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

On September 18, 2019, the Securities and Exchange Commission (“SEC”) filed its first civil suit alleging violations of broker-dealer registration requirements in U.S. digital asset markets.  In a case filed in the U.S. District Court for the Central District of California, the SEC alleged that Defendants ICOBox and its founder, Nikolay Evdokimov, illegally conducted an unregistered public securities offering for their 2017 initial coin offering (“ICO”), and have operated an unregistered brokerage service facilitating the launch of ICOs in digital asset securities since 2017.
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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

In what appears to be an industry-wide sweep involving American Depositary Receipts (“ADRs”), over the last few years the SEC has brought enforcement actions against 13 financial institutions – including depositary banks and brokers that borrow and lend “pre-released” ADRs.  On August 16, 2019, the SEC announced the latest of these actions against two brokers

In late July 2019, U.S. federal and state regulators announced three headline‑grabbing data privacy and cybersecurity enforcement actions against Equifax and Facebook.  Although coverage of these cases has focused largely on their striking financial penalties, as important are the terms the settlements imposed on the companies’ operations as well as their officers, directors, and compliance professionals—and what they signal about potential future enforcement activity to come.
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Last month, Representative Jim Himes (D-Conn) and his co-sponsors, Representatives Carolyn B. Maloney (D-NY) and Denny Heck (D-WA), introduced H.R. 2534:  The Insider Trading Prohibition Act.  Unlike its substantially similar predecessor, H.R. 1625, which was introduced by Representative Himes on March 25, 2015, H.R. 2534 has gained some momentum in the U.S. House of Representatives, having been unanimously approved by the Financial Services Committee in May 2019.  Although the bill is only at the preliminary stage, if the proposal eventually proceeds further in the process of becoming law, it will represent a potentially significant shift in and clarification of U.S. insider trading laws.
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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 January 29, 2019, the SEC announced four settlements with publicly-traded companies for failure to maintain adequate internal control over financial reporting.

None of the companies was charged with making false or inaccurate statements, either about its ICFR or otherwise; indeed, each had repeatedly disclosed material weaknesses in ICFR over many years.

These cases are