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

Petitioners seek review of the SEC's final order finding that petitioners violated Sections 204, 206, and 207 of the Investment Advisors Act of 1940, 15 U.S.C. 80b-4, 80b-6(1)–(2), 80b-7, and Advisors Act Rule 204-1(a)(2), 17 C.F.R. 275.204-1(a)(2). Determining that, by failing to disclose $210,000 in fees received from an investment manager, petitioners misrepresented that they were providing independent and conflict-free advice, the Commission imposed industry bars and cease-and-desist orders, ordered disgorgement, and levied a total of $650,000 in civil penalties. The court denied the petition for review, holding that the Commission reasonably interpreted Section 4E as not imposing a jurisdictional bar to late-filed actions, and that the Commission acted reasonably in imposing its sanctions. View "Montford and Co. v. SEC" on Justia Law

Harman and three of its officers are alleged to have knowingly and recklessly propped up the Company’s stock price by making materially false and misleading statements about the Company’s financial condition and by failing to disclose related material adverse facts in violation of federal securities laws. At issue is whether the complaint stated a plausible claim of securities fraud with respect to three alleged statements that focus primarily on the status of the Company’s personal navigational device (“PND”) products. The court held that, although the challenge to the forward-looking nature of two statements was forfeited, the complaint plausibly alleges that those statements were not entitled to safe harbor protection because the accompanying cautionary statements were misleading insofar as they failed to account for historical facts about PNDs that would have been important to a reasonable investor. Further, the third statement, in the Company’s annual report, is plausibly understood, in the alleged circumstances, as a specific statement about its recent financial performance and not mere puffery. Accordingly, the court reversed the dismissal of the complaint and remanded for further proceedings. View "In Re: Harman Int'l Indus." on Justia Law

Petitioner sought review of the SEC's order to cease and desist from violating the Securities Act of 1933, 15 U.S.C. 77e(a), (c), and the agency's subsequent order denying his motion for reconsideration. Petitioner sold shares of stock in Lexington, Inc. through offshore bank accounts for millions of dollars in profit, but failed to comply with the SEC's registration requirements for the sale of securities. The SEC found that petitioner had violated the Act in two separate enforcement actions. The court found no merit in petitioner’s objections to the SEC’s application of the fraudulent concealment doctrine. The court further held that the Commission correctly rejected petitioner's affirmative defenses of equitable estoppel, judicial estoppel, and waiver. Accordingly, the court denied the petition for review. View "Pierce v. SEC" on Justia Law

After petitioner settled a suit in which the Commission filed a civil complaint against him for committing various securities law violations, petitioner agreed in a consent judgment that he would not contest the allegations of the civil complaint in any related administrative proceeding before the Commission. The Commission then commenced a follow-on proceeding against petitioner to determine whether a remedial sanction was in the public interest and ordered that petitioner be permanently barred from the securities industry and from participating in any offering of penny stock. Petitioner sought vacatur of the Commission's order pursuant to Blinder, Robinson & Co. v. SEC. In Blinder, the court emphasized that, in a follow-on sanctions proceeding, the Commission must abide by a "clear distinction" between the district court's determination of a petitioner's liability under the securities laws and evidence about the circumstances surrounding his misconduct. The court concluded that the Commission considered the relevant record, including petitioner's evidence of the circumstances surrounding his misconduct that did not, in effect, seek to challenge the allegations of the complaint. Accordingly, the court deferred to the Commission's choice of sanction and denied the petition for review. View "Siris v. SEC" on Justia Law

Plaintiff filed a securities class action contending that AIG and its board of directors wrongfully reduced the value of certain securities issued by AIG. The court affirmed the district court's dismissal of the suit for lack of subject matter jurisdiction because the Securities Litigation Uniform Standards Act of 1998 (SLUSA), 15 U.S.C. 77p(d) and 78bb(f)(3), does not confer federal jurisdiction over plaintiff's state-law claims. View "Campbell v. AIG, et al." on Justia Law

The SEC sought a court order compelling SIPC to liquidate a member broker-dealer, SGC. SGC played an integral role in a multibillion-dollar financial fraud carried out through a web of companies. At issue was whether SIPC could instead be ordered to proceed against SGC to protect the CD investors' property. The court affirmed the district court's denial of the application to order SIPC to liquidate SGC where, under the Securities Investor Protection Act, 15 U.S.C. 78ccc(a)(1), the CD investors did not qualify as customers of SGC under the operative statutory definition. View "SEC v. Securities Investor Protection Corp." on Justia Law

