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Matthew C. Solomon has significant experience in complex and high-stakes civil and criminal matters, having served for 15 years with the U.S. Department of Justice and the U.S. Securities and Exchange Commission—including most recently as the SEC’s Chief Litigation Counsel.

On November 6, 2019, the SEC’s Division of Enforcement released its annual report (the “Report”) describing its enforcement actions from fiscal year 2019.[1]  Like prior reports, the Report quantifies the Division’s activities in a number of ways and discusses priority areas going forward.  The Report also brings front-and-center certain challenges the Division has faced – including difficulties navigating recent Supreme Court decisions that call into question the constitutionality of the SEC’s administrative proceedings and the agency’s ability to obtain disgorgement, as well as the impact of the government shut-down and general resource constraints.
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On November 1, 2019, the Supreme Court granted certiorari in Liu v. SEC to decide whether the Securities and Exchange Commission can obtain disgorgement as an equitable remedy in federal court enforcement actions.

The certiorari grant in this case is unusual, because the circuit courts that have considered the issue have all agreed that the

Companies that face non-public government investigations frequently confront challenging questions regarding whether and when to disclose the existence of the investigation, how much to disclose, and any duty to update the disclosure as the investigation proceeds. The SEC recently filed a settled complaint alleging that Mylan committed accounting and disclosure violations for failing to timely

On July 3, SEC Chairman Jay Clayton issued a statement signaling a policy change in SEC settlements and the consideration of applications for waiver of collateral consequences flowing from those settlements, such as the loss of certain significant procedural advantages in (or even outright exemption from) the securities registration process.[1]  In practice, this change could both streamline the process of settling enforcement actions with the SEC and provide additional certainty to settling entities, which, under the current regime, must decide whether to settle a matter before completing and knowing the outcome of negotiations over waivers.
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Last month, Representative Maxine Waters, Chair of the House Financial Services Committee, introduced a discussion draft of the “Bad Actor Disqualification Act of 2019” (the “Proposed Act”).  Similar to proposed legislation Rep. Waters introduced in 2015 and 2017, the effect of the Proposed Act, if passed, would be to dramatically increase the burdens on institutions

On March 27, 2019, the Supreme Court issued a 6-to-2 decision in Lorenzo v. SEC focusing on the distinction between “making” a false statement under Exchange Act Rule 10b-5(b) and engaging in deceptive conduct—so-called “scheme liability”—under Rules 10b-5(a) and (c).

The Court upheld a D.C. Circuit majority decision concluding that the SEC could hold an

On February 20, the Securities and Exchange Commission (the “SEC” or “Commission”) issued a cease-and-desist order against Gladius Network LLC (“Gladius”) concerning its 2017 initial coin offering (“ICO”).  The SEC found that the Gladius ICO violated the Securities Act of 1933’s (“Securities Act”) prohibition against the public offer or sale of any securities not made pursuant to either an effective registration statement on file with the SEC or under an exemption from registration.[1]  While this is far from the first time that the SEC has found that a particular ICO token meets the definition of a “security” under the Securities Act,[2] this is notably the first action involving an ICO token issuer that self-reported its potential violation.  Due to this, and Gladius’s cooperation throughout the investigation, the SEC stopped short of imposing any civil monetary penalties among its ordered remedial measures.
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Last week, in SEC v. Scoville, the U.S. Court of Appeals for the Tenth Circuit held that Dodd-Frank allows the Securities and Exchange Commission to bring fraud claims based on sales of securities to foreign buyers where defendants engage in fraudulent conduct within the United States.

In so holding, the Court concluded that Dodd-Frank

On December 26, 2018, the SEC announced settled charges against ADT Inc. after finding that ADT, in two earnings releases, gave undue emphasis to non-GAAP adjusted EBITDA figures because they identified the relevant GAAP measures only later and much less prominently.

Without admitting or denying the SEC’s factual or legal claims, ADT agreed to an

On November 2, the SEC’s Enforcement Division released its annual report detailing the facts and figures of its enforcement efforts in fiscal year 2018.  At first blush, this year’s report looks strikingly similar to those from recent years, as the headline numbers in most categories are nearly indistinguishable from 2015, 2016, and 2017.  This consistency may be surprising given that 2018 is the first such report reflecting exclusively the enforcement priorities of the Commission since it was reconstituted under Chair Jay Clayton.

But a closer examination of the report, including the components feeding into the top-line facts and figures and commentary by Division co-directors Stephanie Avakian and Steven Peikin, reveals a clear shift in priorities by the Division.  These range from a philosophical shift in its mission to the reallocation of resources during a hiring freeze.  We address here the most notable of these subtle but important changes. 
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