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Securities

TOP STORY—D.C. Cir.: SEC can regulate wireless connection fees

The appellate court rejected ICE’s narrow interpretation of “facilities of an exchange” in favor of the more expansive one urged by the SEC that would allow the agency to regulate wireless service fees charged by exchanges. A panel of the U.S. Court ...

TOP STORY—D.C. Cir.: SEC can regulate wireless connection fees
EXCHANGES AND MARKET REGULATION—Letter requests the SEC to ask for public comment on the need for regulatory redesign for digital assets
January 21, 2022
Joanne Cursinella, J.D.

The petition is a response to Chair Gensler’s request for the digital asset community to “come in and talk to us.” In a letter to the Commission, J.W. Verret, associate professor, George Mason University School of Law and member of the SEC Investor A...

FRAUD AND MANIPULATION—D. Del.: Class action against NRx Pharmaceuticals alleges false and misleading statements about COVID drug
January 21, 2022
Elena Eyber, J.D.

A class action complaint claims NRx Pharmaceuticals made materially false and misleading statements regarding the company’s COVID drug. A securities class action lawsuit has been filed against NRx Pharmaceuticals in the Delaware district court on beh...

INVESTMENT ADVISERS—Mo. App.: Circuit court abused its discretion in ruling against the Commissioner of Securities
January 21, 2022
R. Jason Howard, J.D.

Judicial interference with ongoing administrative proceedings through the issuance of extraordinary writs should be the exception and not the rule, according to the appeals court. The Missouri Court of Appeals has reversed a decision of the circuit c...

PUBLIC COMPANY REPORTING AND DISCLOSURE—Study suggests SEC rulemaking could meaningfully enhance human capital disclosures
January 21, 2022
Lene Powell, J.D.

The study found that a 2020 rule change “shocked” under-disclosing companies into more fully reporting human capital information, despite the rule’s relative lack of specific requirements. Ahead of an expected SEC rule proposal on human capital manag...

WORTH NOTING—Other litigation, regulatory activity and industry news
January 21, 2022
WK Editorial Staff

A weekly roundup of other items of interest to the securities, commodities, and corporate governance communities. SEC NEWS AND SPEECHES— The SEC will hold an open meeting on January 26 to consider proposing several regulatory amendments. First, the C...

Securities

TOP STORY—Gensler has SEC taking closer look at PE, hedge fund fees

The SEC may be poised to look more closely at private equity firms and hedge funds as part of larger focus on market efficiency. SEC Chair Gary Gensler, in a speech to an audience at the Exchequer Club of Washington, D.C., suggested that a wider agen...

TOP STORY—Gensler has SEC taking closer look at PE, hedge fund fees
BROKER DEALERS—Customer protection failures draw $9M fine for Credit Suisse
January 20, 2022
John Filar Atwood

FINRA found, among other things, that Credit Suisse failed to maintain possession or control of billions of dollars of fully paid and excess margin securities it carried for customers. FINRA has fined Credit Suisse Securities $9 million for a number ...

ENFORCEMENT—E.D. Ky.: CFTC obtains consent order imposing $17 million penalty for defrauding commodity futures clients
January 20, 2022
Elena Eyber, J.D.

Federal district court ordered Kentucky resident and his wife to pay $17 million for defrauding commodity futures clients. The CFTC obtained a consent order from a Kentucky district court for permanent injunction, restitution, and disgorgement agains...

FRAUD AND MANIPULATION—C.D. Cal.: Company had plausible explanations for not disclosing all details
January 20, 2022
Jeffrey H. Brochin, J.D.

Shareholder failed to clearly allege why disclosure of alternative valuations of company was necessary and, without that allegation, he did not establish an actionable failure to disclose information. A federal district court in California has grante...

FRAUD AND MANIPULATION—D. Colo.: Colorado man charged with cryptocurrency related fraud
January 20, 2022
R. Jason Howard, J.D.

Investors hit with substantial losses following the defendant’s misappropriation of funds. The SEC has charged a Colorado man with defrauding investors after the discovery that some of the funds intended for the development of a cryptocurrency were d...

FRAUD AND MANIPULATION—S.D.N.Y.: Sovereign immunity shielded CFTC from suit by aggrieved reparations complainant
January 20, 2022
Lene Powell, J.D.

Where sovereign immunity was not waived, a federal district court lacked jurisdiction to hear a suit directly against the CFTC in its official capacity. A complainant unhappy with the result of a CFTC reparations proceeding was unable to sue the agen...

BLOG TRACKER—Noteworthy blog posts and other commentary
January 20, 2022
WK Editorial Staff

The week’s most insightful, intriguing, and entertaining blog posts from the securities, commodities, and corporate governance communities. Proskauer, SEC Defeats Motion to Dismiss Insider-Trading Complaint Alleging Novel “Shadow Trading” Theory , by...

Securities

TOP STORY—N.D. Cal.: Pushing the envelope, SEC ‘shadow’ insider trading case advances

The court ruled that the SEC did not impermissibly push the bounds of insider trading theory, finding that Section 10(b) liability is expansive and the company’s insider trading policy prohibited the type of trading the defendant engaged in. In what ...

TOP STORY—N.D. Cal.: Pushing the envelope, SEC ‘shadow’ insider trading case advances
FINANCIAL INTERMEDIARIES—ESMA report details guidance rules for inside information under Market Abuse Regulation
January 19, 2022
Mark S. Nelson, J.D.

A final report issued by ESMA clarifies when issuers can delay inside information and what constitutes possession of inside information. The European Securities and Markets Authority (ESMA) published a final report detailing guidance on when issuers ...

INTERNATIONAL NEWS—IOSCO seeks feedback on digitalization risks, publishes best practices for global cooperation
January 19, 2022
Anne Sherry, J.D.

