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Criminal Law

NASD, SEC and Regulatory Defense Blog

Securities and regulatory defense trends and issues.
By Michael MacPhail, Esq.

Post Frequency: 0.3/day

Last Entry: June 29, 2009 at 09:53:30

Proposed Imposition of Fiduciary Duties on Brokers

Posted on June 29, 2009
President Obama?s blueprint for financial reform includes a proposal to impose a fiduciary standard on securities brokers who currently are subject only to a suitability standard requiring them to make recommendations that fit a client?s risk tolerance, objectives and financial status...

SEC Survives Attempts to Eliminate It, But Challenges to its Powers Continue

Posted on June 11, 2009
The Obama administration apparently has decided against eliminating the SEC as part of an anticipated package of financial regulatory reforms to be submitted to Congress. Instead, the administration will focus on increasing the powers of regulators. As recently as early 2008, the very existence of the SEC was threatened by...

Colorado Division of Securities Cease and Desist Proceedings

Posted on June 07, 2009
The economic crisis has exposed an unprecedented number of securities frauds around the country. Consistent with national trends, the Colorado Division of Securities has reported a sharp increase in the number of securities fraud investigations and cases in 2009...

SEC?s Unpopularity at an All-Time High

Posted on May 21, 2009
A recent national survey of potential jurors by Dr. Kevin Boully of Persuasion Strategies emphasizes the challenges facing the SEC in rehabilitating its image in the wake of the economic collapse and the Madoff scandal. The survey asked respondents about their opinions of six federal agencies, including the SEC and...

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Did SEC Enforcement Lawyers Engage in Insider Trading?

Posted on May 15, 2009
An article posted on today?s CBS website reports that the FBI is investigating two attorneys in the SEC?s Enforcement Division for insider trading. If these lawyers did indeed trade in the stocks of companies under investigation, this would amount to a shocking betrayal of the public trust and would further...

Pursuing Insider Trading Involving Credit Default Swaps: A Dubious Use Of SEC Resources

Posted on May 14, 2009
On May 5, 2009, the SEC filed its first insider trading case involving credit default swaps. According to its complaint in SEC v. Rorech, Civ. No. 09 CV 4329,( S.D.N.Y.), a former portfolio manager at a hedge fund investment adviser and a salesman at Deutsche Bank Securities Inc...

Chairman Shapiro Defends Role of SEC, Admits Past Mistakes

Posted on April 28, 2009
During a speech yesterday before a Denver meeting of the Society of American Business Editors and Writers conference, SEC Chairman Shapiro defended the role of the agency as the "investor's advocate," while acknowledging that, due to "a lack of resources or because of philosophy," an obvious dig at former Chairman...

Ponzi Nation

Posted on April 17, 2009
An article in USA Today quotes SEC and CFTC officials as stating that these agencies have collectively filed more than 46 Ponzi scheme cases so far in 2009. This week alone, federal or state securities and commodities regulators filed new actions against alleged Ponzi schemes in California, Hawaii and Montana...

Michael MacPhail to Present Free SEC Enforcement Webcast on April 21, 2009

Posted on April 15, 2009
In a sharp detour from the era of Chairman Christopher Cox, the SEC under new Chairman Mary Shapiro's leadership has obtained big budget increases that will be used to increase the number of enforcement lawyers. It has also empowered its staff by streamlining procedures relating to the issuance of formal...

Judge Chastises SEC for Discovery Abuses

Posted on April 14, 2009
A U.S. District Court opinion issued early this year raises questions about the SEC?s commitment to fairness and making full disclosure to defendants in litigation. In SEC v. Collins & Aikman Corp., No. 07-2419 (S.D. N.Y. Jan. 13, 2009), 2009 U.S. Dist...

Punishing the Victims: Madoff Trustee Files First Clawback Case

Posted on April 12, 2009
On April 8, 2009, Irving Picard, the trustee for Bernard L. Madoff Investment Securities, LLC ("BLMIS") filed his first case seeking the return of a "preferential" transfer from BLMIS to a British Virgin Islands entity, Vizcaya Partners Ltd. ("Viscaya") and its Spanish custodial bank...

SEC Played ?Musical Chairs? While Wall Street Burned and Madoff Scammed

Posted on April 10, 2009
While Wall Street firms were busy bringing down the economy with risky mortgage-backed securities and Bernard Madoff?s epic Ponzi scheme was in its final stages, the SEC was involved in a dubious $3.9 million ?restacking? project intended to improve communication among the staff at its palatial Washington, D...

All TROs, All the Time: Can the SEC be Trusted to Exercise its Discretion?

Posted on April 07, 2009
As I previously have noted, a major component of the SEC?s response to the economic crisis is obtaining TROs and asset freezes against defendants in civil actions filed in U.S. District Courts around the country. Yesterday, the SEC filed two more emergency civil actions in Texas and Arizona, obtaining TROs...

Rocky Mountain Securities Conference to Highlight SEC?s Reaction to the Economic Crisis

Posted on April 03, 2009
The forthcoming Rocky Mountain Securities Conference, to be held in Denver on May 8, 2009, will yield important information about the SEC?s two-pronged response to the economic crisis. On the regulatory side, the SEC has proposed requiring audits of investment advisers with custody of client assets, self-certification of the internal...

Arbitrary and Capricious Standards Governing Access to the SEC Staff?s Investigative File

Posted on April 01, 2009
The issuance of a Wells notice presents defense counsel with an opportunity to learn about the proposed case against their client. Counsel should always arrange a conference call or meeting to discuss the charges in detail. Granting access to the entire investigative file (including the testimony transcripts of other witnesses)...

