Division”), Securities and Exchange Commission (“Commission”), recently spoke at Compliance Week 2014 regarding the Division’s accomplishments over the past year and its priorities for the remainder of 2014.1 Of particular interest to anyone in the financial services and investment management industry, Mr. Ceresney indicated that in 2014 the Division has been focusing on certain market structure issues, taking new approaches to settlements and litigation, implementing new technology and bringing cases against legal and compliance professionals, as discussed below.
The illusion that the SEC always wins in court has been shattered by four high-profile SEC trial losses in a two-month span: SEC v. Steffes, 10-cv-6266 (N.D. Ill., Jan. 27, 2014), SEC v. Schvacho, 12-cv-2557 (N.D. Ga., Jan. 7, 2014), SEC v. Jensen, 11-cv-5316 (C.D. Cal., Dec. 10, 2013) and SEC v. Kovzan, 11-cv-2017 (D. Kan., Dec. 4, 2013). These losses – after the notorious Mark Cuban trial loss on October 16, 2013 – show the SEC is struggling to enforce at trial its more aggressive approach of seeking severe sanctions and industry bars for circumstantial cases. We hope these setbacks will cause the SEC to take a step back from its more aggressive approach. But if not, clients should be aware of the significant possibility of beating the SEC at trial.

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