June 23, 2014

Insider Trading: SEC Sues Congress to Compel Subpoenas!

As noted in this WSJ article and NY Times article, the DOJ and SEC have sent subpoenas to Rep. David Camp, Chair of the House Ways & Means Committee, and Congressional Staffer Brian Sutter, regarding whether they tipped traders about a change in health care policy in the wake of a long-running investigation. And on Friday, as noted in this WSJ article, the SEC filed a lawsuit in the Southern District of New York seeking to compel the subpoenas. Possible grand jury to follow.

Here’s an excerpt from David Smyth’s blog about the case:

This is fascinating to me for so many reasons, among them: (1) the potential Constitutional cluster we’re about to witness; (2) the real test this poses for the recently passed STOCK Act’s effectiveness; and (3) another example of Mary Jo White’s severe distaste for those who defy Commission subpoenas.

And here’s an excerpt from the latest WSJ article:

“It’s not unheard of for an agency to serve a subpoena to Congress, but for an agency to sue is—if not unprecedented—at least very rare,” said Michael Stern, who was senior counsel to the U.S. House from 1996 to 2004. “It shows that there is a serious conflict; the SEC really wants the information and the House really wants it protected,” he said.

Conflict Minerals: Are the Form SDs “Working”?

Recently, I blogged that perhaps no one would read all the Form SDs being filed except compliance people like ourselves. But I haven’t focused on how the disclosure in the reports might change corporate behavior – as I’ve been focused on the immaterial nature of them like everyone else in our profession. But as noted by Steve Quinlivan in his blog, a report issued by the “Enough Project” indicates market changes spurred by this Dodd-Frank provision have helped to significantly reduce the involvement of armed groups in eastern Democratic Republic of Congo in the mines of three out of the four conflict minerals. That certainly is good news!

More on Rule 506 Bad Actor Waivers

I’ve blogged several times about the SEC’s evolving policy on Rule 506 Bad Actor waivers as the Commissioners duke it out. The latest is this Reuters article entitled “SEC alters waiver policy to remove ‘too big to fail’ concern.” Here’s an excerpt:

In an interview with Reuters, SEC Republican Commissioner Michael Piwowar said he convinced the agency to alter the language in April after he threatened to vote against approving a waiver for the Royal Bank of Scotland Group Plc.The bank had requested the waiver to retain certain regulatory privileges, some of which make it easier for companies to raise capital, after one of its units struck a criminal plea deal in connection with the Libor bench mark interest rate manipulation case. But Piwowar said he feared voting to approve it without first changing the policy language could lead the market to believe the bank was too big to fail.

That is because the policy originally called for the SEC to consider a company’s “significance to the markets and its connectedness to other market participants” as a factor when deciding whether to deny a waiver. The SEC quietly made the change he requested on April 24.

And in her blog, Vanessa Schoenthaler notes that Senator Sherrod Brown (D-Ohio), Chair of the Banking Subcommittee on Financial Institutions and Consumer Protection, recently wrote a letter to Chair White questioning the Commission’s practices and procedures related to waiver of the automatic disqualification provisions…

– Broc Romanek