Securities Regulation Daily Wrap Up, ENFORCEMENT—2d Cir.: Second Circuit upholds sanctions against trust attorney over false declaration, (Nov 4, 2026)
Counsel knowingly misrepresented when she learned of a private annuity agreement central to an SEC asset freeze.
The Second Circuit affirmed sanctions imposed on an attorney who knowingly submitted a false declaration during an SEC asset-freeze proceeding. The panel held that the district court adequately supported its finding that the attorney acted knowingly and in bad faith when she misrepresented when she learned of a private annuity agreement central to the litigation. The opinion is by summary order and is without precedential effect (SEC v. Dunn, No. 25-2863 (2d. Cir. Nov. 4, 2026)).
Freeze proceeding. The SEC brought the underlying civil enforcement action in 2010 against David Smith and sought to freeze assets held by a trust established by Smith and his wife. The key issue was whether Smith retained an ongoing interest in the trust. This was contrary to representations that the trust existed solely for the benefit of the Smiths' children, on the basis of which the court initially released the trust’s assets from the freeze. A private annuity agreement later provided conclusive evidence that he did.
On July 21, 2010, Jill A, Dunn, the trust’s attorney, received the annuity agreement, One the day after receiving this email, Dunn referred in passing to a private annuity agreement during a call with the SEC. The SEC obtained the agreement on July 27, and it became the basis for their motion for reconsideration.
Later in the proceedings, Dunn submitted a declaration stating that she did not know of the annuity agreement’s existence when she spoke to the SEC and did not possess any documents relating to it then. The district court concluded that those statements were knowingly false and made in bad faith.
During the asset-freeze proceedings, Jill A, Dunn, the trust’s attorney, submitted a declaration stating that she did not know of the annuity agreement’s existence on July 21 and possessed no documents relating to it on that date. The district court concluded that those statements were knowingly false and made in bad faith. The court publicly admonished Dunn for filing a false declaration and ordered her to pay disgorgement.
Bad faith. On appeal, Dunn argued that the district court improperly applied an objective reasonableness standard based on what a competent attorney ordinarily would have done after receiving an important client email. The Second Circuit disagreed, finding that the district court's decision was not based solely on the actions of a reasonable attorney but rested on a broader assessment of Dunn's knowledge, credibility, and motive. Among other things, the lower court found it implausible that Dunn would have overlooked documents constituting a "smoking gun" on the primary issue in the trust litigation.
Incomplete agreement. The panel also rejected Dunn's argument that the district court erred in stating that she had received the complete agreement on July 21, 2010. She had not, so the question then was whether what Dunn had in her possession put her on notice. The panel concluded that the email revealed both the existence of the annuity agreement and Smith's continuing interest in the trust. Since the sanctions ruling turned on Dunn's knowledge of the agreement's existence and significance, the court's mistaken belief that she had received the whole agreement was immaterial.
Due process. Finally, the panel rejected Dunn's due process arguments. The SEC's motion for sanctions was specifically based on her false declaration about the trust and annuity, the panel said, and the district court sanctioned the same conduct described in the motion.
The case is No. 25-2863.
Judge: Per curiam.
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