Plaintiffs, former Carlyle Capital investors, filed suit alleging that Carlyle Capital made material misstatements and omissions in its June 2007 sale of securities and thereby violated the federal securities laws. Plaintiffs also alleged violations of Dutch law. The court concluded that, given the accurate disclosure in the initial June 19 Offering Memorandum and the additional accurate disclosure in the June 29 Supplemental Memorandum, plaintiffs have not sufficiently alleged any material misstatements or omission. Carlyle Capital had no duty under federal securities laws to make further disclosures in the Offering Memorandum or to the press release accompanying the Supplemental Memorandum. Therefore, the district court properly dismissed plaintiffs' federal claims. Applying the choice-of-law rules for the District of Columbia, not Dutch law, the court concluded that plaintiffs failed to sufficiently allege common-law fraud or misrepresentation. View "Wu, et al. v. Stomber, et al." on Justia Law

In response to the Congo war, Congress created Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. 78m(p), which requires the SEC to issue regulations requiring firms using "conflict minerals" to investigate and disclose the origin of those minerals. The Association challenged the SEC's final rule implementing the Act, raising claims under the Administrative Procedure Act (APA), 5 U.S.C. 500 et seq.; the Securities Exchange Act, 15 U.S.C. 78a et seq.; and the First Amendment. The district court rejected all of the Association's claims and granted summary judgment for the Commission and intervenor Amnesty International. The court concluded that the Commission did not act arbitrarily and capriciously by choosing not to include a de minimus exception for use of conflict materials; the Commission could use its delegated authority to fill in gaps where the statute was silent with respect to both a threshold for conducting due diligence and the obligations of uncertain issuers; the court rejected the Association's argument that the Commission's due diligence threshold was arbitrary and capricious; the Commission did not act arbitrarily and capriciously and its interpretation of sections 78m(p)(2) and 78m(p)(1)(A)(i) was reasonable because it reconciled these provisions in an expansive fashion, applying the final rule not only to issuers that manufacture their own products, but also to those that only contract to manufacture; and the court rejected the Association's challenge to the final rule's temporary phase-in period, which allowed issuers to describe certain products as "DRC conflict undeterminable." The court also concluded that it did not see any problems with the Commission's cost-side analysis. The Commission determined that Congress intended the rule to achieve "compelling social benefits," but it was "unable to readily quantify" those benefits because it lacked data about the rule's effects. The court determined that this benefit-side analysis was reasonable. The court held that section 15 U.S.C. § 78m(p)(1)(A)(ii) & (E), and the Commission’s final rule violated the First Amendment to the extent the statute and rule required regulated entities to report to the Commission and to state on their website that any of their products have “not been found to be 'DRC conflict free.'" The label "conflict free" is a metaphor that conveys moral responsibility for the Congo war. By compelling an issuer to confess blood on its hands, the statute interferes with the exercise of the freedom of speech under the First Amendment. Accordingly, the court affirmed in part, reversed in part, and remanded for further proceedings. View "Nat'l Assoc. of Manufacturers, et al. v. SEC, et al." on Justia Law

Petitioner sought review of the SEC's imposition of a civil penalty after the Commission found that petitioner failed to supervise a subordinate who violated securities laws. The court upheld the Commission's decision, concluding that the Commission did not abuse its discretion or act arbitrarily or capriciously in imposing the penalty. The court rejected petitioner's claim that the penalty violated the Excessive Fines Clause of the Eighth Amendment. View "Collins v. SEC" on Justia Law

Plaintiffs brought this action against the Commission seeking a declaratory judgment that recently adopted regulations of the Commission regarding derivatives trading were unlawfully adopted and invalid, and seeking to vacate and set aside those regulations and to enjoin their enforcement. Plaintiffs contended that the Commission violated the Administrative Procedure Act, 5 U.S.C. 500 et seq., in its rulemaking by: (1) failing to address rationales for broadening Commodity Pool Operators (CPOs) exemptions; (2) failing to comply with the Commodity Exchange Act, 7 U.S.C. 2(a), and offering an inadequate evaluation of the rule's costs and benefits; (3) including swaps in the trading threshold, restricting its definition of bona fide hedging, and failing to justify the five percent threshold; and (4) failing to provide an adequate opportunity for notice and comment. The court concluded, however, that the Commission did not act unlawfully in promulgating the regulations at issue. Accordingly, the court affirmed the district court's grant of summary judgment in favor of the Commission. View "Investment Company Inst., et al. v. CFTC" on Justia Law