Spike in SEC Emergency Civil Actions

Posted on March 25, 2009
Since the first of the year, the SEC has already sought and obtained at least fourteen temporary restraining orders (TROs) in actions filed in U.S. District Courts nationwide, compared to only two such actions filed during the same period in 2008. The threat of an emergency civil action presents defense...

IS THE SEC ABOUT TO FREEZE YOUR CLIENT?S ASSETS? DETECTING AND PREVENTING TEMPORARY RESTRAINING ORDERS

Posted on March 18, 2009
Thus far in 2009, the SEC has filed an unprecedented number of emergency civil actions in which it sought temporary restraining orders (TROs) from U.S. District Courts around the country. Since these orders usually contain asset freeze provisions, they have draconian ?game over? consequences for defendants who find themselves unable...

A Wounded Animal is a Dangerous Animal: SEC Requests Budget Increase

Posted on March 13, 2009
SEC Chairman Mary Schapiro appeared before a Congressional panel to make the case for the agency?s budget request, which is supported by the Obama administration, of $1.03 billion for the fiscal year starting in October, an increase of 9 percent from fiscal 2009...

Uptick in Colorado Securities Fraud Cases

Posted on February 22, 2009
According to today?s Denver Post, local securities fraud cases have increased as the economy has deteriorated. Colorado Division of Securities Commissioner Fred Joseph is quoted as stating that open investigations have increased 10-15% over last year, with a focus on oil and gas and real estate cases...

NEW SEC CHAIRMAN TAKES STEPS TO SPEED UP ENFORCEMENT ACTIONS

Posted on February 09, 2009
On February 6, 2009, new SEC Chairman Shapiro announced that she was reversing two policies of her predecessor that amounted to a vote of no-confidence in the staff and tended to delay the institution of enforcement actions. Under former Chairman Cox, the staff was required to get permission from the...

PCAOB Regulation of Broker-Dealer Auditors: Is a ?Legislative Fix? Really Needed?

Posted on February 06, 2009
In the aftermath of the Bernard Madoff Ponzi scheme, regulators and investors are focusing on the need to regulate auditors of broker-dealers. A tiny accounting firm certified the accuracy of the financial statements of Madoff?s broker-dealer, which was an integral part of the fraud and is now in receivership...

PCAOB Registration of Auditors of Privately-Held Broker-Dealers: Is a ?Legislative Fix? Really Needed?

Posted on February 05, 2009
A tiny and largely unregulated accounting firm issued opinions stating that the financial statements of broker-dealer Bernard Madoff Investment Securities were accurate, thereby providing ?cover? for the world?s largest Ponzi scheme. In the aftermath of the Madoff scandal, Congress has focused its attention on the regulation of accounting firms that...

Characteristics of PCAOB Investigations

Posted on January 28, 2009
Six years after the passage of Sarbanes-Oxley, the PCAOB is ramping up the number of investigations and enforcement actions against audit firms and individual CPAs. Lawyers defending clients in PCAOB investigations therefore must learn about the PCAOB?s processes and procedures...

Funding Boost Proposed for SEC Enforcement

Posted on January 22, 2009
The economic collapse and the Madoff scandal have demonstrated the inadequacy of our nation?s financial regulatory system. Part of the problem consists of years of underfunding of the SEC. Historically, the agency was tasked with overseeing a rapidly expanding market while lawmakers, in effect, cut its budget, which is less...

The SEC?s Newfound Interest in Ponzi Schemes

Posted on January 07, 2009
On December 30, 2008, the SEC filed a complaint and sought emergency relief from a court seeking to halt an alleged Ponzi scheme and affinity fraud that collected more than $23 million from thousands of investors in the Haitian-American community nationwide through a network of purported investment clubs...

The Madoff Case: Another Black Eye for the SEC

Posted on December 15, 2008
Last week?s revelations about Bernard Madoff?s $50 billion Ponzi scheme raise serious questions about the efficacy of the SEC?s examination and enforcement programs. Although Mr. Madoff apparently managed large amounts of other people?s money for many years, he did not register his firm as an investment adviser until 2006...

SEC Pads its Enforcement Statistics with ?12(j)? Cases

Posted on December 03, 2008
Reeling from criticism of its inability to police Wall Street?s role in the economic meltdown, the SEC has resorted to padding its enforcement statistics. On October 22, 2008, the SEC issued a press release touting the 671 enforcement matters started in the year ended September 30, 2008 as "[t]he second-highest...

SEC Posts Enforcement "Red Book" on its Website

Posted on October 16, 2008
The SEC recently posted its internal manual used by the Division of Enforcement on the Internet at http://www.sec.gov/divisions/enforce/enforcementmanual.pdf. Publicizing the manual, which provides guidance to the Enforcement staff, is expected to promote consistency among regional offices and the SEC Headquarters...

Section 12(j) Proceedings ? The End of All Public Trading

Posted on September 12, 2008
Reporting public companies that are delinquent in their filings need to beware of the potential consequences of an enforcement action under Section 12(j) of the Securities Exchange Act of 1934, which could include the end of all public trading in their stock...

SEC Charges Six Microcap Companies, Four Officers

Posted on August 08, 2008
On August 6, the SEC filed two separate complaints in the U.S. District Court for the Central District of California against six microcap companies, four officers and four sham consultants for engaging in unregistered public offerings that dumped billions of shares on the market through so-called employee stock option and...

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