On January 12, 2018, the Supreme Court granted a writ of certiorari in Raymond J. Lucia Cos., Inc. v. SEC, No. 17 130,[1] a case raising a key constitutional issue relating to the manner in which the U.S. Securities and Exchange Commission’s (SEC or Commission) appoints its administrative law judges (ALJs). The Court will decide “[w]hether administrative law judges of the [SEC] are Officers of the United States within the meaning of the Appointments Clause.” The answer to this question matters because if SEC ALJs are “officers,” then they should have been appointed by the Commission itself instead of hired through traditional government channels—and the Commission only exercised its ALJ appointment authority in late-2017. Although the question is limited to SEC ALJs, any decision could also impact ALJs at other agencies government-wide.
Continue Reading Supreme Court Grants Certiorari on the Constitutionality of SEC ALJ Appointments– What This Means for the Securities Industry
Kokesh v. SEC: Half a Year On
More than six months have passed since the Supreme Court held, in Kokesh v. SEC, 137 S. Ct. 1635 (2017), that the Securities and Exchange Commission’s (SEC or Commission) disgorgement power constitutes a penalty subject to a five-year statute of limitations. As expected, the Supreme Court’s holding on the penal nature of SEC disgorgement has spurred defendants to seek to broaden its application to other contexts. Most fundamentally, this includes whether the SEC has the statutory authority to seek disgorgement at all. To date, courts have mostly turned aside these challenges. At the same time, however, litigants have grown more creative in their attacks, evidenced by a class action suit seeking reimbursement of nearly $15 billion from the SEC of certain historical disgorgement payments.[1]
Below, we look back at how the lower courts have handled post-Kokesh challenges to the SEC’s disgorgement power and other so-called equitable remedies to date.
Continue Reading Kokesh v. SEC: Half a Year On
SEC Releases Enforcement Division FY 2017 Annual Report: Shift in Tone and Likely Approach
On November 15, 2017, the Securities and Exchange Commission Division of Enforcement released its annual report detailing its priorities for the coming year and evaluating enforcement actions that occurred during Fiscal Year (“FY”) 2017. The Report captures the SEC during a period of transition—Chairman Jay Clayton assumed the helm of the Commission in May 20172
Is the SEC’s Broken Windows Initiative Over? The Picture Is Somewhat Mixed.
Following the 2016 election, it has been widely assumed that the SEC’s Division of Enforcement would no longer pursue the “broken windows” policy implemented under then-SEC Chair Mary Jo White. Under that approach, the Division of Enforcement intentionally pursued smaller, non-fraud cases in an attempt to improve the overall compliance culture within the securities industry. Pronouncements this fall by the Co-Directors of the Division of Enforcement, Stephanie Avakian and Steven Peikin, on their face confirm that assumption, suggesting an end to “broken windows” as a broad-based strategy focused on street-wide sweeps for strict liability and other non-scienter conduct. However, signs persist that the Enforcement Division will continue to pursue some varieties of non-scienter cases, particularly where there exists, even indirectly, the potential for harm to retail investors.
Continue Reading Is the SEC’s Broken Windows Initiative Over? The Picture Is Somewhat Mixed.