A new consultation report aims at helping securities regulators adapt to the challenges posed by technological advancement and digitalization. IOSCO is requesting feedback on a consultation report that addresses growth in digitalization and the use o...

ENFORCEMENT—Adviser raised over $3 million through unregistered fraudulent offerings
January 19, 2022
Rodney F. Tonkovic, J.D.

The adviser participated in an offering fraud scheme by soliciting his advisory clients without disclosing that he received compensation for doing so. An investment adviser has been barred for his participation in unregistered securities offerings. T...

FRAUD AND MANIPULATION—S.D.N.Y.: SEC complaint plausibly alleged Rule 10b-5 violation
January 19, 2022
Jeffrey H. Brochin, J.D.

Dealer status in scalping scheme determined by activities, regardless of the lack of buy-sell customers. A federal district court in New York has denied the motions to dismiss filed by the Defendants in a securities fraud action brought against them ...

IPO TRACKER—TPG is first 2022 new issuer to raise $1 billion in IPO
January 19, 2022
John Filar Atwood

A snapshot of the week’s IPO activity, including completed deals, new preliminary filings and IPO withdrawals. TPG, an alternative asset manager that also sponsors blank check companies (SIC 6770), raised just over $1 billion in its public market deb...

Securities

TOP STORY—U.S.: Supreme Court drops petition on breadth of SLUSA ‘in connection with’ requirement

This action, and another denial last week, leaves no securities-related cases currently pending on the docket. The Supreme Court has denied certiorari for a petition asking it to define the standard for applying the SLUSA "in connection requirement."...

TOP STORY—U.S.: Supreme Court drops petition on breadth of SLUSA ‘in connection with’ requirement
REGULATION TRACKER—Upcoming SEC and CFTC comment deadlines and effective dates
January 18, 2022
WK Editorial Staff

A table of proposed rule comment dates and final rule effective and compliance dates for SEC and CFTC rulemaking. Recent SEC activity includes the following: EDGAR Filer Update. The SEC has adopted amendments to the EDGAR Filer Manual. The updates to...

ENFORCEMENT—Colo. Sup. Ct.: Colorado Supreme Court upholds abatement of restitution order against deceased criminal appellant
January 18, 2022
Elena Eyber, J.D.

The common law doctrine of abatement ab initio applies to a restitution order imposed on a defendant who dies during the pendency of his direct appeal. The Colorado Supreme Court affirmed an appellate court decision that abated a restitution order ag...

FRAUD AND MANIPULATION—N.D. Cal..: Securities fraud claims proceed against EV battery maker
January 18, 2022
Lene Powell, J.D.

Scienter was inferred from the same set of allegations as falsity; if reports were true, then the defendants had knowingly rigged performance tests and misreported results, which was incompatible with lack of knowledge. Plaintiff investors were allow...

FRAUD AND MANIPULATION—S.D. Fla.: Florida resident enjoined from operating private fund
January 18, 2022
David Yucht, J.D.

Private fund scheme netted defendants $2.75 million. The SEC alleged that for several months in 2017, a Florida resident and his now defunct unregistered investment adviser raised over $2.75 million from 11 investors in connection with the sale of pr...

INVESTOR EDUCATION—Ohio App.: Ohio Securities Division could not challenge factual determination made by trial court
January 18, 2022
R. Jason Howard, J.D.

The case did not involve questions of law relating to the constitutionality, construction, or interpretation of a statute or agency rule so appellate court lacked jurisdiction. On administrative appeal, the Ohio Department of Commerce Division of Sec...

CORPORATE GOVERNANCE—Blackrock’s Fink seeks to explain stakeholder capitalism
January 18, 2022
Mark S. Nelson, J.D.

Larry Fink’s annual letter to CEOs and chairs explained that stakeholder capitalism is not an ideological concept but rather is a network of mutually beneficial relationships among numerous groups serving or being served by the corporate entity. In h...

Securities

TOP STORY—CFTC Commissioner Stump thinks ‘We can do hard things’ and adapt to new demands in financial markets

Getting out of our comfort zones is “front of mind” for the Commissioner in light of the innovations being seen in financial markets. In remarks prepared for delivery at the Chamber of Digital Commerce, CFTC Commissioner Dawn D. Stump pointed out tha...

TOP STORY—CFTC Commissioner Stump thinks ‘We can do hard things’ and adapt to new demands in financial markets
Note to subscribers
January 14, 2022

Securities Regulation Daily will not publish on Monday, January 17, in observance of the holiday honoring Martin Luther King, Jr. We will resume publication on Tuesday, January 18, with the extensive coverage you’ve come to expect. Info

FINANCIAL INTERMEDIARIES—Commenters differ on SEC’s securities lending proposals
January 14, 2022
Jay Fishman, J.D.

Some commenters fully support—others say “modify”—the Commission’s “transparency in securities lending” rule proposals. The Better Markets organization and SIFMA stand out among the many persons commenting on the SEC’s rule proposals to increase tran...

BENEFICIAL OWNERSHIP—S.D.N.Y.: Short-swing trading prohibition did not apply to CEO's transactions
January 14, 2022
Rodney F. Tonkovic, J.D.

The CEO traded in two separate classes of stock and only realized long-term profits. A district court dismissed an action to recover short-swing trading profits after finding that the statutory purpose of Exchange Act Section 16(b) was not implicated...

WORTH NOTING—Other litigation, regulatory activity and industry news
January 14, 2022
WK Editorial Staff

A weekly roundup of other items of interest to the securities, commodities, and corporate governance communities. SEC NEWS AND SPEECHES— The Office of the Advocate for Small Business Capital Formation will host its third annual Capital Call on Januar...