February 19, 2016

SEC Enforcement: Top 10 Notable Developments

Ongoing challenges to the constitutionality of the SEC’s administrative proceedings ranks at the top of Baker Hostetler’s informative Top 10 list of SEC Enforcement Highlights of 2015.

According to the latest Cornerstone report, the SEC reportedly filed 76% of its enforcement actions against public companies as administrative proceedings in 2015 – more than triple the number and percentage of actions filed as administrative proceedings since 2010. This controversial issue – namely, the Appointments Clause constitutionality of the appointment of the arguably “inferior officer” administrative law judges who preside over the administrative proceedings, and the related constitutionality of the proceedings themselves – simply refuses to go away pending definitive resolution by the courts.

Here is the complete Top 10 list:

  1. SEC Administrative Proceedings Challenged as to Constitutionality
  2. SEC Claims Against Compliance Officers
  3. Policing Manipulative High-Frequency Trading
  4. First SEC Action to Enforce Cybersecurity Policies
  5. SEC Presses Insider Trading Actions With Mixed Success In Post-Newman Era
  6. SEC Charges Private Equity Giant With Misallocating Broken Deal Expenses
  7. SEC Brings Enforcement Actions Over “Spoofing”
  8. CFTC Brings Action against “Flash Crash” Trader
  9. SEC Actions Protecting Whistleblowers
  10. First Circuit Court of Appeals Vacates SEC Order Not Based on “Substantial Evidence”

See these blogs from Kevin LaCroix, Dorsey & Whitney’s Tom Gorman (here and here), and the WSJ; my previous blogs on the ongoing debate over the SEC’s choice of forum and understanding the differences between being sued in federal district court vs. an administrative proceeding; and my previous blog and podcast on the Securities Enforcement Empirical Database (SEED).

See also the OIG’s recently issued final report of investigation into allegations of bias on the part of the SEC’s ALJs – concluding that there is no evidence to support the allegations.

Is the Yates Memo Unconstitutional?

This recent Corporate Counsel article authored by Paul Hastings Paul Monnin and Eric Stolze – Everything Old Is New Again: Why the Yates Memo is Constitutionally Suspect – does a convincing job of pointing out the several aspects and implications of the DOJ corporate cooperation policies espoused by the September 2015 so-called Yates Memo that raise potential constitutionality issues. Aside from potential constitutional challenges, the memo identifies the not unlikely adverse effects of the policy on internal corporate dynamics. It’s definitely worth a read.

See Broc’s and my earlier blogs on the Yates Memo and our oodles of memos about it in our “White Collar Crime” Practice Area.

Marsh: Cyber Insurance Trends

In this podcast, Marsh Cyber Practice leader Tom Reagan discusses key cyber insurance trends in the context of Marsh’s recent benchmarking report, including:

– Can you describe the overall trends in frequency of acquisition of cyber coverage?
– What are the top reasons companies are purchasing cyber coverage?
– What are the overall trends in terms of coverage limits?
– Are there any industry-specific trends?
– Can you describe the current state of knowledge – or perhaps confusion – about cyber insurance coverage?
– What are the overall pricing and insurance market trends?
– Is there anything companies can do to better position themselves before they seek to acquire or renew coverage?


– by Randi Val Morrison