Justia U.S. D.C. Circuit Court of Appeals Opinion Summaries

Articles Posted in Securities Law
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The DC Circuit denied a petition for review challenging the Commission's 2018 rule allowing investment companies to post shareholder reports online and mail paper copies to shareholders upon request. Petitioners argued that the SEC did not adequately consider the interests of shareholders who prefer reports in paper form. The court held, however, that the consumer organization lacked Article III standing. In this case, the organization could not reasonably have believed that its barebones affidavit, vaguely describing the preferences and burdens of unnamed members and others, sufficed to prove its representational standing; nor could it reasonably have believed that its standing was self-evident from the rulemaking record. The court also held that the paper-industry representatives asserted interests beyond those protected or regulated by the securities laws. Applying Hazardous Waste Treatment Council v. Thomas, 885 F.2d 918, 921–22 (D.C. Cir. 1989), the court held that the conflict between the interests of paper sellers and those of shareholders is likely to increase over time, and this suggests a systematic misalignment with shareholder preferences, which makes paper companies distinctly unqualified to advance the interests of shareholders. View "Twin Rivers Paper Co., LLC v. SEC" on Justia Law

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An investment adviser and its principals petitioned for review of the SEC's determination that they violated Section 206(2) and Section 207 of the Investment Advisers Act. The SEC alleged that petitioners failed for many years to disclose its arrangement with Fidelity and the conflicts of interest arising from that compensation. The DC Circuit denied the petition in part, holding that the Commission's findings of negligent violations under section 206(2) were supported by substantial evidence. However, the court granted the petition in part, holding that the Commission's findings of willful violations under section 207 based on the same negligent conduct were erroneous as a matter of law where the repeated failures to adequately disclose conflicts of interest were no more than negligent. View "The Robare Group, Ltd. v. SEC" on Justia Law

Posted in: Securities Law
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After the Board charged petitioner and found that he violated the Board's rules and auditing standards, he petitioned to vacate the orders and sanctions against him. The D.C. Circuit held that the Board infringed plaintiff's right to counsel by unreasonably barring an accounting expert from assisting his counsel at the Board interview. Therefore, the court granted the petition for review, vacated the order of the SEC, and remanded with directions that the Commission vacate the Board's underlying orders and sanctions. View "Laccetti v. SEC" on Justia Law

Posted in: Securities Law
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After the Board charged petitioner and found that he violated the Board's rules and auditing standards, he petitioned to vacate the orders and sanctions against him. The D.C. Circuit held that the Board infringed plaintiff's right to counsel by unreasonably barring an accounting expert from assisting his counsel at the Board interview. Therefore, the court granted the petition for review, vacated the order of the SEC, and remanded with directions that the Commission vacate the Board's underlying orders and sanctions. View "Laccetti v. SEC" on Justia Law

Posted in: Securities Law
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LSTA represents firms that serve as investment managers of open-market collateralized loan obligations (CLO). LSTA challenged the defendant agencies' decision, embodied in the Credit Risk Retention Rule, to apply the credit risk retention requirements to managers of CLOs in section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The DC Circuit agreed with LSTA that, given the nature of the transactions performed by CLO managers, the language of the statute invoked by the agencies does not encompass their activities. Because CLO managers were not "securitizers" under section 941, the managers need not retain any credit risk. Accordingly, the court reversed the judgment of the district court and remanded with instructions to grant summary judgment to LSTA. View "The Loan Syndications and Trading Assoc. v. SEC" on Justia Law

Posted in: Securities Law
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Petitioner challenged the Commission's decision to sustain FINRA's decision to permanently bar him from membership and from working with any of its affiliated members. The DC Circuit held that the Commission reasonably grounded its decision in the record, which extensively evidenced petitioner's acts of misappropriation, his prolonged efforts to cover his tracks through falsehoods, and his repeated and deliberate obstruction of investigators. The court remanded with respect to the permanent bar on petitioner's registration with FINRA and affiliation with its members for the Commission to determine in the first instance whether Kokesh v. SEC, 137 S. Ct. 1635 (2017), has any bearing on his case. View "Saad v. SEC" on Justia Law

Posted in: Securities Law
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After the SEC determined that petitioner's conduct violated various securities-fraud provisions, the DC Circuit upheld the Commission's findings that the statements in petitioner's emails were false or misleading and that he possessed the requisite intent. However, the court held that petitioner did not "make" false statements for purposes of Rule 10b-5(b) of the Securities Act of 1934, 15 U.S.C. 78j, because petitioner's boss, and not petitioner himself, retained "ultimate authority" over the statements. The court reasoned that, while petitioner's boss was the "maker" of the false statements, petitioner played an active role in perpetrating the fraud by folding the statements into emails he sent directly to investors in his capacity as director of investment banking, and by doing so with an intent to deceive. Therefore, petitioner's conduct infringed the other securities-fraud provisions he was charged with violating. The court set aside sanctions and remanded for the Commission to reassess the appropriate remedies. Accordingly, the court granted the petition for review in part, vacated the sanctions, and remanded. View "Lorenzo v. SEC" on Justia Law

Posted in: Securities Law
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OCC, a clearing agency that facilitates trades in options and other financial instruments, developed a Capital Plan in an attempt to boost its capital reserves and to alter how fees and refunds were calculated. The DC Circuit remanded to the SEC, which approved OCC's proposed change to its rules, for further proceedings. In this case, the change was subject to approval by the SEC, which granted approval without itself making the findings and determinations prescribed by the Securities Exchange Act of 1934. The court held that, because the SEC effectively abdicated its responsibility to OCC, this did not represent the kind of reasoned decisionmaking required by either the Exchange Act or the Administrative Procedure Act. View "Susquehanna International Group v. SEC" on Justia Law

Posted in: Securities Law
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After petitioner was convicted of conspiracy, selling unregistered securities, and mail fraud, the SEC barred petitioner from associating with six classes of securities market participants. The court agreed with petitioner's argument that the Commissioner's imposition of Dodd-Frank’s collateral ban constitutes an impermissibly retroactive penalty because it is premised on pre-Dodd-Frank misconduct. See Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), Pub. L. No. 111–203, 124 Stat. 1376 (2010). Therefore, the Commission abused its discretion in barring petitioner from associating with the investment adviser, municipal securities dealer and transfer agent classes because those bars are impermissibly retroactive, and the court granted that portion of the petition. The court rejected petitioner's "unclean hands" argument and denied the remainder of the petition. View "Bartko v. SEC" on Justia Law

Posted in: Securities Law
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Petitioners seek review of the Commission's decision imposing sanctions for violations of the Investment Advisers Act of 1940, 15 U.S.C. 80b-21, and the rule against misleading advertising. Here, the Commission instituted an administrative enforcement action against petitioners for alleged violations of anti-fraud provisions of the Investment Advisers Act based on how they presented their “Buckets of Money” retirement wealth-management strategy to prospective clients. The court rejected petitioners' contention that the Commission’s decision and order under review should be vacated because the ALJ rendering the initial decision was a constitutional Officer who was not appointed pursuant to the Appointments Clause. The court also concluded that there is substantial evidence to support the Commission’s finding that petitioners’ “Buckets-of-Money” presentation promised to provide an historical-data-only backtest where the analysis would account for “rebucketizing.” Paying deference to the Commission's choice of sanctions, the court upheld the district court's imposition of the lifetime industry bar on Raymond J. Lucia. The court rejected petitioners' remaining contentions and denied the petition for review. View "Raymond J. Lucia Co. v. SEC" on Justia Law

Posted in: Securities Law